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IFRIC 14 provides general guidance on how to assess the limit in IAS 19 Employee Benefits on the amount of a pension fund surplus that can be recognised as an asset.  It also explains how the pensions asset or liability may be affected when there is a statutory or contractual minimum funding requirement.

The Interpretation will standardise practice and ensure that entities recognise an asset in relation to a surplus on a consistent basis. No additional liability need be recognised by the employer under IFRIC 14 unless the contributions that are payable under the minimum funding requirement cannot be returned to the company.

IFRIC 14 is likely to have the most impact in countries that have a minimum funding requirement and where there are restrictions on a company's ability to get refunds or reduce contributions.

IFRIC 14 is effective for annual periods beginning on or after 1 January 2008. Earlier application is permitted.

Click for the Press Release (PDF 63k).

 

IFRIC D21 Real Estate Sales aims to standardise accounting practice among real estate developers for sales of units, such as apartments or houses, 'off plan', that is, before construction is complete.

At present, real estate developers interpret IFRSs differently and record revenue for the sale of the units at different times. Some record revenue only when they have handed over the completed unit to the buyer, while others record revenue earlier, as construction progresses, by reference to the stage of completion of the development.

IFRIC D21 proposes that revenue should be recorded as construction progresses only if the developer is providing construction services, rather than selling goods (completed real estate units).

It proposes features that indicate that the seller is providing construction services. In many countries, these features tend currently not to be present in typical off plan sale agreements.

The comment deadline is 5 October 2007. Click for Press Release (PDF 39k).

 

Staff comments relate to the following matters, among others:

• Assertion of compliance with IFRSs. "In the vast majority of the companies we reviewed, the company's auditor opined on the company's compliance with the jurisdictional version of IFRS that the company used, but did not opine on the company's compliance with IFRS as published by the IASB."
• Manner of presentation - income statement. Issues included descriptions of subtotals in the income statement, accounting policies for excluding items from operating income, and calculation of voluntary per-share measures.
• Manner of presentation - cash flow statement. Issues included definition of cash equivalents and presentation of expenses outside of cash flow from operations.
• Intercorporate investments. Accounting treatments for common control mergers, recapitalisations, reorganisations, acquisitions of minority interests, and similar transactions.
• Consolidation. Exclusion of a subsidiary from consolidation.
• Accounting policy decisions. Basis for choosing accounting policies that are not explicitly covered in IFRSs.
• Specialised industries. 'Substantial variation' in accounting for insurance contracts and in the reporting of extractive industry exploration and evaluation activities.
• Accounting policies regarding revenue recognition, intangible assets and goodwill, identifying and evaluating impairment, leases, contingent liabilities, and financial instruments.
• Banks. Recognition of loan impairments by banks.

Click to (PDF 44k). The comment letters sent by the SEC staff to the companies whose IFRS financial statements were reviewed, and the company responses, are available on the SEC website at http://sec.gov/divisions/corpfin/ifrs_reviews.

The newsletter, titled SEC Tackles a Wide Range of Topics, discusses the following recent SEC developments:

1. the issuance of interpretive guidance for management's internal control evaluations,
2. rule amendments for management's report on internal controls,
3. proposed changes for smaller public companies,
4. the establishment of an advisory committee to improve financial reporting, and
5. proposals for requiring electronic filing and simplifications of Form D.

The proposal would amend Form 20-F and make conforming changes to Regulation S-X to accept financial statements prepared in accordance with the English language version of IFRS as published by the IASB without reconciliation to US GAAP when contained in the filings of foreign private issuers with the Commission. The proposal notes that "current requirements regarding the reconciliation to U.S. GAAP will not change for a foreign private issuer that uses a basis of accounting other than the English language version of IFRS as published by the IASB". Click to (PDF 296k). There is a 75-day comment period. The proposal includes a link for submitting comments electronically.

Deloitte UK welcomes the IASB's SME Exposure Draft and supports the approach the IASB has taken in developing a simplified, self-contained set of accounting principles.

There is no case for two sets of wholly different accounting standards (IFRSs and UK GAAP) in the medium term in the UK, and we support the ASB's decision to consider an appropriate exit strategy for UK GAAP.... We support the continued use of a three-tier system in the UK and that it should be as follows: Full IFRSs for listed and publicly accountable groups and entities; IFRS for SMEs standard for large and medium private companies, including subsidiaries of listed and publicly accountable entities (the 'middle tier'); FRSSE [UK's existing Financial Reporting Standard for Smaller Entities] for small companies.

Click to (PDF 483k).

IFRIC 13 addresses the accounting by entities that provide their customers with incentives to buy goods or services by providing awards (called 'award credits' in the Interpretation) as part of a sales transaction. Common examples are airline and hotel loyalty schemes and credit card reward schemes. IFRIC 13 requires the entity that grants the awards to account for the sales transaction that gives rise to the award credits as a 'multiple element revenue transaction' and allocate the fair value of the consideration received or receivable between the award credits granted and the other components of the revenue transaction. This newsletter explains the requirements of IFRIC 13. You will find all Past IAS Plus Newsletters Here. You can sign up for Free Subscription by Email.