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2012

Final notes from the October IASB meeting

22 Oct 2012

The IASB's October meeting was held in London on 15-19 October 2012, some of it a joint meeting with the FASB. We have posted the remaining Deloitte observer notes from the session on insurance contracts on Friday afternoon.

The IASB discussed financial instruments with participating features and the transitional requirements of the fianl insurance standard and their interaction with the requirements and effective date of IFRS 9 'Financial Instruments'.

Click through for direct access to the notes: Insurance contracts (IASB only)

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

IASB updates work plan for October meeting decisions

21 Oct 2012

The International Accounting Standards Board (IASB) has publicly released a revised work plan reflecting changes as a result of decisions made at its October 2012 meeting. The project on IAS 8 effective dates and transition has been removed, and a new project on revenue-based methods of depreciation under IAS 16 and IAS 38 added (splitting it out from the annual improvements 2011-2013 cycle).


Background to the changes

At its October meeting, the IASB tentatively decided that the ballot draft on amendments to IAS 8 to be withdrawn and the narrow scope project removed from the IASB work plan.  Issues arising from the project may instead be dealt with in an upcoming disclosure forum and as part of the Conceptual Framework project.

At the meeting, the IASB also discussed the forthcoming exposure draft on the 2011-2013 annual improvements cycle and noted concerns of the Due Process Oversight Committee within the last Trustees meeting that the amendments to IAS 16 and IAS 38 regarding revenue-based depreciation may not meet the annual improvements criteria.  Accordingly, the Board decided to expose the proposals on IAS 16 and IAS 38 as a separate exposure draft.


Due process documents expected before the end of 2012

The following due process documents are expected to be issued by the end of 2012 (this includes those items already noted above in some cases):

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

Further notes from the October 2012 IASB meeting

19 Oct 2012

The IASB's October meeting was held in London on 15-19 October 2012, some of it a joint meeting with the FASB. We have posted Deloitte observer notes from Wednesday's joint session on Insurance contracts, Thursday's joint session on Revenue recognition and Friday's sessions on IFRIC update, Due process papers, and IAS 8.

Click through for direct access to the notes:

Wednesday, 17 October 2012

Thursday, 18 October 2012
Friday, 19 October 2012

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

Deloitte releases new IFRS e-learning modules

19 Oct 2012

Deloitte’s Global Audit Learning group have released three new e-learning modules on IFRS 9 'Financial Instruments: Classification and Measurement', IFRS 10 'Consolidated Financial Statements' and IFRS 11 'Joint Arrangements'. These modules are additions to the extensive catalog of IFRS e-learning content made freely available by Deloitte.

Deloitte’s e-learning on IFRS has been a leading educational resource on IFRS since it was initially released in 2004, with over 5.6 million modules downloaded to date and a range of corporate, educational and professional organisations using the content as their primary tool for IFRS education.

Three new modules have recently been released:

  • IFRS 9 Financial Instruments: Classification and Measurement - covering the requirements of classification and measurement of financial assets and liabilities under IFRS 9 as modified by the IASB’s  "Mandatory Effective Date and Transition Disclosures".
  • IFRS 10 Consolidated Financial Statements - covering the requirements of IFRS 10 with a focus on the control definition, how to apply the principle of control in various real life situations and applying the accounting requirements for the preparation of consolidated financial statements.
  • IFRS 11 Joint Arrangements - covering the requirements of IFRS 11 with a focus on the various ways in which joint ventures can be structured and how the structure impacts the accounting treatment and also transactions between joint ventures.

Note: You may be requested to register to access the above modules - no personally identifying information is requested in the registration process.

There are also further modules in development, which are expected to be released in the near future:

  • IFRS 9: Derecognition,
  • IAS 32 and Offsetting, and
  • IFRS 13: Fair Value Measurement.

There are now 40 modules are available, tackling the key extant and new standards issues by the IASB.  The modules have been designed to help users develop their knowledge and application of the basic principles and concepts of the IFRSs and IASs. Each module provides:

  • Real life scenarios to demonstrate application of the standards
  • "Coach me" sections to explain the principles and theory
  • Worked examples to show aspects of the standards in action
  • Reference materials to support learning
  • A printable certificate if you pass the assessment at the end of each module

The IFRS e-learning modules are available free of charge and may be used and distributed freely, without alteration from the original form and subject to the terms of the Deloitte copyright over the material.

Click to go to Deloitte’s IFRS e-learning.

