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News

IPSASB finalises proposals on reporting service performance information

01 Apr 2015

The International Public Sector Accounting Standards Board (IPSASB) has published Recommended Practice Guideline 3 (RPG 3) that provides guidance on the reporting of service performance information. The RPG is designed to allow public sector entities to be held accountable through the provision of high quality service performance information, by providing guidance on how such information should be presented, and its recommended characteristics.

RPG 3 follows an exposure draft published in 2013 and an earlier consultation paper released in 2011. It responds to the perceived need for a principles-based and consistent framework for service performance information that focuses on user needs. The press release states:

Service provision is the primary function of the vast majority of public sector entities. Service performance information is essential for users to evaluate the services provided and public sector entities' efficient and effective use of resources to deliver those services. RPG 3 provides guidance to support the quality of service performance information already reported by entities and offers a useful framework for entities that have not yet started to report service performance information.

The guidance in RPG 3 Reporting Service Performance Information aligns with the IPSASB's view that public sector financial reporting has a greater scope than financial statements alone. Therefore, it:

  • provides principles applicable to the presentation of service performance information and definitions that establish a standardised service performance information terminology;
  • addresses the reporting entity and reporting period for service performance information;
  • provides guidance on the choice of performance indicators that show an entity's achievements with respect to its service performance objectives, disclosures about the basis of the reported information, and service performance-related narrative discussion and analysis; and
  • states that service performance information may be presented either in the same report as the financial statements or in a separate report, and identifies factors to consider when making that decision.

RPGs are considered 'good practice', are not mandatory, and do not need to be applied in order for a public sector entity to comply with International Public Sector Accounting Standards (IPSAS).

Please click for the following additional information on the IPSASB website:

Feedback on the EFRAG Discussion Paper on the classification of claims

31 Mar 2015

The European Financial Reporting Advisory Group (EFRAG) has published a feedback statement summarising the main messages from respondents to EFRAG’s Discussion Paper 'Classification of Claims'.

The paper, published in July 2014, was aimed at assisting the IASB in the development of its project on distinguishing between equity and liabilities in the context of the revision of the Conceptual Framework for Financial Reporting. The EFRAG paper addressed the classification of claims in general and thus went beyond the discussion around the mere distinction between equity and liabilities. Respondents to the Discussion Paper generally supported the identified framework but most respondents considered that current binary classification model in IFRS should be retained, with a negative definition of equity and refinement of the positive definition of a liability. The Discussion Paper and reactions to it were discussed at the last ASAF meeting.

The feedback statement is available on the EFRAG website.

ESMA publishes report on the activities of accounting enforcers and their findings within the EU in 2014

31 Mar 2015

All in all, the European Securities and Markets Authority (ESMA) sees improved transparency in European IFRS financial statements but believes that more information is needed on forbearance practices and impairment tests.

The report contains data from the examination approximately a quarter of the IFRS interim or annual financial statements of the 6400 issuers listed on EU regulated markets. The enforcers took action against 306 (22%) of the issuers subject to ex-post examinations, representing approximately 5% of issuers listed on regulated markets. The report also includes quantitative and qualitative results of the review of the 2013 interim and annual IFRS financial statements of 176 issuers in the EU and examines the level of compliance with IFRS in the areas identified as common enforcement priorities. Although the assessment showed improvements in the quality of application of IFRS, ESMA identified room for improvement where insufficient information was provided relating to forbearance practices in financial statements as well as the lack of disclosure of key assumptions when performing impairment tests for non-financial assets with an indefinite useful life.

In connection with the report, which is based on ESMA's 2014 Guidelines on enforcement of financial information, ESMA has also published a table of which EU jurisdictions comply, do not comply or intend to comply with the guidelines (including reasons for non-compliance).

The following information is available on the ESMA website:

IASB Chairman discusses non-GAAP measures

31 Mar 2015

In a speech given in Seoul, Korea, Hans Hoogervorst, Chairman of the International Accounting Standards Board (IASB), stressed that 'greater discipline' is needed in the use of non-GAAP measures.

Mr Hoogervorst touched on several topics during his speech - including the Disclosure Initiative and the IFRS Taxonomy -, but the main focus of his remarks were non-GAAP measures and their relation to IFRS financial statements.

In his speech, he admitted that alternative performance measures (or 'non-GAAP measures') can be very helpful as IFRSs do not cater to individual sectors but aim at creating comparability across sectors. This makes them comparatively generic, and alternative performance measures can be used to provide investors with additional, more tailored insight into how a company is being run. Yet he also warned that alternative measures are not free of bias as even seemingly common measures such as EBITDA are often presented in an 'adjusted' or 'normalised' or otherwise modified form. In addition, non-GAAP measures are often presented with a prominence that obscures IFRS numbers. Mr Hoogervorst stated:

While the IASB has no ambition to stamp out the use of non-GAAP measures, we do think that investors would benefit from greater discipline in their presentation in the financial statements. That is why the IASB is currently looking at such measures as part of our Disclosure Initiative. Our starting point for this work is the belief that the IFRS numbers should serve as the primary performance measures by which entities describe their financial position and performance. We go to great lengths to ensure the IFRS numbers are neutral, comparable, and verifiable. IFRS financial statements provide information that markets can trust. From this starting point, we have no problem with companies providing additional non-GAAP measures to enrich the IFRS data in financial statements. Yet some basic ground rules should be respected.

