No. S 124
Companies Act
(Chapter 50)
Companies (Accounting Standards) (Amendment) Regulations 2005
In exercise of the powers conferred by section 200A(1) of the Companies Act, the Accounting Standards Committee (known as the Council on Corporate Disclosure and Governance), with the approval of the Minister for Finance, hereby makes the following Regulations:
Citation and commencement
1.  These Regulations may be cited as the Companies (Accounting Standards) (Amendment) Regulations 2005 and shall come into operation on 16th March 2005.
Amendment of Third Schedule
2.  The Third Schedule to the Companies (Accounting Standards) Regulations (Rg 6) (referred to in these Regulations as the principal Regulations) is amended ––
(a)by deleting paragraph (i) in the third column of the item relating to FRS 27 and substituting the following paragraph:
“(i)Delete the following words in paragraphs 10 (d) and 41 of IAS 27:
“that comply with International Financial Reporting Standards”;”.
(b)by inserting, immediately after the words “(March 2004)” in the second column of the item relating to FRS 39, the words “(Amendment December 2004)”;
(c)by deleting paragraphs (i), (ii) and (iii) in the third column of the item relating to FRS 39 and substituting the following paragraphs:
“
(i) Delete paragraphs 103 to 110 of IAS 39 and substitute the following paragraphs:
“103.  An entity shall apply this Standard (including the amendments issued in September 2004) for annual periods beginning on or after 1 January 2005. Earlier application is permitted. An entity shall not apply this Standard (including the amendments issued in March 2005) for annual periods beginning before 1 January 2005 unless it also applies FRS 32 (issued in 2004). If an entity applies this Standard for a period beginning before 1 January 2005, it shall disclose that fact.”.
“Early Adoption
103A.  An entity that has adopted FRS 39 (issued 2003) before its effective date of 1 January 2005 shall apply the transitional provisions set out in paragraphs 104 to 108, except for paragraphs 106A and 106B.”.
“104.  This Standard shall be applied retrospectively except as specified in paragraphs 105, 106, 107, 107A and 108 (excluding paragraphs 106A and 106B). The opening balance of retained earnings for the earliest prior period presented and all other comparative amounts shall be adjusted as if this Standard had always been in use unless restating the information would be impracticable. If restatement is impracticable, the entity shall disclose that fact and indicate the extent to which the information was restated.”.
“105.  When this Standard is first applied, an entity is permitted to designate a previously recognised financial asset or financial liability as a financial asset or financial liability at fair value through profit or loss or available for sale despite the requirement in paragraph 9 to make such designation upon initial recognition. For any such financial asset designated as available for sale, the entity shall recognise all cumulative changes in fair value in a separate component of equity until subsequent derecognition or impairment, when the entity shall transfer that cumulative gain or loss to profit or loss. For any financial instrument designated as at fair value through profit or loss or available for sale, the entity shall:
(a)restate the financial asset or financial liability using the new designation in the comparative financial statements; and
(b)disclose the fair value of the financial assets or financial liabilities designated into each category and the classification and carrying amount in the previous financial statements.”.
“106.  An entity shall not adjust the carrying amount of non-financial assets and non-financial liabilities to exclude gains and losses related to cash flow hedges that were included in the carrying amount before the beginning of the financial year in which this Standard is first applied.  At the beginning of the financial period in which this Standard is first applied, any amount recognised directly in equity for a hedge of a firm commitment that under this Standard is accounted for as a fair value hedge shall be reclassified as an asset or liability, except for a hedge of foreign currency risk that continues to be treated as a cash flow hedge.”.
“First-time Adoption
106A.  When this Standard is first applied, an entity shall apply the transitional provisions set out in paragraphs 106B to 108. Early adoption shall be restricted to annual periods beginning on or after 1 January 2003.”.
“106B.  Retrospective application is not permitted (except as permitted by paragraph 108). The transition to this Standard is as follows:
(a)recognition, derecognition, measurement and hedge accounting policies followed in financial statements for periods prior to the effective date of this Standard shall not be reversed and, therefore, those financial statements shall not be restated;
(b)for those transactions entered into before the beginning of the financial year in which this Standard is initially applied that the entity did previously designate as hedges, the recognition, derecognition and measurement provisions of this Standard shall be applied prospectively. Therefore, if the previously designated hedge does not meet the conditions for an effective hedge set out in paragraph 88 and the hedging instrument is still held, hedge accounting shall no longer be appropriate starting with the beginning of the financial year in which this Standard is initially applied. Accounting in prior financial years shall not be retrospectively changed to conform to the requirements of this Standard. Paragraphs 91 and 101 explain how to discontinue hedge accounting;
