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News

We comment on the proposed amendments for measuring quoted investments in subsidiaries, joint ventures and associates at fair value

16 Jan 2015

We have published our comment letter on the International Accounting Standards Board's (IASB) Exposure Draft ED/2014/4 'Measuring Quoted Investments in Subsidiaries, Joint Ventures and Associates at Fair Value'.

The IASB's proposed amendments would confirm that the unit of account for investments in subsidiaries, joint ventures and associates is the investment as a whole, but that the fair value measurement of quoted investments in subsidiaries, joint ventures and associates should be the product of the quoted price multiplied by the quantity of financial instruments held, without adjustments. The IASB also proposed to align the fair value measurement of a quoted CGU to the fair value measurement of a quoted investment. Lastly, the proposed amendments also included an addition to the Illustrative Examples for IFRS 13 to illustrate the application of paragraph 48 of that standard to a net risk exposure of Level 1 financial assets and financial liabilities.

We disagree with the departure from the principle that fair value measurement should be consistent with the unit of account of the asset or liability to be measured.

Click for the full comment letter.

US and EU remain committed to convergence, stress the importance of consistent application

16 Jan 2015

Participants in the U.S. - EU Financial Markets Regulatory Dialogue (FMRD) met on 12 January 2015 to exchange information on regulatory developments as part of their ongoing dialogue and discuss their strong cooperation and shared interests in continuing to implement and enforce robust standards, including those on the G-20 financial regulatory agenda.

Participants discussed recent developments regarding the use of IFRS and US GAAP and "reiterated their commitment to convergence on high quality accounting standards and committed to continue their efforts regarding consistency in the application of accounting standards in practice".

The FRMD has been the forum for discussion of EU and US regulators since 2002. It brings together representatives of the European Commission (DG MARKT), the European Supervisory Authorities (ESAs - European Banking Authority, European Insurance and Occupational Pensions Authority, European Securities and Markets Authority) and the U.S. Treasury and independent regulatory agencies, including the Board of Governors of the Federal Reserve System, Commodity Futures Trading Commission (CFTC), Federal Deposit Insurance Corporation, and Securities and Exchange Commission (SEC).

Please click to access the full joint statement on the EC website. The next meeting of the FMRD will take place in Brussels, Belgium in July 2015.

We comment on the IASB discussion paper on rate regulation

16 Jan 2015

We have published our comment letter on the International Accounting Standards Board's (IASB) Discussion Paper DP/2014/2 'Reporting the Financial Effects of Rate Regulation'.

Our comment letter offers an anylsis of the main points of the discussion paper and we agree that that the hybrid scheme described as 'defined rate regulation' captures many of the features of regulatory regimes encountered in practice. We also agree that a focus on the rights and obligations arising from rate regulation is necessary to determine whether these give rise to assets and/or liabilities that meet the criteria for recognition per the Conceptual Framework for Financial Reporting. We recommend that the next step in the project be an accounting discussion paper preceding the development of any new Standard or amendment to existing standards.

Please click for a summary of our main points and access to the full comment letter

Agenda for the Joint Transition Resource Group for Revenue Recognition meeting

15 Jan 2015

The agenda has been released for the third meeting of the Joint Transition Resource Group for Revenue Recognition (TRG), which is being jointly held at the offices of the IASB and FASB on 26 January 2015. The TRG will discuss a number of topics related to the boards’ new revenue standard, “Revenue From Contracts With Customers” (issued as IFRS 15 by the IASB and ASU 2014-09 by the FASB).

The TRG was formed in June 2014 and is responsible for soliciting, analysing, and discussing stakeholder issues arising from implementation of the new standards in order to assist the IASB and the FASB to determine what, if any, action will be needed to address those issues.

The agenda for the meeting is as follows:

Monday, 26 January 2015

  • Introductory remarks
  • Research project update
  • Identifying promised goods or services
  • Incremental costs to obtain a contract
  • Transition: contract modifications
  • Noncash considerations
  • Stand-ready obligations
  • Islamic financing transactions
  • Collectibility
  • Variable consideration
  • Material rights, considerations payable to a customer, and significant financing component submissions

Agenda papers — including a submission log of issues compiled by Staff — for this meeting are available on the IASB's website.

