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2 September 2010: Singapore Exchange encourages sustainability reporting
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Singapore Exchange ("SGX") has issued a proposed "Policy Statement on Sustainability Reporting" and accompanying Guide for SGX listed companies to use in formulating their sustainability reporting.
The proposed sustainability reporting is voluntary. SGX is of the view that as more companies become inspired to adopt sustainability reporting, it will be natural to take the next step on guidelines and standards leading to rules.
Following is an extract from the proposed guidelines:
The Exchange encourages the adoption of internationally accepted reporting frameworks, such as the Global Reporting Initiative (GRI) Reporting Framework, in disclosing the issuer’s sustainability performance. The GRI Reporting Framework is universally applicable to all organisations and sets out general principles and indicators that issuers can use to measure and report their economic, environment and social performance.
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The proposals are open for comment until 29 October 2010. Click for:
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2 September 2010: New IFRS publication from Deloitte India
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Deloitte (India) has published Tracking IFRS (PDF 485k). This publication provides a summary of the IASB exposure draft ED/2010/6 Revenue from Contracts with Customers and includes preliminary observations with respect to the possible impacts of the exposure draft on current practice in India. Companies in India will transition to Indian accounting standards converged with IFRSs from 2012 onwards.
Click for:
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1 September 2010: FASB issues proposed ASU update on multiemployer plans
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The FASB has issued a proposed Accounting Standards Update (ASU) to Subtopic
715-80 Compensation—Retirement Plans—Multiemployer Plans.
The ASU proposes additional quantitative and qualitative disclosures
from employers, including:
- A description of the plans in which the employer is involved
- The employer’s contractual commitments to the plans
- The expected impact of participating in the plans on the employer’s future cash flows (including the potential impact of plan withdrawal obligations).
If approved, the proposed ASU would require a public company to provide the enhanced disclosures for fiscal years ending after 15 December 2010. Comment are due on or before 1 November 2010.
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1 September 2010: New editorial corrections to IFRSs
 |
The IASB has posted to its website a new batch of
Editorial Corrections to IFRSs. This batch includes editorial corrections and changes to IFRS for SMEs (issued July 2009), IFRS 9 Financial Instruments (issued November 2009), Improvements to IFRSs (issued May 2010), Bound Volume (Red Book) 2010 and Bound Volume (Blue Book)
2010.
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1 September 2010: Heads Up on July PCAOB Standing Advisory Group meeting
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Deloitte (United States) has published a new Heads Up Newsletter (PDF 120k) discussing the meeting of the PCAOB's Standing Advisory Group (SAG) held on 15 July 2010. The SAG discussed the following: broker-dealer audit considerations, FASB projects and their potential impact on auditors, and the auditor's consideration of subsequent events. In addition, the PCAOB staff summarised comments it has received on its proposed audit committee communications standard and gave an update on its plans to undertake a project on the auditor's reporting model.
In relation to the impacts of the current IASB-FASB convergence process and the move to more 'principles-based' standards, the Heads Up notes the following:
There was considerable debate and discussion regarding the proposed timeline for the completion of current and upcoming FASB projects, with many voicing concerns about the potential for compromising quality in standards if the current timeline were to be strictly followed. In addition, many SAG members expressed concern about (1) resources and the ability to respond within compressed time frames and (2) capacity constraints that could cause diversions from financial reporting needs, potentially affecting the quality of financial reporting.
SAG members also discussed the increase in judgment that will be needed as a result of the FASB's move to more principles-based accounting standards. These same individuals encouraged the PCAOB and the SEC to implement the recommendation of the SEC's Advisory Committee on Improvements to Financial Reporting and develop a judgment framework for both issuers and auditors to help them arrive at well-reasoned judgments.
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1 September 2010: Draft US-GAAP XBRL taxonomy released for comment
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The United States Financial Accounting Foundation (FAF) has announced the availability of the proposed 2011 US-GAAP Financial Reporting Taxonomy for public review and comment. The updated taxonomy contains updates for accounting standards and other recommended improvements to the official taxonomy currently in use by filers in the United States Securities and Exchange Commission's (SEC) EDGAR system.
The deadline for comments is 30 October 2010. Click for:
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31 August 2010: Deloitte newsletter on IFRSs in Canada
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The August edition of Deloitte Canada's IFRS newsletter Countdown has been issued. This edition focuses on:
- Enhancing the comparability of IFRS financial statements
- Canadian Securities Administrators (CSA) review on IFRS transition disclosures
- Summary of Deloitte IFRS publications, webcasts, and other IFRS-related events
- An update on international standard setting activities and IFRS developments
in Canada
Click here to download the August 2010 edition of Countdown (PDF 768k). A French translation is also available (PDF 1,661k). Click here to visit our Canada country page |
31 August 2010: Trustees seek views on criteria for annual improvements process
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The IFRS Foundation, the oversight body of the International Accounting Standards Board (IASB), today published for public comment proposed enhancements to the criteria for the IASB’s annual improvements process.