(c)at the beginning of the financial year in which this Standard is initially applied, an entity shall recognise all derivatives in its balance sheet as either assets or liabilities and shall measure them at fair value (except for a derivative that is linked to and that must be settled by delivery of an unquoted equity instrument whose fair value cannot be measured reliably). Because all derivatives, other than those that are designated hedging instruments, are considered held for trading, the difference between previous carrying amount (which may have been zero) and fair value of derivatives shall be recognised as an adjustment of the balance of retained earnings at the beginning of the financial year in which this Standard is initially applied (other than for a derivative that is a designated hedging instrument);
(d)at the beginning of the financial year in which this Standard is initially applied, an entity shall apply the criteria in paragraphs 43-54 to identify those financial assets and liabilities that shall be measured at fair value and those that shall be measured at amortised cost, and it shall remeasure those assets as appropriate. An entity is permitted to designate a previously recognised financial asset or financial liability as a financial asset or financial liability at fair value through profit or loss or available for sale despite the requirement in paragraph 9 to make such designation upon initial recognition.  For any such financial asset designated as available for sale, the entity shall recognise all cumulative changes in fair value in a separate component of equity until subsequent derecognition or impairment, when the entity shall transfer that cumulative gain or loss to profit or loss. Any adjustment of the previous carrying amount shall be recognised as an adjustment of the balance of retained earnings at the beginning of the financial year in which this Standard is initially applied;”.
“(e)at the beginning of the financial year in which this Standard is initially applied, any balance sheet positions in fair value hedges of existing assets and liabilities shall be accounted for by adjusting their carrying amounts to reflect the fair value of the hedging instrument;
(f)if an entity’s hedge accounting policies prior to initial application of this Standard had included deferral, as assets and liabilities, of gains or losses on cash flow hedges, at the beginning of the financial year in which this Standard is initially applied, those deferred gains and losses shall be reclassified as a separate component of equity to the extent that the transactions meet the criteria in paragraph 88 and, thereafter, accounted for as set out in paragraphs 97-100; and
(g)transactions entered into before the beginning of the financial year in which this Standard is initially applied shall not be retrospectively designated as hedges.”.
“Early Adoption and First-time Adoption
107.  Except as permitted by paragraph 108, an entity shall apply the derecognition requirements in paragraphs 15-37 and Appendix A paragraphs AG36-AG52 prospectively.  Accordingly, if an entity derecognised financial assets under FRS 39 (issued 2003) as a result of a transaction that occurred before 1 January 2004 and those assets would not have been derecognised under this Standard, it shall not recognise those assets.”.
“107A.  Notwithstanding paragraph 104, an entity may apply the requirements in the last sentence of paragraph AG76, and paragraph AG76A, in either of the following ways:
(a)prospectively to transactions entered into after 25 October 2002; or
(b)prospectively to transactions entered into after 1 January 2004.”.
“108.  Notwithstanding paragraph 107, an entity may apply the derecognition requirements in paragraphs 15-37 and Appendix A paragraphs AG36-AG52 retrospectively from a date of the entity’s choosing, provided that the information needed to apply FRS 39 to assets and liabilities derecognised as a result of past transactions was obtained at the time of initially accounting for those transactions.”.
“109.  This Standard supersedes FRS 39 Financial Instruments: Recognition and Measurement issued in 2003.”.”.
(ii) Insert the following paragraphs immediately after paragraph AG76 of Appendix A to IAS 39:
“AG76A. The subsequent measurement of the financial asset or financial liability and the subsequent recognition of gains and losses shall be consistent with the requirements of this Standard. The application of paragraph AG76 may result in no gain or loss being recognised on the initial recognition of a financial asset or financial liability. In such a case, FRS 39 requires that a gain or loss shall be recognised after initial recognition only to the extent that it arises from a change in a factor (including time) that market participants would consider in setting a price.”.
”;
(d)by renumbering the existing paragraphs (iv) to (viii) in the third column of the item relating to FRS 39 as paragraphs (iii) to (vii), respectively;
(e)by inserting, immediately after the item relating to FRS 39, the following item:
“
FRS 40
Investment Property
 