The Bruce Column — Quality, not quantity, should define materiality

19 Oct 2012

The use of materiality as a means of bringing coherence to disclosures has come to the fore in the latest thinking from the UK Financial Reporting Council, says our resident columnist, Robert Bruce.

There is probably only one aspect of current financial reporting on which everyone can unequivocally agree. There is too much of it. As a result there have been cascades of suggested solutions for trimming the mass of information. People have tried to cut clutter. They have tried to shorten the reports. They have tried to make them more readable. But we still face a forest of trees and little chance of seeing the wood within.

Another tack is required. And as the IASB rolls up its sleeves to start its work on a disclosure framework there is no shortage of advice. It would be best to start from the point of agreement. There is too much stuff being disclosed in a relatively disorganised way. What is required is a better way of defining what should and shouldn’t be there without making the process too rigid and prone to excess boilerplatery.

Back in 2011 ESMA, the European Securities and Markets Authority, pointed to one way forward with its consultation paper on the issue of materiality in financial reporting. And in August this year it produced a summary of the responses which it received. Perhaps the most significant was this: ‘Responses across most stakeholder groups raised concerns about the length of disclosures reaching the point where they could obscure readers’ understanding of the entity’s financial position and performance. Many respondents considered that proper application of the materiality concept could address this position.’

And so it comes as no surprise to find the UK’s Financial Reporting Council devoting a sizeable chunk of its new paper, ‘Thinking about Disclosures in a Broader Context’, to the topic. ‘In our view’, it says at the outset, ‘the “disclosure problem” is not just about quantity; the quality of disclosures, in terms of meeting the needs of users, is also an issue. Financial reports have become a disjointed collection of disclosures driven by different authoritative sources. The objective of financial reporting seems to have been forgotten as disclosures have become more about compliance than communication’.

And for the FRC too the answer is a disclosure framework as an attempt to ‘empower preparers to apply materiality more robustly to disclosures’. From there a principle is developed: ‘Materiality is entity-specific. Preparers apply materiality to disclosure requirements set by regulators so that financial reports only provide disclosures that are relevant to the entity’.

But the water simply becomes muddier when it comes to disclosure. ‘Materiality as a concept in relation to recognition and measurement is well-established’, the paper says. ‘However, what materiality means from a disclosure perspective is less clear. Therefore, it is not surprising that materiality is not being applied robustly to disclosures’. So there is a resulting confusion. ‘Some would say that we have a principle-based model for recognition and measurement, but a compliance-based model for disclosures’. And what does this lead to? ‘The overall result is disclosure of immaterial information that leads to clutter’, concludes the paper.

The problem is the lack of precision, something which both preparers and users of financial reporting like to depend upon. The IASB’s Conceptual Framework essentially defines whether information is material or not by whether its omission or misstatement would mislead users. The UK Accounting Standards Board adds the point that by shunting too much immaterial information into the financial statements ‘the resulting clutter can impair the understandability of the other information provided’ And amongst IFRSs IAS 1 makes it clear that ‘an entity need not provide a specific disclosure required by an IFRS if the information is not material’.

So the building blocks do exist. It is just that they are scattered about in disparate places and not made plain in some central repository. What the FRC is suggesting is that some classification criteria might make it simpler. They suggest three: ‘top-level’, the sort of disclosures ‘that would be of interest to the 10-minute reader’; middle level, based on the ‘concept of materiality as described in accounting standards; and bottom level where ‘items that are considered to be insignificant or trivial’ would languish.

As so often the problem will be definitions, boundaries and precision. Or, as the FRC puts it: ‘Determining the order of magnitude of these different terms can be difficult’.

It suggests the following: ‘significant, material, not material, immaterial’, and, finally, ‘insignificant’. That makes sense. But the task ahead would be to set boundaries between them. The FRC agrees that this is ‘not an easy task’ but is sure that the IASB will be up to it. ‘We recommend that the IASB considers this point and as a minimum uses the terms consistently’, it says. And then provides a helpful graphic showing how the application of a framework to materiality in disclosures within financial statements might work.

It is a start. But it is only one of many proposals, ideas and initiatives which the IASB will be presented with as it starts its own thinking process. There is a long way to go and Hans Hoogervorst’s proposed timeline for completing the IASB’s conceptual framework programme by 2015 is very ambitious.

IFRS Foundation issues educational material to support IFRS 13

19 Oct 2012

As part of the IASB’s Education Initiative, the IFRS Foundation staff, with the assistance of the valuation expert group, is developing educational material to support IFRS 13. The draft of the first chapter of this educational material titled ‘Measuring the fair value of unquoted equity instruments within the scope of IFRS 9 Financial Instruments’ is now available.

