OVERVIEW OF FRS 109
Classification and Measurement of Financial Instruments
(a) Financial assets are measured at their fair value at initial recognition, and subsequently measured at amortised cost (using the effective interest method), FVOCI or FVTPL.
Fair value as defined in FRS 113 is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
(b) All financial liabilities are classified as subsequently measured at amortised cost (using the effective interest method), except for certain financial liabilities (including derivatives liabilities) which are measured at FVTPL.
Impairment – Recognition of ECL
(a) An entity recognises a loss allowance for ECL on a financial asset (being a debt instrument) that is measured at amortised cost or at FVOCI, a lease receivable, a contract asset or a loan commitment and a financial guarantee contract.
(b) At each reporting date, an entity assesses whether the credit risk on a financial instrument has increased significantly since initial recognition and recognises ECL as follows:
(i) 12-month ECL
Where the credit risk on a financial instrument has not increased significantly since initial recognition or if the financial instrument is determined to have low credit risk at the reporting date, the loss allowance for that financial instrument is measured at an amount equal to 12-month ECL.
(ii) Lifetime ECL – Not a credit-impaired financial asset
Where the credit risk on a financial instrument has increased significantly since initial recognition before the financial asset becomes credit-impaired at the reporting date, the loss allowance for that financial instrument is measured at an amount equal to lifetime ECL.
(iii) Lifetime ECL – Credit-impaired financial asset
Where the credit risk on a financial instrument has increased significantly since initial recognition and the financial asset is credit-impaired at the reporting date, the loss allowance for that financial instrument is measured at an amount equal to lifetime ECL.
Credit-impaired financial asset as defined in Appendix A of FRS 109 is where a financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred.
(c) For loan commitments, an entity considers changes in the risk of a default occurring on the loan to which a loan commitment relates. For financial guarantee contracts, an entity considers the changes in the risk that the specified debtor will default on the contract. The loss allowance for loan commitments and financial guarantee contracts is recognised as a provision.
(d) If the loss allowance for a financial instrument is measured at an amount equal to lifetime ECL in the previous reporting period, but it is determined at the current reporting date that the credit risk on the financial instrument has not increased significantly since initial recognition, the loss allowance for that financial instrument is measured at an amount equal to 12-month ECL at the current reporting date.
(e) The amount of ECL (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised under FRS 109 is recognised in the profit or loss as an impairment loss or gain.
(f) For trade receivables or contract assets that result from transactions that are within the scope of FRS 115 and lease receivables that result from transactions that are within the scope of FRS 116, FRS 109 provides for a simplified approach to always measure the loss allowance at an amount equal to lifetime ECL.
Gains and losses
(a) For a financial asset or financial liability that is measured at FVTPL, the unrealised gain or loss is recognised in the profit or loss.
(b) For a financial liability designated as at FVTPL, the unrealised gain or loss representing the effects of changes in the credit risk of that financial liability is presented in OCI. However, if the presentation in OCI would create or enlarge an accounting mismatch in the profit or loss, all unrealised gain or loss (including the effects of changes in the credit risk of that financial liability) on that financial liability is recognised in profit or loss. The presentation of the effects of changes in a liability’s credit risk in OCI is not applicable to loan commitments and financial guarantee contracts that are designated as at FVTPL, all gains and losses on such loan commitments and financial guarantee contracts are recognised in the profit or loss.
(c) For an investment in equity instrument that is designated at FVOCI, the unrealised gain or loss including any related foreign exchange gains or losses is recognised in OCI. Amounts presented in OCI are never transferred to the profit or loss, not even when the equity instrument is derecognised. However, the cumulative gain or loss may be transferred within equity.
(d) For an investment in debt instrument that is measured at FVOCI, the unrealised gain or loss is recognised in OCI. However, impairment gains or losses and foreign exchange gains and losses are recognised in the profit or loss. When the debt instrument is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from OCI to the profit or loss. Interest calculated using the effective interest method is recognised in the profit or loss.
(e) For a financial asset or financial liability that is measured at amortised cost, a gain or loss is recognised in the profit or loss when the financial asset or financial liability is derecognised and through the amortisation process. Impairment gains or losses and foreign exchange gains and losses are recognised in the profit or loss. Interest calculated using the effective interest method is recognised in the profit or loss.
Tax Treatment arising from the adoption of FRS 109
(a) The IRAS has issued a revised e-Tax Guide – Income Tax Treatment Arising from Adoption of FRS 109 – Financial Instruments on 22 November 2017.
(b) The e-Tax Guide provides guidance on the tax treatment for entities adopting FRS 109.
Fundamentals of FRS 109
(a) The Accounting Standards Council issued FRS 109 Financial Instruments in December 2014. FRS 109, which replaces FRS 39, applies to entities for financial periods beginning on or after 1 January 2018.
Under FRS 109, financial assets are classified on the basis of:
– the business model within which they are held, and
– their contractual cash flow characteristics.
FRS 109 introduces a “fair value through other comprehensive income” (FVOCI) measurement category, while removing the:
– held-to-maturity
– loans and receivables, and
– available-for-sale
categories.
(b) FRS 109 also introduces requirements relating to a financial liability designated at “fair value through profit or loss” (FVTPL), to address the fair value changes attributable to the changes in the credit risk of that financial liability. Any such attributed fair value gain or loss is to be presented in “other comprehensive income” (OCI) unless there is an accounting mismatch.
(c) As for impairment requirement, it is no longer necessary for a loss event to have occurred before impairment losses are recognised under FRS 109. Instead, an entity always accounts for expected credit losses.
(d) On the hedge accounting requirements under FRS 109, where the time value of an option contract was not designated as a hedging instrument under FRS 39, an entity must apply retrospectively the hedge accounting rules under FRS 109 to present in OCI the change in the time value of that option contract. The hedge accounting rules to present in OCI under FRS 109 also apply to the:
– forward element of a forward contract, and
– foreign currency basis spread
of a financial instrument where the forward element and foreign currency basis spread were not designated as a hedging instrument under FRS 39.
SECTION 34AAA TAX TREATMENT – Adjustment on change of basis of computing profits of financial instruments resulting from FRS 109
(a) Section 34AA(1) (in operation on 26 October 2017) provides that, with certain exceptions, any amount:
– chargeable with or exempt from tax, or
– allowable as a deduction
in respect of any financial instrument of a qualifying person for the purposes of sections 10, 14, 14I and 37, respectively, is that which, in accordance with FRS 109, is recognised in determining the profit, loss or expense in respect of that financial instrument for that year of assessment.
