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ESMA (European Securities and Markets Authority) (dark gray) Image
European Union Image

19th ESMA enforcement decisions report released

28 Jul 2016

The European Securities and Markets Authority (ESMA) has published further extracts from its confidential database of enforcement decisions taken by European national enforcers. This batch deals with decisions in relation to IAS 8, IAS 12, IAS 18, IAS 19, IAS 21, IAS 38, IAS 39, IAS 41, IFRS 2, IFRS 3, IFRS 8, IFRS 11, IFRS 13, IFRIC 14, IFRIC 17, and IFRIC 21.

The European national enforcers of financial information monitor and review financial statements published by issuers with securities traded on a regulated European market and who prepare their financial statements in accordance with International Financial Reporting Standards (IFRS) and consider whether they comply with IFRS and other applicable reporting requirements, including relevant national law.

ESMA has developed a confidential database of enforcement decisions taken by individual European enforcers as a source of information to foster appropriate application of IFRS.

The publication of enforcement decisions is designed to inform market participants about which accounting treatments European national enforcers may consider as complying with IFRS, i.e. whether the treatments are considered as being within the accepted range of those permitted by IFRS. ESMA considers the publication of the decisions, together with the rationale behind them, will contribute to a consistent application of IFRS in the European Union.

Topics covered in the latest batch of extracts, covering the period from February 2014 to April 2016, include:


Standard Topic

IAS 39 Financial Instruments: Recognition and Measurement

Inflation-related index derivative embedded in a host lease contrac

IFRS 11Joint Arrangements

Classification of a separate vehicle as joint operation based on ‘other facts and circumstances’

IAS 21 The Effects of Changes in Foreign Exchange Rates

Selection of the appropriate exchange rate when multiple exchange rates are available

IAS 38 Intangible Assets

Presentation of gains arising from the sale of an intangible asset

IFRS 13Fair Value Measurement

Identification of unobservable inputs

IFRS 3 Business Combinations
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
IFRS 2Share-based Payment

Reverse acquisition of a listed shell company

IAS 18Revenue
IFRS 8Operating Segments

Disclosure of the amounts of significant categories of revenue

IAS 38 Intangible Assets

Determination of whether a dealer network acquired in a business combination is an intangible asset with indefinite useful life

IFRS 13Fair Value Measurement
IFRIC 17Distributions of Non-cash Assets to Owners

Exchange of a business for an interest in a subsidiary and subsequent distribution of the acquired subsidiary to owners

IAS 19Employee Benefits
IFRIC 14IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

The determination of the maximum economic benefits available from a pension plan and the measurement of the defined benefit asset

IAS 12Income Taxes
IAS 41Agriculture

Measurement of a deferred tax liability relating to biological assets when income tax rates are changing over the assets’ useful lives

IFRIC 21Levies

Accounting for contributions to a deposit guarantee fund in the interim financial report

Click for access to the full report (link to ESMA website). The ESMA has also published an updated overview of all enforcement decisions ever published.

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IPSASB consults on public sector specific financial instruments

28 Jul 2016

The International Public Sector Accounting Standards Board (IPSASB) has released for comment 'Public Sector Specific Financial Instruments'.

Neither International Financial Reporting Standards (IFRSs) nor International Public Sector Accounting Standards (IPSAS) specifically address some financial instruments that are unique to the public sector such as:

  • special drawing rights;
  • currency in circulation; and
  • monetary gold.

As a consequence, there is inconsistent reporting between entities and users may not have the information they need for accountability and decision-making purposes.

As a first step to developing specific guidance the IPSASB has released a consultation paper seeking feedback on some preliminary views on accounting for the three public sector financial instruments highlighted above. The objective of the paper is to initiate a debate abou the types of instruments considered to be in scope of the project and approaches to recognition and measurement of those items included in the project.

Comments on the consultation paper are due to the IPSASB by 31 December 2016.

Please click for the following additional information on the IPSASB website:

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EFRAG draft comment letter on proposed amendments on the application of the definition of a business

27 Jul 2016

The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment letter on the IASB exposure draft ED/2016/1 'Definition of a Business and Accounting for Previously Held Interests'.

