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EFRAG appoints new TEG members under the new governance structure

15 Dec 2014

The Board of the European Financial Reporting Advisory Group (EFRAG) has announced the appointment of six new members of its Technical Experts Group (TEG). The appointments are a consequence of EFRAG's new governance structure and of three current TEG members stepping down from their roles.

Under the new structure, EFRAG TEG consists of a maximum of 16 members of which at least four members are nominated by the standard-setters of France, Germany, Italy and the UK. Its new role is to provide technical advice to the EFRAG Board who will be responsible for all EFRAG positions.

The standard-setter representatives will provide a direct liaison with, and the facility of obtaining input from, the standard-setters and their constituents in four main countries in Europe. So far Anthony Appleton (FRC, UK), Tommaso Fabi (OIC, Italy) and Dr. Sven Morich (ASCG, Germany) have been appointed.

The other three newly appointed members (Phil Aspin (UK), Geert Ewalts (Netherlands), Prof. Dr. Günther Gebhardt (Germany)) will replace three TEG members who are stepping down from their role - among them Deloitte Partner Prof. Dr. Andreas Barckow who has been appointed as future President of the Accounting Standards Committee of Germany (ASCG).

Please click for the press release on the EFRAG website.

We comment on the proposed amendments regarding the recognition of deferred tax assets for unrealised losses

15 Dec 2014

We have published our comment letter on the International Accounting Standards Board’s (IASB) Exposure Draft ED/2014/3 'Recognition of Deferred Tax Assets for Unrealised Losses'.

The IASB's proposed amendments aim at clarifying the following aspects:

  • Unrealised losses on debt instruments measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference regardless of whether the debt instrument's holder expects to recover the carrying amount of the debt instrument by sale or by use.
  • The carrying amount of an asset does not limit the estimation of probable future taxable profits.
  • Estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible temporary differences.
  • An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law restricts the utilisation of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type.

In general, we agree with the proposed amendments; however, we suggest some enhancements to the wording to better clarify the proposals.

Click for the full comment letter.       

Short survey on accounting changes

12 Dec 2014

The Italian standard-setter Organismo Italiano di Contabilità (OIC) is helping the IASB to understand investor views on accounting changes by conducting a short survey.

The requirements in IFRSs, in particular in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, make a distinction between how an entity should present and disclose different types of accounting changes in its financial statements. Changes in accounting policies must be applied retrospectively while changes in accounting estimates are accounted for prospectively. Companies sometimes struggle to apply changes in accounting policies retrospectively and also find it sometimes difficult to distinguish between accounting policies and accounting estimates.

The OIC is now conducting a survey to help the IASB understand investor views on the following aspects:

  • the type of financial statement information that is needed when a company makes an accounting change;
  • whether the type of the change affects information needs; and
  • whether there is more than one way companies could provide information about accounting changes that would still satisfy all needs.

More information about the online survey is available on the OIC website. It should take approximately 15 minutes to complete and can be completed until 15 February 2015.

IFRS Foundation announces new Vice-Chairs of the Trustees

10 Dec 2014

The Trustees of the IFRS Foundation have announced that the Monitoring Board has confirmed the appointments of Ronald Arculli and Harvey Goldschmid to serve as Vice-Chairs of the Trustees. The new Vice-Chairs will replace from 1 January 2015 Tsuguoki Fujinuma and Robert Glauber, who are stepping down at the end of their terms.

Mr Arculli is a former Chairman of Hong Kong Exchanges and Clearing Limited and a former Chairman of the World Federation of Exchanges. Mr Goldschmid is Dwight Professor of Law at Columbia University and a former Commissioner of the US Securities and Exchange Commission. Please click for the corresponding press release on the IASB website.

FASB chairman discusses post-convergence priorities

09 Dec 2014

Russell Golden, the Chairman of the US Financial Accounting Standards Board (FASB), gave a speech at this year's American Institute of Certified Public Accountants (AICPA) Conference on Current SEC and PCAOB Developments on the FASB's post-convergence project agenda.

