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IASB publishes proposals arising from its 2011-2013 annual improvements cycle

Nov 20, 2012

The International Accounting Standards Board (IASB) has released Exposure Draft ED/2012/2 'Annual Improvements to IFRSs 2011–2013 Cycle', containing the latest proposals for minor corrections and edits to IFRS.

The IASB's annual improvements project provides a streamlined process for dealing efficiently with a collection of amendments to IFRSs. The primary objective of the process is to enhance the quality of standards, by amending existing IFRSs to clarify guidance and wording, or to correct for relatively minor unintended consequences, conflicts or oversights. Amendments are made through the annual improvements process when the amendment is considered non-urgent but necessary.

The Exposure Draft proposes changes to the following pronouncements:

PronouncementAmendments proposed
IFRS 1 First-time Adoption of International Financial Reporting Standards (changes to the Basis for Conclusions only) Meaning of effective IFRSs
Clarifies that an entity, in its first IFRS financial statements, has the choice between applying an existing and currently effective IFRS or applying early a new or revised IFRS that is not yet mandatorily effective, provided that the new or revised IFRS permits early application. An entity is required to apply the same version of the IFRS throughout the periods covered by those first IFRS financial statements.
IFRS 3 Business Combinations Scope of exception for joint ventures
Clarifies that:
  • IFRS 3 excludes from its scope the accounting for the formation of all types of joint arrangements as defined in IFRS 11 Joint Arrangements
  • the scope exception in paragraph 2(a) of IFRS 3 only applies to the financial statements of the joint venture or the joint operation itself.
IFRS 13 Fair Value Measurement Scope of of paragraph 52 (portfolio exception)
Clarifies that the scope of the portfolio exception defined in paragraph 52 of IFRS 13 includes all contracts accounted for within the scope of IAS 39 Financial Instruments: Recognition and Measurement or IFRS 9 Financial Instruments, regardless of whether they meet the definition of financial assets or financial liabilities as defined in IAS 32 Financial Instruments: Presentation.
IAS 40 Investment Property Clarifying the interrelationship of IFRS 3 and IAS 40
Clarifies that IFRS 3 and IAS 40 are not mutually exclusive when classifying property as investment property or owner-occupied property. Determining whether a specific transaction meets the definition of both a business combination as defined in IFRS 3 and investment property as defined in IAS 40 requires the separate application of both standards independently of each other.

The proposed effective date for the amendments is for annual periods beginning on or after 1 January 2014, although entities are permitted to adopt them earlier.

The Exposure Draft does not include proposals in relation to the use of the revenue-based depreciation and amortisation under IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets, as the IASB decided at its October 2012 meeting to separately expose these proposals.

The proposals follow on from the proposals for the 2010-2012 annual improvements cycle, where an Exposure Draft was issued in May 2012, with finalised amendments from that cycle expected in the second quarter of 2013.

The Exposure Draft is open for comment for 90 days, with comments closing on 18 February 2013.

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