Qualifying person to section 34AA tax treatment
(a) In relation to any year of assessment, the qualifying person means:
(i) in the case of a YA of a basis period beginning on or after 1 January 2018 (which is the operative date of FRS 109), a person who is required to prepare or maintain financial accounts in accordance with FRS 109 for that basis period,
(ii) in the case of a YA for a basis period beginning on a date before 1 January, a person who chooses to prepare financial accounts in accordance with FRS 109 for that basis period,
(iii) in any case, a person who applies to the CIT to be subject to section 34AA.
(b) Section 34AA does not apply to entities that do not need to comply with FRS 109 for accounting purposes, e.g. eligible small entities that chosen to comply with the SFRS for Small Entities.
Exceptions to section 34AA adjustment
Section 34AA(3) provides for certain exceptions to section 34AA(1), including:
(a) Negotiable certificate of deposit – where a qualifying person to whom section 10(12)(b) applies derives interest from a negotiable certificate of deposit or derives a gain or profit from the sale of that certificate, the person’s income from that certificate or sale must be treated in the manner set out in section 10(12);
(b) Debt securities – where a qualifying person derives interest from debt securities, the interest that is chargeable to tax under section 10(1)(d) is the amount computed at the contractual interest rate and not at the effective interest rate;
(c) Interest-free loan – any amount of profit or expense in respect of a loan for which no interest is payable must be disregarded;
(d) Non-arm’s length loans – the interest income chargeable to tax, and the interest expense allowable as a deduction, are the amounts of such income and expense that are computed at the contractual interest rate and not at the effective interest rate;
(e) Interest expense – in a case where section 14(1)(a) applies, only interest expense incurred in respect of the money borrowed and computed at the contractual interest rate is allowed as a deduction under that provision;
(f) Hedging instrument – where the underlying asset or liability is on capital account will be disregarded, i.e. the profit or loss (realised or unrealised) will not be taxed or allowed as a deduction.
Where the underlying asset or liability is on revenue account, the profit or loss (whether realised or unrealised) will be taxed or allowed as a deduction;
(g) Financial instrument – any amount of expected credit losses of a financial instrument that is not credit-impaired, being losses that are recognised in accordance with FRS 109 in determining the profit or loss of such instrument, must be disregarded;
(h) Banks and finance companies – in the case where the qualifying person is a bank or qualifying finance company, the provisions in section 14I apply (subject to the regulations made under section 34AA(13)(a)) in relation to a provision made by the qualifying person for an expected credit loss arising from loans or securities that are not credit-impaired, as those provisions apply in relation to a provision for doubtful debts arising from the person’s loans or for diminution in the value of the person’s investments in securities;
(i) Equity instrument – where an equity instrument on revenue account of a qualifying person that is measured at “fair value through other comprehensive income” (FVTOCI) is disposed of, an amount prescribed as the gain or loss to the qualifying person on such disposal, is chargeable to tax, or is to be allowed as a deduction;
(j) Discounts and premiums on debt securities – a gain from discounts or premiums on debt securities, being a gain chargeable to tax under section 10(1)(d) –
(i) is treated as accruing only on the maturity or redemption of the debt securities; and
(ii) is treated as equal to the difference between the amount received on the maturity or redemption of the debt securities and the amount for which the debt securities were first issued;
(k) Debt securities at a premium – where a qualifying person issues debt securities at a discount or redeems issued debt securities at a premium, and section 14(1)(a) applies in respect of the outgoing represented by such discount or premium, such outgoing is treated to be incurred and deductible only when it is paid on the maturity or redemption of the debt securities and –
(i) for debt securities issued in the basis period relating to the year of assessment 2008 or subsequent years of assessment, is treated as equal to the difference between the amount paid on the maturity or redemption of the debt securities and the amount for which the debt securities were first issued; or
(ii) for debt securities issued before the basis period relating to the year of assessment 2008, is treated as equal to the part of the difference in sub-paragraph (i) that would be attributable to the year of assessment 2008 and subsequent years of assessment;
(l) Debt securities with an embedded derivative – in a case where –
(i) a qualifying person issues debt securities at a discount or redeems issued debt securities at a premium;
(ii) the debt securities were issued with an embedded derivative to acquire shares or units in the qualifying person; and
(iii) the outgoing represented by such discount or premium is deductible under section 14(1),
such part of the outgoing that is attributable to the embedded derivative is not deductible;
(m) Financial instrument on revenue account – where a financial instrument on revenue account of a qualifying person (being a financial liability measured at fair value through profit or loss) matures or is sold, bought back or redeemed, any gain or loss to the qualifying person that is realised on such maturity or from such sale, buy back or redemption (being a gain or loss that is recognised in other comprehensive income in accordance with FRS 109) is chargeable to tax, or is to be allowed as a deduction.
When a gain, loss or expense in on the Contrary
(a) Section 344AA(7) provides for a case where:
(i) any gain relating to a financial instrument and recognised under FRS 109 was not taxed because it was treated as capital in nature, and
(ii) any loss or expense relating to a financial instrument and recognised under FRS 109 was allowed as a deduction because it was treated as revenue in nature.
If:
(i) the gain is later discovered to be revenue in nature, or
(ii) the loss or expense discovered to be capital in nature,
then:
(i) the gain, loss or expense, together with
(ii) any previous gain, loss or expense
in respect of the instrument that was similarly mischaracterised, is treated as income for the YA that is the year in which the discovery takes place.
(b) No assessment for that income may be made after the period of four years after the end of the YA of the basis period in which the instrument is disposed of.
Additional amount from section 34AA(7) relates to the same financial instrument
(a) Section 344AA(8) Where:
(i) any gain relating to a financial instrument and recognised under FRS 109 was taxed because it was treated as revenue in nature, and
(ii) any loss or expense relating to a financial instrument and recognised under FRS 109 was not allowed as a deduction because it was treated as capital in nature,
and
(i) the gain was later discovered to be capital in nature, or
(ii) the loss or expense discovered to be revenue in nature,
then a deduction is to be allowed for:
(i) the gain, loss or expense, as well as
(ii) any previous gain, loss or expense
in respect of the instrument that was similarly mischaracterised, for the YA that is the year in which the discovery takes place.
(b) No claim for such deduction may be made after the period of four years after the end of the YA of the basis period in which the instrument is disposed of.
