# L_2021234EN.01009001.xml

| 2.7.2021 | EN | Official Journal of the European Union | L 234/90 |
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2.7.2021

EN

Official Journal of the European Union

L 234/90

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COMMISSION REGULATION (EU) 2021/1080

of 28 June 2021

amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Accounting Standards 16, 37 and 41, and International Financial Reporting Standards 1, 3 and 9

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards (1), and in particular Article 3(1) thereof,

Whereas:

| (1) | By Commission Regulation (EC) No 1126/2008 (2) certain international standards and interpretations that were in existence at 15 October 2008 were adopted. |
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(1)

By Commission Regulation (EC) No 1126/2008 (2) certain international standards and interpretations that were in existence at 15 October 2008 were adopted.

| (2) | On 14 May 2020, the International Accounting Standards Board (IASB) published several minor amendments to International Accounting Standard (IAS) 16 Property, Plant and Equipment, IAS 37 Provisions, Contingent Liabilities and Contingent Assets, and International Financial Reporting Standards (IFRS) 3 Business Combinations. Those amendments provide further clarifications for a more consistent application of the standards, or update references. |
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(2)

On 14 May 2020, the International Accounting Standards Board (IASB) published several minor amendments to International Accounting Standard (IAS) 16 Property, Plant and Equipment, IAS 37 Provisions, Contingent Liabilities and Contingent Assets, and International Financial Reporting Standards (IFRS) 3 Business Combinations. Those amendments provide further clarifications for a more consistent application of the standards, or update references.

| (3) | The IASB also issued on 14 May 2020 the Annual Improvements to IFRS Standards 2018–2020 Cycle in the framework of its regular improvement process. The annual improvements aim at streamlining and clarifying existing standards. The objective of the annual improvements is to address non-urgent but necessary issues discussed by the IASB during the project cycle on areas of inconsistency in International Financial Reporting Standards, or where clarification of wording is required. The annual improvements contain amendments to IAS 41 Agriculture, IFRS 1 First-time Adoption of International Financial Reporting Standards, and IFRS 9 Financial Instruments. |
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(3)

The IASB also issued on 14 May 2020 the Annual Improvements to IFRS Standards 2018–2020 Cycle in the framework of its regular improvement process. The annual improvements aim at streamlining and clarifying existing standards. The objective of the annual improvements is to address non-urgent but necessary issues discussed by the IASB during the project cycle on areas of inconsistency in International Financial Reporting Standards, or where clarification of wording is required. The annual improvements contain amendments to IAS 41 Agriculture, IFRS 1 First-time Adoption of International Financial Reporting Standards, and IFRS 9 Financial Instruments.

| (4) | Following the consultation with the European Financial Reporting Advisory Group, the Commission concludes that the amendments to IAS 16 Property, Plant and Equipment, IAS 37 Provisions, Contingent Liabilities and Contingent Assets, IAS 41 Agriculture, IFRS 1 First-time Adoption of International Financial Reporting Standards, IFRS 3 Business Combinations, and IFRS 9 Financial Instruments meet the criteria for adoption set out in Article 3(2) of Regulation (EC) No 1606/2002. |
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(4)

Following the consultation with the European Financial Reporting Advisory Group, the Commission concludes that the amendments to IAS 16 Property, Plant and Equipment, IAS 37 Provisions, Contingent Liabilities and Contingent Assets, IAS 41 Agriculture, IFRS 1 First-time Adoption of International Financial Reporting Standards, IFRS 3 Business Combinations, and IFRS 9 Financial Instruments meet the criteria for adoption set out in Article 3(2) of Regulation (EC) No 1606/2002.

| (5) | Regulation (EC) No 1126/2008 should therefore be amended accordingly. |
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(5)

Regulation (EC) No 1126/2008 should therefore be amended accordingly.

| (6) | The measures provided for in this Regulation are in accordance with the opinion of the Accounting Regulatory Committee, |
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(6)

The measures provided for in this Regulation are in accordance with the opinion of the Accounting Regulatory Committee,

HAS ADOPTED THIS REGULATION:

