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IASB's Financial Instruments Guide 2015 available now

16 Apr 2015

The IFRS Foundation has announced that the 'Financial Instruments 2015 Guide' is now available to buy. The guide offers the complete text, with extensive cross-references, of the standards on financial instruments issued by the IASB.

The guide comprises two volumes:

  • Volume 1 is a guide through the official text of IAS 39 and the other financial instruments Standards as it assumes no early application.
  • Volume 2 is a guide through the official text of IFRS 9 and the other financial instruments Standards assuming early application.
It sells for £58  a copy plus shipping. Please click for more information and placing your order.

Feedback on the European Discussion Paper on separate financial statements

16 Apr 2015

The European Financial Reporting Advisory Group (EFRAG) has published a feedback statement summarising the main messages from respondents to the Discussion Paper 'Separate Financial Statements'.

The paper, published in September 2014, was aimed at addressing concerns around how some accounting issues in separate financial statements should be dealt with and a number of practical concerns have arisen in the application of IFRS to the separate financial statements. The discussion paper considered how separate financial statements are used in Europe for economic decision-making and analysed the technical financial reporting issues that arise under IFRS when preparing such financial statements. The paper also proposed solutions to the issues identified and suggestions on how to consider separate financial statements in the future.

Most respondents welcomed the initiative of EFRAG and its partners in issuing the paper as a way of stimulating the discussion on separate financial statements, a topic that historically has received little attention from the IASB. While not all respondents considered that separate financial statements give rise to significant issues, a majority agreed that it would be useful if the IASB reviewed existing requirements, with a view to developing a specific set of general principles for separate financial statements.

The feedback statement is available on the EFRAG website.

Summary of March GPF meeting now available

16 Apr 2015

Minutes of the meeting of the Global Preparers Forum (GPF) with representatives of the International Accounting Standards Board (IASB) held in London on Thursday, 5 March 2015 are now available.

The following are some of the highlights of the matters discussed at the meeting:

  • IASB Update. One of the concerns of the GPF members was convergence. GPF members challenged the extent to which the IASB and FASB really are converged in respect of the Leases projects. Also, GPF members commented that that it was unhelpful to refer to convergence in respect of IFRS 15 if the words in IFRS are going to be different from US GAAP and, as a result, outcomes may also be different.
  • IFRS Interpretations Committee Update. The meeting discussed:
    •  IAS 2/IAS 38: Should interest be accreted on prepayments for long-term supply contracts?
    • IAS 16: Accounting for proceeds and costs of testing of PPE
    • IAS 12: Reflecting uncertainty in the recognition and measurement of income taxes
  • Agenda consultation 2015. GPF members commented on the strategic direction of the IASB Agenda and suggested that the IASB should now spend more time on maintaining existing standards. They also commented on projects that should be prioritised. Again, convergence was brought up as a topic, however, GPF members felt that convergence should not be raised as a topic in the agenda consultation as convergence has been tried but has failed.
  • Business combinations under common control. The IASB staff provided an update on the research project on business combinations under common control (BCUCC). A few GPF members commented on the scope of the project.
  • Income tax accounting. The purpose of this session was to understand how, and to what extent, income tax information is used by internal management; to identify the existing practical problems about the current accounting for income taxes; and to get a sense of a direction for improving the accounting standard for income tax.
  • Review of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. GPF members were provided with results of a preparers’ survey launched by the OIC in December 2014 and were asked whether those results were consistent with their views. Most members agreed with the findings of the survey.
  • Discount rates. The IASB staff provided an update on the research project on discount rates. GPF members expressed support for conducting research on discount rates, however, they stated that this research should be of medium priority. They also stated that any standard-setting action should occur through cross-cutting projects as opposed to piecemeal amendments to different individual standards at different times.
  • Share-based payment. The IASB staff provided an update on the research project on share-based payment. The objective of the project is to identify the most common areas of complexity in IFRS 2. GPF members agreed that there are some areas of complexity in IFRS 2, however, they also commented that the standard issued in 2004 has achieved its main objective. They stated that this research should be of medium to low priority.
  • Performance reporting. The IASB staff provided an update on the research project on performance reporting that was added to the IASB's agenda in July 2014. Although the project is entitled ‘Performance reporting’, it is inevitable that the statement of financial position will be considered as part of the project. The staff emphasised that the IASB would learn from the consultations it undertook in the FSP project, and the mistakes it made. GPF members voiced some concerns, and the IASB staff promised that the IASB would develop the project cautiously. Opinions as to what priority should be given to this project were split.

