ESR AR 2019 EN

Notes to the Consolidated Financial Statements 31 December 2019 135 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ESR Annual Report 2019 2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (continued) (b) IFRIC-Int 23 addresses the accounting for income taxes (current and deferred) when tax treatments involve uncertainty that affects the application of IAS 12 (often referred to as “uncertain tax positions”). The interpretation does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The interpretation specifically addresses (i) whether an entity considers uncertain tax treatments separately; (ii) the assumptions an entity makes about the examination of tax treatments by taxation authorities; (iii) how an entity determines taxable profits or tax losses, tax bases, unused tax losses, unused tax credits and tax rates; and (iv) how an entity considers changes in facts and circumstances. Upon adoption of the interpretation, the Group considered whether it has any uncertain tax positions arising from the transfer pricing on its intergroup sales. Based on the Group’s tax compliance and transfer pricing study, the Group determined that it is probable that its transfer pricing policy will be accepted by the tax authorities. Accordingly, the interpretation did not have any impact on the financial position or performance of the Group. 2.3 ISSUED BUT NOT YET EFFECTIVE IFRSs The Group has not adopted the following standards that have been issued but not yet effective, in the financial statements: Amendments to IFRS 3 Definition of a Business 1 Amendments to IFRS 9, Interest Rate Benchmark Reform 1  IAS 39 and IFRS 7 Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor  and its Associate or Joint Venture 4 IFRS 17 Insurance Contracts 2 Amendments to IAS 1 and IAS 8 Definition of Material 1 Amendments to IAS 1 Classification of liabilities as current or non-current 3 1 Effective for annual periods beginning on or after 1 January 2020 2 Effective for annual periods beginning on or after 1 January 2021 3 Effective for annual periods beginning on or after 1 January 2022 4 No mandatory effective date yet determined but available for adoption Further information about those IFRSs that are expected to be applicable to the Group is described below. Amendments to IFRS 3 clarify and provide additional guidance on the definition of a business. The amendments clarify that for an integrated set of activities and assets to be considered a business, it must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. A business can exist without including all of the inputs and processes needed to create outputs. The amendments remove the assessment of whether market participants are capable of acquiring the business and continue to produce outputs. Instead, the focus is on whether acquired inputs and acquired substantive processes together significantly contribute to the ability to create outputs. The amendments have also narrowed the definition of outputs to focus on goods or services provided to customers, investment income or other income from ordinary activities. Furthermore, the amendments provide guidance to assess whether an acquired process is substantive and introduce an optional fair value concentration test to permit a simplified assessment of whether an acquired set of activities and assets is not a business. The Group expects to adopt the amendments prospectively from 1 January 2020. Since the amendments apply prospectively to transactions or other events that occur on or after the date of first application, the Group will not be affected by these amendments on the date of transition.