The annual improvements process provides a mechanism for non-urgent but
necessary amendments to International Financial Reporting Standards (IFRSs)
to be grouped together and issued in one package. Such amendments may clarify
guidance and wording, or make relatively minor amendments to the standards
that address unintended consequences, conflicts or oversights.
The suggested amended criteria for determining whether a matter relating to the clarification or
correction of IFRSs should be addressed using the annual improvements process are outlined below. All criteria must be met.
(a) The proposed amendment has one or both of the following
characteristics:
- (i) clarifying—the proposed amendment would improve IFRSs by:
- clarifying unclear wording in existing IFRSs, or
- providing guidance where an absence of guidance is
causing concern.
- A clarifying amendment maintains consistency with the
existing principles within the applicable IFRSs. It does not
propose a new principle, or a change to an existing principle.
- (ii) correcting—the proposed amendment would improve IFRSs by:
- resolving a conflict between existing requirements of
IFRSs and providing a straightforward rationale for
which existing requirement should be applied, or
- addressing an oversight or relatively minor
unintended consequence of the existing requirements
of IFRSs.
- A correcting amendment does not propose a new principle or
a change to an existing principle, but may create an exception
from an existing principle.
(b) The proposed amendment has a narrow and well-defined purpose,
ie the consequences of the proposed change have been considered
sufficiently and identified.
(c) It is probable that the IASB will reach conclusion on the issue on a
timely basis. Inability to reach a conclusion on a timely basis may
indicate that the cause of the issue is more fundamental than can
be resolved within annual improvements.
(d) If the proposed amendment would amend IFRSs that are the subject
of a current or planned IASB project, there must be a pressing need
to make the amendment sooner than the project would.
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The consultation document of the IFRS Foundation is open for comment until 30 November 2010.
It can be accessed via the
IASB's
website. The corresponding press release is available
Here (PDF 35k).
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31 August 2010: FASB issues two new ASUs
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The FASB has released two new Accounting Standards Updates (ASUs):
The updates result from the July meeting of FASB's Emerging Issues Task Force. More information about the
decisions reached at the EITF meeting can be found in the EITF Snapshot
(PDF 130k).
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31 August 2010: Malaysian Accounting Standards Board defers IFRIC 15 equivalent
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The Malaysian Accounting Standards Board (MASB) has decided to defer the application of IC Interpretation 15 Agreements for the Construction of Real Estate (IC 15) from 1 July 2010 to 1 January 2012. However, entities that wish to apply IC 15 early can do so if they wish.
Beside differing application dates, IC 15 has the same requirements as IFRIC 15 (the effective date of IFRIC 15 is 1 January 2009).
The MASB explains the reason for the deferral as follows:
...in light of the importance of the Real Estate sector to the Malaysian economy, the MASB Board in its deliberations on 23 August 2010 felt it would be prudent to temporarily defer the application of IC 15 to 1 January 2012. This is to allow for deliberations on the implementation of IC 15 to continue and to enable the examination of the proposed standard on Revenue from Contracts with Customers with stakeholders both locally and within the region, using its participation in the Asian-Oceanian Standard-Setters Group (AOSSG).
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Click for press release (link to MASB website).
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30 August 2010: Summary of the June 2010 meeting of
the IFRS Advisory Council
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The IASB has posted to its website
a summary of the June 2010 meeting of
the IFRS Advisory Council. Among other
topics, the Advisory Council discussed the IASB work plan post-June 2011.
Members of the Council suggested that accounting for Islamic transactions and agriculture should be added to the top priorities of the IASB
and that XBRL must be considered together with the disclosure framework. Click
for the
Advisory Council Minutes on the IASB's Website. |
30 August 2010: IIROC proposes to harmonzie regulatory financial reporting standards with IFRS
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A proposal published by the Investment Industry Regulatory Organization of Canada (IIROC) on Friday shows that IFRS is infiltrating more widely than just financial reporting to become the global accounting language.
The proposal is for moving to International Financial Reporting Standards
(IFRSs) for regulatory reporting albeit with some departures in certain areas, which are, however,
"limited to only situations where the effort and cost to converge outweigh the regulatory value or benefit of complying with IFRS".