The full report is available on the IASB website.

Deloitte releases e-learning module on IFRS 15

15 Apr 2015

Deloitte’s Global Audit Learning group has released an e-learning module on IFRS 15. This new module is an addition to the extensive catalogue of IFRS e-learning content made freely available by Deloitte.

Each Deloitte e-learning module provides training in the background, scope and principles of each pronouncement, and provides practical insights into their application. Topics covered in the IFRS 15 module include the principles for the recognition of revenue to the sale of goods, services, licenses, royalties, and any variable consideration or modifications to contracts; and guidance is provided on how these principles should be applied by using the new five step revenue recognition model.

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.

For details on the full range of e-learning modules go to Deloitte’s IFRS e-learning website. A listing of available e-learning modules is also available on our IAS Plus IFRS e-learning page.

Report on IFRS adoption by Japanese companies

15 Apr 2015

The Financial Services Agency of Japan (FSA) has released a report studying IFRS adoption by Japanese companies. The report is primarily intended to provide information for Japanese companies planning to move to IFRSs to further increase voluntary adoption of IFRSs by public companies in Japan. However, it also offers insights into the progress of adoption of IFRSs in Japan in general.

The 77-page report, which is predominently based on responses to a questionnaire that 65 companies provided, covers 1) the respondents' motivation to adopt IFRSs, 2) the migration process and project management structure, 3) the cost of adoption, and 4) implementation challenges. The report is available free of charge on the FSA website (Japanese language only).

Updated 'IFRS as global standards' publication

15 Apr 2015

The IFRS Foundation has published an updated version of 'IFRS as Global Standards: a Pocket Guide'. The guide provides an overview of the adoption of IFRS in 138 countries and other jurisdictions around the world.

The summaries on the use of IFRS are based off information obtained by national standard-setters and other organisation that have responded to a survey by former IASB member, Paul Pacter.

IFRS as Global Standards: a Pocket Guide can be downloaded free of charge from the IASB' website. It is accompanied by Financial Reporting Standards for the World Economy, an analysis of what can be learned from the jurisdiction profiles that form the basis for the pocket guide.

FAF strategic plan confirms that convergence may happen in instances but is not a top priority for the FASB

10 Apr 2015

The US Financial Accounting Foundation (FAF) board of trustees has approved a final version of the strategic plan for the FAF, the Financial Accounting Standards Board (FASB), and the Governmental Accounting Standards Board (GASB), which outlines the three organisations' long-term vision and goals.

As stressed before, the strategic plan confirms that the FASB's overall strategy is to improve financial reporting in general, but that in doing so "the FASB will first consider the best interests of those who provide capital to companies and not-for-profit organizations (investors, lenders, other creditors, and donors) both in the U.S. and other markets that use or reference Generally Accepted Accounting Principles (GAAP)". However, the plan adds that the FASB will continue to work with other standard-setters internationally, though still with the topmost priority of improving the quality of US GAAP:

As an integral part of this strategy, the FASB will work to maintain and strengthen its existing cooperative relationships with other national and regional standard setters. The broader flow of information and ideas resulting from these relationships mutually informs each standard setter’s thinking and contributes to the shared understanding of perspectives and circumstances that can reduce or avoid unnecessary differences among standards used internationally. In some cases, however, the FASB (or other national standard setters) may conclude that the best interests of its own capital markets outweigh the goal of completely converged accounting standards.

The FAF strategic plan thus reflects the FASB comments on comparability in international accounting standards that were added to the FASB website post convergence.

Please click to access the following information on the FAF and FASB websites:

Summary of the CMAC February 2015 meeting

09 Apr 2015

The IASB has released a summary of the Capital Markets Advisory Committee (CMAC) meeting which was held in London on 27 February 2015.

