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Effective dates

Date recorded:

Leasing project

Even through the Boards have not completed all of their deliberations regarding the leasing project, the Chair of the FASB questioned whether a decision could be made to re-expose the leasing project to provide interested parties with an opportunity to comment on revisions the Boards have undertaken since the publication of Leases ED. With little deliberation, the Boards noted that decisions taken to date were sufficiently different from those published in the Leases ED to warrant re-exposure of the revised proposals. The Boards intend to complete their deliberations, including consideration of the comment period, during the third quarter of 2011 with a view to publish a revised exposure draft shortly afterwards.

Effective dates and transition methods

Following an October 2010 request for views from stakeholders about the time and effort that would be involved in adopting several new standards and when those standards should be effective, in addition to further constituent outreach conducted during the second quarter of 2011, the staff presented a detailed assessment of feedback received on effective dates and transitional disclosures necessary to assist users in understanding the effects of new requirements.

Following this discussion, the Boards were asked to consider whether: early adoption should be permitted and first-time adopters of IFRSs (IASB-only discussion topic) should be permitted to adopt IFRSs early. This initial discussion was in reference to the following projects: revenue recognition, leases, financial instruments and insurance contracts.

The staff recommended that early application of standards should be permitted. However, the staff noted that the Boards should assess further each separate standards project to determine whether this policy is appropriate in the context of that project or whether other conditions should be applied. The majority of the Boards expressed concerns with allowing for early adoption given that it would lead to incomparable financial information between entities given timing of adoption of new standards. This was a particular focus of the IASB given the need to promote comparability across jurisdictions. Opposing Board views expressed concern with denying preparers the ability to prepare financial statements under the new standards given that the new standards are expected to be more relevant and faithfully representative. Finally, a few Board members expressed that a vote was not needed in this area, as national standard setters maintained the power in a local jurisdiction to allow for early adoption if so desired.

When put to a vote, the FASB did not support early adoption of standards. However, the IASB chose not to vote on the general topic of early adoption of standards, as it would look at each project individually in reaching a conclusion on early adoption.

The staff asked the IASB if it would permit early application of new IFRSs by first-time adopters of IFRSs, consistent with its current policy (i.e., first-time adopters could choose early the requirements in IFRSs before the mandatory effective date). With little debate, the IASB agreed to permit early application of new IFRSs by first-time adopters of IFRSs.

Revenue recognition project

The staff requested that the Boards consider an effective date for the revenue recognition project, in addition to considering potential early application of the final standard.

The staff recommended that the effective date of the proposed standard (as would be outlined in the 2011 re-exposure draft) would not be earlier than annual reporting periods beginning on or after 1 January 2015, but explained that the Boards would re-evaluate the effective date before issuing the final standard. Such timing served to consider cross-project discussions, required system changes and dual processing and transitioning.

Multiple Board members questioned the need for a vote on the effective date given that the timing of final standard issuance had not yet been determined. Other Board members felt it was important to highlight to constituents a preliminary date so that preparers could evaluate their own transitioning requirements. Also, one Board member expressed a desire to extend the effective date (e.g., annual reporting periods beginning on or after 1 January 2016) to allow for adequate time for translation of standards, system changes and retrospective application. While Board members acknowledged this concern, many preferred to retain the 2015 dating and reconsider the date at finalisation of the standard.

Thus, the Boards decided that the effective date of the proposed standard (as would be outlined in the 2011 re-exposure draft) would not be earlier than annual reporting periods beginning on or after 1 January 2015. A more definitive date would be established at final standard issuance.

Further, the FASB decided that early adoption of the standard would not be permitted, while the IASB narrowly voted to permit early adoption of this particular standard.