The proposal is available on the
IIROC's website; comments are due within 60
days of the publication of the notice. More information on financial reporting in Canada is available on our
country page for Canada. |
30 August 2010: Deloitte IFRS newsletter in Japanese
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Deloitte's IFRS Centre of Excellence in Japan has published a Japanese translation of the following IFRS in Focus newsletter: IASB issues Exposure Draft on Lease Accounting (PDF 334k). Here is the English Version (PDF 111k)
We have put permanent links to all Japanese translations of the IFRS in Focus newsletters on our
Japan Page. The Japan Center of Excellence IFRS web pages are Here (in Japanese).
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29 August 2010: Deadline reminder – EDs on defined benefit plans and uncertainty analysis disclosure
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We remind you that comments on the Exposure Drafts
Defined Benefit Plans
and Fair Value Option for Financial Liabilities
are due on 6 September 2010 and 7 September 2010, respectively. The ED on
defined benefit plans was issued on 29 April 2010 and would amend the accounting
for defined benefit plans through which some employers provide long-term
employee benefits, such as pensions and post-employment medical care. The ED on
uncertainty analysis disclosure was issued on 29 June 2010 and would require the
measurement uncertainty analysis disclosure to reflect the interdependencies
between unobservable inputs used to measure fair value in Level 3 of the
three-level fair value hierarchy. |
27 August 2010: New Accounting Alert from Deloitte New Zealand
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Deloitte (New Zealand) has published a new Accounting Alert (PDF 237k) discussing the following topics:
- IASB developments in lease accounting, revenue recognition and insurance contracts
- Possible relief for entities affected by the NZ Budget 2010 removal of tax depreciation on buildings (see our earlier story)
- Other topics, including proposals to harmonise Australian and New Zealand equivalents of IFRS (see our earlier story) and the NZ Securities Commission review of corporate governance disclosures by selected issuers.
Click to download the Accounting Alert (PDF 237k). Past editions of the New Zealand Accounting Alerts are available here.
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26 August 2010: IASB proposes amendments to IFRS 1
 | The International Accounting Standards Board (IASB) today published for public comment proposed amendments to
IFRS 1 First-time Adoption of International Financial Reporting Standards.
The proposal would amend IFRS 1 by replacing references to a fixed transition date of ‘1 January 2004’ with ‘the date of transition to IFRSs’. As a result, entities adopting IFRSs for the first time would not have to restate derecognition transactions that occurred before the date of transition to IFRSs. In addition, first-time adopters would also not have to recalculate ‘day 1’ differences on initial recognition of financial instruments, where the transaction occurred before the date of transition to IFRSs.
The Basis for Conclusions states:
IFRS 1 First-time Adoption of International Financial Reporting Standards
requires a first-time adopter to restate past derecognition transactions
that occurred after 1 January 2004. This requirement was included in
IFRS 1 as a result of the revision to IAS 39 Financial Instruments: Recognition
and Measurement in 2003, to place entities then adopting IFRSs for the first
time in the same position as existing IFRS users at that time. As time
passes, the fixed transition date of 1 January 2004 becomes more remote
and increasingly less relevant to the financial reports of additional
jurisdictions that will adopt IFRSs. |
The exposure draft
Removal of Fixed Dates for First-time Adopters is open for comment until 27 October 2010.
It can be accessed via the
IASB's website. The IASB's press release is available
here (PDF
98k). Our related project page offers a summary of the
discussions leading up to the publishing of the exposure draft.
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26 August 2010: IFRS Interpretations Committee publishes proposed guidance on surface mining
| The IFRS Interpretations Committee,
the interpretative body of the IASB, has today published for public comment proposed guidance on the accounting for
stripping costs in the production phase of a surface mine.
The draft Interpretation considers
the following questions:
- (a) Is the definition of an asset met?
- (b) When should the stripping campaign component be recognised?
- (c) How should the stripping campaign component be measured initially?
- (d) How should the stripping campaign component be measured subsequently?
The IFRS Interpretations Committee
has reached the conclusion that costs associated with a ‘stripping campaign’ should be accounted for as an additional component of an existing asset, and that this component should be written down over the reserves that directly benefit from the campaign.
DI/2010/1 Stripping Costs in the Production Phase of a Surface Mine is open for comment until 30 November 2010.
It can be accessed via the
IASB's website. The IASB's press release is available
here (PDF 35k). Our related
project page offers a summary of the
discussions leading up to the publishing of the draft Interpretation.
