November

Endorsement of IFRS 9 is postponed

13 Nov 2009

In our News Story of 4 November 2009 we reported that the European Financial Reporting Advisory Group (EFRAG) had posted on its website an Invitation to Comment on its Draft Endorsement Advice relating to the endorsement of IFRS 9 for use in the European Union.

EFRAG consulted both on its assessment of IFRS 9 against the EU endorsement criteria and on its initial assessment of the costs and benefits that would arise from the implementation of IFRS 9 in the EU. Comments were requested by 13 November 2009. In that Draft Endorsement Advice, EFRAG's overall tentative conclusion was that the information provided by IFRS 9 would be relevant, reliable, understandable, and comparable. "IFRS 9 satisfies the criteria for EU endorsement and EFRAG should therefore recommend its endorsement". However, EFRAG has now decided that "more time should be taken to consider the output from the IASB project to improve accounting for financial instruments. Therefore, at this stage, EFRAG has decided not to finalise its endorsement advice on IFRS 9. EFRAG is currently considering how it will proceed in its work to address the package of standards that are expected to replace IAS 39." Most likely, EFRAG's deferral means that IFRS 9 will not be available for use in Europe for 2009 year-ends.

 

Heads Up on proposed consolidation deferral

12 Nov 2009

Deloitte United States has published a Heads Up Newsletter titled Board Votes to Defer Statement 167 for Interests in Certain Entities.

FASB tentatively decided to defer indefinitely the effective date of Statement 167 Amendments to FASB Interpretation No. 46(R) Consolidation of Variable Interest Entities for reporting of investments in the financial statements of asset managers. The FASB staff indicated that mutual funds, hedge funds, private equity funds, money market funds, and venture capital funds are examples of entities that may meet the conditions for deferral. The FASB staff also indicated that securitisation entities, asset-backed financing entities, or entities formerly classified as qualifying special-purpose entities (QSPEs) would not meet the conditions. If finalised, the deferral would be effective for 2009.
Click to view Heads Up Board Votes to Defer Statement 167 for Interests in Certain Entities (PDF 89k).

 

IASB issues IFRS 9 'Financial Instruments'

12 Nov 2009

Today, the IASB issued IFRS 9 'Financial Instruments' as the first step in its project to replace IAS 39 Financial Instruments: Recognition and Measurement.

IFRS 9 introduces new requirements for classifying and measuring financial assets. Those requirements must be applied starting 1 January 2013, with earlier adoption permitted including for 2009. The IASB intends to expand IFRS 9 during 2010 to add new requirements for classifying and measuring financial liabilities, derecognition of financial instruments, impairment, and hedge accounting. By the end of 2010, IFRS 9 will be a complete replacement for IAS 39 – mandatory for 2013 and optional in earlier years. Click for IASB Press Release (PDF 103k). In a letter accompanying a mailing of the new standard to key stakeholders, IASB Chairman Sir David Tweedie wrote:

"The completion of the first phase of the project responds directly to the recommendation of the G20 Leaders and other stakeholders to reduce the complexity of accounting for financial instruments. As requested, we have completed this first phase in time for companies to use, optionally, the new standard for year-end 2009 financial statements. Given the particular importance of this standard and the broad interest in its development, we undertook unprecedented efforts to consult stakeholders around the world in order to refine the proposals we published in July 2009 for public consultation. Furthermore, in response to concerns that were raised during our consultations the IASB has made various modifications to the proposals to improve the final product."

Concurrent with issuing IFRS 9, the IASB published a Project Summary and Feedback Statement (PDF 133k) outlining how the Board has responded to comments received during the development of the new standard. The IASB also published a separate Summary of Responses to European Concerns (PDF 25k).

Overview of IFRS 9 Financial Instruments

IFRS 9 divides all financial assets that are currently in the scope of IAS 39 into two classifications – those measured at amortised cost and those measured at fair value – based on the following principles:

  • Debt instruments. A debt instrument that meets two conditions can be measured at amortised cost:
    • Business model test. The objective of the entity's business model is to hold the financial asset to collect the contractual cash flows (rather than to sell the instrument prior to its contractual maturity to realise its fair value changes).
    • Cash flow characteristics test: The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding.
    All other debt instruments must be measured at fair value through profit or loss (FVTPL). Even if an instrument meets the two amortised cost tests, IFRS 9 contains an option to measure such instruments at FVTPL, with some restrictions. The available-for-sale and held-to-maturity categories currently in IAS 39 are not included in IFRS 9.
  • Equity instruments. All equity investments in scope of IFRS 9 are to be measured at fair value in the balance sheet, value changes recognised in profit or loss. There is no 'cost exception' for unquoted equities. However, if the equity investment is not held for trading, an entity can make an irrevocable election at initial recognition to measure it at fair value through other comprehensive income (FVTOCI) with only dividend income recognised in profit or loss. Despite the fair value requirement for all equity investments, IFRS 9 contains guidance on when cost may be the best estimate of fair value and also when it might not be representative of fair value.
  • Derivatives. All derivatives, including those linked to unquoted equity investments, are measured at fair value.
  • Embedded derivatives. The embedded derivative concept of IAS 39 is not included in IFRS 9. Consequently, embedded derivatives that under IAS 39 would have been separately accounted for at FVTPL because they were not closely related to the financial host asset will no longer be separated. Instead, the contractual cash flows of the financial asset are assessed in their entirety, and the asset as a whole is measured at FVTPL if any of its cash flows do not represent payments of principal and interest.
  • Reclassification. For debt instruments, reclassification is required between FVTPL and amortised cost, or vice versa, if the entity's business model objective for its financial assets changes so its previous model assessment would no longer apply.
IFRS 9 amends some of the requirements of IFRS 7 Financial Instruments: Disclosures including added disclosures about investments in equity instruments designated as at FVTOCI.

