Integrated Report 2020

INTEGRATED REPORT 2020 CIM FINANCIAL SERVICES LTD Explanatory Notes 30 SEPTEMBER 2020 2. ACCOUNTING POLICIES (CONT’D) 2.4 Statement of compliance The financial statements of CIM Financial Services Ltd comply with the Companies Act 2001 and have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by The International Accounting Standard Board (IASB). 2.5 Changes in accounting policies and disclosures (a) New and amended standards and interpretation The Group applied for the first time certain standards and amendments, which are effective for annual periods beginning on or after 1 October 2019. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. The nature and the effect of these changes are disclosed below. IFRS 16 – Leases results in the recognition of almost all leases on balance sheet. The standard removes the current distinction between operating and financing leases and requires recognition of an asset (the right to use the leased item) and a financial liability to pay rentals for virtually all lease contracts. The Group has adopted IFRS 16 retrospectively with the cumulative effect of initial application recognised as an adjustment to the opening balance of retained earnings. The Group has elected to apply the standard to contracts that were previously identified as leases applying IAS 17. The reclassifications and adjustments arising from the new leasing rules are recognised in the opening balance sheet on 1 October 2019. The new accounting policies are disclosed in note 23. On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under IAS 17. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1 October 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 1 October 2019 was 5.3%. IFRIC 23 – Uncertainty over Income Tax Treatments explains how to recognise and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment. There are no new disclosure requirements but requirement to provide information about judgements and estimates made in preparing the financial statements. The interpretation has no impact on the Group’s financial statements. Prepayment Features with negative compensation (Amendments to IFRS 9) enable entities to measure certain prepayable financial assets with negative compensation at amortised cost. These assets, which include some loan and debt securities, would otherwise have to be measured at fair value through profit or loss. To qualify for amortised cost measurement, the negative compensation must be reasonable compensation for early termination of the contract and the asset must be held within a ‘held to collect’ business model. The amendments have no impact on the Group’s financial statements. Long- term Interests in Associates and Joint Ventures (Amendments to IAS 28) clarify the accounting for long-term interests in an associate or joint venture, which in substance form part of the net investment in the associate or joint venture, but to which equity accounting is not applied. Entities must account for such interests under IFRS 9 before applying the loss allocation and impairment requirements in IAS 28. The amendments have no impact on the Group’s financial statements. Annual Improvements to IFRSs 2015–2017 Cycle • IFRS 3 – clarified that obtaining control of a business that is a joint operation is a business combination achieved in stages. • IFRS 11 – clarified that party obtaining joint control of a business that is a joint operation should not remeasure its previously held interest in the joint operation. • IAS 12 – clarified that income tax consequences of dividends on financial instruments classified as equity should be recognised according to where the past transactions or events that generated distributable profits were recognised. • IAS 23 – clarified that, if a specific borrowing remains outstanding after the related qualifying asset is ready for its intended use or sale, it becomes part of general borrowings. The amendments have no impact on the Group’s financial statements, Plan Amendment, Curtailment or Settlement (Amendments to IAS 19) clarifies that entities must: • calculate the current service cost and net interest for the remainder of the reporting period after a plan amendment, curtailment or settlement by using the updated assumptions from the date of the change. 75