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25 August 2010: IFRS Foundation Education Initiative publishes briefing for chief executives
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The IFRS Foundation Education Initiative has published the 2010 edition of International Financial Reporting
Standards – Briefing for Chief Executives, Audit Committees and Boards of Directors to the eIFRS site. These briefing notes
provide summaries of all IFRSs issued at 1 July 2010 at a high level and in non-technical language. It's specially
prepared for chief executives, members of audit committees, company directors and others who want a broad overview of
IFRSs and of the business implications of implementing them. The electronic PDF is available in the eIFRS Online
Subscriber Area of the IASB's website for access by both Comprehensive and eIFRS subscribers.
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25 August 2010: FASB issues two new proposed ASUs resulting from the July EITF meeting
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The FASB has released two new proposed Accounting Standards Updates (ASUs):
The proposals result from the July meeting of FASB's Emerging Issues Task Force. The comment period for both proposals closed on 8 October 2010. Both proposed ASUs note there is no equivalent guidance under IFRS on the topics with which they deal. More information about the proposals can be found in EITF Snapshot (PDF 130k), which summarises the 29 July 2010 EITF meeting.
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25 August 2010: FASB expands from 5 to 7 members, Chairman Herz retires
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The Board of Trustees of the United States Financial Accounting Foundation (FAF) has announced that the Financial Accounting Standards Board (FASB) will grow from five to seven members. In addition, FASB Chairman Robert Herz has decided to retire from the FASB after more than eight years leading the standard-setting board. FASB member Leslie Seidman has been appointed Acting Chairman, effective October 1, 2010.
The FASB previously operated with seven board members from its inception in 1973 until 2008. The transition to a seven-member board will occur as soon as the process to recruit and evaluate candidates is complete, which the FAF expects to occur in early 2011.
Chairman Jack Brennan, FAF Chairman said:
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"Returning the Board to the seven-member structure will enhance the FASB’s investment in the convergence agenda with the International Accounting Standards Board (IASB), while addressing the unprecedented challenges facing the American capital markets in the months and years ahead"
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Click here to go to the FAF press release (link to the FAF website).
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24 August 2010: Notes from special August IASB meeting
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The IASB met in London on 24 August 2010 for a second special meeting for the month. The topics discussed were as follows (click through to detailed Deloitte observer notes for that topic):
Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers for the entire meeting. The next IASB meeting is currently scheduled for 13-17 September 2010.
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24 August 2010: Newsletter on leases proposals
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Deloitte's IFRS Global Office has published an
IFRS in Focus Newsletter – IASB issues
Exposure Draft on Lease Accounting (PDF 111k). On 17 August 2010, the International Accounting Standards Board (IASB) and
US Financial Accounting Standards Board (FASB) published a joint exposure draft ED 2010/9 Leases. The ED would
eliminate the distinction between operating leases and finance leases and would introduce new accounting models for
lessees and lessors. Lessees would no longer be permitted to treat leases as “off-balance sheet” financings but instead
would be required to recognise an asset and liability for all leases within the scope of the proposals.
Click for:
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24 August 2010: Insurance accounting newsletter in German
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Deloitte (United Kingdom) is publishing a series of Insurance Accounting Newsletters. We post these regularly on our
IAS Plus Insurance Project Page. Deloitte (Germany) is translating some of these newsletters into German. The latest is:
The newsletter
provides a detailed analysis of the main provisions in the
Exposure Draft issued on 30 July by the IASB
to revise substantially IFRS 4 Insurance Contracts.
All of the earlier insurance newsletters available in German are on our
Germany Country Page. |
24 August 2010: New issue of the IASB's Investor Perspectives
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In April 2010, the Trustees of the IFRS Foundation and the IASB launched a
programme to enhance investors’
participation in the development of International Financial Reporting Standards (IFRSs).
One of the enhancements is a newsletter for investors. Board members Stephen Cooper, Patrick Finnegan and Patricia McConnell publish timely updates on financial reporting matters.
A new issue of the Investor Perspectives is now available:
All Investor Perspectives are archived on the
IASB's website.
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24 August 2010: New IAESB education handbook
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The International Accounting Education Standards Board (IAESB) has released the 2010 edition of its Handbook of International Education Pronouncements. The 2010 handbook contains the IAESB's suite of eight International Education Standards (IESs), including the Framework for International Education Standards for Professional Accountants (the Framework), as well as three International Education Practice Statements.