Applicants invited for IFRS Interpretations Committee membership

13 Jan 2015

The Trustees of the IFRS Foundation have invited applications for candidates to fill up to four vacancies on the International IFRS Interpretations Committee for terms that will expire on 30 June 2015. The IFRS Interpretations Committee is the interpretative body of the IASB.

Members are expected to attend approximately six two-day meetings each year held in London. Terms of membership will begin on 1 July 2015 and will expire on 30 June 2018. Membership is unpaid, but the IFRS Foundation meets members' expenses of travel on IFRIC business.

Applications are accepted until 6 March 2015.

Please click for more information on the IASB's website.

Accounting considerations in view of Venezuela's foreign exchange controls

13 Jan 2015

Since 2010, Venezuela has been considered a highly inflationary economy and the Venezuelan government has instituted several mechanisms for foreign exchange control, including multiple exchange rates and capital control. In a "pre-clearance" issue the staff of the US Securities and Exchange Commission (SEC) has now signalled that it does not object to a registrant's conclusion to deconsolidate its Venezuelan operations due to an other-than-temporary lack of currency exchangeability and the existence of several government limitations on the registrant's ability to control the operations. The considerations would also apply in similar form under IFRS.

The consolidation considerations arising in this context would need to be based at a minimum on the following factors:

  • Volume restrictions on currency exchange activity;
  • The ability to access available legal currency exchange mechanisms in volumes desired or needed by the entity;
  • Recent developments that might affect expectations about the future direction of restrictions; and
  • The extent and severity of restrictions imposed by the government on an entity's operations and whether those restrictions demonstrate an entity's inability to control them.

If an entity ultimately concludes that deconsolidation is appropriate, it must also determine the appropriate date for deconsolidation and the appropriate currency exchange rate to use for remeasuring its deconsolidated investment and any other outstanding monetary balances that are no longer eliminated in consolidation. It would also need to provide comprehensive and clear disclosure of the basis for its consolidation/deconsolidation conclusion.

Deloitte (United States) has published a Financial Reporting Alert that discusses considerations related to consolidation and disclosure under US GAAP in connection with the environment in Venezuela. Although US GAAP focused, the publication contains many considerations that equally apply to consolidation under IFRS. The factors discussed in connection with Venezuela should also be considered in connection with other jurisdictions where the government has installed foreign exchange controls.

Please click for Financial Reporting Alert 14-5 - Consolidation and Disclosure considerations related to Venezuelan operations. It complements the April 2014 Financial Reporting Alert 14-1 - Foreign currency exchange accounting implications of recent government actions in Venezuela.

FASB's new ASU on extraordinary items brings US GAAP guidance closer to IAS 1

11 Jan 2015

The US Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) 2015-01 'Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items'.

The FASB released the new guidance as part of its simplification initiative, which is intended to "identify, evaluate, and improve areas of [US] GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements". At the same time, the update will align more closely US GAAP income statement presentation guidance with IAS 1 Presentation of Financial Statements, which prohibits the presentation and disclosure of extraordinary items since re-issuing the standard in 2003, effective 2005.

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

Agenda for the January 2015 IASB meeting

10 Jan 2015

The International Accounting Standards Board (IASB) will meet at its offices in London on 20-22 January 2015. Part of the meeting will be held jointly with the Financial Accounting Standards Board (FASB) to discuss the leases project. Additionally, the IASB will discuss the conceptual framework, the IFRS for SMEs, the disclosure initiative, IFRS implementation issues, insurance contracts, and emission trading schemes.

The full agenda for the meeting, dated 10 January 2015, can be found here.  We will post any updates to the agenda, and our Deloitte observer notes from the meeting, on this page as they are available.

European Union formally adopts Annual Improvements to IFRS - Cycle 2010-2012 and amendments to IAS 19

09 Jan 2015

The European Union has published Commission Regulations endorsing 'Annual Improvements to IFRSs 2010–2012 Cycle' and 'Defined Benefit Plans: Employee Contributions (Amendments to IAS 19)'.

Commission Regulation (EC) No 2015/28 of 17 December 2014 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council published in the Official Journal on 9 January 2015 adopts Annual Improvements to IFRSs 2010–2012 Cycle issued by the IASB in December 2013.

