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Korean preparers state that costs of IFRS adoption outweigh benefits

26 Apr 2016

Korea adopted IFRS in full in 2011 to enhance accounting transparency of Korean entities and usefulness of their financial information as well as to maximise the value of domestic entities by improving their accessibility to global capital markets. There have been numerous analyses carried out on the costs and benefits of Korea’s IFRS adoption, however, so far they were conducted exclusively from the users’ point of view. The Korean Accounting Standards Board (KASB) has now made available research into the costs and benefits from the preparers’ perspective.

The main result of this research is that approximately one half of the surveyed preparers replied that the costs of IFRS adoption exceed the benefits, and only around 10% of the respondents replied that the benefits exceed the costs.

According to the research, high costs seem to arise from difficulties in dealing with certain aspects of IFRS financial statements. The preparers especially mentioned the following five aspects:

  • preparation of notes to the financial statements,
  • preparation of consolidated financial statements,
  • fair value measurement,
  • making discretional judgments for application of principle-based accounting, and
  • accounting for financial instruments.

As a result of these difficulties they also felt that understandability had deteriorated, that comparability had decreased and that there was an increase of excessive interference by external organisations.

The KASB has analysed the difficulties and has concluded that the following measures can help to improve the IFRS implementation environment:

  • The technical inquiry service should be strengthened by providing information on general IFRS implementation issues to the public in Q&A format and providing more detailed information grouped by industry.
  • The accounting education, which has seen little change since the adoption of IFRS, should be reformed. It seems especially desireable to move the focus from items of financial statements to standards and accounting principles and to help students to develop the ability to make necessary judgments.
  • Relevant laws and regulations should be amended to bridge the gap that has arisen between accounting standards and the accounting requirements under the commercial law.
  • Improvements need to be made in relation to notes to the financial statements to improve the level of understanding of and usefulness for the users of financial statements by encouraging entities to focus on preparing notes considering materiality or use of easy-to-understand expressions.

Please click to download the full research paper, which is a slightly abridged translation of an earlier Korean version, from the KASB website.

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Harmonisation of accounting standards improves cross-border mobility

25 Apr 2016

New joint research from the University of Chicago and the Humboldt University of Berlin shows that the recent EU harmonisation of accounting and auditing standards had a discernible positive effect on accountants’ cross-border migration relative to other professions when compared with pre-harmonisation levels.

The analysis uses the fact that over the past decade, national accounting and auditing standards have to a large extent been replaced by international standards now common across the EU member states. This enabled the authors to study the extent to which professional standards constitute an economically significant barrier to cross-border migration and also whether harmonising standards can have a meaningful effect on cross-border mobility.

The authors find that after accounting and auditing standards were harmonised, there was a 17-24% increase in the movement of accountants relative to comparable professions, relative to pre-harmonisation mobility rate. They conclude that accounting harmonisation can have a meaningful effect on cross-border migration and thus can be used as a tool to improve the efficiency of the labour market.

A summary of the research with references to underlying papers is available free of charge through VoxEU portal of the Centre for Economic Policy Research. There is also an SSRN version of the main research paper that forms the backbone of the VoxEU article, likewise available free of charge.

The different effects of the adoption of IFRSs has been the object of extensive research. We'd especially like to point out the research of Professor Christian Leuz of the Booth School of Business of the University of Chicago (one of the authors of the article highlighted above) around the ‘Global Player Segment’ (GPS), which we reported on earlier.

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IASB updates work plan

22 Apr 2016

Following its April 2016 meeting, the IASB has updated its work plan. As mentioned before, directly tracing the Board's progress on the individual projects has become impossible since the change of the work plan format in July 2015, unless the Board makes definite progress or has to make larger corrections. Of these, only a few can be identified since the previous work plan. However, the IASB has begun to indicate the month which issuance of exposure drafts or final standards may occur.

Changes to the work plan include:

Major projects

  • Conceptual framework is now expected to be issued after 6 months. Previously, no timeline was set for issuance.

Im­ple­men­ta­tion projects

The revised IASB work plan is available on the IASB's website.

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IASB posts fourth webinar on insurance contracts standard

22 Apr 2016

The IASB has posted the fourth instalment of its weekly webinar series on the upcoming insurance contracts standard.