The handbook can be downloaded free of charge in PDF format from IFAC's Publications and Resources site. Printed copies can also be ordered. Printed copies can also be ordered. The IFAC press release announcing the publication of the handbook is available here (link to IFAC website). |
24 August 2010: Japanese translation of IFRIC Review
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Deloitte's IFRS Centre of Excellence in Japan has published a Japanese translation (PDF 391k) of the July 2010 edition of our IFRIC Review newsletter, discussing the IFRS Interpretations Committee meeting held on 8-9 July 2010. Here is the English Version (PDF 84k).
We have put permanent links to all Japanese translations of the IFRIC Review newsletters on our Japan country page. The Japan Center of Excellence IFRS web pages are Here (in Japanese).
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23 August 2010: Two publications available in Spanish
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We have posted the following Spanish language publications from Deloitte (Colombia).
You will find all of our resources in Spanish
Here.
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23 August 2010: New law promotes adoption of IFRS in Russia
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The State Duma of the Russian Federation has passed a Law On Consolidated Financial
Statements which had remained
untouched since almost the end of 2004. On 17 December 2004 the State Duma
actually approved the law in the second reading but no attempts to hold the third and final reading of the law
were made. The final reading of the draft law finally took place on 7 July 2010, and Russia’s President Dmitry Medvedev recently signed it into law.
The law applies to banks, insurance
companies, and all companies that have securities accepted to trades at
domestic exchanges. It requires these entities to produce, submit to regulators and
publish financial statements in accordance with the International
Financial Reporting Standards (IFRS). The Law states that IFRS statements are to be produced in
addition to statements under the Russian Accounting Standards (RAS) and not
in their stead.
Requirements formulated in the new Law will come into effect following
a formal recognition from the Government and Central bank. The Law
does not present a mechanism or a timeline for such recognition, but it is expected to take place some time between 2012 and 2015.
More information about the financial reporting framework in Russia is available on our
IAS Plus country page for Russia. |
22 August 2010: Agenda for 2-3 September 2010 Interpretations Committee meeting
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The IFRS Interpretations Committee will meet at the IASB's offices in London on Thursday and Friday
2 and 3 September 2010 (morning only on 3 September). The meeting is open to the public and will be webcast. The tentative agenda is shown below.
Agenda for the Interpretations Committee Meeting
Thursday and Friday,
2 and 3 September 2010 |
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Thursday 2 September 2010 (10:00h-18:00h)
- Introduction/ Administrative Session
- IFRS 2 Share-based Payment – Vesting and non-vesting conditions
- IFRS 2 Share-based Payment – Accounting for share-based payment awards upon an entity’s termination of an employee
- IAS 27 Consolidated and Separate Financial Statements – Put options written over non-controlling interests
- Review of Tentative Agenda Decisions published in July IFRIC Update
- IFRS 1 First-time Adoption of International Financial Reporting Standards – Repeat application
- IAS 12 Income Taxes – Recognising deferred tax assets for unrealised losses on AFS debt securities
- IAS 21 The Effects of Changes in Foreign Exchange Rates – Repayment of investment/CTA
- New Items for Initial Consideration
- IAS 1 Presentation of Financial Statements – Encouraged v required disclosures (continued on Friday morning as needed)
- IAS 1 Presentation of Financial Statements – Comparatives in financial statements
- IAS 36 Impairment of Assets – Accounting for impairment testing of goodwill when non-controlling interests are recognised
Friday 3 September (09:00-11:45h)
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20 August 2010: FASB webcast on revenue recognition project
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On Thursday 26 August 2010, the FASB will hold a webcast to discuss the potential effects of the Exposure
Draft Revenue from Contracts with Customers on current practices relating to accounting for real estate transactions.
The Exposure Draft is open for public comment until 22 October 2010. The live webcast is offered free of charge.
Viewers will have the opportunity to email questions to panelists during the event.
- Topic: Revenue Recognition Project: Potential Effects on the Real Estate Contracts
- Date and time: 26 August 2010, 2:00pm Eastern Daylight Time
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More information on the webcast and registration:
Click Here
- More information about the revenue project on IAS Plus:
Click Here
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20 August 2010: IASB staff draft of IFRS on Fair Value Measurement
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The IASB has posted to its website a staff draft of a forthcoming IFRS on fair value measurement, reflecting the tentative decisions made to date by the IASB and the FASB.
The IASB's initial exposure draft on fair value measurement was issued in May 2009 and has been followed up a number of requests for information and feedback, including an additional limited scope exposure draft issued in June 2010.
The IASB is not requesting comments on the staff draft, but notes the FASB issued a nearly identical proposed Accounting Standards Update (ASU) Amendments for Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. Accordingly, constituents may wish to comment on the proposals by submitting a comment letter to the FASB prior to the end of the comment period for the proposed ASU (7 September 2010).
