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AcSB submits paper for ASAF discussion of rate regulation

19 Sep 2016

During the upcoming meeting of the Accounting Standards Advisory Forum (ASAF) at the IASB's offices in London on 29 September 2016, members will discuss rate-regulated activities. The Canadian Accounting Standards Board (AcSB) has submitted a paper on 'Results of research on the decision-usefulness of financial information that reflects the economics of rate-regulated activities' for the discussion.

The data in the paper provides evidence, mainly from existing practice in Canada, demonstrating what information users need to understand the economics of rate-regulated activities, and how this information factors into their decision-making. It concludes that in the case of rate-regulated entities, users take into consideration the financial effects of rate regulation when making their assessments. The paper also argues that rate-regulated assets command a premium in purchase price given the stable earnings and predictable cash flows they can offer.

Please click for access to the full paper on the AcSB website.

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Deloitte releases e-learning modules on IFRS 16

16 Sep 2016

Deloitte’s Global Audit Learning group has released two e-learning modules on IFRS 16 (basic and advanced). These new modules are an addition to the extensive catalogue of IFRS e-learning content made freely available by Deloitte.

The new modules provide training in the background, scope and principles under IFRS 16 Leases, and the application of this standard. In the IFRS 16 (basic) module you will learn about how to identify whether a contract is within the scope of the standard and the key principles of lease accounting. In the IFRS 16 (advanced) module, you will deeper dive into the key principles of lease accounting and learn about areas of potential judgment in applying IFRS 16.

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.

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Wayne Upton — An appreciation

15 Sep 2016

Wayne Upton, the IASB’s Director of International Activities and Chairman of the IFRS Interpretations Committee, who has died suddenly, was a friendly and thoughtful man and a benign though invariably forthright presence in all his activities.

He listened to people. As he said in an interview reflecting on his role as Director of International Activities: ‘The purpose is not to attempt to boil down a single view but to get people together talking about issues. And what you find then is that thought leaders emerge and the quality of the response is much better’. And he maintained the same philosophy in his role as Chairman of the Interpretations Committee. He summed that role up with the words: ‘I am the Chair. I’m the facilitator, hopefully a consensus builder, but to have a vision or a mission I am not sure is appropriate’.

And he was also a man who looked for solutions. He was not going to hide behind a barricade of formality. Referring to the procedures of the Interpretations Committee and how it worked he once commented: ‘I think there is enough wiggle room, and there’s a technical term for you, in those criteria that if we see something that needs doing then we can find a way to do it’.

And as an archetypal American accountant at the London-based IASB he had developed a characteristically perceptive overview. He had been almost twenty years at the US standard-setting body, FASB, and he had been with the IASB almost since its inception. He would joke that he felt that the last time he had been a ‘real’ accountant must have been around the time ‘when Eisenhower was President’. But his view of the relationship between the FASB and the IASB was the real insight. ‘I think the IASB is culturally different than the FASB’, he said, ‘and all of that really stems from the fact that we have a hundred jurisdictions or so that are involved in our process and the FASB has only one. And that means that we have to create a different dynamic’. And he well understood the differences that this created. ‘I think it’s a mistake to characterise our standards at the IASB as principles based and the FASB standards as rules based’, he said. ‘I didn’t spend 17 years over there being unprincipled. As I say, it is a difficult balance between the appropriate level of assistance that you give people and keeping the standards to a manageable level’.

He will be sorely missed in many ways and at many levels.

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We comment on the proposed amendments to the IFRS Foundation Constitution

15 Sep 2016

We have commented on the proposed amendments to the IFRS Foundation Constitution that are the result of the Trustees 2015 review of structure and effectiveness of the IFRS Foundation.

As stated in our comments on the June 2016 proposals, we

  • support the proposal to have three geographical regions to be used throughout the IFRS Foundation when determining the distribution of Trustees and the IASB and other appointments;
  • disagree with the proposal to reduce the size of the IASB from 16 to 13 members;
  • do not support reducing the number of meetings of the Advisory Council from three meetings per year to two; and
  • encourage the IFRS Foundation Trustees to act much more as a body of non-executive directors.

Please click to access the full comment letter.

