This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version. Please upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

June

Amendments to IFRS 6 and IFRS 1

30 Jun 2005

The IASB has issued amendments to IFRS 1 and IFRS 6 to clarify that an entity that both (a) adopts IFRSs for the first time before 1 January 2006 and (b) applies IFRS 6 before that date is exempted not only from providing comparative prior-period disclosures but also from applying the recognition and measurement requirements of IFRS 6 in the prior comparative period.

Click to Download the IASB Press Release (PDF 48k).

 

Amendments proposed to IFRS 3, IAS 27, IAS 37

30 Jun 2005

The IASB and the US Financial Accounting Standards Board (FASB) have each published for public comment exposure drafts containing joint proposals to improve and align the accounting for business combinations.

The proposals include a draft standard that the boards have developed in their first major joint project. The proposed standard would replace the existing requirements of the IASB's IFRS 3 Business Combinations and the FASB's Statement 141 Business Combinations.

The proposals retain the fundamental requirement of IFRS 3 and SFAS 141 to account for all business combinations using the purchase method of accounting, by which one party is always identified as acquiring the other.

 

Principal changes being proposed to IFRS 3:

  • The acquirer would measure the business acquired at its total fair value and, consequently, recognise the goodwill attributable to any non-controlling interests (previously referred to as minority interests) rather than just the portion attributable to the acquirer. This is sometimes called the 'full goodwill method'. The current version of IFRS 3 requires a business combination to be measured and recognised on the basis of the accumulated cost of the combination.
  • Payments to third parties for consulting, legal, audit, and similar services associated with an acquisition would be recognised generally as expenses when incurred rather than capitalised as part of the business combination. The current version of IFRS 3 requires direct costs of the business combination to be included in the cost of the acquiree.
  • The acquirer would measure and recognise the acquisition-date fair value of the assets acquired and liabilities assumed as part of the business combination, with limited exceptions. Those exceptions are goodwill, non-current assets (or disposal group) classified as held for sale, deferred tax assets or liabilities, and assets or liabilities related to the acquiree's employee benefit plans. Thus there will be fewer exceptions to the principle of measuring assets acquired and liabilities assumed in a business combination at fair value.
  • The acquirer would recognise separately from goodwill an acquiree's intangible assets that meet the definition of an intangible asset in IAS 38 Intangible Assets and are identifiable (that is, they arise from contractual-legal rights or are separable). The current version of IFRS 3 requires the recognition of intangible assets separately from goodwill only if they meet the IAS 38 definition and are reliably measurable.
  • The acquirer would account for a bargain purchase by reducing goodwill until the goodwill related to that business combination is reduced to zero and then by recognising any remaining excess in profit or loss. The current version of IFRS 3 requires the excess of the acquirer's interest in the net fair values of the acquiree's assets and liabilities over cost to be recognised immediately in profit or loss.
  • Acquisitions of additional non-controlling equity interests after the business combination will no longer be accounted for using the acquisition method. Instead, they will be accounted for as transactions with owners.
  • The scope of IFRS 3 would be broadened to include business combinations involving only mutual entities and those achieved by contract alone.
Two additional exposure drafts:
  • The IASB and the FASB also published exposure drafts proposing that non-controlling interests should be classified as equity within the consolidated financial statements and that the acquisition of non-controlling interests should be accounted for as an equity transaction. The IASB's proposals are presented as amendments to IAS 27 Consolidated and Separate Financial Statements.
  • The IASB also has proposed to amend IAS 37 Provisions, Contingent Liabilities and Contingent Assets, to treat items previously described as 'contingent liabilities' more consistently in and outside a business combination.

 

 

The IASB invites comments on all of the exposure drafts by 28 October 2005. Click to Download the IASB Press Release (PDF 56k).

June 2005 edition of EITF Roundup

30 Jun 2005

We have posted the (PDF 152k), which provides an overview of the issues discussed, consensuses reached, and administrative matters discussed at the 15-16 June 2005 meeting of FASB's Emerging Issues Task Force.

You will find past issues Here.

Trustees' press release on constitutional changes

28 Jun 2005

As we have previously reported, at their meeting in Paris on 21 June 2005 the Trustees of the IASC Foundation approved a number of Amendments to the IASCF Constitution following their review of the structure and operations of the IASB, IFRIC, SAC, and the IASCF.

Those amendments are intended:

  • to enhance the organisation's accountability by increasing the Trustees' oversight and interaction with parties interested in, and affected by, accounting standards.
  • to improve the transparency of the organisation's operations by introducing new procedures and practices.
  • to establish a high level advisory group of leaders of official international and regional organisations to assist the Trustees in their responsibility for nominating and appointing individuals as Trustees.
  • to respond to concern that the experiences of those from some large economies outside Europe and North America have not been represented among the Trustees by expanding the number of Trustees from 19 to 22, with a provision for two new appointments from Asia/Oceania.
  • to emphasise the need for, and to encourage, extensive consultation through formal and informal mechanisms, including a reinvigorated and more effective Standards Advisory Council, and expanded liaison beyond existing due process requirements.
  • to highlight the commitment of the Trustees to ensuring that an independent IASB is composed of individuals that bring to its work not only technical expertise but a broad range of perspectives and skills, including practical experience.
  • to take explicit note of the special needs of small and medium-sized entities.