The IASB and FASB expect to jointly consider comments received in developing a joint standard, which is expected to be issued early in 2011. Click for:
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20 August 2010: FASB posts staff draft of ASU on insurance contract costs
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The FASB has posted a staff draft of the Final Accounting Standards Update (ASU) Insurance (Topic 944): Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts (a consensus of the FASB Emerging Issues Task Force).
The draft ASU results from the July EITF meeting, where the EITF reached a final consensus on which costs incurred during the acquisition of new or renewal insurance contracts are eligible to be deferred and subsequently amortised ('deferred acquisition costs' (DAC)). In relation to a comparison with IFRS, the draft ASU notes:
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The guidance on deferred acquisition costs under IFRS is limited and is subject to significant judgment. IFRS neither prohibits nor requires the deferral of acquisition costs, nor does it prescribe which acquisition costs are deferrable, the period and method of their amortization, or whether an insurer should present deferred acquisition costs as an asset or as a reduction in insurance liabilities.
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20 August 2010: Upcoming Deloitte webcast on lease accounting exposure draft
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On Friday 10 September 2010, Deloitte (United States) will present a live webcast on the exposure draft Leases.
The webcast will discuss:
- Key provisions and concepts for lessor and lessee accounting
- Potential implications for organisations' operations and accounting systems
- Timelines for the comment letter process, roundtable discussions, final draft, and adoption.
There is no charge to attend the web presentation, but you need to register to participate. Details:
- Topic: FASB's Exposure Draft on Lease Accounting: A Closer Look at the Proposed Guidance
- Date and time: 10 September, 2:00pm EDT (US)
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More information on the webcast and registration:
Click Here
- More information about the leases project on IAS Plus:
Click Here
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19 August 2010: FASB delays comment deadline for proposed ASU on contingencies
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The FASB has extended the comment deadline on its proposed Accounting Standards Update Contingencies (Topic 450):
Disclosure of Certain Loss Contingencies to 20 September 2010. The original comment deadline was 20 August 2010,
but was extended because of feedback from respondents noting the need for more time to provide adequate comments. Click
here to
read the news release (link to FASB website).
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19 August 2010: FASB issues proposed ASU on defined contribution pension plans
19 August 2010: Annual report of the UK FRRP
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The Financial Reporting Review Panel (FRRP) of the UK Financial
Reporting Council (FRC) has published its annual report 2010. The FRRP is
responsible for ensuring that the annual
accounts of public companies and large private
companies comply with the requirements of the Companies Act
and applicable accounting standards. An excerpt from the FRRP findings: |
Conclusion
The Panel found continuing improvement in the general quality of IFRS financial
reporting. It was particularly pleased to note improvements in the description of
significant accounting policies and the disclosure of judgements made by Boards in
applying those policies. However, in two areas, capital management and share‐based
payment disclosures, reporting was sometimes poor in terms of content, extent and
usefulness. The Panel believes that, as the economy stabilises, these areas will assume
greater significance in corporate reports. The FRC will, therefore, conduct a targeted
review of these matters. The results of the reviews are to be published in the autumn.. |
Click for:
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19 August 2010: Update on New Zealand deferred tax issue
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We posted an earlier story regarding issues arising in New Zealand related to deferred tax accounting for
certain buildings for which tax depreciation had been removed by a tax law change. The effect of the tax law change is resulting in many New Zealand companies
recognising a deferred tax liability in respect of existing buildings, significantly impacting profits. These issues are related to the IASB's current
consideration of an exemption to the principles of IAS 12 Income Taxes for certain revalued assets.
The New Zealand Financial Reporting Standards Board (FRSB) recently held a meeting where the issue was further discussed. The FRSB considered, but ultimately rejected, a proposal to modify the New Zealand equivalent of IAS 12 to permit an exemption from the recognition of deferred taxes on affected buildings. This decision was communicated to the New Zealand Accounting Standards Review Board (ASRB) and an updated Communiqué was issued on 18 August 2010 confirming that deferred tax should be recognised in many instances.
In respect of a possible departure from IFRSs, the Communiqué states:
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...this would mean that NZ IFRS is no longer aligned with IFRS, and so the financial statements for profit-oriented entities would not comply with both local and international accounting standards - thereby undermining the fundamental objective of New Zealand's adoption of IFRS.
Therefore, while the Boards acknowledge the serious concerns that have been raised about the accounting impact of the recent tax changes for entities to comply with NZ IAS 12, the suggestion to make changes to (or provide exemptions from) the standard is not a viable solution, both because of time constraints and the wider implications for the New Zealand financial reporting framework.
