In its draft endorsement advice on the investment entities amendments, EFRAG notes the following on the question of the exemption from consolidation:

EFRAG generally believes that a reporting entity should not differentiate between types of entities when applying the control model of consolidation in IFRS 10 Consolidated Financial Statements. However, EFRAG notes that the Amendments respond to the concerns of users of financial statements, who expressed support for a consolidation exception for subsidiaries of investment entities, and argued that their interests are best served by having a single line measurement basis based on fair value, instead of consolidation of subsidiaries of investment entities.... Although EFRAG acknowledges... concerns, we believe that limiting the use of the exception to investment entities as defined under the Amendments, does not affect the relevance of information produced by those entities, and therefore should not preclude the information provided under the Amendments from meeting the relevance criterion.

In accordance with its usual technical analysis, the draft endorsement advice also considers the investment entity amendments in terms of reliability, compatibility, and understandability before noting "EFRAG’s overall initial assessment is that the information resulting from the application of the Amendments would not be contrary to the true and fair view principle".

Comments on the Invitation to Comment on EFRAG's draft endorsement advice are requested by 28 January 2013.

Click for:

• More information about the draft endorsement advice (link to EFRAG website)
• EFRAG Endorsement Status Report 20 December 2012

Consistent with the AASB's prior deliberations, the proposals in the body of Exposure Draft ED 233 Australian Additional Disclosures - Investment Entities would see the issue of the investment entities amendments, together with additional Australian-specific disclosure requirements.

The additional disclosures would require:

• a consolidated statement of profit or loss and other comprehensive income
• a consolidated statement of financial position
• a consolidated statement of changes in equity
• a consolidated statement of cash flows
• a summary of the significant accounting policies used in preparing the above consolidated financial statements.

The consolidated financial statements would include controlled investees despite the investment entities exception to consolidation requirements provided in AASB 10 Consolidated Financial Statements (equivalent to IFRS 10).  No exemption from the disclosure requirement would be provided under the AASB's 'reduced disclosure requirements'.

Consistent with the deliberations at the AASB's December meeting, ED 233 also includes two 'alternative views':

• Alternative View 1 - effectively arguing against adoption of the investment entities amendments, as the AASB members holding this view consider them "a violation of the basic principle that an entity should account for all of its assets, liabilities, income and expenses".  Other concerns expressed include a lack of a rigorous definition of an 'investment entity' and complication of accounting requirements by adding exceptions
• Alternative View 2 - immediately issue in Australia the IASB’s investment entity requirements as made by the IASB, without imposing additional disclosure requirements that "imposes significant additional costs on Australian investment entities relative to their international counterparts".  AASB members supporting this view nevertheless would accept the disclosure proposals in the exposure draft in order to retain Australia's compliance with IFRS.

The proposals are open for comment until 29 March 2013.  Click for (links to AASB website):

• AASB press release
• ED 233 Australian Additional Disclosures - Investment Entities

The IASB has announced that responses to the survey will be confidential and no information published will be attributable to any individual or organisation. The survey is expected to take around 10 minutes to complete, although the survey does provide for many 'free form' sections where respondents can provide detailed information if they desire.

Click for:

• IASB announcement (link to IASB website)
• Direct link to the survey.

This 71-page chapter addresses the fair value measurement of unquoted equity instruments. It presents a range of commonly used valuation techniques for measuring the fair value of unquoted equity instruments within the market and income approaches, as well as the adjusted net asset method. This chapter does not prescribe the use of a specific valuation technique, but instead encourages the use of professional judgement and the consideration of all facts and circumstances surrounding the measurement.

It is the first of a series of chapters of educational material provided to support IFRS 13. These chapters are being developed to describe, at a high level, the thought process for measuring assets, liabilities and an entity’s own equity instruments at fair value, ensuring consistency with the objective of a fair value measurement set out in IFRS 13. Additional chapters will be published as they are finalised.

Click to view (links to IASB website):

• First chapter: Measuring the fair value of unquoted equity instruments within the scope of IFRS 9 Financial Instruments
• Educational material on fair value measurement page

The proposed ASU introduces the sole impairment test for financial assets measured at amortised cost or fair value through other comprehensive income (FV-OCI) — irrespective of the form of the asset (i.e., loan versus debt security). Under the proposed model, a reporting entity would recognise an impairment allowance equal to the current estimate of expected credit losses (i.e., all contractual cash flows that the entity does not expect to collect) for such assets as of the end of the reporting period.