(c) The provisions in section 34AA(7) and section 34AA(8) are necessary because unrealised gains, losses or expenses may be recognised under FRS 109, before their true nature becomes known.
Gains and losses or expenses recognised before an entity qualifies for section 34AA treatment
(a) Section 34AA(13) enables regulations to be made for various transitional matters, including regulations:
(i) to treat as the income of a person an amount of profit recognised under FRS 109 as the person’s profit before the person becomes a qualifying person, and
(ii) allowing a deduction to a person for an amount of loss or expense recognised under FRS 109 as the person’s loss or expense before the person becomes a qualifying person.
(b) Such regulations may be made, e.g. to deal with the “transitional” gains, losses or expenses for financial instruments of persons who had previously elected not to be subject to the tax treatment under section 34A, but who then become subject to section 34AA.
FRS 109 TAX TREATMENT
(a) Where an entity adopts FRS 109 for accounting purpose, the tax treatment of its financial assets and financial liabilities will generally follow the accounting treatment from the YA of the basis period in which FRS 109 is first applied, except where specific tax treatment has been established under case law or provided under the statutes, or where accounting treatment deviates significantly from tax principles (FRS 109 tax treatment).
(b) Unless an election is made, the FRS 109 tax treatment does not apply to entities that do not need to comply with FRS 109 for accounting purpose, e.g. eligible small entities that chosen to comply with the SFRS for Small Entities.
Financial Assets
Financial assets measured at FVTPL (including those designated as at FVTPL)
(a) For or financial assets on revenue account, tax treatment is aligned with the accounting treatment under FRS 109 (similar to the FRS 39 tax treatment).
This means that all gains or losses (including related exchange differences) recognised in the profit or loss will be taxed or allowed as a deduction, even though they are not realised.
(b) For financial assets on capital account, entities is required to submit an itemised list of these assets, including those that are derecognised during the year, to the CIT for his determination whether the assets are indeed on capital account.
The list should be submitted yearly together with the income tax return.
Where the CIT has agreed that the financial assets are on capital account, any gains or losses (including related exchange differences) recognised in the profit or loss will not be taxed or allowed as a deduction.
In such a case, the entity has to track the gains or losses recognised in the profit or loss and make the necessary tax adjustments.
Financial assets measured at FVOCI
(a) For equity instruments measured at FVOCI, all gains or losses (including related exchange differences) on such instruments are recognised in OCI.
At the time of derecognition, the cumulative gains or losses previously recognised in OCI are not transferred to the profit or loss.
To determine the appropriate tax adjustments to be made in the YA of the basis period in which an equity instrument is derecognised, entities are provide the CIT with an itemised list of equity instruments derecognised; including information such as disposal proceeds, cost/carrying amount at DIA, cumulative gain or loss previously recognised in OCI and whether an equity instrument was held on capital or revenue account.
The list should be submitted together with the tax return for the YA of the basis period in which an equity instrument is derecognised.
For the derecognition of equity instruments on revenue account, tax adjustments will be made in the tax computations to bring to tax or allow as a deduction (as the case may be) the cumulative gains or losses previously recognised in OCI.
(b) For debt instruments measured at FVOCI, the tax treatment as follows:
(i) Debt instrument on revenue account
Fair value gain or loss recognised in OCI will not be taxed or allowed as a deduction.
Cumulative gains or losses previously recognised in OCI, which are transferred to the profit or loss at the time of derecognition of the instrument, will be taxed or allowed as a deduction.
Impairment loss, reversal amount of impairment loss and foreign exchange gain or loss recognised in the profit or loss will be taxed or allowed as a deduction.
Interest income based on the amount recognised in the profit or loss, which is calculated using the effective interest method under FRS 109, will be taxed.
(ii) Debt instrument on capital account
Fair value gain or loss recognised in OCI will not be taxed or allowed as a deduction.
Cumulative gains or losses previously recognised in OCI, which are transferred to the profit or loss at the time of derecognition of the instrument, will not be taxed or allowed as a deduction.
Tax adjustments are required.
Impairment loss, reversal amount of impairment loss and foreign exchange gain or loss recognised in the profit or loss will not be taxed or allowed as a deduction. Tax adjustments are required.
Interest income recognised in the profit or loss under FRS 109 will be adjusted to that computed based on the coupon/contractual interest rate (for debt securities) and that computed based on the provisions of section 10(12) (for negotiable certificates of deposit).
For discount/premium derived from debt securities, tax adjustment will be made to assess such discount/ premium to tax upon maturity or redemption of the debt securities in accordance with the provisions of section 10(8A).
Tax adjustments are required.
(c) For debt instruments on capital account, the requirements to provide a yearly listing and to track the gains or losses (exchange differences and impairment) recognised in the profit or loss are also applicable.
Financial assets measured at amortised cost
(a) The tax treatment for debt instruments measured at amortised cost is the same as that for debt instruments measured at FVOCI.
Where a debt instrument on revenue account is derecognised, any gain or loss on the derecognition of that instrument recognised in the profit or loss will be taxed or allowed as a deduction.
For debt instruments on capital account, the requirements to provide a yearly listing and to track the gains or losses (exchange differences and impairment) recognised in the profit or loss are also applicable.
Financial Liabilities
(a) Under FRS 109, all financial liabilities are measured at amortised cost, except for certain financial liabilities that are measured or designated as at FVTPL.
(b) The classification and measurement of financial liabilities are largely similar to those under FRS 39, except for fair value changes attributable to the changes in the credit risk of a financial liability that is designated as at FVTPL.
Financial liabilities designated as at FVTPL
(a) All gains or losses (including related exchange differences) on a financial liability that is measured at FVTPL are recognised in the profit or loss, except for the amount of gain or loss that is attributable to the changes in the credit risk of that financial liability.
Such attributed gain or loss on the effects of changes in the financial liability’s credit risk will be recognised in OCI under FRS 109.
However, where the presentation in OCI would create or enlarge an accounting mismatch in the profit or loss, such attributed gain or loss continues to be recognised in the profit or loss.
Under FRS 39, gain or loss on the effects of changes in a financial liability’s credit risk was recognised in the profit or loss.
(b) Tax treatment for financial liabilities measured or designated as at FVTPL are as follows:
(i) Financial liability on revenue account
Gain or loss (including related exchange differences and the effects of changes in the credit risk of the financial liability) recognised in the profit or loss will be taxed or allowed as a deduction, even though they are not realised.