The amendments impacted seven standards:

  • IFRS 2 Share-based Payment,
  • IFRS 3 Business Combinations,
  • IFRS 8 Operating Segments,
  • IFRS 13 Fair Value Measurement (changes to the Basis for Conclusions only, so not part of the EU endorsement),
  • IAS 16 Property, Plant and Equipment,
  • IAS 24 Related Party Disclosures, and
  • IAS 38 Intangible Assets.

Commission Regulation (EC) No 2015/29 of 17 December 2014 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council published in the Official Journal on 9 January 2015 adopts Defined Benefit Plans: Employee Contributions (Amendments to IAS 19) issued by the IASB in November 2013. The amendments clarify the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service.

All amendments are effective in the EU for annual periods beginning on or after 1 February 2015, however, earlier application is permitted so EU companies can adopt in accordance with the IASB effective date (1 July 2014).

Note: The European Financial Reporting Advisory Group (EFRAG) has updated its endorsement status report to reflect the adoptions.

Roadmap for application of IFRS converged standards in India released, notification to follow "shortly"

05 Jan 2015

The Indian Ministry of Corporate Affairs (MCA) has released a revised road map for the adoption of Indian Accounting Standards (Ind AS), which are largely converged with International Financial Reporting Standards (IFRSs). The roadmap will become effective once the notification has been issued.

India originally intended to converge with IFRSs in a phased approach beginning in 2011, but transition to Ind AS was postponed. In April 2014, the Institute of Chartered Accountants of India (ICAI) publicly released a summary of its recommendations to the MCA on the timetable for the adoption of Ind AS, which proposed that listed and large entities should mandatorily apply Ind AS in consolidated financial statements for accounting periods beginning on or after 1 April 2016. This was picked up by the Indian Finance minister Arun Jaitley who said in his maiden budget speech in July 2014 that there was an urgent need to converge the current Indian accounting standards with IFRS.

The MCA has now released a revised roadmap that has been drawn up after "wide consultations with various stakeholders and regulators". In essence, companies with a net worth of Rs. 500 crore or more will have to mandatorily follow Ind AS from 1 April 2016. Corporates having a net worth of less than Rs. 500 crore but are listed, or in the process of getting listed, and companies with a net worth of Rs. 250 crore or more will have to follow the new norms from 1 April 2017. However, the new road map exempts banking, insurance and non-banking finance companies. The exact details for companies coming under the road map are quoted below from the MCA press release:

The Indian Accounting Standards (Ind AS) shall be applicable to the companies as follows:
  1. On voluntary basis for financial statements for accounting periods beginning on or after April 1, 2015, with the comparatives for the periods ending 31st March, 2015 or thereafter;
  2. On mandatory basis for the accounting periods beginning on or after April 1, 2016, with comparatives for the periods ending 31st March, 2016, or thereafter, for the companies specified below: 
    1. Companies whose equity and/or debt securities are listed or are in the process of listing on any stock exchange in India or outside India and having net worth of Rs. 500 Crore or more. 
    2. Companies other than those covered in (2.) (a) above, having net worth of Rs. 500 Crore or more. 
    3. Holding, subsidiary, joint venture or associate companies of companies covered under (2.) (a) and (2.) (b) above. 
  3. On mandatory basis for the accounting periods beginning on or after April 1, 2017, with comparatives for the periods ending 31st March, 2017, or thereafter, for the companies specified below: 
    1. Companies whose equity and/or debt securities are listed or are in the process of being listed on any stock exchange in India or outside India and having net worth of less than rupees 500 Crore.
    2. Companies other than those covered in paragraph (2.) and paragraph (3.)(a) above that is unlisted companies having net worth of rupees 250 crore or more but less than rupees 500 Crore. 
    3. Holding, subsidiary, joint venture or associate companies of companies covered under paragraph (3.) (a) and (3.) (b) above. 
    However, Companies whose securities are listed or in the process of listing on SME exchanges shall not be required to apply Ind AS. Such companies shall continue to comply with the existing Accounting Standards unless they choose otherwise.
  4. Once a company opts to follow the Indian Accounting Standards (Ind AS), it shall be required to follow the Ind AS for all the subsequent financial statements. 
  5. Companies not covered by the above roadmap shall continue to apply existing Accounting Standards prescribed in Annexure to the Companies (Accounting Standards) Rules, 2006.

Please click for access to the full press release on the MCA website.

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