The FASB’s proposed impairment model would apply to all financial assets measured at amortised cost or FV-OCI, though it does permit a practical expedient in limited circumstances. Thus, the proposed model would apply to trade and lease receivables and loan commitments not measured at fair value through net income (FV-NI).

Comments on the proposed ASU are due by 30 April 2013.

Comparison with IFRS

The approach in the proposed ASU represents the third model that was exposed by the FASB for comment. This model and the first model were included in FASB-only documents; the second model was a supplementary document published jointly with the IASB in January 2011. Through June 2012, the FASB and the IASB continued to jointly deliberate a ”three bucket” impairment model for financial assets. However, after constituents expressed significant concerns that the joint model could be difficult to understand, operationalise, and audit, the FASB decided to develop an alternative impairment model. Because the IASB did not receive similar feedback from its constituents they have tentatively decided to continue deliberations of the jointly developed model. The two Boards, however, are committed to joint redeliberations after receiving comments on their respective proposals. The IASB plans to issue its exposure draft on impairment in the first quarter of 2013.

The following table highlights some of the key similarities and differences between the FASB’s proposed model and the IASB’s current thinking:

Click to view the news release (linking to the proposed ASU) on the FASB's website. Also see the related Deloitte (United States) Heads Up newsletter for more detailed information on the proposed ASU.

The topics discussed were:

• Progress of the IASB and the FASB towards completion of the three remaining convergence projects (Revenue recognition, Leases and Financial instruments) and the joint project on Insurance contracts
• Discount rate in the measurement of pension liabilities
• IFRS 11 and separate financial statement
• Post-implementation review of IFRS 8 Operating Segments
• An OIC-EFRAG survey on the subsequent measurement of goodwill that can contribute to the definition of the scope of the IFRS 3 post-implementation review
• Revision of the Conceptual framework

Please click for:

• Press release on the IASB's website
• High level summary of the meeting’s discussions on the EFRAG website

Details of the changes from the previous work plan dated 4 December 2012 are as follows:

New projects

• Rate-regulated activities - inclusion of this project in the active agenda, to be completed in two phases: an interim IFRS (exposure draft expected in first or second quarter 2013) and a comprehensive project (discussion paper expected in the second half of 2013).
  This dual approach is the result of much debate on this contentious topic. Over the past few years, several jurisdictions adopting IFRS for the first time or considering the adoption of IFRS, including Canada, have come out very vocal in support of an interim standard (and possibly final standard) that would allow grandfathering of existing accounting practice upon adoption of IFRS. These views have often been in conflict with the views of other jurisdictions that already adopted IFRSs and having already changed their accounting for regulatory asset and liabilities, they are generally not supportive of exceptions or changes being made for new adopters. The IASB is balancing the desire to have Canada (where companies with rate regulated activities still have not adopted IFRSs) and other jurisdictions fully adopt IFRSs without amendment with the views of those jurisdictions already using IFRSs. Thus the IASB decided (after much debate) to proceed with the issuance of an exposure draft for an interim standard that will allow some sort of grandfathering in addition to their prior decision arising from the Agenda Consultation process to proceed with a comprehensive project on rate regulated activities.  There is no certainty at this early stage about what the ultimate outcome will be for either project.
• IAS 12 — Deferred tax assets for unrealised losses - a new project split out separately from the annual improvements process, as was decided at the December IASB meeting, with an exposure draft expected in the fourth quarter of 2013
• IAS 36 — Recoverable amount disclosures for non-financial assets - a narrow scope amendment designed to clarify relevant disclosure requirements, which the IASB agreed at its December meeting would be fast tracked as an amendment outside the annual improvements process in an attempt to finalise the amendment as timely as possible. An exposure draft is expected in the first quarter of 2013.

Clarification of target dates on other projects

• IFRS 11 — Acquisition of an interest in a joint operation - new target date of fourth quarter of 2013 for the finalisation of the proposed amendments
• IFRS 10/IAS 28 — Sales or contributions of assets between an investor and associate or joint venture - new target date of third quarter of 2013 for the finalisation of the proposed amendments
• Interpretations - clarification of the expected finalisation of Interpretations on levies charged to operate in a specific market (second quarter 2013, previously first half 2013) and put options written on non-controlling interests (fourth quarter 2013, previously second half 2013)
• Conceptual framework - clarification of the expected issue of a discussion paper in the second quarter of 2013 (previously first half of 2013).

Click for IASB work plan dated 19 December 2012 (link to IASB website). We have updated our project pages to reflect the updated work plan and other known developments.

Click through for direct access to the notes:

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