Mr Golden stressed that the FASB's first priority is to improve US GAAP; he spoke about the FASB's simplification initiative and reducing complexity within US GAAP. He also admitted the need for a complete conceptual framework to bridge gaps and minimise inconsistencies. These priorities have helped align some areas of US GAAP and IFRS (i.e., inventory balance sheets, development stage enterprises, and extraordinary items), although sometimes the simplification of US GAAP has resulted in differing conclusions than those of the IASB (i.e., leases, impairment, classification and measurement, and insurance).

On the subject of international cooperation, Mr Golden said:

I believe that continuing to work toward the development of more comparable global accounting standards is an important way to help reduce complexity. That’s why we continue to collaborate and cooperate with the IASB and national standards setters with an eye toward agreeing on and adopting standards that either are converged or that have the fewest possible differences.

The full text of Mr Golden's speech is available on the FASB's website.

Ian Mackintosh speaks at US conference

09 Dec 2014

At the annual American Institute of Certified Public Accountants (AICPA) Conference on Current SEC and PCAOB Developments being held in Washington DC this week, IASB Vice-Chairman, Ian Mackintosh participated in a panel discussion and delivered prepared remarks. In the subsequent discussion, Mr Mackintosh reflected on the statement made earlier in the conference by US SEC Chief Accountant, James Schnurr on the possibility of permitting voluntary supplementary use of IFRSs in the United States.

In his prepared remarks, Mr Mackintosh's discussed the global success of IFRS and noted the increasing relevancy of IFRS to many American companies. He discussed the convergence project, stressing the importance of the almost-finished leases project and stated, "Convergence was not a perfect process but it was a good one and we achieved a great deal. The similarities between the two sets of Standards are bigger than the differences."

During the question and answer portion of the panel session, Mr Mackintosh discussed Mr Schnurr's earlier remarks on the possibility of permitting voluntary supplementary use of IFRSs in the United States. He stated that he was pleased that the discussion was back on the agenda and that Mr Schnurr had worked so diligently, catching up to speed in the two months since taking on the role of Chief Accountant. However, Mr Mackintosh cautioned that this marks only restarting the discussion; and success of the possible fourth approach would depend upon the number of registrants who would volunteer to provide the IFRS supplementation.

Mr Mackintosh's prepared remarks are available on the IASB's website. His comments on Mr Schnurr's speech were provided by Deloitte observers.

FASB and FAF comment on voluntary disclosure of IFRS information

09 Dec 2014

The Financial Accounting Foundation (FAF) and the Financial Accounting Standards Board (FASB) have issued a statement welcoming a possible voluntary disclosure of IFRS-based financial reporting information in addition to US GAAP-based information.

At the annual American Institute of Certified Public Accountants (AICPA) Conference on Current SEC and PCAOB Developments, Jim Schnurr, Chief Accountant of the US Securities and Exchange Commission (SEC), mentioned yesterday voluntary disclosure of IFRS-based financial reporting information as one example of how IFRS could be incorporated into the US reporting system. He also indicated that in this context reconsidering the SEC's current thinking that IFRS-based measures are "non-GAAP" financial measures might be required. The statement published by FAF and FASB comments:

We also believe it makes sense to explore whether there are ways to remove barriers that might exist for companies that voluntarily choose to offer investors a second set of financial statements prepared in accordance with International Financial Reporting Standards (IFRS). We believe that voluntarily providing IFRS information on a supplemental basis, subject to audit, SEC review and other regulatory scrutiny, could be an important tool in fostering further convergence of Generally Accepted Accounting Principles (GAAP) and IFRS.

The full statement is available on the FAF website.

2015 IFRS 'Blue Book' now available

09 Dec 2014

The IFRS Foundation has published '2015 IFRS Consolidated without early application' - the 'Blue Book'.

This volume (nicknamed the "Blue Book") contains all official pronouncements that are mandatory on 1 January 2015. It does not include IFRSs with an effective date after 1 January 2015.

The following are the main changes made since 1 January 2014:

The Blue Book sells for £70 plus shipping (academic, developing country, and volume discounts apply). The publication can be purchased through the IASB web shop.

Summary of November GPF meeting now available

09 Dec 2014

Minutes of the meeting of the Global Preparers Forum (GPF) with representatives of the International Accounting Standards Board (IASB) held in London on Thursday, 6 November 2014 are now available. The meeting discussed a broad range of topics, including a number of IASB active and research projects, and IFRS Interpretations Committee issues.

