Page 49 - CPC 2018 Annual Report

FINANCIAL STATEMENTS 47
Under IAS 39, for all cash flow hedges, the amounts accumulated in the cash flow hedge reserve are reclassified to profit or loss as a reclassification adjustment in the same period as the hedged expected cash flows affect profit or loss. However, under IFRS 9, for cash flow hedges of foreign currency risk associated with forecast non-financial asset purchases, the amounts accumulated in the cash flow hedge reserve and the cost of hedging reserve will instead be included directly in the initial cost of the non-financial asset when it is recognized.
The types of hedge accounting relationships that the Company currently designates meet the requirements of IFRS 9 and are aligned with the entity’s risk management strategy and objective.
(iv) Disclosures
IFRS 9 will require extensive new disclosures, in particular about hedge accounting, credit risk and expected credit losses. The Company’s assessment included an analysis to identify data gaps against current processes and the Company plans to implement the system and controls changes that it believes will be necessary to capture the required data.
(v) Transition
Changes in accounting policies resulting from the adoption of IFRS 9 will generally be applied retrospectively, except as described below.
• The Company will take advantage of the exemption allowing it not to restate comparative information for prior periods with respect to classification and measurement (including impairment) changes. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 generally will be recognized in retained earnings and reserves as at January 1, 2018.
• The new hedge accounting requirements should generally be applied prospectively.
• The following assessments have to be made on the basis of the facts and circumstances that exist at the date of initial application.
– The determination of the business model within which a financial asset is held.
– The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at FVTPL.
– The designation of certain investments in equity instruments not held for trading as at FVOCI. 2. IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18 “Revenue” and IAS 11 “Construction Contracts”.
(i) Sales of goods
For the sale of products, revenue is currently recognized when the goods are delivered to the customers’ premises, which is taken to be the point in time at which the customer accepts the goods and the related risks and rewards of ownership transfer. Revenue is recognized at this point provided that the revenue and costs can be measured reliably, the recovery of the consideration is probable and there is no continuing management involvement with the goods. Under IFRS 15, revenue will be recognized when a customer obtains control of the goods.
For the loyalty program operated by the Company, revenue is currently allocated between the loyalty program and products using the residual value method. Consideration is allocated to the loyalty program based on their fair value, and the remainder of the consideration is allocated to products. The amount allocated to the loyalty program is deferred, and is recognized when the loyalty points are redeemed or expire. Under IFRS 15, consideration will be allocated between the loyalty program and products based on their relative stand-alone selling prices. As a consequence, a lower proportion of the consideration will be allocated to the loyalty program, and therefore, less revenue is likely to be deferred.