Gain or loss on the effects of changes in the financial liability’s credit risk recognised in OCI will not be taxed or allowed as a deduction.
Cumulative gains or losses on the effects of changes in the financial liability’s credit risk previously recognised in OCI, which are not transferred to the profit or loss at the time of derecognition of that liability, will be taxed or allowed as a deduction.
Tax adjustments are required.
Interest expense, borrowing cost and the related exchange differences recognised in the profit or loss will be allowed as a deduction.
(ii) Financial liability on capital account
Gain or loss (including related exchange differences and the effects of changes in the credit risk of the financial liability) recognised in the profit or loss will not be taxed or allowed as a deduction.
Tax adjustments are required
Gain or loss on the effects of changes in the financial liability’s credit risk recognised in OCI will not be taxed or allowed as a deduction.
Cumulative gains or losses on the effects of changes in the financial liability’s credit risk previously recognised in OCI, which are not transferred to the profit or loss at the time of derecognition of that liability, will not be taxed or allowed as a deduction
Tax treatment on interest expense, borrowing cost and the related exchange differences, please refer to paragraph below on “Financial liability on capital account – Interest expense, borrowing cost and related exchange differences”.
Financial liabilities measured at amortised cost
(a) Tax treatment for financial liabilities measured at amortised cost are as follows:
(i) Financial liability on revenue account
Exchange differences (realised or unrealised) recognised in the profit or loss will be taxed or allowed as a deduction.
Gain or loss recognised in the profit or loss at the time of derecognition of the financial liability will be taxed or allowed as a deduction.
Interest expense and borrowing cost (both calculated using the effective interest method under FRS 109) and the related exchange differences recognised in the profit or loss will be allowed as a deduction.
(ii) Financial liability on capital account
Exchange differences recognised in the profit or loss will not be taxed or allowed as a deduction.
Gain or loss recognised in the profit or loss at the time of derecognition of the financial liability will not be taxed or allowed as a deduction.
Tax adjustments are required.
Tax treatment on interest expense, borrowing cost and the related exchange differences, please refer to paragraph below on “Financial liability on capital account – Interest expense, borrowing cost and related exchange differences”.
Financial liability on capital account – Interest expense, borrowing cost and related exchange differences
(a) Interest expense and borrowing cost (including related exchange differences) recognised in the profit or loss under FRS 109 will not be allowed as a deduction.
Only interest expense incurred based on contractual interest rate and the related exchange differences on the payment of interest will be allowed as a deduction under section 14(1)(a)(i).
Borrowing cost (other than interest expense) which is incurred as a substitute for interest expense or to reduce interest cost (known as “prescribed borrowing cost”) will be allowed as a deduction under section 14(1)(a)(ii).
Where such borrowing cost is in the form of a discount or premium on redemption of debt securities (including the redemption of convertible debt securities), the deduction under section 14(1)(a)(ii) is allowed as a deduction only at the time the discount or premium is incurred by the issuer (i.e. at maturity or redemption of debt securities), and the deduction is given in respect of the difference between the redemption price and the issue price of the debt securities.
(b) The above tax treatment also applies to an issuer that issues debt securities that are convertible to another company’s shares (commonly known as exchangeable debt securities).
Financial liability (whether on revenue account or on capital account) – Convertible debt securities
(a) An issuer of convertible debt securities (which provide an option to the holder of debt securities to convert its debt securities to the issuer’s own shares) is required to reflect the liability and equity components of such debt securities separately on the issuer’s balance sheet.
At initial recognition, the issuer is required to fair value the liability component (as if there was no equity component), and the equity component will be the difference between the fair value of the convertible debt securities as a whole and the fair value of the liability component.
Subsequently, the issuer is required to amortise the discount/premium to the profit or loss, where the discount/premium is the difference between the redemption price and the liability component initially recognised in the financial statements.
(b) For tax purpose, the discount/premium attributable to the equity component or the embedded derivative (which is the option to convert the debt securities into equity) is not allowable as a deduction.
This is because there is no actual cash outlay and such discount/premium is capital in nature (being related to the issuer’s share capital). This is notwithstanding that the discount/premium attributable to the liability component may be allowable as a deduction under section 14(1).
Tax adjustment is required.
Impairment
(a) The key changes in impairment requirements under FRS 109 are as follows:
(i) Impairment methodology
Under the FRS 39 incurred loss model, impairment losses are only recognised in the profit or loss when there is objective evidence of impairment as a result of loss events.
Under the FRS 109 ECL model, impairment losses, which represent 12-month ECL or lifetime ECL, are recognised when there is some risk of default or even in the absence of loss events.
(ii) Recognition and measurement of impairments in respect of financial guarantee contracts and loan commitments
Impairments were previously recognised and measured as a provision under FRS 37 Provisions, Contingent Liabilities and Contingent Assets.
Such impairments are now recognised and measured as a provision for ECL under FRS 109.
(b) Impairment losses recognised in the profit or loss in respect of credit-impaired financial instruments (including debt instruments, lease receivables, contract assets or loan commitments and financial guarantee contracts (paragraph 5.5.1 of FRS 109)) that are on revenue account are allowable as a deduction.
Any reversal amount subsequently recognised in the profit or loss is taxable and indexation (the adjustment to compensate for the reduction of tax rate between the YA a deduction was allowed to the YA the same amount is brought back to tax) is not required in respect of the amount reversed.
(c) No deduction will be allowed for impairment losses in respect of the following:
(i) Credit-impaired financial instruments that are on capital account;
(ii) Non-credit-impaired financial instruments (whether on revenue or capital account).
Special rules for impairment of financial instruments on revenue account for banks (including merchant banks) and qualifying finance companies under section 14I(7) in certain circumstances
(a) The impairment losses on non-credit-impaired loans and debt securities recognised in the profit or loss of banks, merchant banks and qualifying finance companies will be allowed as a deduction till YA 2019 or YA 2020, depending on their financial year end.
(b) Banks, merchant banks and qualifying finance companies must satisfy the provisions in section 14I for the purpose of determining an amount of impairment to be allowed as a deduction.
The prescribed value of investments in securities as referred to in section 14I(5), will exclude the prescribed value of investment in equity instrument.
Any subsequent reversal amount of the impairment is taxable to the extent that the impairment was allowed as a deduction under section 14I.
Indexation of the taxable amount is not required.