The series, hosted by IASB member Darrel Scott, will discuss the following topics related to the upcoming insurance contracts standard:

  • The need for change and the history of the project. (issued 1 April)
  • What is an insurance contract? (issued 8 April)
  • Initial measurement of insurance contracts. (issued 15 April)
  • Subsequent measurement of insurance contracts. (issued 22 April)
  • Modifications to the general model: variable fee contracts.
  • Other modifications to the general model.
  • Presentation and disclosure.
  • Applying the Standard for the first time.

For more information, see the webinar page on the IASB’s website.

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IPSASB publishes guidance on the applicability of IPSASs

22 Apr 2016

The International Public Sector Accounting Standards Board (IPSASB) has published 'The Applicability of IPSASs' and a revised 'Preface to International Public Sector Accounting Standards', which change how the IPSASB communicates the type of public sector entities that it considers when developing its guidance.

Until now, the IPSASB guidance included a definition of a Government Business Enterprise (GBE) and a statement that GBEs apply International Financial Reporting Standards (IFRS). The definition of a GBE has proved ambiguous in places and difficult for preparers to interpret. The guidance now published

  • provides the characteristics of public sector entities for which IPSAS are designed,
  • replaces the term GBE with the term “commercial public sector entities”,
  • removes the definition of a GBE from IPSAS 1 Presentation of Financial Statements, and
  • amends the scope section of each existing pronouncement by removing the paragraph that states that the pronouncement does not apply to GBEs.

Please click for a press release with access to the new guidance on the IPSASB website.

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April 2016 IASB meeting notes posted

21 Apr 2016

The IASB met at its offices in London on 19–21 April 2016. We have posted the Deloitte observer notes from all of the sessions held.

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Agenda for the June 2016 ITCG meeting

21 Apr 2016

The agenda is available for the next meeting of the IFRS Taxonomy Consultative Group (ITCG), which will be held in London on 7 June 2016.

The agenda is summarised below:

Tuesday 7 June 2015 (09:00-16:40)

  • Welcome
  • Update on activities
  • Use of structured electronic reporting (including the IFRS Taxonomy)
  • IFRS Foundation’s strategy for technology and taxonomy
  • IFRS Taxonomy implementation guidance
    • User experiences and introduction
    • Small group discussions
    • Summary small group discussions
  • IFRS Taxonomy content areas for review
  • IFRS Taxonomy educational materials
    • Guide to IFRS Taxonomy common practice content
  • Implementation of Taxonomy Packaging 1.0
    • Versioning control and translations
  • ITCG member updates

Agenda papers for this meeting are available on the IASB's website.

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Agenda for current IASB meeting changed

20 Apr 2016

Please note that the IASB is making faster progress on the discussions during this month's meeting. Some Agenda consultation sections were pulled forward as was the discussion of financial instruments with characteristics of equity, which will now be held this afternoon from 16:15–17:45.

Please click for our updated agenda and first meeting notes from yesterday's discussions.

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2016 IFRS XBRL taxonomy webinar - recording available

20 Apr 2016

On 31 March 2016, the IFRS Foundation issued its 2016 IFRS Taxonomy. On 13 April 2016, the IFRS Taxonomy team held a webinar session to answer questions about the IFRS Taxonomy 2016. A recording of that webinar is now available.

To listen to the webinar and view the slides on the IFRS Foundation website please click here.

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EDs of first set of GRI sustainability reporting standards available for comment

20 Apr 2016

The Global Reporting Initiative (GRI) has released exposure drafts of an initial set of six GRI Standards developed by the Global Sustainability Standards Board (GSSB).

These include three standards that will be applicable to all organisations:

  • The Foundation Standard including the reporting principles and ‘in accordance’ criteria;
  • The General Disclosures Standard covering organisational profile, governance, stakeholder engagement, reporting practice, strategy and analysis; and
  • The Management Approach Standard including the disclosure on management approach.

There are also exposure drafts of three topic-specific standards: Emissions, Indirect Economic Impacts and Public Policy.

Please click to access the exposure drafts and a corresponding press release on the GRI website.

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