Page 112 - Interloop Annual Report 2018-2019

NOTES TO THE UNCONSOLIDATED NOTES TO THE UNCONSOLIDATED
FINANCIAL STATEMENTS FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2019 FOR THE YEAR ENDED JUNE 30, 2019
all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required
to recognize a right-of-use asset representing its right to use the underlying leased asset and a lease liability
representing its obligation to make lease payments. The full impact of the future adoption is currently under
review.
- IFRIC 23 ‘Uncertainty over Income Tax Treatments’ (effective for annual periods beginning on or after
January 01, 2019):
IFRIC 23 clarifies how the recognition and measurement requirements of IAS 12 ‘Income taxes’, are applied
where there is uncertainty over income tax treatments. An uncertain tax treatment is any tax treatment applied by
an entity where there is uncertainty over whether that treatment will be accepted by the tax authority. For example,
a decision to claim a deduction for a specific expense or not to include a specific item of income in a tax return is
an uncertain tax treatment if its acceptability is uncertain under tax law. IFRIC 23 applies to all aspects of income
tax accounting where there is an uncertainty regarding the treatment of an item, including taxable profit or loss,
the tax bases of assets and liabilities, tax losses and credits and tax rates. The interpretation is not expected to
have significant impact on the Company’s financial statements.
- Amendments to IAS 1, ‘Presentation of financial statements’, and IAS 8, ‘Accounting policies, changes
in accounting estimates and errors’ (effective for the Company’s annual period beginning on January
1, 2019):
These amendments and consequential amendments to other IFRSs:
(i) use a consistent definition of materiality throughout IFRSs and the Conceptual Framework for Financial
Reporting;
(ii) clarify the explanation of the definition of material; and
(iii) incorporate some of the guidance in IAS 1 about immaterial information. 4.
These amendments are not expected to have a significant impact on the Company’s future financial
statements.
- Amendment to IFRS 3 ‘Business Combinations’ – Definition of a Business (effective for business
combinations for which the acquisition date is on or after the beginning of annual period beginning
on or after 1 January 2020):
The IASB has issued amendments aiming to resolve the difficulties that arise when an entity determines whether
it has acquired a business or a group of assets. The amendments clarify that to be considered a business,
an acquired set of activities and assets must include, at a minimum, an input and a substantive process that
together significantly contribute to the ability to create outputs. The amendments include an election to use a
concentration test. The standard is effective for transactions in the future and therefore would not have an impact
on past financial statements.
Interloop Limited
110
- Annual Improvements to IFRS Standards 2015–2017 Cycle. The new cycle of improvements addresses
improvements to following approved accounting standards (effective for annual period beginning on
or after January 1, 2019):
- IFRS 3 Business Combinations and IFRS 11 Joint Arrangements. The amendment aims to clarify the
accounting treatment when a company increases its interest in a joint operation that meets the definition of
a business. A company remeasures its previously held interest in a joint operation when it obtains control of
the business. A company does not remeasure its previously held interest in a joint operation when it obtains
joint control of the business.
- IAS 12 Income Taxes. The amendment clarify that all income tax consequences of dividends (including
payments on financial instruments classified as equity) are recognized consistently with the transaction that
generates the distributable profits.
- IAS 23 Borrowing Costs. The amendment clarify that a company treats as part of general borrowings any
borrowing originally made to develop an asset when the asset is ready for its intended use or sale.
Further, the following new standards have been issued by the International Accounting Standards Board
(IASB), which are yet to be notified by the Securities and Exchange Commission of Pakistan (SECP), for the
purposes of their applicability in Pakistan:
IFRS - 1 ‘First time adoption of International Financial Reporting Standards’.
IFRS - 14 ‘Regulatory Deferral Accounts’.
IFRS - 17 ‘Insurance Contracts’.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of financial statements in conformity with the approved accounting standards require management to
make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts
of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under the circumstances, the results of which
form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimates are revised if the revision affects only that period, or in the period of the
revision and future periods. Judgments made by management in application of the approved accounting standards
that have significant effect on the unconsolidated financial statements and estimates with a significant risk of material
adjustments in the next year are discussed in respective policy notes. The areas where various assumptions and
estimates are significant to the Company’s financial statements or where judgment was exercised in application of 2018 - 19
accounting policies are as follows:
• Estimate of useful life of operating fixed assets - note 5.1 Annual Report
111