Deloitte IFRS for SMEs newsletter in Spanish

11 Nov 2009

Deloitte (Colombia) is publishing a series of Spanish language bulletins about the new IFRS for SMEs.

We have now posted No 18:
  • Bulletin No 18 (10 November 2009) discusses Section 22 of the IFRS for SMEs, which deals with liabilities and equity. Click to Download Bulletin 18 (PDF 197k).
We have many resources in Spanish Here.

 

IASB webcast on IFRS 9

11 Nov 2009

On 12 November 2009, the staff of the IASB will present a webcast about the forthcoming IFRS 9 Financial Instruments: Classification and Measurement.

The webcast will be followed by a Q&A session in which registered participants can submit questions online. There is no charge to participate, but you must register. Details:

 

Heads Up on IASB credit loss proposal

11 Nov 2009

Deloitte United States has published a Heads Up newsletter titled IASB Proposes New Approach to Accounting for Credit Losses.

The newsletter discusses the IASB's recent exposure draft Financial Instruments: Amortised Cost and Impairment, which proposes a fundamentally new approach to accounting for credit losses to replace the existing 'incurred-loss' model. The proposed approach, which affects the recognition of both net interest revenue and credit impairment, is designed to result in earlier loss recognition by taking into account future credit losses expected over the life of loans or other financial assets (an 'expected-loss' approach).
Click to view Heads Up IASB Proposes New Approach to Accounting for Credit Losses (PDF 172k). The IAS Plus project page is Here.

 

FEE supports adoption of IFRS 9 in Europe

11 Nov 2009

FEE (the Federation of European Accountants) has sent a letter to the European Commission calling on the EC and others to support endorsement of IFRS 9 Financial Instruments for use in Europe.

Click to view the FEE's letter to the European Commission (PDF 69k).

 

Deloitte IFRS conference in Japan

11 Nov 2009

On Tuesday 8 December 2009, Deloitte Touche Tohmatsu LLC will hold an annual seminar Towards the adoption of International Financial Reporting Standards in Japan.

Speakers at this predominantly Japanese-language event include:
  • Mr. Atsushi Saito, President and CEO of Tokyo Stock Exchange Group, Inc.
  • Mr. Noriaki Shimazaki, IASC Foundation Trustee and Chairman of the Sub-Committee on Accounting, Nippon Keidanren (Japan Business Federation).
  • Mr. Tatsumi Yamada (Member of IASB) and Mr. Wayne Upton (IASB Director of International Activities).
  • Tohmatsu partners will discuss possible implications of the planned IFRS adoption for Japanese companies.
  • Deloitte member firms will participate, as panelists, in a discussion on the current status of the adoption of IFRSs by countries/areas around the globe, as well as matters that will require the first-time adopters in Japan to note.
This seminar will be held in Tokyo, with live video broadcasts in Nagoya, Osaka and Fukuoka. Click for Conference Agenda and Registration Information (PDF 1,134k).

 

SEC Chairman comments on IASB-FASB convergence

10 Nov 2009

In our News Story of 6 November 2009 we reported that the IASB and the US Financial Accounting Standards Board (FASB) issued a joint statement reaffirming their commitment to improve IFRSs and US GAAP and to bring about their convergence.

The Boards also expressed their agreement to intensify their efforts to complete the major joint projects described in their 2006 Memorandum of Understanding (MoU), as updated in 2008. US SEC Chairman Mary L Schapiro has made the following Statement (PDF 27k) supporting the renewed convergence commitment:

I am greatly encouraged by the commitment of the IASB and the FASB to provide greater transparency to the standard setting process and their convergence efforts. I believe that these efforts will result in improved financial information provided to investors.

 

Updated report on European IFRS endorsement

10 Nov 2009

The European Financial Reporting Advisory Group (EFRAG) has updated its report showing the status of endorsement, under the EU Accounting Regulation, of each IFRS, including standards, interpretations, and amendments.

Click to download the Endorsement Status Report as of 9 November 2009 (PDF 133k). The following IASB pronouncements are awaiting European Commission endorsement for use in Europe:

Standards

  • IFRS 1 First-time Adoption of IFRS – Restructured standard (2008)
Interpretations
  • IFRIC 17 Distributions of Non-cash Assets to Owners
  • IFRIC 18 Transfers of Assets from Customers
Amendments
You can always find the endorsement status report Here.

 

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