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Recent integrated and sustainability reporting developments

15 Sep 2016

A summary of recent developments at the GRI/GSSB, SASB/SEC, IIRC/CIPFA, and ACCA/Malaysian Institute of Accountants.

The GRI Global Sustainability Standards Board (GSSB) has approved the final drafts of all 36 GRI Standards for publication and is aiming at a mid-October launch. In prepration for the launch, GRI has published an overview of developments so far as well as next steps an launch events. Please click for more information on the GRI website.

The Sustainability Accounting Standards Board (SASB) has published an analysis of the comment letters the Securities and Exchange Commission (SEC) has received on its Concept Release: Business and Financial Disclosure Required by Regulation S-K published in April 2016. Comments on the Concept Release have sent a strong signal to the SEC that times have changed – investors want and need better disclosure of material sustainability-related information in SEC filings. The report is available on the SASB website.

The International Integrated Reporting Council (IIRC) and the Chartered Institute of Public Finance and Accountancy (CIPFA) with the support of the World Bank have developed an introductory guide to explain to public sector leaders and their teams how integrated thinking and reporting can help the sector consider how to make the most of resources, encourage the right behaviours and demonstrate to stakeholders how they are achieving the strategy and creating value over the short and longer term. The guide Focusing on Value Creation in the Public Sector is available on the CIPFA website.

The Malaysian Institute of Accountants (MIA) and the Association of Chartered Certified Accountants (ACCA) have released the results of a survey of over 300 report preparers and users. 61.8% of respondents believe that the use of integrated reporting would make Malaysian businesses more attractive to investors. Please click for the full results of the survey on the ACCA website.

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Death of Wayne Upton, Chairman of the IFRS Interpretations Committee

14 Sep 2016

The staff and the Trustees of the IFRS Foundation and the International Accounting Standards Board have released condolences on the sudden death of Wayne Upton, Director of International Activities at the IASB and Chairman of the IFRS Interpretations Committee.

Following a distinguished career at the FASB, Mr Upton joined the IASB in 2001 and was, at different times, Research Director, Chair of the IFRS Interpretations Committee, Chair of the Emerging Economies Group, and Coordinator of the Islamic Finance Consultative Group. In his role as Director of International Activities he played an important role in supporting jurisdictions around the world with their transition to IFRSs.

Please click for the Statement on the passing of Wayne Upton on the IASB website.

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Pre-meeting summaries posted for the IASB's September meeting

13 Sep 2016

The International Accounting Standards Board (IASB) will meet at its offices in London on 20 and 22 September 2016. We have posted our pre-meeting summaries for the meeting that allow you to follow the IASB’s decision making more closely. For each topic to be discussed we summarise the agenda papers made available by the IASB staff and point out the main issues to be discussed by the IASB and the staff recommendations.

On Tuesday 20 September, the IASB will discuss five topics:

  • The Board has been considering amending IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, to clarify how to distinguish between a change in accounting policy and a change in an estimate. If the Board agrees with the staff recommendation we expect to see the exposure draft being published in the next few months.
  • The Board has two hours scheduled to discuss its thinking for the Discussion Paper planned on Financial Instruments with the Characteristics of Equity. The focus is on the application of the separate presentation requirements to derivatives classified as liabilities. The objective is to complete the discussion of the application of the Gamma approach to derivatives on ‘own equity’. The Board will also discuss how to improve the disclosure requirements to provide information to users that is not provided through classification and presentation.
  • The Board is being asked to clear for publication a draft Interpretation on the interaction between the impairment requirements in IFRS 9 and IAS 28.
  • The Board will hear the main messages the staff plan to give in the Feedback Statement on the Agenda Consultation.
  • The Board also has an education session (which means that no technical decisions will be made) on revisions to the measurement sections of the Conceptual Framework.

On Thursday 22 September, the IASB will discuss its revisions to the Conceptual Framework. The Board is seeking to conclude its discussions on the reporting entity, presentation and disclosure, asymmetry in treating gains and losses, the definition of equity and materiality. Note that there is a longer than normal break in the middle of this session, with the public discussions being scheduled for 9:00am to 11:00am and 1:30pm to 2:30pm, London time.

