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S

IFR
S

Issue

Description

Required Action

IAS
16

Free Of
Charge assets

Accounting for Free


of cost / heavily
discounted assets.
Under IFRS, the
assets are recognized
at cost and the cost
is defined as the
amount of cash or
cash equivalents paid
or the fair value of
the other
consideration given
to acquire an asset at
the time of its
acquisition or
construction. Fair
value of asset
acquired is generally
not required except
in case of exchange
transactions where
the fair value of asset
given up is not
reliably measurable.
However the
Company currently
has a practice to fair
value all the assets
which are taken at Nil
Value or which are
heavily discounted
(More than 40%)
which may need to be
changed under IFRS.

No action at the end of


FA. Only need to
implement approved
Accounting Treatment

M
/
O
M

E & Y Feedback Items


FOC assets recd from
Vendors - During our discussion
on diagnostic of IAS 16, we were
informed that STC received FoC
assets from vendors only,
accordingly we have
documented our observations
highlighting the gaap difference
in the impact assessment
checklist.
FOC assets recd from the
Govt - Please refer IAS 20
Accounting for Govt grant
checklist.
FOC assets recd in exchange
of existing assets - During our
discussions, we were informed
that STC does not have any
instance of exchange of assets
and the same is documented in
the checklist. In case you have
discovered now that STC has an
existing case of exchange of
assets, kindly share the related
contract so that we can look at
the same for diagnostic.
FOC assets received from
customers (IFRIC 18) - IFRIC

E & Y Required
Action

To
includ
e in
WP

E&Y to provide
financial
advice thereon
for all existing
scenarios i.e.
Assets
Exchange
Assets
dependency
etc. as per
IFRS..

YES

18 has been replaced with IFRS


15. Will be covered in IFRS 15
checklist.
EY is doing IFRS diagnostic based
on the existing contracts/
transactions of STC. We cannot
envisage all the possible future
scenarios / transactions.

IFR
S

Issue

IAS
16

IAS
16

Opening
Balances
Fixed Assets

Costs of site
preparation

Description
Land & building and
plant & equipment
transferred from
Telecom Division to
STC in 1998 were
recognized at fair
value. Accounting for
the same needs to be
evaluated whether
the same was in line
with the IFRS
requirements - Was it
a business
Combination or
contribution of assets
by shareholders?
Costs of site
preparation (soft
costs) such as rent
and security costs
incurred during

Required Action

Need to coordinate with


the Technical
Committee. Not
applicable with respect
to FA. Need to define
the mechanism of
transfer and respective
treatment and
respective Financial
Statements

As per stc existing


procedure all those cost
are capitalized;
however more details is
needed to identify

M
/
O

E & Y Feedback Items

We will not be able to envisage


and provide the impact
assessment based on all possible
scenarios. Kindly provide us the
actual facts and accounting done
under SOCPA at the time of
acquisition, so that we can look
at the same for diagnostic.
Ok, EY will provide further
guidance in a technical
memo.

E & Y Required
Action

To
includ
e in
WP

E&Y to tell STC


correct
accounting
under all
possible
scenarios

YES

Further
guidance is
needed to
determine
what type of

YES

construction of tower
sites are considered
to be directly
attributable, and
hence may be
included in cost at
initial recognition.

clearly soft cost and


investigate about
current situation.

Cost of dismantling
and restoration of
sites is not
capitalized currently.

FA to identify the
possible criteria to
depict cost of
dismantling and
restoration with
related parties e.g NW
The treatment of this
provision should be
clarified
Is this will applied to
existing asset or only
new assets!?
The discount rate

IAS
16

Dismantling
and
Restoration
Cost

IAS
16

IFR
S

Major
inspection
6cost

Issue

Major inspection
cost is recognized in
the carrying amount
of the item of PPE as
a replacement if the
recognition criteria
are satisfied. Any
remaining carrying
amount of the cost of
the previous
inspection is derecognized.

Description

Ok, EY will provide further


guidance in a technical memo

site
preparation
costs need to
be capitalized
in case of STC.
Could be
covered as
part of
Technical
Paper
Guidance
needed on how
to estimate the
cost.
EY to provide if
any exception
as First Time
Adoption of
IFRS.

YES

NO
Needs more
clarification Regarding
the relevance to
telecom Industry ;
however inspection cost
is capitalized when
incurred during
installation of the
asset.

Required Action

M
/
O

Not Applicable on Telecom


Industry

E & Y Feedback Items

E&Y
Required
Action

To
includ
e in

WP
6

IAS
16

Reassessment
of useful life
& Residual
value

Reassessment of
useful life, residual
value and
depreciation method

Applying this needs


involvement of
technical department
however changing the
useful life will have
financial impacts.
Residual value should
be analyzed and criteria
should be built with
participation of
technical department
and Material
Management.

