IMF Bentham Limited Annual Report 2019

Notes to the Financial Statements continued –– The adoption of AASB 9 has changed the Group’s accounting for impairment losses of financial assets by replacing AASB 139’s incurred loss approach with a forward-looking expected credit loss (ECL) approach. Upon transition to AASB 9 no material variance in asset values stated under the new ECL approach to previous book values were noted as the litigation receivables had either immaterial expected credit losses assessed due to the credit quality of the debtor or had already assumed an amount equal to the life-time expected credit losses where there was a material movement in the receivables credit risk. In addition, expected credit losses on cash and cash equivalents were deemed to be immaterial as cash deposits are short term, less than 90 days and with AA rated banks. Accordingly, no adjustment was required. AASB 15 Revenue from Contracts with Customers and consequential amendments to other Australian Accounting Standards The Group adopted AASB 15 with effect from 1 July 2018. AASB 15 outlines a single comprehensive model of accounting for revenue arising from contracts with customers and supersedes the revenue recognition requirements that are included in other Accounting Standards and Interpretations, in particular AASB 118 Revenue (“AASB 118”). AASB 15 moves from a “risks and rewards” model of revenue recognition under AASB 118 to a “control” model of revenue recognition. Set out below are the key impacts arising from the adoption of the new standard applicable to the Group’s litigation contracts in progress. The Group adopted AASB 15 using the modified retrospective method (see below). At the date of initial application of AASB 15, 1 July 2018, the Group had no material contracts falling directly within the scope of AASB 15. The Group’s Litigation Contracts in Progress do not fall directly within the scope of AASB 15 as they are collaborative arrangements and there is no customer/ vendor relationship established within the contract. However, AASB 15 is relevant to the Group due to the consequential amendments to AASB 138 Intangible Assets (“AASB 138”) relating to the disposal of intangible assets. The Group’s Litigation Contracts in Progress are classified as intangible assets. Litigation Contracts in Progress are derecognised when the Group disposes of the intangible asset. Gains or losses arising from derecognition of Litigation Contracts in Progress are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the profit or loss as other income. Prior to the adoption of AASB 15 and the consequential amendments to AASB 138, AASB 138 required the Group to recognise net income on disposal of its intangible assets with the proceeds on disposal measured in accordance with AASB 118. After the amendment, AASB 138 requires the proceeds on disposal of intangible assets to be recognised and measured in accordance with the requirements of AASB 15. In this regard, the date of disposal of an intangible asset is now the date that the recipient obtains control of the intangible asset in accordance with the requirements for determining when a performance obligation is satisfied in AASB 15. The amount of consideration to be included in the gain or loss arising from the derecognition of an intangible asset is determined in accordance with the requirements for determining the transaction price under AASB 15. Subsequent changes to the estimated amount of the consideration included in the gain or loss are accounted for in accordance with the requirements for changes in the transaction price in AASB 15. Further detail of the new accounting policy applicable to litigation contracts in progress can be found in Note 10. Following the adoption of AASB 15, the Group has entered into management services agreements with Fund investors and will derive revenue from customer contracts. The accounting policy for revenue recognition can be found in Note 2. Transition impact The Group adopted AASB 15 using the modified retrospective method of adoption. At the date of initial application, 1 July 2018, the adoption of AASB 15 did not have a material effect on the Group and no adjustment was taken to opening retained earnings as at 1 July 2018. There was no material impact of applying AASB 15 and the consequential amendments to AASB 138 in the current year. In applying the consequential amendments to AASB 138 relating to the disposal of intangible assets, the Group did not apply the amended Standard to litigation contracts derecognised prior to the date of initial application of the amended Standard consistent with the transitional provisions of AASB 15 using the modified retrospective method of adoption. About this Report (continued) 86