EFRAG welcomes the IASB proposal and supports the following:

  • A more comprehensive framework and reduces the workload when distinguishing business combinations from asset acquisitions compared to the current guidance in IFRS 3.
  • Inclusion of a ‘screening test’ with some suggested improvements to accommodate more borderline cases.
  • Different sets depending on whether the set of activities and assets has outputs.
  • The use of illustrative examples but with a greater focus on guidance that requires significant judgement.
  • The clarification of the accounting for previously held interests to align with the definition of a business.

Further, the EFRAG encourages a converged approach by the IASB and FASB regarding the proposals.

Comments on EFRAG's draft comment letter are requested by 18 October 2016. For more in­for­ma­tion, see the press release and the draft comment letter on the EFRAG website.

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EBA consults on guidance on accounting for expected credit losses

27 Jul 2016

The European Banking Authority (EBA) has launched a consultation on draft guidelines on credit institutions' credit risk management practices and accounting for expected credit losses.

The EBA draft guidelines build on the guidance by the Basel Committee on Banking Supervision (BCBS) in December 2015 on the same matter and feature a detailed section on the application of IFRS 9 Financial Instruments. The draft guidance notes:

The EBA welcomes the move from an incurred loss model to an ECL model under IFRS 9. IFRS 9 is, overall, an improvement compared to IAS 39 in the accounting for financial instruments and the changes on credit loss provisioning should contribute in addressing the G20’s concerns about the issue of ‘too little, too late’ recognition of credit losses and improve the accounting recognition of loan loss provisions by incorporating a broader range of credit information. IFRS 9 is therefore expected to address some prudential concerns and contribute to financial stability. However, the application of IFRS 9 also requires the use of judgement in the ECL assessment and measurement process which could potentially affect the consistent application of IFRS 9 across credit institutions and the comparability of credit institutions’ financial statements.

The EBA notes that the objective of the proposed guidelines is to be in line with the BCBS guidance. The EBA guidelines would also not prevent credit institutions from meeting the impairment requirements in IFRS 9.

Comments on the draft guidance are requested by 26 October 2016. The EBA aims to finalise the proposed guidelines during the fourth quarter of 2016 or first quarter of 2017, taking into account the comments received during the consultation. The guidelines should be implemented by 1 January 2018.

Please click for the following additional information on the EBA website:

KASB (Korean Accounting Standards Board) (lt blue) Image
AASB (Australian Accounting Standards Board) (lt blue) Image

KASB and AASB publish final study on the influence of cultural background and translation on the interpretation of IFRSs

26 Jul 2016

In December 2015, the Australian Accounting Standards Board (AASB) and the Korea Accounting Standards Board (KASB) reported on a joint research project on IFRS implementation at the ASAF meeting that month. The final report on the project that explored how cultural background and translation affect the interpretation of the terms that are used in IFRS is now available.

The findings in the final report are consistent with those detailed in December 2015: differences in cultures and languages can lead to different interpretations of terms used in IFRSs - a fact that is not helped by the circumstance that the IASB itself uses a variety of terms for similar fact patterns and not even consistenly across standards. Accordingly, the report emphasises that it will be useful for the IASB to consider narrowing down the number of terms, to give considerable attention to how terms might be interpreted and translated in different jurisdictions when developing a standard, to consider developing principles and guidance that could be applied consistently across the standards, and to use standard-setting outreach and consultative processes to obtain input on translation and interpretation issues in different jurisdictions.

The final report, which forms KASB Research Report No.39 and AASB Research Report No.2, can be accessed through the press release on the KASB website.


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IASB posts webcast on IFRS 9 forward-looking information

25 Jul 2016

The IASB has made available a webcast discussing forward-looking information in the application of the expected credit loss impairment requirements in IFRS 9.

The webcast, which features IASB member Sue Lloyd, Technical Director Kumar Dasgupta, and Practice Fellow Uni Choi, covers the following topics:

  • “when multiple scenarios are relevant and the concept of non-linearity;
  • consistency of scenarios;
  • probability-weighted assessment of significant increase in credit risk; and
  • approaches to incorporating forward-looking scenarios”

The webcast is available on the IASB’s website.