Following factors are considered


in determining the useful life of
an asset:
(a)
expected usage of the
asset. Usage is assessed by
reference to the asset's expected
capacity or physical output.
(b)
expected physical wear
and tear, which depends on
operational factors such as the
number of shifts for which the
asset is to be used and the repair
and maintenance programme,
and the care and maintenance of
the asset while idle.
(c)
technical or commercial
obsolescence arising from
changes or improvements in
production, or from a change in
the market demand for the
product or service output of the
asset.
(d)
legal or similar limits on
the use of the asset, such as the
expiry dates of related leases.
The useful life of an asset is
defined in terms of the asset's
expected utility to the entity. The
asset management policy of the
entity may involve the disposal
of assets after a specified time or
after consumption of a specified
proportion of the future

Further
Guidance
needed.

YES

economic benefits embodied in


the asset. Therefore, the useful
life of an asset may be shorter
than its economic life. The
estimation of the useful life of
the asset is a matter of
judgement based on the
experience of the entity with
similar assets.
In practice, the residual value of
an asset is often insignificant and
may be immaterial in the
calculation of the depreciable
amount. However, management
need to estimate and exercise its
judgement.
As discussed, there is no further
technical guidance under IFRS.
Residual value and Useful life
needs to be assessed on an
annual basis. Assessment of
residual value and useful life is a
management judgement.
Management may take inputs of
technical team / engineers while
doing the assessment and also
look at what other global peers
doing (bench-marking).

IFR
S

Issue

Description

7
IAS
38

IAS
16

Independent
Software
Assets

Assets
componentiza
tion

Intangible assets in
FAR which is software
should be reclassified
to intangible assets.
Components of an
asset with differing
patterns of benefits
must be depreciated
separately

Required Action
Intangible assets in FAR
which is software
should be identified,
studied and clear road
map should be
designed to resolve this
issue.
STC already explained
how we are capitalizing
the Assets along with
the details of one PO
for detailed
understanding.

M
/
O

E & Y Feedback Items

E & Y Required
Action

To
includ
e in
WP
NO

As per the current scope of work,


we will not be able provide any
conclusion. This is discussed and
agreed in the TC meeting.

EY to provide
advice on
STC's
compliance
status
regarding
componentizati
on based on

NO

the feedback
provided by
engineers and
PO
9

IAS
16

Spare Parts

1
0

IAS
16

SelfConstructed
Assets

1
1

IAS
16

Fixed Assets
Disclosure

IFR

Issue

Major spare parts


and stand-by
equipment may
qualify as property,
plant and equipment
if the entity expects
to use them in more
than one period.
Otherwise, such
items are considered
as inventory.
IAS 16.22, missing in
impact checklist.
Self-constructive
assets accounting is
different. SOPCA
require these assets
to be booked at lower
of cost and FV. What
is IFRS treatment

No assessment for
disclosures?
Disclosures might
need change in
software or
additional fields in
oracle

Description

NO
As confirmed by related
parties MM & NW ,STC
does not have any
major spare parts
having a life of more
than 1 year therefore
all the spare parts are
expensed off at the
time of actual
consumption.

STC has no SelfConstructed Assets


currently. However,
need to identify the
treatment for future
reference.

The same is already updated in


the checklist post our discussion
with Process Owners.

Also need to
include Labor
Treatment on
ISP like labor
cost incurred
during design
and planning
phase directly
related with
the Assets
creation.

NO

NO

What action is required


to comply with the IAS
Disclosure requirement

Covered under Disclosure


checklist separately

Required Action

E & Y Feedback Items

E & Y Required
Action

To

S
1
2
IFRI
C12

IFRIC 12,
concession
agreement

1
3
IAS
16

includ
e in
WP

/
O

Depreciation
on Idle Assets

IFRIC 12 also relates


with the tangible
Assets and Payments
to the grantor or
third parties for the
use of tangible assets
(right of-access
payments)/(Right To
Use)
IAS16.55, different
treatment for
permanent idle
assets, where SOCPA
requires depreciation
to be ceased

NO
Stc has some contracts
with this nature and
need to involve
wholesale sector.

As per existing stc


procedure when there
are idle assets the
depreciation does not
stop

As discussed this is related to


IRU transactions and the same is
covered under IAS 17 Leases
checklist

Nothing is mentioned in this


regard under SOCPA, however,
we have captured this as part of
STCs existing policy and
updated the checklist to that
effect.

NO