Article 1

The Annex to Regulation (EC) No 1126/2008 is amended as follows:

| (a) | International Accounting Standard (IAS) 16 Property, Plant and Equipment is amended as set out in the Annex to this Regulation; |
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(a)

International Accounting Standard (IAS) 16 Property, Plant and Equipment is amended as set out in the Annex to this Regulation;

Property, Plant and Equipment

| (b) | IAS 37 Provisions, Contingent Liabilities and Contingent Assets is amended as set out in the Annex to this Regulation; |
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(b)

IAS 37 Provisions, Contingent Liabilities and Contingent Assets is amended as set out in the Annex to this Regulation;

Provisions, Contingent Liabilities and Contingent Assets

| (c) | IAS 41 Agriculture is amended as set out in the Annex to this Regulation; |
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(c)

IAS 41 Agriculture is amended as set out in the Annex to this Regulation;

Agriculture

| (d) | International Financial Reporting Standard (IFRS) 1 First-time Adoption of International Financial Reporting Standards is amended as set out in the Annex to this Regulation; |
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(d)

International Financial Reporting Standard (IFRS) 1 First-time Adoption of International Financial Reporting Standards is amended as set out in the Annex to this Regulation;

First-time Adoption of International Financial Reporting Standards

| (e) | IFRS 3 Business Combinations is amended as set out in the Annex to this Regulation; |
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(e)

IFRS 3 Business Combinations is amended as set out in the Annex to this Regulation;

Business Combinations

| (f) | IFRS 9 Financial Instruments is amended as set out in the Annex to this Regulation; |
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(f)

IFRS 9 Financial Instruments is amended as set out in the Annex to this Regulation;

Financial Instruments

Article 2

Each company shall apply the amendments referred to in Article 1, at the latest, as from the commencement date of its first financial year starting on or after 1 January 2022.

Article 3

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 28 June 2021.

For the Commission

The President

Ursula VON DER LEYEN

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(1)  
  OJ L 243, 11.9.2002, p. 1.

1

(2)  Commission Regulation (EC) No 1126/2008 of 3 November 2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council (OJ L 320, 29.11.2008, p. 1).

2

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ANNEX

Amendments to IAS 16 Property, Plant and Equipment

Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets

Amendments to IFRS 3 Business Combinations

Annual Improvements to IFRS Standards 2018-2020 Cycle

Amendments to IAS 16 Property, Plant and Equipment

Paragraphs 17 and 74 are amended; paragraphs 20A, 74A, 80D and 81N are added. The requirements formerly in paragraph 74(d) have not been amended but have been moved to paragraph 74A(a).

MEASUREMENT AT RECOGNITION

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Elements of cost

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| 17. | Examples of directly attributable costs are:
  ...






  (e) | costs of testing whether the asset is functioning properly (ie assessing whether the technical and physical performance of the asset is such that it is capable of being used in the production or supply of goods or services, for rental to others, or for administrative purposes); and
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17.

...

(e)

costs of testing whether the asset is functioning properly (ie assessing whether the technical and physical performance of the asset is such that it is capable of being used in the production or supply of goods or services, for rental to others, or for administrative purposes); and

...

...

| 20A | Items may be produced while bringing an item of property, plant and equipment to the location and condition necessary for it to be capable of operating in the manner intended by management (such as samples produced when testing whether the asset is functioning properly). An entity recognises the proceeds from selling any such items, and the cost of those items, in profit or loss in accordance with applicable Standards. The entity measures the cost of those items applying the measurement requirements of IAS 2.
  ... |
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20A

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DISCLOSURE

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| 74. | The financial statements shall also disclose:

  ...






  (b) | the amount of expenditures recognised in the carrying amount of an item of property, plant and equipment in the course of its construction; and |
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74.