Our pre-meeting summaries are available on our meeting note page and will supplement them with our popular meeting notes after the meeting.

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First European Commission report on the activities of the IFRS Foundation, EFRAG and PIOB

13 Sep 2016

In April 2014 a regulation of the European Union came into force establishing a Union programme to support specific activities in the field of financial reporting and auditing for the period of 2014-20. The regulation forms the legal basis for the co-financing of the IFRS Foundation, EFRAG and PIOB. According to the regulation, the Commission must prepare an annual report on the activity of the beneficiaries of the programme. The first report is now available.

On the activities the of the IFRS Foundation the report's conclusion are as follows (the IFRS 4 references are to be read as references to the new insurance contracts standard replacing IFRS 4 and expected as IFRS 17 within the next six months):

In respect of whether IFRS:

  • take due account of different business models: IFRS 9 explicitly recognises the importance of business models in determining measurement of financial instruments and IFRS 15 is considered flexible enough to meet different business models. The Conceptual Framework gives business models more emphasis.
  • reflect the actual consequences of economic transactions: IFRS 15 achieves this and IFRS 16 also seeks to better reflect the actual consequences of economic transactions and provide much-needed transparency about companies’ lease assets and liabilities. IFRS 4 Insurance Contracts, currently finalised by the IASB, is also expected to provide a realistic depiction and better comparability of financial performance of the insurance industry across different consituencies. Furthermore, the Conceptual Framework will introduce the concept of substance over form, which is important for portraying economic transactions appropriately.
  • are not overly complex: IFRS 9 is a complex standard however it has introduced simplifications in the accounting for financial instruments. In EFRAG’s view, presented in the endorsement advice, IFRS 9 does not contain any complexity that may impair understandability. IFRS 15 is more complex than the standard it replaces but this is justifiable as the previous standard was no longer appropriate to reflect the complexity of modern day business transactions.
  • avoid artificial short-term and volatility biases: IFRS 15 is effective in avoiding such volatility as it contains specific provisions that apply where there is uncertainty in recognising future revenue. As regards IFRS 4 Insurance Contracts, EFRAG will look at this aspect during the endorsement process following the publication of the standard by the IASB.

The Commission also reiterates its support for the re-introduction of the concept of prudence into the Conceptual Framework and welcomes the comprehensive effects analysis, which accompanied IFRS 16.

As regards EFRAG, the Commission notes that the organisation has been well equipped to strengthen the legitimacy of its positions and significantly contribute to the objective of Europe speaking with one voice. EFRAG's assessment of whether new or proposed financial reporting requirements are conducive to the public good is lauded.

As regards PIOB, the Commission notes that it will continue monitoring the funding developments and will cooperate with other interested stakeholders to ensure that the PIOB benefits from a clear, stable, diversified and adequate funding system.

Please click to access the full report on the European Commission's website.

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IASB addresses concerns about the different effective dates of IFRS 9 and the new insurance contracts standard

12 Sep 2016

The International Accounting Standards Board (IASB) has published 'Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance Contracts''. The amendments are intended to address concerns about the different effective dates of IFRS 9 and the forthcoming new insurance contracts standard (expected as IFRS 17 within the next six months).



As it has become obvious that the effective date of IFRS 17 can no longer be aligned with the effective date of IFRS 9 Financial Instruments there have been calls for the IASB to delay application of IFRS 9 for insurance activities and align the effective date of IFRS 9 for those activities with the effective date of the new insurance contracts standard. Proponents of a deferral argued that:

  • The different effective dates would lead to accounting mismatches and volatility in profit or loss that users of financial statements might find difficult to understand.
  • Making decisions about applying the new classification and measurement requirements in IFRS 9 before the new insurance contracts standard is finalised would be difficult as the decisions might differ from those companies would have made had all details of the new standard been known.
  • Having to cope with two major accounting changes in a relatively short time would bear the potential of significantly increased costs and efforts (for preparers and for users).

The IASB has acknowledged these concerns and is therefore amending IFRS 4 Insurance Contracts to address the concerns expressed about the different effective dates of IFRS 9 and IFRS 17.