Transfer of loans by banks (including merchant banks) and finance companies
(a) When a bank or finance company (“transferor”) transfers to another entity (“transferee”) a credit-impaired loan and a cumulative amount of impairment losses for that credit-impaired loan for which a deduction was previously allowed to the transferor, the tax treatment in the table below will apply.
When both Transferor and Transferee* is a bank or finance company
The deduction of impairment loss previously allowed to the transferor is treated as having been allowed to the transferee.
Any subsequent reversal amount of that impairment loss is treated as a trading receipt of the transferee in the YA of the basis period in which the reversal amount is recognised in the profit or loss.
No indexation of the reversal amount is required.
When Transferor is a bank or finance company and Transferee* is a non-bank or non-finance company
The deduction of impairment loss previously allowed to the transferor is treated as a trading receipt of the transferor in the YA of the basis period in which the date of transfer falls.
*on the date of transfer of credit-impaired loan.
(b) Where the transfer by a bank or qualifying finance company is in respect of a non-credit-impaired loan, the same tax treatment shown above will apply. This is provided in section 14I.
Hedging Instruments
General tax treatment
(a) For a hedging instrument that is acquired under a bona fide commercial arrangement for the sole purpose of hedging against any risk associated with an underlying asset or liability, the following tax treatment applies:
(i) Where the underlying asset or liability is on revenue account (e.g. trade receivables, and trade payable arising from inventory purchase), any gain or loss (realised or unrealised) in respect of the hedging instrument that is recognised in the profit or loss will be taxed or allowed as a deduction.
(ii) Where the underlying asset or liability is on capital account, any gain or loss on hedging instrument recognised in the profit or loss will not be taxed or allowed as a deduction. Tax adjustment is required.
(b) Where the underlying asset or liability on hedging instrument is recognised in OCI (whether on revenue or capital account), the gain or loss will not be taxed or allowed as a deduction.
Option agreement as a hedging instrument
(a) An option contract is an agreement between two parties, i.e. an option issuer and an option holder, where the option issuer provides the option holder with a right but not an obligation to buy or sell an underlying asset or instrument (i.e. the underlying hedged item) at a specific strike price within a specified period or on a specified date.
For the provision of this right, the option issuer will charge and the option holder will pay, a premium (known as the “option premium”) under the option agreement.
(b) The value of an option contract comprises two parts – intrinsic value (the difference between the market value of the underlying and the strike price of the option) and time value (equal to the option premium minus intrinsic value).
For accounting purpose, where the time value of an option is excluded from hedge accounting, the change in fair value of the time value of the option is accounted for at FVTPL under FRS 39 and thus recognised in the profit or loss; whereas it must be recognised in OCI under FRS 109 which is to be applied retrospectively.
The cumulative amount of change in fair value of the time value in OCI is subsequently either amortised to the profit or loss or adjusted against the initial cost of the underlying hedged item.
The tax treatment at paragraph (a) of “general tax treatment” will apply to cases where the cumulative amount in OCI is subsequently amortised to the profit or loss.
(c) Where the cumulative amount in OCI is adjusted against the initial cost of the underlying hedged item, and the underlying hedged item relates to a qualifying machinery or plant for the purpose of claiming capital allowance under section 19 or 19A, the amount of option premium that is included in the cost of the machinery or plant will not qualify for capital allowance.
This is because option premium is a cost incurred to acquire a right under an option contract and thus it is not regarded as part of the cost of a machinery or plant for tax purpose.
Tax adjustment is required.
Interest-Free Loans & Non-Arm’s Length Loans
Interest-free loans (measured using effective interest method)
(a) Where an interest-free loan is measured using the effective interest method, an effective interest rate is imputed using a comparable market interest rate (of say 5%). The “loss” (or “gain”) will be recognised in the profit or loss, either immediately at initial recognition of the loan or amortised over the life of the loan.
As such “interest income” or “interest expense” imputed based on the market interest rate (of say 5%) recognised in the profit or loss over the life of the loan are merely book entries, “gain” or “loss” will not be taxed and allowed as a deduction.
Tax adjustments will be required to disregard these items.
Loans at below-market interest rate (measured using effective interest method)
(a) The accounting treatment for an interest-free loan is also applicable to a loan at below-market interest rate.
An example of a loan at a below-market interest rate is a loan provided by an employer to its employees (as a form of employee benefit) at an interest rate of say 1% when the market interest rate is say 5%. There will be a “deferred staff cost” recognised at initial recognition of the loan.
Depending on the condition(s) attached to the loan, such “deferred staff cost” may be recognised immediately to the profit or loss, or amortised and recognised in the profit or loss over the life of the loan.
Apart from the interest received computed based on the contractual interest rate of say 1%, there will be an “interest income” recognised in the profit or loss over the life of the loan which is imputed based on the market interest rate of say 5%, and and the amount of “deferred staff cost” that are recognised in the profit or loss, over the life of the loan, adds up to the total amount of interest received computed based on the contractual interest rate.
The imputed “interest income” recognised in the profit or loss will not be taxed and the “deferred staff cost” recognised in the profit or loss will not be allowed as a deduction because they are merely book entries.
For tax purpose, only the interest income computed based on the contractual interest rate will be taxed.
Tax adjustments will be required.
Non-arm’s length loans (measured using effective interest method)
(a) For a non-arm’s length loan, the accounting treatment and the tax treatment are similar to those of an interest-free loan and a loan at below-market interest rate.
Any imputed “interest income” and any imputed “interest expense”) recognised in the profit or loss will not be taxed or allowed as a deduction because they are merely book entries.
Tax adjustments will be required.
For tax purpose, only interest expense computed based on contractual interest rate will be allowed as a deduction and interest income computed based on contractual interest rate will be taxed.
The CIT may make further adjustment to the interest income or interest expense based on the arm’s length principle in section34D.
YA of Adjustment where a Financial Instrument is Discovered to be on Revenue Account instead of on Capital Account and Vice Versa
(a) Where in any YA, there is information showing that a financial instrument (regardless of an asset or a liability) ought to be regarded as on revenue account instead of on capital account, or vice versa, instead of revising or amending the assessments for the earlier YAs, all the tax adjustments in respect of the gains or losses (unrealised or realised) of that financial instrument that were previously recognised in the profit or loss will be made in the YA in which the financial instrument is discovered to be regarded as such.
The same tax treatment will also apply to the gain or loss in respect of the related hedging instruments.
(b) Despite the above, any additional assessment must be made within the period of 4 years beginning immediately after the end of the YA of the basis period in which the financial instrument is disposed of.