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(b)

the amount of expenditures recognised in the carrying amount of an item of property, plant and equipment in the course of its construction; and

| (c) | the amount of contractual commitments for the acquisition of property, plant and equipment |
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(c)

the amount of contractual commitments for the acquisition of property, plant and equipment

| 74A | If not presented separately in the statement of comprehensive income, the financial statements shall also disclose:







  (a) | the amount of compensation from third parties for items of property, plant and equipment that were impaired, lost or given up that is included in profit or loss; and |
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74A

(a)

the amount of compensation from third parties for items of property, plant and equipment that were impaired, lost or given up that is included in profit or loss; and

| (b) | the amounts of proceeds and cost included in profit or loss in accordance with paragraph 20A that relate to items produced that are not an output of the entity’s ordinary activities, and which line item(s) in the statement of comprehensive income include(s) such proceeds and cost. |
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(b)

the amounts of proceeds and cost included in profit or loss in accordance with paragraph 20A that relate to items produced that are not an output of the entity’s ordinary activities, and which line item(s) in the statement of comprehensive income include(s) such proceeds and cost.

TRANSITIONAL PROVISIONS

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| 80D | Property, Plant and Equipment—Proceeds before Intended Use, issued in May 2020, amended paragraphs 17 and 74 and added paragraphs 20A and 74A. An entity shall apply those amendments retrospectively, but only to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after the beginning of the earliest period presented in the financial statements in which the entity first applies the amendments. The entity shall recognise the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the beginning of that earliest period presented. |
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80D

EFFECTIVE DATE

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| 81N | Property, Plant and Equipment—Proceeds before Intended Use, issued in May 2020, amended paragraphs 17 and 74, and added paragraphs 20A, 74A and 80D. An entity shall apply those amendments for annual reporting periods beginning on or after 1 January 2022. Earlier application is permitted. If an entity applies those amendments for an earlier period, it shall disclose that fact. |
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81N

Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets

Paragraphs 68A, 94A and 105 are added and paragraph 69 is amended. Paragraph 68 is not amended, but is included for ease of reading.

APPLICATION OF THE RECOGNITION AND MEASUREMENT RULES

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Onerous contracts

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| 68. | This Standard defines an onerous contract as a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it. |
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68.

| 68A | The cost of fulfilling a contract comprises the costs that relate directly to the contract. Costs that relate directly to a contract consist of both:






  (a) | the incremental costs of fulfilling that contract—for example, direct labour and materials; and |
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68A

(a)

the incremental costs of fulfilling that contract—for example, direct labour and materials; and

| (b) | an allocation of other costs that relate directly to fulfilling contracts—for example, an allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling that contract among others. |
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(b)

an allocation of other costs that relate directly to fulfilling contracts—for example, an allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling that contract among others.

| 69. | Before a separate provision for an onerous contract is established, an entity recognises any impairment loss that has occurred on assets used in fulfilling the contract (see IAS 36).
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69.

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TRANSITIONAL PROVISIONS

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| 94A | Onerous Contracts—Cost of Fulfilling a Contract, issued in May 2020, added paragraph 68A and amended paragraph 69. An entity shall apply those amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments (the date of initial application). The entity shall not restate comparative information. Instead, the entity shall recognise the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings or other component of equity, as appropriate, at the date of initial application. |
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94A

EFFECTIVE DATE

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| 105. | Onerous Contracts—Cost of Fulfilling a Contract, issued in May 2020, added paragraphs 68A and 94A and amended paragraph 69. An entity shall apply those amendments for annual reporting periods beginning on or after 1 January 2022. Earlier application is permitted. If an entity applies those amendments for an earlier period, it shall disclose that fact. |
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105.

Amendments to IFRS 3 Business Combinations

Paragraph 11 is amended and the footnote to Framework for the Preparation and Presentation of Financial Statements in paragraph 11 is deleted. Paragraphs 14, 21, 22 and 23 are amended and paragraphs 21A, 21B, 21C, 23A and 64Q are added. A heading is added above paragraph 21A and the headings below paragraph 21 and above paragraph 22 are amended. Paragraph 10 is unamended but is included for ease of reference.

THE ACQUISITION METHOD

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Recognising and measuring the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree

Recognition principle

| 10. | As of the acquisition date, the acquirer shall recognise, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree. Recognition of identifiable assets acquired and liabilities assumed is subject to the conditions specified in paragraphs 11 and 12. |
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10.