The basic rules Mr Hoogervorst referred to were that alternative performance measures should not present information that is misleading and that this information should not be given greater prominence in the financial statements than the IFRS numbers. He also stressed that the IASB is aware that this might be an area where more action is needed. He said: "We are also open to the idea of learning from the use of non-GAAP measures. Where the use of such measures is widespread and many companies are systematically adjusting the IFRS numbers, then maybe there is a vacuum in IFRS that we need to look at." However, he also pointed out that the IASB has already begun to act. Mr Hoogervorst cited the December 2014 amendments to IAS 1 as a case in point and also mentioned that a discussion paper on the principles of disclosure is expected to be published by the end of 2015.

Please click to download the full text of Mr Hoogervorst's speech from the IASB website.

March 2015 IFRS Interpretations Committee meeting notes — Part 2 (concluded)

30 Mar 2015

The IFRS Interpretations Committee met in London on 24 March 2015. We've posted the Deloitte observer notes for the final session on IFRS 5.

The topics discussed were as follows (click through to access detailed Deloitte observer notes for each topic):

TUESDAY, 24 MARCH 2015

Items for continuing consideration

You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

Japan completes endorsement of IFRS 9 without modifications

30 Mar 2015

The Financial Services Agency (FSA) of Japan has announced that additional IFRSs were designated for use by companies voluntarily applying IFRSs in Japan. The announcement effectively includes all IASB pronouncements issued up to 31 December 2014. This means that endorsement of IFRS 9 'Financial Instruments' is now complete in Japan.

Newly designated IFRSs include:

  • IFRS 9 Financial Instruments (July 2014);
  • Equity Method in Separate Financial Statements (August 2014);
  • Annual Improvements 2012–2014 Cycle (September 2014);
  • Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (September 2014);
  • Investment Entities: Applying the Consolidation Exception (December 2014); and
  • Disclosure Initiative (Amendments to IAS 1) (December 2014).

Click for the FSA press release (in Japanese only, link to FSA website).

March 2015 ASAF meeting notes on insurance contracts

30 Mar 2015

The Accounting Standards Advisory Forum (ASAF) in London on 26–27 March 2015. We have posted the Deloitte observer notes from the session on insurance contracts.

The meeting discussed a presentation from the Accounting Standards Board of Japan (ASBJ), which proposed that the contractual service margin (CSM) of an insurance contract should be presented in the accumulated balance of other comprehensive income (AOCI), and sought the ASAF’s advice on specific issues relating to the new insurance contracts Standard as the earliest possible mandatory date of this Standard will be after the mandatory effective date of IFRS 9 Financial Instruments. Please click through for direct access to the notes.


US SEC commissioner discusses global accounting standards

27 Mar 2015

Kara Stein, a Commissioner of the US Securities and Exchange Commission (SEC), gave her opinion on the future of IFRSs in the United States during a speech at the Brooklyn Law School in New York City. Ms Stein discussed international cooperation in the wake of the global financial crisis and called for worldwide collaboration on data aggregation and disclosure. She then discussed IFRS adoption in the United States, noting:

I am not convinced of a need to abandon U.S. GAAP in favor of IFRS. That is not to say that U.S. GAAP is perfect. Nor is IFRS perfect. I’m also not convinced that providing financial statements in two different sets of accounting standards would be beneficial for either investors or issuers. With complexity in both businesses and products on the rise, it seems that presenting information in a dueling set of financial reporting standards does not really aid in understanding.

To be frank, this debate between dueling standards needs to move on. Neither regime worked ideally in the financial crisis, and neither may serve investors well in today’s post-financial crisis, technologically disrupted, and data-driven world. In practice and in reality, accounting standards may vary between jurisdictions due to legal and cultural factors, as well as differences in perspective. Remember, IFRS is not consistently implemented around the world.

Ms Stein acknowledged that convergence “makes sense” but suggested “reimagining” accounting regimes to use technology and globalisation to “minimize differences and maximize global investment and access to capital.”

The full transcript of Ms Stein’s speech is available on the SEC's website.

March 2015 IFRS Interpretations Committee meeting notes — Part 1

27 Mar 2015

The IFRS Interpretations Committee met in London on 24 March 2015. We've posted the Deloitte observer notes for the sessions on IAS 12, IAS 19, IAS 21, IFRS 10, IFRS 11, IFRIC 14, and the Committee's work in progress

Second issue of the IASB's new publication series for investors

27 Mar 2015

The IASB has issued the second edition of its newsletter 'The Essentials' that aims at increasing investors' awareness of IFRS and enhance the insights they obtain when analysing information produced by IFRS financial statements.

The series was introduced in the latest Investor Update the IASB published last week. The second issue of this series deasl with the presentation of financial statements and addresses reporting principles, the reporting of extraordinary items and differences between IFRSs and US GAAP.

Please click to access Issue 2 of The Essentials or the archive of all issues (both links to IASB website).

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