(c) As for the issuance of any amended assessment, a claim must be made by the entity within the period of 4 years beginning immediately after the end of the YA of the basis period in which the financial instrument is disposed of.
VALUE OF ASSETS TO BE USED IN THE TOTAL ASSET METHOD FOR COMPUTING INTEREST ADJUSTMENT
(a) Previously, for entities who have not opted out of FRS 39 tax treatment, by default, the value of financial assets to be used in the TAM when making interest adjustment is the value reported in the balance sheet without adjustment for any impairment allowances made and valuation surplus/deficit.
Despite the default treatment, entities may elect to use the historical cost of the financial assets as the value of the assets when making interest adjustments using the TAM.
Once elected, the historical cost must be applied consistently.
(b) Entities who were on FRS 39 tax treatment and had previously elected to use historical cost as the value of their financial assets for TAM purpose, can continue to use the historical cost as the value of their financial assets for TAM purpose when they transit into FRS 109 tax treatment.
These entities must continue to track the historical costs of all assets separately and keep proper records on such costs.
(c) For entities who did not make an election to use historical cost as the value of their financial assets for TAM purpose while they were on FRS 39 tax treatment (includes those who have made an election to use historical cost while they were on FRS 39 tax treatment but have subsequently opted to use the value of the financial assets as shown in the balance sheet), the election is no longer available to them after they transit into FRS 109 tax treatment.
These entities will continue to use the value of financial assets reported in balance sheet as the value of assets for TAM purpose.
Where such entities have entered into an option agreement to hedge against the cost of the acquisition of their machinery or plant, the value of the machinery or plant to be used for TAM purpose is the cost of the machinery or plant without the amount of option premium.
(d) While the default treatment for the value of financial assets to be used for TAM purpose under FRS 109 tax treatment is the value of the financial assets reported in balance sheet, entities whose first set of financial accounts is prepared and maintained in accordance with FRS 109 and who wish to use the historical cost of their financial assets as the value of assets for TAM purpose, can submit a written election (or a tax computation using the historical cost of its financial assets as the value of assets when making interest adjustment using the TAM) to the CIT together with their first income tax return.
Once an election is made, these entities must ensure that:
(i) The historical costs of all financial assets are tracked separately;
(ii) Proper records on the cost of all financial assets are kept; and
(iii) The historical cost is applied consistently to the TAM when making interest adjustments.
(e) The following entities, that have previously elected to use historical cost of their financial assets as the value of assets for TAM purpose, will continue to apply the historical cost consistently:
(i) Entities that do not need to comply with FRS 109
(ii) Insurer that apply the temporary exemption from FRS 109
(f) Regardless of when the election to use historical cost is made (i.e. when under FRS 39 tax treatment or FRS 109 tax treatment), entities may, at any time thereafter, exercise an irrevocable option to use the value of their financial assets as shown in the balance sheet as the value of assets for TAM purpose.
Transition to FRS 109 Tax Treatment
(a) When FRS 109 is first applied for accounting purpose (i.e. at DIA), an entity may have to reclassify its financial assets and financial liabilities and re-measure the carrying amounts of the reclassified financial assets and financial liabilities in accordance with FRS 109.
Any difference between the re-measured carrying amount at the beginning of the financial year in which FRS 109 is first applied (re-measured carrying amount at DIA) and the end of the financial year immediately before the DIA (previous carrying amount), which represents the unrealised gain or unrealised loss, is recognised in the retained earnings at the beginning of the financial year in which FRS 109 is first applied (opening retained earnings at DIA) or other components of equity, as appropriate.
(b) In addition, the entity must apply the impairment requirements in accordance with FRS 109 for the recognition and measurement of a loss allowance for a financial asset, a lease receivable, a contract asset or a loan commitment and a financial guarantee contract. Any difference between –
(i) the opening loss allowance at DIA determined in accordance with FRS 109; and
(ii) the ending impairment allowance in accordance with FRS 39 or provision in accordance with FRS 37,
which represents the impairment loss or impairment gain (i.e. reversal), is recognised in the opening retained earnings at DIA.
Loss allowance is defined in FRS 109 to mean the allowance for ECL on financial assets measured at amortised cost, lease receivables and contract assets, the accumulated impairment amount for financial assets measured at FVOCI and the provision for ECL on loan commitments and financial guarantee contracts.
Ending impairment allowance or provision refer to the amount of impairment allowance and provision as at the end of the financial year immediately before the DIA.
(c) The unrealised gain or loss and the impairment loss or gain, recognised at DIA, are collectively known as the transitional accounting adjustment.
Where the transitional accounting adjustment is recognised in other components of equity at DIA, there will be no tax adjustment required.
Where the transitional accounting adjustment is recognised in the opening retained earnings at DIA, it may, under certain circumstances, be subject to tax or allowed as a deduction in the YA of the basis period in which FRS 109 is first applied (“transitional YA”).
The transitional YA is also the first YA in which FRS 109 tax treatment applies.
Transition from FRS 39 Tax Treatment to FRS 109 Tax Treatment
(a) The tables below show the applicable tax treatment for transitional accounting adjustments that are recognised in the opening retained earnings at DIA.
Entities are required to show the details of how each tax adjustment is arrived at in their tax computations and must keep sufficient documents to support the tax adjustments.
Entities are not required to submit the documents with their tax returns but must do so upon the CIT’s request.