Recognition conditions

| 11. | To qualify for recognition as part of applying the acquisition method, the identifiable assets acquired and liabilities assumed must meet the definitions of assets and liabilities in the Conceptual Framework for Financial Reporting at the acquisition date. For example, costs the acquirer expects but is not obliged to incur in the future to effect its plan to exit an activity of an acquiree or to terminate the employment of or relocate an acquiree’s employees are not liabilities at the acquisition date. Therefore, the acquirer does not recognise those costs as part of applying the acquisition method. Instead, the acquirer recognises those costs in its post-combination financial statements in accordance with other IFRSs.
  ... |
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11.

...

| 14. | Paragraphs B31–B40 provide guidance on recognising intangible assets. Paragraphs 21A–28B specify the types of identifiable assets and liabilities that include items for which this IFRS provides limited exceptions to the recognition principle and conditions.
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14.

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Exceptions to the recognition or measurement principles

| 21. | This IFRS provides limited exceptions to its recognition and measurement principles. Paragraphs 21A–31A specify both the particular items for which exceptions are provided and the nature of those exceptions. The acquirer shall account for those items by applying the requirements in paragraphs 21A–31A, which will result in some items being:






  (a) | recognised either by applying recognition conditions in addition to those in paragraphs 11 and 12 or by applying the requirements of other IFRSs, with results that differ from applying the recognition principle and conditions. |
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21.

(a)

recognised either by applying recognition conditions in addition to those in paragraphs 11 and 12 or by applying the requirements of other IFRSs, with results that differ from applying the recognition principle and conditions.

| (b) | measured at an amount other than their acquisition-date fair values. |
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(b)

measured at an amount other than their acquisition-date fair values.

Exceptions to the recognition principle

Liabilities and contingent liabilities within the scope of IAS 37 or IFRIC 21

| 21A | Paragraph 21B applies to liabilities and contingent liabilities that would be within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets or IFRIC 21 Levies if they were incurred separately rather than assumed in a business combination. |
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21A

| 21B | The Conceptual Framework for Financial Reporting defines a liability as ‘a present obligation of the entity to transfer an economic resource as a result of past events’. For a provision or contingent liability that would be within the scope of IAS 37, the acquirer shall apply paragraphs 15–22 of IAS 37 to determine whether at the acquisition date a present obligation exists as a result of past events. For a levy that would be within the scope of IFRIC 21, the acquirer shall apply IFRIC 21 to determine whether the obligating event that gives rise to a liability to pay the levy has occurred by the acquisition date. |
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21B

| 21C | A present obligation identified in accordance with paragraph 21B might meet the definition of a contingent liability set out in paragraph 22(b). If so, paragraph 23 applies to that contingent liability. |
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21C

Contingent liabilities and contingent assets

| 22. | IAS 37 defines a contingent liability as:






  (a) | a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or |
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22.

(a)

a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or

| (b) | a present obligation that arises from past events but is not recognised because:






  (i) | it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or |
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(b)

a present obligation that arises from past events but is not recognised because:

(i)

it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

| (ii) | the amount of the obligation cannot be measured with sufficient reliability. |
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(ii)

the amount of the obligation cannot be measured with sufficient reliability.

| 23. | The acquirer shall recognise as of the acquisition date a contingent liability assumed in a business combination if it is a present obligation that arises from past events and its fair value can be measured reliably. Therefore, contrary to paragraphs 14(b), 23, 27, 29 and 30 of IAS 37, the acquirer recognises a contingent liability assumed in a business combination at the acquisition date even if it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation. Paragraph 56 of this IFRS provides guidance on the subsequent accounting for contingent liabilities. |
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23.

| 23A | IAS 37 defines a contingent asset as ‘a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity’. The acquirer shall not recognise a contingent asset at the acquisition date.
  ... |
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23A

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EFFECTIVE DATE AND TRANSITION

Effective date

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| 64Q | Reference to the Conceptual Framework, issued in May 2020, amended paragraphs 11, 14, 21, 22 and 23 and added paragraphs 21A, 21B, 21C and 23A. An entity shall apply those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2022. Earlier application is permitted if at the same time or earlier an entity also applies all the amendments made by Amendments to References to the Conceptual Framework in IFRS Standards, issued in March 2018. |
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64Q

Amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards

Paragraph 39AG and, in Appendix D, paragraph D13A are added. Paragraph D1(f) is amended.