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18 August 2010: IASB issues editorial corrections to leases ED
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The International Accounting Standards Board (IASB) has released a number of editorial corrections to ED/2010/9 Leases, published yesterday. ED/2010/9 is open for comment until 15 December 2010. Click for:
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18 August 2010: Deloitte global press release on IASB and FASB proposals to overhaul lease accounting
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Deloitte has published a global press release on the IASB and FASB proposals to overhaul lease accounting. The IASB and FASB proposals would creates a new accounting model for both lessees and lessors and eliminates the concept of operating leases.
Excerpts from the press release:
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"As leasing is such a common transaction, this proposal would, no doubt, affect companies around the globe and across all industries," said Joel Osnoss, Global IFRS Leader, Clients & Markets, Deloitte Touche Tohmatsu Limited.
"Many of the proposed requirements could prove time-consuming to adopt, which makes a well-thought-out work plan critical to a smooth transition to the new accounting rules. Companies that use leasing should start thinking today about how this proposal could affect their financial statements, and should consider the need to make changes to lease structuring, performance metrics, debt covenants, and systems. Education of key stakeholders will also be necessary."
The IASB has stated that the comment period will end on 15 December 2010, with the final standard due for publication in June 2011. The effective date of the new leasing standard is still uncertain. The proposed transition requirements would not grandfather any existing leases. Therefore, lessors and lessees that enter into longer-term leases will need to consider the potential affect of the proposed rules on existing leases.
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18 August 2010: Heads Up on leases proposals
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Deloitte (United States) has published a new Heads Up newsletter (PDF 222k) discussing the exposure draft (ED) Leases, issued by the FASB and IASB. The ED, released by the FASB as a proposed Accounting Standards Update (ASU), creates a new accounting model for both lessees and lessors and eliminates the concept of operating leases. The proposed ASU, if finalised, would converge the FASB's and IASB's accounting for lease contracts in most significant areas.
The table below, reproduced from the newsletter, highlights the most significant provisions of the proposed lease accounting model:
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Lessees
- Lessees will recognize a right-of-use asset and a liability for their obligation to make lease payments for all leases. "Off-balance-sheet" leases and the concept of "lease classification" in the current accounting model will no longer exist for lessees.
- For leases previously classified as operating leases, rent expense will be replaced with amortization expense and interest expense. Amortization of the right-of-use asset will generally be on a straight-line basis; however, interest expense will be front-end loaded (i.e., like interest on an amortizing mortgage).
- Under an expected-outcome approach, the lessee recognizes contingent rentals and residual value guarantees as part of the lease liability. The lessee bases its inclusion of rentals for renewal periods in the lease liability on the longest possible term that is more likely than not to occur.
- Unlike the current lease accounting model, the new model requires an assessment of whether there are new facts and circumstances that would significantly change the lessee's estimate of contingent rents and renewal periods as of each reporting period.
- The identification of nonlease components (e.g., maintenance costs in certain arrangements) will become more important under the new model.
- Total lease-related expense will be front-end loaded, unlike current operating lease treatment. Rising asset prices, or a lessee entering into an increased number of new leases, could result in net income remaining lower than the amount that would be achieved under current operating lease accounting – even as old leases expire.
- Because rental expense is not recorded under the new model, EBITDA will be higher than it is under current operating lease accounting.
- Lease payments will be treated as financing cash outflows in the statement of cash flows. Under current U.S. GAAP, operating lease rent payments are treated as an operating cash flow.
Lessors
- The proposed ASU includes two accounting models for lessors. A lessor that retains exposure to significant risks or benefits associated with the underlying asset would apply the performance obligation approach; otherwise, the lessor would apply the derecognition approach.
- Under the performance obligation approach, the leased asset remains on the lessor's books. The lessor records (1) a receivable for the expected lease payments and (2) a corresponding performance obligation liability (essentially, deferred revenue).
- Under the derecognition approach, a portion of the leased asset is removed from the lessor's books. The lessor records (1) a receivable (and income) for the expected lease payments and (2) a residual asset representing the right to the underlying asset at the end of the lease term. Expense would be recognized for the portion of the leased asset that is removed from the lessor's books. Income and expense may be presented net depending on the lessor's business model.
- The FASB has a separate project to consider whether owners of investment properties (e.g., certain lessors of real estate) should be required to record those properties at fair value.
Business Consequences
- An increase in assets and liabilities could result in lower asset turnover ratios, lower return on capital, and an increase in debt-to-equity ratios. This could affect borrowing capacity or compliance with loan covenants.