| C&M under | Tax treatment in transitional YA | ||
| FRS 39 | FRS 109 | ||
| Financial Asset – Equity Instrument | |||
| (i) | AFS/ Unquoted equity instrument carried at cost (see paragraph 66 of FRS 39) (see paragraph 7.2.12 of FRS 109 for the transitional accounting adjustment) | FVTPL | Financial asset on revenue account
– To tax or allow as a deduction, the unrealised gain or loss, recognised in the opening retained earnings at DIA Financial asset on capital account – No tax adjustment is required |
| Financial Asset – Debt Instrument, Loans and Receivables | |||
| (i) | AFS/Amortised Cost | FVTPL | Financial asset on revenue account
– To tax or allow as a deduction, the unrealised gain or loss, recognised in the opening retained earnings at DIA – To tax, the reversal amount of impairment loss, recognised in the opening retained earnings at DIA, to the extent that the amount had been previously allowed as a deduction under FRS 39 tax treatment Financial asset on capital account – No tax adjustment is required. |
| Financial Asset – Debt Instrument, Loans and Receivables | |||
| (ii) | AFS/Amortised Cost | FVOCI/ Amortised Cost | Financial asset on revenue account
– To tax, the reversal amount of impairment loss, recognised in the opening retained earnings at DIA, to the extent that the amount had been previously allowed as a deduction under FRS 39 tax treatment – To allow as a deduction, the impairment loss recognised in the opening retained earnings at DIA, to the extent that the amount is in respect of a credit-impaired financial instrument Financial asset on capital account – No tax adjustment is required |
| Financial Asset – Debt Instrument, Loans and Receivables | |||
| (iii) | FVTPL | FVOCI/ Amortised Cost | Financial asset on revenue account
– To tax or allow as a deduction, the unrealised gain or loss, recognised in the opening retained earnings at DIA – To allow as a deduction, the impairment loss recognised in the opening retained earnings at DIA, to the extent that the amount is in respect of a credit-impaired financial instrument Financial asset on capital account – No tax adjustment is required |
| Financial Liability | |||
| (i) | FVTPL | FVTPL | Financial liability on revenue account
– To tax or allow as a deduction, the unrealised gain or loss on the effects of changes in the financial liability’s credit risk, recognised in the opening retained earnings at DIA Financial liability on capital account – No tax adjustment is required |
| (ii) | Derivative liability carried at cost (see paragraph 47(a) of FRS 39) (see paragraph 7.2.13 of FRS 109 for the transitional accounting adjustment) | FVTPL | Financial liability on revenue account
– To tax or allow as a deduction, the unrealised gain or loss, recognised in the opening retained earnings at DIA Financial liability on capital account – No tax adjustment is required |
| (iii) | Provisions for loan commitment and financial guarantee contracts were previously recognised and measured in accordance with FRS 37 | Loan commitment/ Financial guarantee contract | Financial liability on revenue account
– To allow as a deduction, the provision for impairment recognised in the opening retained earnings at DIA, to the extent that the amount is in respect of a credit-impaired financial instrument Financial liability on capital account – No tax adjustment is required |
| Time Value of Option Contract, Forward Element of Forward Contract and Foreign Currency Basis Spread of Financial Instrument (that are excluded from hedge accounting under FRS 39) | |||
| (i) | Profit or loss | OCI | Underlying hedged item on revenue account
– To tax or allow as a deduction, the unrealised gain or loss recognised in the opening retained earnings at DIA Underlying hedged item on capital account – No tax adjustment is required |
Transition from pre-FRS 39 Tax Treatment to FRS 109 Tax Treatment
(a) For entities transiting from pre-FRS 39 tax treatment to FRS 109 tax treatment, please refer to the applicable tax treatment required in the transitional YA in Annex C of the IRAS e-Tax Guide on Income Tax: Income Tax Treatment Arising from Adoption of FRS 109 – Financial Instruments.
(b) To ease transition for entities who may face cash flow issues due to additional tax payable arising from the move from pre-FRS 39 tax treatment to FRS 109 tax treatment, an additional 3-month instalment will be provided for entities who are currently on the pre-FRS 39 tax treatment.
This applies to taxes payable for the YA relating to the basis period in which FRS 109 is first adopted.
The additional 3-month instalment is given upon request by entities. Requests for longer instalment periods will be handled on a case-by-case basis.
Reclassification of Financial Assets after Adoption of FRS 109
(a) FRS 109 requires an entity to reclassify its financial assets from one measurement category to another measurement category if the entity changes its business model for managing financial assets after it has adopted FRS 109. Reclassification of financial instruments after the adoption of FRS 109 is only applicable to financial assets and not financial liabilities (see paragraphs 4.4.1 and 4.4.2 of FRS 109).
Based on the reclassification requirements under FRS 109, only financial assets that are debt instruments can be reclassified.
Only debt instruments can be reclassified after the adoption of FRS 109 although the reclassification is expected to be infrequent (see paragraph B4.4.1 of Appendix B of FRS 109).
Equity instruments are by default measured at FVTPL and the designation at FVOCI is by an irrevocable election at initial recognition (see paragraph 4.1.4 of FRS 109) and therefore cannot be reclassified after adoption of FRS 109.
The reclassification is applied prospectively from the reclassification date. There is no restatement of any previously recognised gains, losses (including impairment gains or losses) or interest (paragraph 5.6.1 of FRS 109).
(b) Where the reclassification of debt instruments under FRS 109 results in the recognition of a gain or loss in the OCI (see IE 111 and IE 112 of FRS 109), there will be no tax adjustment required.
Where the reclassification results in a gain or loss being recognised in the profit or loss at reclassification date, the gain or loss may be taxable or allowable as a deduction in the YA of the basis period in which the reclassification applies (“reclassification YA”).
(c) The table below shows the applicable tax treatment for gains or losses on debt instruments that are recognised in the profit or loss at reclassification date.
Entities are required to show the details of how each tax adjustment is arrived at in their tax computations and must keep sufficient documents to support the tax adjustments.
Entities are not required to submit the documents with their income tax returns but must do so upon the CIT’s request.
| FRS 109, C&M at | Tax treatment in reclassification YA | |
|
Initial recognition |
Reclassification date | |
| Amortised Cost (see IE 109)/ FVOCI (see IE 114) | FVTPL | Financial asset on revenue account
– To tax or allow as a deduction, the unrealised gain or loss, recognised in the P&L at reclassification date Financial asset on capital account – No tax adjustment is required |
| FVTPL | Amortised Cost (see IE 110)/ FVOCI (see IE 113) | Financial asset on revenue account
– To allow as a deduction, the impairment loss recognised in the P&L at reclassification date, to the extent that the amount is in respect of a credit-impaired debt instrument Financial asset on capital account – No tax adjustment is required |
ENTITIES Not Required to Comply with FRS 109
(a) Entities that do not need to comply with FRS 109 for accounting purposes (e.g. those who qualify for and have chosen to comply with the SFRS for Small Entities) will continue to apply the pre-FRS 39 tax treatment or FRS 39 tax treatment (as the case may be).
These entities may refer to the IRAS e-Tax Guide “Income Tax Implications arising from the Adoption of FRS 39 – Financial Instruments: Recognition & Measurement” for guidance on the pre-FRS 39 tax treatment (at paragraphs 2 to 5 of the e-Tax Guide) and the FRS 39 tax treatment.