EFFECTIVE DATE

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| 39AG | Annual Improvements to IFRS Standards 2018–2020, issued in May 2020, amended paragraph D1(f) and added paragraph D13A. An entity shall apply that amendment for annual reporting periods beginning on or after 1 January 2022. Earlier application is permitted. If an entity applies the amendment for an earlier period, it shall disclose that fact. |
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39AG

Appendix D

Exemptions from other IFRSs

This appendix is an integral part of the IFRS.

| D1 | An entity may elect to use one or more of the following exemptions:
  ...






  (f) | cumulative translation differences (paragraphs D12–D13A); |
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D1

...

(f)

cumulative translation differences (paragraphs D12–D13A);

...

Cumulative translation differences

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| D13A | Instead of applying paragraph D12 or paragraph D13, a subsidiary that uses the exemption in paragraph D16(a) may elect, in its financial statements, to measure cumulative translation differences for all foreign operations at the carrying amount that would be included in the parent’s consolidated financial statements, based on the parent’s date of transition to IFRSs, if no adjustments were made for consolidation procedures and for the effects of the business combination in which the parent acquired the subsidiary. A similar election is available to an associate or joint venture that uses the exemption in paragraph D16(a).
  ... |
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D13A

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Amendment to IFRS 9 Financial Instruments

Amendment to IFRS 9 Financial Instruments

Paragraph 7.1.9, paragraph 7.2.35 and its heading, and paragraph B3.3.6 A are added. Paragraph B3.3.6 is amended. The requirements in paragraph B3.3.6 A have not been amended but have been moved from paragraph B3.3.6.

Chapter 7 Effective date and transition

Chapter 7 Effective date and transition

7.1   EFFECTIVE DATE

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| 7.1.9. | Annual Improvements to IFRS Standards 2018–2020, issued in May 2020, added paragraphs 7.2.35 and B3.3.6 A and amended paragraph B3.3.6. An entity shall apply that amendment for annual reporting periods beginning on or after 1 January 2022. Earlier application is permitted. If an entity applies the amendment for an earlier period, it shall disclose that fact. |
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7.1.9.

Annual Improvements to IFRS Standards 2018–2020

7.2   TRANSITION

...

Transition for Annual Improvements to IFRS Standards

Transition for Annual Improvements to IFRS Standards

| 7.2.35. | An entity shall apply Annual Improvements to IFRS Standards 2018–2020 to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendment. |
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7.2.35.

An entity shall apply Annual Improvements to IFRS Standards 2018–2020

Appendix B

Application Guidance

This appendix is an integral part of the Standard.

...

RECOGNITION AND DERECOGNITION (CHAPTER 3)

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Derecognition of financial liabilities (Section 3.3)

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| B3.3.6 | For the purpose of paragraph 3.3.2, the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10 per cent different from the discounted present value of the remaining cash flows of the original financial liability. In determining those fees paid net of fees received, a borrower includes only fees paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf. |
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B3.3.6

| B3.3.6 A | If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability.
  ... |
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B3.3.6 A

...

Amendment to IAS 41 Agriculture

Amendment to IAS 41 Agriculture

Paragraph 22 is amended and paragraph 65 is added.

RECOGNITION AND MEASUREMENT

...

| 22. | An entity does not include any cash flows for financing the asset or re-establishing biological assets after harvest (for example, the cost of replanting trees in a plantation forest after harvest).
  ... |
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22.

An entity does not include any cash flows for financing the asset or re-establishing biological assets after harvest (for example, the cost of replanting trees in a plantation forest after harvest).

...

EFFECTIVE DATE AND TRANSITION

...

| 65. | Annual Improvements to IFRS Standards 2018–2020, issued in May 2020, amended paragraph 22. An entity shall apply that amendment to fair value measurements on or after the beginning of the first annual reporting period beginning on or after 1 January 2022. Earlier application is permitted. If an entity applies the amendment for an earlier period, it shall disclose that fact. |
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65.

Annual Improvements to IFRS Standards 2018–2020

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