The Trustees have today issued a Press Release detailing the steps leading to the constitutional changes (PDF 84k).

Two new projects planned for IASB agenda

27 Jun 2005

At today's meeting of the Standards Advisory Council, IASB research director Wayne Upton said that the IASB staff plans to propose to the Board, for consideration in July, two new projects for the Board's active agenda: Fair value measurement guidance. This project would focus on how to measure fair value.

It would not deal with when a standard should require fair-value measurement, but only how to measure fair value if a standard requires it. The FASB is currently completing work on a similar project, and the IASB's project would build on the FASB's work. The staff will propose that the project lead to an IASB standard rather than amendment of the IASB Framework.
  • Issues arising from IFRIC 3 Emission Rights. This project will consider ways to resolve the 'accounting mismatch' that arises when the intangible asset is measured at historical cost while the related provision is measured at the market value of the allowances needed to settle it. Two possible ways of resolving the 'mismatch' are:
    • Amend IAS 38 Intangible Assets to allow emission allowances that are traded in an active market to be measured at fair value through profit and loss.
    • Amend IAS 39 Financial Instruments to treat the emission allowances as financial instruments to be measured at fair value through profit and loss.
    Either way, an exposure draft is planned for July 2006.
  • Notes from the IASB meeting 23 June 2005

    27 Jun 2005

    The IASB met at its offices in London on Wednesday and Thursday, 22-23 June 2005. We have combined the preliminary and unofficial notes taken by Deloitte observers at the meeting in a Separate Web Page. .

    The IASB met at its offices in London on Wednesday and Thursday, 22-23 June 2005. We have combined the preliminary and unofficial notes taken by Deloitte observers at the meeting in a Separate Web Page.

    EFRAG seeks to be more 'proactive'

    27 Jun 2005

    The European Financial Reporting Advisory Group (EFRAG) has released a Position Paper (PDF 21k) on Proactive Accounting Activities in Europe: EFRAG and the National Standard Setters.

    The objectives of the greater proactivity, as agreed by EFRAG and 17 European accounting standard setters, are:
    • EFRAG and the national standard-setters (NSS) should work much more closely together to improve the input from Europe to the global standard-setting process.
    • By working more closely together and pooling resources, Europe should become more involved in the IASB's work from an early stage.
    • Increased co-operation will encourage the development of common views and ensure, as far as is practicable, that the messages Europe gives the IASB are consistent.

    Webcast covers a range of IFRS/UK GAAP issues

    26 Jun 2005

    The Deloitte United Kingdom IFRS Centre of Excellence is running a monthly series of hour-long Internet-based IFRS technical updates, focusing on the most important international accounting standards and how they will affect UK companies.

    The fourteenth session was run on Thursday 23 June 2005 and focused on the new Operating and Financial Review, company law and other regulatory changes, and draft guidance on IFRSs and distributable profits. To access the recording Click Here. The recording of each session will be available on this website for a period of at least 3 to 4 weeks from the date of the presentation. Links to past sessions may be found on our United Kingdom Page. The recording is no longer available online.

    IASB withdraws IFRIC 3 'Emission Rights'

    25 Jun 2005

    The IASB has voted to withdraw IFRIC 3 'Emission Rights', which had been issued in December 2004 and was scheduled to go into effect for annual periods beginning on or after 1 March 2005.

    IFRIC 3 specifies that emission rights (allowances) granted by government are intangible assets that should be recognised in the financial statements in accordance with IAS 38 Intangible Assets and that as a participant produces emissions, it recognises a provision for its obligation to deliver allowances in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

    Some of the Board's constituents had expressed concern about a resulting 'accounting mismatch' because the intangible asset is measured at historical cost while the provision is measured at the market value of the allowances needed to settle it.

    IFRIC discussed the matter at its 2-3 June 2005 meeting. That discussion included a staff analysis of a proposal by EFRAG for the development of a form of cash flow hedge accounting to reduce the volatility resulting from the timing of receipt of allowances. IFRIC had recommended that the Board consider these wider issues.

    The Board also had before it a letter from the European Commission requesting that the effective date of IFRIC 3 be deferred. The Board concluded that while IFRIC 3 is the appropriate interpretation of the existing requirements of IAS 37 and IAS 38, the 'accounting mismatch' problem suggests the need for a more comprehensive consideration of the issue. Pending that consideration, IFRIC 3 has been withdrawn.

     

    Comment deadline on SME questionnaire is next week

    24 Jun 2005

    We remind IAS Plus visitors that the deadline for responding to the IASB's Staff Questionnaire on Possible Recognition and Measurement Modifications for Small and Medium-sized Entities (SMEs) is 30 June 2005. For information about the SME project click Here. .

    We remind IAS Plus visitors that the deadline for responding to the IASB's Staff Questionnaire on Possible Recognition and Measurement Modifications for Small and Medium-sized Entities (SMEs) is 30 June 2005. For information about the SME project click Here.

    Correction list for hyphenation

    These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.