If these entities wish to apply FRS 109 tax treatment, they may make a written application to the CIT to be a qualifying person for FRS 109 tax treatment.
Once the CIT approves the application, they can apply FRS 109 tax treatment from the YA of the basis period in which the CIT grants the approval or such later YA as the CIT may approve.
(b) Financial Reporting Standard 104 Insurance Contracts (“FRS 104”) specifies the financial reporting for insurance contracts by any entity that issues such contracts (“insurer”) until the second phase of the project on insurance contracts is completed.
FRS 104 does not apply to other assets and liabilities of an insurer, such as financial assets and financial liabilities within the scope of FRS 39 and FRS 109 (see paragraph IN3 of FRS 104 and paragraph C8(IN3) of Appendix C of FRS 109).
As insurers are required to apply FRS 109 for annual periods beginning on or after 1 Jan 2018 before the adoption of the forthcoming insurance contracts standard, the Accounting Standards Council issued Amendments to FRS 104: Applying FRS 109 Financial Instruments with FRS 104 Insurance Contracts (“Amendments to FRS 104”) on 23 Dec 2016 to provide two options to insurers when applying FRS 109 with FRS 104 for annual periods beginning on or after 1 Jan 2018.
The two options available to an insurer are summarised below.
(i) Temporary exemption from FRS 109 (paragraph 20A of the Amendments to FRS 104)
An insurer whose activities are predominantly connected with insurance may elect to apply the temporary exemption from FRS 109.
An insurer that applies the temporary exemption from FRS 109 will continue to apply FRS 39 for accounting purpose for annual periods beginning before 1 Jan 2021.
(ii) The overlay approach (paragraph 35B of Amendments to FRS 104)
An insurer that first applies FRS 109 may elect to apply the overlay approach to designated financial assets.
A financial asset is eligible for designation if it is measured at FVTPL under FRS 109 but would not have been measured at FVTPL under FRS 39, and if it is held in respect of an insurance activity.
Designation of eligible financial assets is on an instrument-by-instrument basis.
An insurer that applies the overlay approach will reclassify, from the profit or loss to OCI, an amount of gain or loss (called “overlay adjustment”) equal to the difference between:
a. the amount reported in the P&L, at the end of the reporting period, for the designated financial assets applying FRS 109; and
b. the amount that would have been reported in the P&L, at the end of the reporting period, for the designated financial assets if the insurer had applied FRS 39.
The overlay approach is applied retrospectively.
An insurer recognises as an adjustment to the opening balance of accumulated OCI, an amount equal to the difference between the fair value of the designated financial assets determined applying FRS 109 at DIA and their previous carrying amount determined applying FRS 39.
(c) An insurer that applies the temporary exemption from FRS 109 will continue to apply the FRS 39 tax treatment (or the pre-FRS 39 tax treatment, as the case may be).
When the insurer stops applying the temporary exemption from FRS 109 and starts applying FRS 109 (but without applying the overlay approach45), it must apply the FRS 109 tax treatment including the applicable tax treatment for the transitional accounting adjustments in the transitional YA at paragraph “Transition from FRS 39 Tax Treatment to FRS 109 Tax Treatment” above (or at Annex C, as the case may be).
(d) An insurer that applies the overlay approach must apply the FRS 109 tax treatment including the applicable tax treatment for the transitional accounting adjustments in the transitional YA at paragraph “Transition from FRS 39 Tax Treatment to FRS 109 Tax Treatment” above (or at Annex C, as the case may be).
Where the designated financial assets are on revenue account, any gain or loss due to the overlay adjustment presented in the profit or loss, will be taxable or allowable as a deduction and thus no tax adjustment is required.
Where the designated financial assets are on capital account, any gain or loss due to the overlay adjustment presented in the profit or loss will not be taxable or allowable as a deduction and thus tax adjustment is required.
(f) An insurer can stop applying the overlay approach.
(i) By de-designating a financial asset because it is no longer held in respect of an insurance activity (see paragraphs 35I(a) and 35J of Amendments to FRS 104).
The insurer stops applying the overlay approach to that financial asset and reclassifies from accumulated OCI to the profit or loss, the cumulative gains or losses relating to that financial asset.
Where that financial asset is on revenue account, the cumulative gains or losses presented in profit or loss will be taxable or allowable as a deduction.
Where that financial asset is on capital account, the cumulative gains or losses presented in profit or loss will not be taxable or allowable as a deduction. Tax adjustment is required.
(ii) By making an irrevocable election, at the beginning of any annual period, to stop applying the overlay approach to all designated financial assets (see paragraphs 35I(b) and 35K of Amendments to FRS 104).
Cumulative gains or losses relating to all those financial assets will be reclassified from accumulated OCI to the opening retained earnings or the profit or loss (as the case may be).
Where the financial assets are on revenue account, the cumulative gains or losses presented in the opening retained earnings or in the profit or loss (as the case may be) will be taxable or allowable as a deduction. Tax adjustment is required for those gains or losses that are presented in the opening retained earnings.
Where the financial assets are on capital account, the cumulative gains or losses presented in the opening retained earnings or in the profit or loss (as the case may be) will not be taxable or allowable as a deduction. Tax adjustment is required for those gains or losses that are presented in the profit or loss.
EFFECTIVE DATE OF FRS 109 TAX TREATMENT
(a) Entities who apply FRS 109 for annual periods beginning on or after 1 Jan 2018 must apply FRS 109 tax treatment from the YA of the basis period in which FRS 109 is first applied for accounting purpose.
No option to remain in pre-FRS 39 tax treatment
(b) The FRS 109 tax treatment will be the only tax treatment once entities adopt FRS 109 for accounting purpose.
There will be no option to opt out of the FRS 109 tax treatment.
Early application of FRS 109 for accounting purpose
(c) For an entity that applies FRS 109 in its entirety before 1 Jan 2018, the FRS 109 tax treatment will apply from the YA relating to the financial period in which FRS 109 is first applied.
For example, an entity first applied FRS 109 to its financial statements beginning on 1 Jan 2015, the entity will have to apply FRS 109 tax treatment with effect from YA 2016 (inclusive).
(d) For an entity that applies, before 1 January 2018, only the FRS 109 accounting requirement to present in OCI the effects of changes in the credit risk of financial liabilities that are designated at FVTPL, the FRS 109 tax treatment will apply only to the gain or loss on the effects of these changes from the YA relating to the financial period in which FRS 109 accounting requirements is first applied.
Last reviewed: 6 February 2018