FRENCKEN GROUP LIMITED
ANNUAL REPORT 2015
52
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
(a) Basis of preparation (Cont’d)
FRS 109
Financial Instruments
(Cont'd)
Key requirements of FRS 109: (Cont'd)
• With some exceptions, financial liabilities are generally subsequently measured at amortised cost. With
regard to the measurement of financial liabilities designated as at FVTPL, FRS 109 requires that the amount
of change in fair value of such financial liability that is attributable to changes in the credit risk be presented
in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk
in other comprehensive income would create or enlarge an accounting mismatch to profit or loss. Changes
in fair value attributable to the financial liability’s credit risk are not subsequently reclassified to profit or loss.
• In relation to the impairment of financial assets, FRS 109 requires an expected credit lossmodel, as opposed to an
incurred credit loss model under FRS 39. The expected credit loss model requires an entity to account for
expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in
credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred
before credit losses are recognised.
The management is currently evaluating the potential impact of the application of FRS 109
Financial Instruments
on the financial statements of the Group and of the Company in the period of initial application.
FRS 115
Revenue from Contracts with Customers
In November 2014, FRS 115 was issued which establishes a single comprehensive model for entities to use
in accounting for revenue arising from contracts with customers. FRS 115 will supersede the current revenue
recognition guidance including FRS 18
Revenue
, FRS 11
Construction Contracts
and the related Interpretations
when it becomes effective.
The core principle of FRS 115 is that an entity should recognise revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the consideration to which the entity expects to be entitled
in exchange for those goods or services. Specifically, the Standard introduces a 5-step approach to revenue
recognition:
• Step 1: Identify the contract(s) with a customer.
• Step 2: Identify the performance obligations in the contract.
• Step 3: Determine the transaction price.
• Step 4: Allocate the transaction price to the performance obligations in the contract.
• Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.
Under FRS 115, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when
“control” of the goods or services underlying the particular performance obligation is transferred to the customer.
Far more prescriptive guidance has been added in FRS 115 to deal with specific scenarios. Furthermore, extensive
disclosures are required by FRS 115.
The management is currently evaluating the potential impact of the application of FRS 115
Revenue from
Contracts with Customers
on the financial statements of the Group in the period of initial application.
NOTES TO FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2015 (CONT’D)
