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News

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IASB webcast on the definition of a lease now available

13 Apr 2016

As part of the IASB webcast series on IFRS 16 implementation, the IASB staff has made available a webcast related to the definition of a lease.

This webcast discusses the IFRS 16 requirements and application guidance relating to the definition of a lease, practical differences between IFRS 16 and the previous definition of a lease  in IAS 17 and IFRIC 4, and how entities should account for contracts with both lease and service components.

The new webcast and all previous webcasts of the series available on the IFRS 16 implementation page on the IASB’s website.

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IASB publishes clarifications to IFRS 15

12 Apr 2016

The International Accounting Standards Board (IASB) has published final clarifications to IFRS 15 'Revenue from Contracts with Customers'. The amendments are effective for annual reporting periods beginning on or after 1 January 2018 (same effective date as IFRS 15 itself). Earlier application is permitted.

 

Background

On 28 May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers. After issuing the new revenue standard, which is substantially the same as the FASB's ASU 2014-09, the IASB and the FASB formed the joint Revenue Transition Resource Group (TRG) to support the implementation of the new standard. The substantial majority of the issues discussed by the TRG were resolved without the need for standard-setting activity. However, five topics (identifying performance obligations, principal versus agent considerations, licensing, collectability, and measuring non-cash consideration) were identified as requiring consideration by the Boards. In addition, some stakeholders asked for practical expedients. After considering the five topics and possible practical expedients, the IASB proposed in July 2015 targeted amendments in three areas of IFRS 15 as well as some transition relief. The proposals in the exposure draft have now been finalised.

 

Changes

The amendments in Clarifications to IFRS 15 'Revenue from Contracts with Customers' address three of the five topics identified (identifying performance obligations, principal versus agent considerations, and licensing) and provide some transition relief for modified contracts and completed contracts. The IASB concluded that it was not necessary to amend IFRS 15 with respect to collectability or measuring non-cash consideration. In all its decisions, the IASB considered the need to balance helping entities with implementing IFRS 15 and not disrupting the implementation process.

Identifying performance obligations. IFRS 15 requires an entity to identify performance obligations on the basis of distinct promised goods or services. To clarify the concept of 'distinct', the IASB has added the clarification that the objective of the assessment of a promise to transfer goods or services to a customer is to determine whether the nature of the promise, within the context of the contract, is to transfer each of those goods or services individually or, instead, to transfer a combined item or items to which the promised goods or services are inputs.

Principal versus agent considerations. When another party is involved in providing goods or services to a customer, IFRS 15 requires an entity to determine whether it is the principal in the transaction or the agent on the basis of whether it controls the goods or services before they are transferred to the customer. To clarify how to assess control, the IASB has amended and extended the application guidance on this issue, and especially stresses:

  • that an entity determines whether it is a principal or an agent for each specified good or service promised to the customer and could be a principal for some specified goods or services and an agent for others;
  • that the indicators provided for assessing control are not a conclusive list; and
  • that the indicators provided may be more or less relevant to the assessment of control depending on the nature of the specified good or service and the terms and conditions of the contract so that different indicators may provide more convincing evidence in some contracts than others.

Licensing. When an entity grants a licence to a customer that is distinct from other promised goods or services, the entity has to determine whether the licence is transferred at a point in time or over time on the basis of whether the contract requires the entity to undertake activities that significantly affect the intellectual property to which the customer has rights. To clarify when an entity's activities significantly affect the intellectual property, the IASB has amended the application guidance and stresses that the activities significantly affect the intellectual property if

  • the activities are expected to significantly change the form or the functionality of the intellectual property; or
  • the ability of the customer to obtain benefit from the intellectual property is substantially derived from, or dependent upon, those activities.

Additionally, the IASB has extended the application guidance with respect to the application of the royalties constraint.

Transition relief. The IASB has provided two additional practical expedients (both optional):

  • An entity need not restate contracts that are completed contracts at the beginning of the earliest period presented (for entities that using the full retrospective method only).
  • For contracts that were modified before the beginning of the earliest period presented, an entity need not retrospectively restate the contract but shall instead reflect the aggregate effect of all of the modifications that occur before the beginning of the earliest period presented (also for entities recognising the cumulative effect of initially applying the standard at the date of initial application).

 

Alternative view

One Board member voted against the publication of the amendments. This Board member supports all clarifications and the additional transition relief, but disagrees with the proposal to require an entity to apply the amendments retrospectively as if those amendments had been included in IFRS 15 at the date of initial application as this would be inconsistent with allowing early application of IFRS 15.

 

Interaction with the FASB

The FASB has adopted a more piecemeal approach to amending its revenue standard and has decided to publish more extensive amendments. Final amendments to the application guidance on principal versus agent considerations were published in March 2016, amendments on identifying performance obligations and licensing are expected soon, and other narrow scope amendments and practical expedients on transition are expected slightly after that.

Also, while the IASB has announced that it will no longer attend TRG meetings as it is of the view that stakeholders need to know that they can continue their implementation process with the confidence that IFRS 15 will not be subject to further changes, the FASB declared in February that it will continue to address implementation issues and has scheduled three TRG meetings for 2016.

 

Additional information

Please click for:

 

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Pre-meeting summaries for the April IASB meeting

12 Apr 2016

The International Accounting Standards Board (IASB) will meet at its offices in London on 19–21 April 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.