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ASBJ publishes amendments to 'Japan’s Modified International Standards'

25 Jul 2016

In June 2015, the Accounting Standards Board of Japan (ASBJ) issued "Japan’s Modified International Standards (JMIS): Accounting Standards Comprising IFRSs and the ASBJ Modifications". JMIS are standards and interpretations issued by the International Accounting Standards Board (IASB) with certain 'deletions or modifications' where considered necessary. The first set of JMIS comprised standards issued by the IASB as at 31 December 2012. Since then, the ASBJ examined the Standards issued by the IASB during 2013 and today has issued an updated version of JMIS.

New or amended Standards issued by the IASB during 2013 covered by the endorsement process for this round were:

  • IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39)
  • IFRIC 21 Levies
  • Recoverable Amount Disclosure for Non-Financial Assets
  • Novation of Derivatives and Continuation of Hedge Accounting
  • Defined Benefit Plans: Employee Contributions
  • Annual Improvements to IFRSs 2010-2012 Cycle
  • Annual Improvements to IFRSs 2011-2013 Cycle

The ASBJ has published several documents in relation with this new round of endorsement including a press release and a new version of ASBJ Modification Accounting Standard No. 2. All documents are available on the ASBJ website.

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Analysis of IFRS application by listed companies around the world

25 Jul 2016

The IFRS Foundation has released an analysis of the number of listed companies using IFRSs around the world.

The analysis combines information about the numbers of listed companies published on the websites of the two major global associations of securities exchanges: World Federation of Exchanges (WFE) and Federation of European and Asian Stock Exchanges (FEAS) with the information on the use of IFRSs around the world.

The analysis concludes that of the approximately 48,000 domestic listed companies on the 85 major securities exchanges in the world more than 25,000 use IFRSs. Not surprisingly, of those domestic listed companies that do not use IFRSs, over 80 per cent are listed in China, India, Japan, and the United States.

Please click to access the full analysis on the IASB website.

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We comment on three IFRIC tentative agenda decisions

22 Jul 2016

We have published our comment letters to the IFRS Interpretations Committee on tentative agenda decisions not to take onto the Committee’s agenda (1) service concession arrangements for which the infrastructure is leased (IFRIC 12), (2) fees and costs included in the '10 per cent' test for the purposes of derecognition (IAS 39), and (3) written puts over non-controlling interests to be settled by a variable number of the parent’s shares (IAS 32).

We agree with the IFRS Interpretations Committee's decision not to add a request for clarification of how an operator accounts for a service concession arrangement not including any construction or upgrade services for which the infrastructure is leased onto its agenda for the reasons set out in the tentative agenda decision. Please click to access the full comment letter.

We do agree with the IFRS Interpretations Committee's decision not to add the issue of which fees and costs should be included in the ‘10 per cent’ test for the purposes of derecognition of a financial liability onto its agenda, however, we believe a more significant clarification of the standard is warranted as well as, since there is currently significant diversity, explicit transition provisions. Please click to access the full comment letter.

We do not agree with the IFRS Interpretations Committee's decision not to add the request for guidance on written puts over non-controlling interests that will, or may, be settled by the exchange of a variable number of the parent’s own equity instruments onto its agenda because it will (1) promote structuring and increase diversity in practice over what is likely to be a significant period of time before the FICE project is completed and (2) general comments on NCI puts in the tentative agenda decision could give rise to ‘contamination’ and bring uncertainty and diversity into what is now a largely consistent practice around more traditional, cash-settled, NCI put arrangements. Please click to access the full comment letter.

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Video recordings from the EFRAG@15 event

22 Jul 2016

On 6 July 2016, the European Financial Reporting Advisory Group (EFRAG) held a celebration event and seminar to mark its 15th anniversary and welcome its new leadership.

We had already reported on the event and provided you with a summary of all speeches and discussions. EFRAG now follows suit and makes available on its website transcripts of the speeches and recordings of the two panel discussions.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.