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

  • IFRS taxonomy. Some concern was expressed that the IASB's new approval process for taxonomy updates as new standards or amendments are issued may be seen by some regulators as an endorsement of those taxonomy elements and lead to restrictions on where and how information is disclosed in financial statements
  • Leases. In addition to concerns raised about the IASB and FASB proposals for leases being significantly different, there was a suggestion the IASB should form a transition resource group on leases because of possible different interpretations of some areas of application of the forthcoming standard
  • Foreign exchange restrictions in hyperinflationary economies. GPF members shared their experiences with this topic, particularly since the third official exchange rate mechanism was introduced in Venezuela earlier this year. There was a suggestion that some kind of blended or weighted average rate might best reflect the economics of the situation in some cases, and that a narrow-scope amendment to IAS 21 The Effects of Changes in Foreign Exchange Rates may be needed to allow entities to reflect the economics of exchangeability in these situations
  • Foreign exchange translation of revenue. The meeting discussed a recent IFRS Interpretations Committee issue where an entity enters into a foreign currency sales contract and receives a non-refundable payment in advance of the delivery of goods or services. Over half of the GPF members had experience of sales contracts under which payments were received in advance, and most of these member record revenue in profit or loss using the exchange rate at the date of revenue recognition, with only a few using the rate at the date of the advance cash receipt (considered consistent with US GAAP and with treating the deferred revenue as a non-monetary item)
  • Research agenda. There were some suggestions about involving preparers in technical decisions arising at the research stage of projects to provide guidance on operability, and it was noted it would be more important to involve prepares at an earlier stage if there is a significant cost or cost benefit consideration associated with the project
  • Emissions trading schemes. GPF members noted a variety of approaches are being used to account for emissions trading schemes.  Many stressed that when looking at how to account for a scheme, the unit of account should be the scheme as a whole, rather than an approach similar to that in withdrawn IFRIC 3 Emission Rights which focused on individual components at a point in time. Many accrue a liability through the period, typically based on the expected cost of the additional allowances required. Options on how to account for surplus allowances were also discussed
  • Equity method of accounting. The majority of GPF members preferred the equity method of account to either cost or fair value, but there was some discussion as to whether the equity method is appropriate for all associate entities, perhaps requiring a review of the meaning significant influence. Some members considered the equity method useful where the business model means the operations of the investee are 'embedded' within the operations of the investors, but it may not be appropriate if the holding is temporary or the investment is not held for the purpose of the business. Difficulties in applying the equity method were discussed, including the need to obtain information to determine elimination entries, and whether elimination entities should be required (as prices are negotiated on an arm's length basis)
  • Disclosure initiative. GPF members discussed cohesiveness in presentation and disclosure of financial statements and disclosure of cash flow information. There was support for including a communication principle in IFRS to promote the linkage of information in financial statements, but there was some caution that cohesiveness should not be prescriptive requiring the classification and grouping of information in a particular way. GPF members gave cost and benefit perspectives on the disclosure of some key cash flow measures, with most stating additional disclosures about cash flows would require systems changes and would be a cost burden.

The full report is available on the IASB website.

Agenda for December 2014 EEG meeting

08 Dec 2014

The International Accounting Standards Board's Emerging Economies Group (EEG) is meeting in Jakarta, Indonesia on 11-12 December 2014. The meeting will be hosted by the Indonesian Financial Accounting Standards Board and will discuss a number of issues, including accounting for extractive industries, non-financial assets and foreign currency convertible bonds.

The agenda for the meeting is summarised below:

Thursday, 11 December 2014 (09:00-20:00)

  • Address by hosting country (Indonesia)
  • Address by EEG Chair (Wayne Upton)
  • Accounting for extractive industries (presentations and discussions)
  • Accounting for foreign currency convertible bonds (FCCBs)
  • Welcome dinner

Friday, 12 December 2014 (09:00-13:00)

  • IASB updates
  • Non-financial assets
  • Administrative issues - topics and venues for meetings next year
  • Discussion and approval of the communiqué
  • Summary of the meeting
  • Working lunch

Agenda papers for the meeting are available on the IASB website.

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