A main focus of the IASB's discussions this month will be the feedback to the Agenda Consultation (more than six hours split over all three days). In order to stress the fact that although they all form part of the Agenda Consultation redeliberations, these discussions also refer to individual projects on the IASB agenda, our observers have decided to summarise each agenda paper for the Agenda Consultation discussion separately. Rather than going to our meeting note page you might find it more intuitive to go to the Agenda Consultation project page if you want to get an overview of all Agenda Consultation discussions this month. For all other pre-meeting summaries please see our meeting note page and note that all summaries are posted strictly in the order of discussion at the IASB meeting.

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Feedback to the EFRAG consultation on its proactive agenda

11 Apr 2016

The European Financial Reporting Advisory Group (EFRAG) has issued a summary of the feedback received on its proactive agenda consultation. The consultation sought views on the recent proactive work performed by the EFRAG as well as future proactive activities relevant for Europe.

EFRAG received 13 replies to its consultation and additional feedback in a number of outreach events spread over Europe. In general, respondents considered EFRAG proactive activities as important contributions to the international accounting debate. However, some called for more evidence and clarity on the objective that EFRAG tries to achieve in each project and the way EFRAG proactive projects were selected. The EFRAG Board has therefore decided that:

  • Any new proactive project must be clearly motivated and the reasons for taking up the project must be clearly communicated.
  • For any new project a news item explaining the proactive project will be published to inform constituents.
  • A project plan would be included with an overview of the planned outreach activities.

For more information, see the press release and feedback statement on the EFRAG’s website.

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'Des nouvelles réalités'

11 Apr 2016

Deloitte France has gone live with an IFRS 16 website in the French language.

The website offers:

  • an introduction to IFRS 16 Leases;
  • background information about the current and the coming treatment of leases - much of it intuitively visualised;
  • a library of publications that can be downloaded free of charge; and
  • registration for a 45 minute webinar to be held on 10 May 2016.

Please click to access IFRS 16 Locations — Affutez vos engagements.

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EFRAG updates website

11 Apr 2016

The European Financial Reporting Advisory Group (EFRAG) has updated its website to a more modern look. Unfortunately, EFRAG decided against aliasing its existing content, so all links you might have saved and bookmarks you might have will need to be updated. We provide you with a list of links to major content.

The new links are:

Unfortunately, the new website doesn't offer a search function anymore.

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April 2016 IASB meeting agenda posted

08 Apr 2016

The IASB has posted the agenda for its next meeting, which will be held at its offices in London on 19–21 April 2016.

The meeting will feature discussions on:

  • Agenda Consultation:
    • Effect of comments received on setting the work plan
    • Overview of investor feedback
    • Primary financial statements
    • Research overview
    • Provisions, contingent liabilities and contingent assets
    • Comments received on IFRS 5
    • New topics
    • Discount rates
    • Pollutant pricing mechanisms
    • Rate-regulated activities
  • Insurance and IFRS 9
  • Disclosure Initiative:
    • Feedback summary on Exposure Draft: IFRS Practice Statement Application of Materiality to Financial Statements
    • Disclosures about restrictions on cash and about liquidity
    • Distinction between changes in accounting policies and changes in accounting estimates
    • Changes in accounting estimates: disclosures
  • Conceptual Framework
  • Business combinations under common control
  • Goodwill and impairment
  • Financial instruments with characteristics of equity

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

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IASB posts second webinar on insurance contracts standard

08 Apr 2016

The IASB has posted the second installment 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.
  • Subsequent measurement of insurance contracts.
  • 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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UK FRC believes the European Commission might be traveling in the wrong direction on non-financial reporting

08 Apr 2016

In January 2016, the European Commission launched a public consultation to collect views from stakeholders on non-binding guidance on the methodology for reporting of non-financial information by certain large companies across all sectors. The UK Financial Reporting Council (FRC) has reponded and warns that the proposed guidance might be too prescriptive.

Among the main concerns, the FRC notes that in developing the guidelines, the Commission could go beyond the principles in the corresponding directive and inadvertently introduce new disclosures. The FRC also believes that certain characteristics of the proposed guidelines could lead to boiler plate reporting or confusion - examples cited are:

  • a comprehensive list of KPIs in the guidelines, which might encourage companies to include immaterial KPIs in their reporting; and
  • an exhaustive list of all frameworks for non-financial reporting, that might exclude other frameworks that address similar issues or that go beyond the Commission's guidelines.

The comment letter states:

Any guidelines should be concise, principles-based and allow companies flexibility to tell their story. We do not support prescriptive guidelines as these can lead to boiler plate reporting as well as resulting in excessive detail that can obscure relevant information.

Please click to access the full comment letter on the FRC website.

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Recent sustainability reporting developments

08 Apr 2016

A summary of recent developments at the GRI and SASB.

The Global Reporting Initiative (GRI) has announced the formation of a Due Process Oversight Committee (DPOC). The DPOC will ensure that the activities of GRI's Global Sustainability Standards Board (GSSB) are conducted in accordance with its due process, which is crucial for ensuring public and stakeholder confidence that GRI standards are being appropriately developed in the public interest. Please click to access a corresponding press release on the GRI website.

After completing provisional standards for 79 industries in 10 sectors, the US Sustainability Accounting Standards Board (SASB) has launched its next phase of standards development and will enter a period of consultation on the provisional standards and proposed process to codify and maintain them. To this end, the SASB is consulting on three key documents — the SASB Rules of Procedure, the SASB Conceptual Framework, and proposed changes to its Sustainable Industry Classification System —  for a 90-day public comment period. Please click to access a corresponding press release on the SASB website.

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