- The elimination of "off-balance-sheet" financing eliminates one of the advantages of leasing for lessees. This could result in a push toward shorter term leases or buying an asset rather than leasing it. Lessees would need to balance this consideration with potentially higher rents for shorter-term leases as well as reduced amortization periods for leasehold improvements (which would generally result from a shorter lease term). In addition, the other benefits of leasing – flexibility to change locations or equipment, reduced property management responsibilities, potential for financing 100 percent of the asset cost, improved cash flows, etc. – remain unchanged.
- Accounting systems will most likely need to be enhanced or updated to address the new standard – lease contract management systems will need to be more closely integrated with lease accounting systems.
- The new model will result in additional temporary differences for income tax accounting purposes. In addition, state and local taxes will be affected when the computation (or impact) of taxes is based on U.S. GAAP amounts.
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18 August 2010: Deloitte (UK) press release on IASB leases proposals
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Further to our earlier story, Deloitte (United Kingdom) has published a press release on the IASB's proposals in ED/2010/9 Leases.
Excerpts from the press release:
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Veronica Poole, head of the Deloitte Global IFRS Leadership Team, said:
"The proposals mean that all leases would be brought onto the balance sheet as liabilities, along with their matching assets. It means that IASB Chairman, Sir David Tweedie, may yet achieve his oft-repeated ambition of flying on an aircraft which actually appears on that airline's balance sheet"
Mark Beddy, UK audit partner in the Deloitte real estate practice, commented:
"In the long-term, we believe that the accounting changes in the treatment of property leases will transform the way many companies approach property strategies. Property in general will need to become a much more strategic business issue. Forced to view property as having a balance sheet liability, companies will have to give much more consideration to how to manage and reduce it."
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17 August 2010: Spanish Heads Up on financial statement presentation
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We have posted the following Spanish language Heads Up publication from Deloitte (Colombia).
You will find all of our resources in Spanish
Here.
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17 August 2010: IASB and FASB publish proposals to improve the financial reporting of leases
| The International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) today published for public comment joint proposals to improve the financial reporting of lease contracts. The proposals are one of the main projects included in the boards’ Memorandum of Understanding. The proposals, if adopted, will greatly improve the financial reporting information available to investors about the financial effects of lease contracts.
The accounting under existing requirements depends on the classification of a lease. Classification as an operating lease results in the lessee not recording any assets or liabilities in the statement of financial position (balance sheet) under either International Financial Reporting Standards or US standards (generally accepted accounting principles). This results in many investors having to adjust the financial statements (using disclosures and other available information) to estimate the effects of lessees’ operating leases for the purpose of investment analysis.
The proposals would result in a consistent approach to lease accounting for both lessees and lessors–a ‘right-of-use’ approach. Among other changes, this approach would result in the liability for payments arising under the lease contract and the right to use the underlying asset being included in the lessee’s statement of financial position, thus providing more complete and useful information to investors and other users of financial statements.
ED/2010/9 is open for comment until 15 December 2010. Click for:
As part of their additional outreach, the boards are seeking entities that would be willing to take part, on a confidential basis, in field work to discuss and test the provisions of their proposals for lease accounting. The purpose of the field work is to assess the operationality and the costs and benefits of the proposed new standard.
More Information is available in the
IASB press release.
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17 August 2010: Agenda for the special 24 August IASB meeting
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The IASB will hold an additional Board meeting on 24 August 2010 from 11:00 to
15:00 to discuss the Financial Instruments project and Income Taxes. The meeting
will be open to public observation and will be webcast. Presented below is the
agenda for the meeting.
IASB Board Meeting Agenda
24 August 2010, London |
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Tuesday 24 August 2010
IASB Meeting (11:00-15:00)
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17 August 2010: Japanese and United States standard-setters meet to discuss global convergence
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Representatives of the Accounting Standards Board of Japan (ASBJ) and United States Financial Accounting Standards Board (FASB) met on 12-13 August 2010 to discuss global convergence of accounting standards. The meeting, held in Tokyo, discussed recent developments in both boards' convergence projects with the IASB, as well as the IASB's projects on financial instruments, revenue recognition and leases.
Ikuo Nishikawa, Chairman of the ASBJ, commented:
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We commend the FASB’s continuing work on convergence with the IASB towards a single set of high-quality, global accounting standards. We would also like to support the FASB’s efforts to reconcile differences with the IASB to develop converged guidance on the accounting for financial instruments.
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Click for full press release (PDF 45k).
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Click for Earlier August News.
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