The topics discussed at the meeting included:

  • EFRAG discussion paper on separate financial statements.
    In September 2014, a European discussion paper was published that considered how separate financial statements are used in Europe for economic decision-making and analysed the technical financial reporting issues that arise under IFRS when preparing such financial statements. CMAC members discussed the paper and considered that it was useful to have separate and consolidated financial statements prepared under the same basis (IFRS).
  • Financial reporting in hyperinflationary economies (IAS 29).
    The IASB has been asked to consider a request to change the definition of hyperinflation so that 8 per cent per annum over a three year period (ie cumulatively 26 per cent) would indicate hyperinflation. CMAC members were of the view that the IASB should not lower the indicative threshold.
  • Income taxes.
    The staff asked the CMAC members what tax information is used for analysis today and how this information is incorporated into valuation models and whether today’s accounting for income tax provides the information needed or whether the corresponding standard should be improved. CMAC members stated that investors use tax information, to help them to project future tax cash flow but that investors are looking for more information about effective tax rates and differences in taxation that relate to jurisdictional factors.
  • Disclosure Initiative.
    The IASB staff provided an overview and update on the activities that collectively comprise the Disclosure Initiative. Feedback from CMAC members was sought on the overall initiative and in particular on the Principles of Disclosure project. Most CMAC members agreed with the topics addressed in the Principles of Disclosure project and stressed that the concept of materiality was of particular interest to investors. As part of the discussion, CMAC members also considered the results of the the OIC survey for investors launched in December 2014.

The next CMAC meeting will take place on 11 and 12 June 2015.

The full meeting summary is available on the IASB website.

AAOIFI amends its standard on consolidation

09 Apr 2015

The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) has amended its existing accounting standard on consolidation – FAS 23 'Consolidation'.

The amendments to FAS 23 clarify, that control over an entity that triggers consolidation does not only exist if the Islamic financial institution preparing consolidated financial statements holds 50 per cent or more of the voting rights in the entity or if the Islamic financial institution has obtained control through agreement with the entity's other shareholders or with the entity itself. Rather, the amendments clarify that, in addition to the existing stipulations in the FAS 23, control may also exist through rights arising from other contractual arrangements, voting rights of the Islamic financial institutions that give de facto power over an entity, potential voting rights, or a combination of these factors. FAS 23 will thus be closer aligned with IFRS 10 Consolidated Financial Statements.

The amendment is effective for annual reporting periods ending on or after 31 December 2015. The full text of the amendment will be included in the next publication of AAOIFI standards scheduled for early 2015.

Please click for the press release on the AAOIFI website offering more details on the amendments to FAS 23.

US FASB aligns with IFRSs on presentation of debt issuance costs

07 Apr 2015

The US Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs”, as part of its simplification initiative. The ASU changes the presentation of debt issuance costs in financial statements. Under the ASU, an entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortisation of the costs is reported as interest expense.

The ASU specifies that “issue costs shall be reported in the balance sheet as a direct deduction from the face amount of the note” and that “[a]mortization of debt issue costs shall also be reported as interest expense.” According to the ASU’s Basis for Conclusions, debt issuance costs incurred before the associated funding is received (i.e., the debt liability) should be reported on the balance sheet as deferred charges until that debt liability amount is recorded.

For public business entities, the guidance in the ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after 15 December 2015. For entities other than public business entities, the guidance is effective for fiscal years beginning after 15 December 2015, and interim periods beginning after 15 December 2016. Early adoption is allowed for all entities for financial statements that have not been previously issued. Entities would apply the new guidance retrospectively to all prior periods (i.e. the balance sheet for each period is adjusted).

Requiring presentation of debt issuance costs as a direct reduction of the related debt liability (rather than as an asset) is consistent with the presentation of debt discounts under US GAAP. In addition, it converges the guidance in US GAAP with that in IFRSs, under which transaction costs that are directly attributable to the issuance of the liability are treated as an adjustment to the initial carrying amount of the financial liability.

For more information, see Deloitte's related Heads Up newsletter, as well as the ASU on the FASB’s website.

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