The amendments in Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance Contracts' (Amendments to IFRS 4) provide two options for entities that issue insurance contracts within the scope of IFRS 4:

  • an option that permits entities to reclassify, from profit or loss to other comprehensive income, some of the income or expenses arising from designated financial assets; this is the so-called overlay approach;
  • an optional temporary exemption from applying IFRS 9 for entities whose predominant activity is issuing contracts within the scope of IFRS 4; this is the so-called deferral approach.

The application of both approaches is optional and an entity is permitted to stop applying them before the new insurance contracts standard is applied.

Overlay approach. The amendments that form the overlay approach permit an entity to exclude from profit or loss and recognise in other comprehensive income the difference between the amounts that would be recognised in profit or loss in accordance with IFRS 9 and the amounts recognised in profit or loss in accordance with IAS 39 Financial Instruments: Recognition and Measurement provided that the entity issues contracts accounted for under IFRS 4, applies IFRS 9 in conjunction with IFRS 4, and classifies financial assets as fair value through profit or loss in accordance with IFRS 9 when those assets were previously classified at amortised cost or as available-for-sale in accordance with IAS 39.

Deferral approach. Under the amendments that make up the deferral approach, an entity is permitted to apply IAS 39 rather than IFRS 9 for annual reporting periods beginning before 1 January 2021 if it has not previously applied any version of IFRS 9 and if its predominant activity is issuing contracts within the scope of IFRS 4. An entity determines whether its predominant activity is issuing contracts within the scope of IFRS 4 by comparing the carrying amount of its liabilities arising from contracts within the scope of IFRS 4 with the total carrying amount of its liabilities. An insurer’s activities are predominantly connected with insurance if (a) the carrying amount of its liabilities arising from contracts within the scope of IFRS 4 is significant compared to the total carrying amount of all its liabilities and (b) the percentage of the total carrying amount of its liabilities connected with insurance relative to the total carrying amount of all its liabilities is either greater than 90 per cent or less than or equal to 90 per cent but greater than 80 per cent, and the insurer does not engage in a significant activity unconnected with insurance. In connection with the deferral approach there is also a temporary exemption from specific requirements in IAS 28 regarding uniform accounting policies when using the equity method.


Dissenting opinion

One Board member voted against the publication of the amendments because this Board member does not agree with the temporary exemption from applying IFRS 9. This Board member argues that the deferral approach will reduce comparability, including between entities that issue insurance contracts. The Board member acknowledges the concerns voiced but is of the opinion that the overlay approach offers enough relief and makes a temporary exemption from applying IFRS 9 unnecessary.


Effective date and disclosures

An entity applies the overlay approach retrospectively to qualifying financial assets when it first applies IFRS 9. Application of the overlay approach requires disclosure of sufficient information to enable users of financial statements to understand how the amount reclassified in the reporting period is calculated and the effect of that reclassification on the financial statements.

An entity applies the deferral approach for annual periods beginning on or after 1 January 2018. Predominance is assessed at the reporting entity level at the annual reporting date that immediately precedes 1 April 2016. Application of the deferral approach needs to be disclosed together with information that enables users of financial statements to understand how the insurer qualified for the temporary exemption and to compare insurers applying the temporary exemption with entities applying IFRS 9. The deferral can only be made use of for the three years following 1 January 2018. Predominance is only reassessed if there is a change in the entity’s activities.


Additional information

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In connection with the amendments the IASB has also published a proposed Update 2 to the IFRS Taxonomy 2016 containing taxonomy elements for the amendments. More information on the proposed taxonomy update is available on the IASB website. Comments are requested by 15 November 2016.


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September 2016 IASB meeting agenda posted

11 Sep 2016

The IASB has posted the agenda for its next meeting, which will be held at its offices in London on 20 and 22 September 2016.

4.5 hours o the short meeting will be devoted to the Conceptual Framework. Also on the agenda are amendments to IAS 8, IFRS implementation issues, financial instruments with characteristics of equity, and the Agenda consultation.

The full agenda for the meeting can be found here. We will post any updates to the agenda, our comprehensive pre-meeting summaries as well as observer notes from the meeting on this page as they become available.

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