The staff is not seeking any comments on the draft and will keep the draft available until the end of November 2012. The final version of the document is expected in December 2012.

Click to view (links to IASB website):

IPSASB releases consultation paper on government reporting

19 Oct 2012

The International Public Sector Accounting Standards Board (IPSASB) has published a Consultation Paper which aims to help reduce differences between Government Finance Statistics (GFS) reporting guidelines and International Public Sector Accounting Standards (IPSASs).

The Consultation Paper, IPSASs and Government Finance Statistics Reporting Guidelines, was developed by a task force that included representation from both the IPSASB and the statistical community, including the International Monetary Fund and Eurostat, and national representatives from Brazil, the United Kingdom, South Africa, and Switzerland.

The paper outlines the two key types of financial information produced by Governments:

  • government finance statistics (GFS) on the general government sector (GGS) for the purpose of macroeconomic analysis and decision making, applying Government Finance Statistics (GFS) reporting guidelines
  • general purpose financial reports (GPFRs) for accountability and decision making at an entity level, including the whole of government reporting entity, prepared using IPSASs applicable to accrual based financial statements.

The paper asserts there is considerable overlap between these two reporting frameworks, but also provides an overview of differences between GFS reporting guidelines and IPSASs, and goes on to identify opportunities to reduce these differences.  These opportunities include:

  • potential changes to the IPSAS setting process, ranging from range from a positive commitment to avoid all unnecessary differences to inclusion of GFS comparisons in all IPSASs
  • possible IPSASB projects to reduce differences, e.g. 'reporting entity' definition, currency on issue, inventory measurement, defence weapons, measurement and financial statement presentation
  • the use of accounting information for GFS, only considering alternative sources of data, and alternative measurement approaches if the financial reporting data has clearly failed to address GFS issues
  • possible changes to measurement requirements under GFS, particularly the valuation of assets for which there is no active and liquid market, heritage assets and long-lived, specialised assets, for which market prices are unavailable.

The paper notes that using a single integrated financial information system can result in significant benefits, including reduction of GFS report preparation time, costs, and effort. Improvements are also likely to the source data for GFS reports, with flow-on benefits in terms of report quality.

The Consultation Paper is an important step toward more global acceptance and adoption of IPSAS and is open for comment until 31 March 2013.  Click for IPSASB press release (link to IFAC website).

Additional notes from the October 2012 IASB meeting

18 Oct 2012

The IASB's October meeting is being held in London on 15-19 October 2012, some of it a joint meeting with the FASB. We have posted Deloitte observer notes from Monday's joint session on Insurance contracts and Thursday's Classification and measurements and Impairment sessions.

Click through for direct access to the notes:

Monday, 15 October 2012

Thursday, 18 October 2012

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

IFAC and IIRC agree to co-operate

17 Oct 2012

The International Federation of Accountants (IFAC) and the International Integrated Reporting Council (IIRC) have signed a Memorandum of Understanding (MoU) to promote cooperation, coordination, and alignment between the two bodies. The MoU seeks to take advantages of the 'inherent synergies' between the work of IFAC and the IIRC in supporting of an internationally accepted framework for integrated reporting.

Under the MoU, IFAC and the IIRC acknowledge each other's mandates (speaking for the accountancy profession and developing an integrated reporting framework) and both parties acknowledge the complementary nature of those respective mandates.  This is on the basis that:

"the successful development and implementation of <IR> [Integrated Reporting] is materially relevant and beneficial to the accountancy profession and the public interest and the active involvement and support of the accountancy profession is materially relevant and beneficial to the development and implementation of <IR>."

The MoU contains a number of commitments between the parties regarding such things as respecting each other's mandate and working together.  In particular, the MoU seeks to "identify ways and means by which <IR> principles can be aligned with accounting practices to strengthen corporate reporting".

The MoU, which was signed in September and publicly announced on 17 October 2012, covers a number of related matters and is in force until 30 September 2014 - by which time the IIRC is expecting to have completed the first edition of its integrated reporting framework.

Click for:

Notes from the October 2012 IASB meeting

17 Oct 2012

The IASB's October meeting is being held in London on 15-19 October 2012, some of it a joint meeting with the FASB. We have posted Deloitte observer notes from Monday's education session on insurance contracts and Wednesday's macro hedge accounting session.

Click through for direct access to the notes:

Monday, 15 October 2012

Wednesday, 17 October 2012

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

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