• Service: IFRS
  • Industry: Infrastructure, Government and Healthcare, Transport & Logistics
  • Type: Business and industry issue
  • Date: 07/06/2011

Preparing for latest IFRS developments 

 In 2010 the IASB launched an ambitious and challenging program to amend and/or rewrite a number of standards. Some of those standards will have a significant impact on the Transport and Logistics sector.

The latest developments most relevant to the Transport and Logistics sector include:


  • Exposure draft ED Leases - See Shipping Insights publications

    If enacted as proposed, the new lease accounting standard will result in significant changes for shipping companies, airlines, terminal operators and logistics companies, where it is common to lease assets under an operating lease, which currently are not included on the balance sheet.

    In the future, these leases will be included as a right to use asset and a lease liability, increasing debt and gearing ratio’s. The exposure draft may therefore result in transport and logistics companies re-looking at ways in which they finance and operate.

    We recommend to start analyzing the impact of these changes and to consider the effect on existing contracts such as debt covenants

  • Newly released standards on Joint arrangements (IFRS 11)    
    The Transport and logistics sector uses joint ventures to a significant degree and the old proportionate consolidation option was extensively used.

    The free choice however between proportionate consolidation and the equity method has been eliminated and you will therefore likely see some major effects whereby extensive activities, which previously were shown gross in the financial statements, now shrink to a one-line basis. The transition from proportionate consolidation to the equity method will affect virtually all line items, notably decreasing revenue, assets and liabilities. If the joint venture is profitable and a taxable entity, then the transition will also decrease profit before tax as tax expenses of the joint arrangement will no longer be included in the tax line.

    With an implementation date of years beginning on or after 1 January 2013, it is time to start preparing for this change and more specifically:


  • Consider the impact on performance measures
  • Consider the effect on existing contracts such as debt and remuneration agreements
  • Communicate the impact to users of financial statements, including managing their expectations

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The information on this site will interest any organization reporting under, or in the process of converting to IFRS.