IAS 40
(March 2004)
Investment Property
 
(i) Delete the following words in paragraph 80 of IAS 40:
“An entity that has previously applied IAS 40 (2000) and elects for the first time to classify and account for some or all eligible property interests held under operating leases as investment property shall recognise the effect of that election as an adjustment to the opening balance of retained earnings for the period in which the election is first made.”
and substitute the following words:
“Under the fair value model, an entity should report the effect of adopting this Standard on its effective date (or earlier) as an adjustment to the opening balance of retained earnings for the period in which the Standard is first adopted.”,
 
 
 
 
(ii) Delete “2005” in paragraph 85 of IAS 40 and substitute “2007”.
 
 
 
 
(iii) Delete the following words in paragraph 86 of IAS 40:
“Withdrawal of IAS 40 (2000)
86.  This Standard supersedes IAS 40 Investment Property (issued in 2000).”.
”; and
(f)by inserting, immediately after paragraph (ii) in the third column of the item relating to FRS 101, the following paragraphs:
“(iii)Insert, immediately after paragraph 13(j) of IFRS 1, the following paragraph:
“(k)fair value measurement of financial assets or financial liabilities at initial recognition (paragraph 25F).”
(iv)Insert, immediately after paragraph 25E of IFRS 1, the following paragraph:
“Fair value measurement of financial assets or financial liabilities
25F.  Notwithstanding the requirements of paragraphs 7 and 9, an entity may apply the requirements in the last sentence of FRS 39 paragraph AG76, and paragraph AG76A, in either of the following ways:
(a)prospectively to transactions entered into after 25 October 2002; or
(b)prospectively to transactions entered into after 1 January 2004.”.”.
Amendment of Fourth Schedule
3.  Paragraph 3 of the Fourth Schedule to the principal Regulations is amended ––
(a)by deleting the word “and” at the end of sub-paragraph (f); and
(b)by deleting the full-stop at the end of sub-paragraph (g) and substituting the word “; and”, and by inserting immediately thereafter the following sub-paragraph:
“(h)investments in financial assets to which FRS 39 Financial Instruments: Recognition and Measurement applies.”.
Amendment of Seventh Schedule
4.  The Seventh Schedule to the principal Regulations is amended —
(a)by inserting, immediately after the words “ SIC-12” in the second column of the item relating to INT FRS 12, the words “(Amendment November 2004)”; and
(b)by deleting paragraph (iii) in the third column of the item relating to INT FRS 12 and substituting the following paragraphs:
“(iii)Delete the paragraph under the heading “Effective Date” and substitute the following paragraph:
“INT FRS 12 comes into effect on 1st February 2003. Changes in accounting policies should be accounted for in accordance FRS 8. An entity shall apply the amendments for annual periods beginning on or after 1 January 2005. If an entity applies FRS 102 for an earlier period, the amendment shall be applied for that earlier period.”;
(iv)Delete the words in paragraph 6 of SIC-12 and substitute the following words:
“This Interpretation does not apply to post-employment benefit plans or other long-term employee benefit plans to which FRS 19 applies.”.
(v)Insert, immediately after paragraph 14 of SIC-12, the following paragraphs:
“15A.  In 2005, the scope of INT FRS 12 was amended. That Amendment is effective for annual periods beginning on or after 1 January 2005, unless an entity applied FRS 102 for an earlier period, in which case the Amendment is effective for that earlier period. Before that Amendment, INT FRS 12 excluded from its scope equity compensation plans and post-employment benefit plans. Paragraphs 15B-15E summarise the considerations in reaching its consensus to amend the scope of INT FRS 12.
15B.  The issue on whether the scope exclusion in INT FRS 12 for equity compensation plans should be removed when FRS 102 becomes effective was considered. Equity compensation plans were excluded from the scope of INT FRS 12 because they were within the scope of FRS 19 and that Standard did not specify recognition and measurement requirements for equity compensation benefits. However, once FRS 102 became effective, FRS 19 would no longer apply to equity compensation plans. FRS 102 specifies recognition and measurement requirements for equity compensation benefits.
15C.  Also, FRS 102 amended FRS 32, to state that paragraphs 33 and 34, which relate to the treatment of treasury shares, should be applied to treasury shares purchased, sold, issued or cancelled in connection with employee share option plans, employee share purchase plans, and all other share-based payment arrangements. However, in some cases, those shares might be held by an employee benefit trust (or similar entity) set up by the entity for the purposes of its share-based payment arrangements. Removing the scope exclusion in INT FRS 12 would require an entity that controls such a trust to consolidate the trust and, in so doing, to apply the requirements of FRS 32 to treasury shares held by the trust.
15D.  It was therefore concluded that, to ensure consistency with FRS 102 and FRS 32, the scope of INT FRS 12 should be amended by removing the exclusion of equity compensation plans.
15E.  At the same time, the scope exclusion in INT FRS 12 for post-employment benefit plans was discussed. It was noted that, although INT FRS 12 did not exclude other long-term employee benefit plans from its scope, FRS 19 nevertheless requires those plans to be accounted for in a manner similar to the accounting for post-employment benefit plans. It was therefore concluded that, to ensure consistency with FRS 19, the scope exclusion in INT FRS 12 should also apply to other long-term employee benefit plans.”.”.
[G.N. Nos. S 401/2004; S 412/2004; S 521/2004; S 561/2004]

Made this 16th day of March 2005.

J Y PILLAY
Chairman,
Council on Corporate
Disclosure and Governance,
Singapore.
[F200402551T; AG/LEG/SL/50/2002/1 Vol. 8]
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