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News

IFRS - IASB Image

IASB publishes proposed amendments to IAS 12

Jul 17, 2019

On July 17, 2019, the International Accounting Standards Board (IASB) published an exposure draft "Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Proposed amendments to IAS 12)" that aim at clarifying how companies account for deferred tax on leases and decommissioning obligations. Comments are requested by November 14, 2019.

 

Background

The IFRS Interpretations Committee received a submission about IAS 12, Income Taxes and the recognition of deferred tax in relation to leases (when a lessee recognizes an asset and a liability at the lease commencement) and decommissioning obligations (when an entity recognizes a liability and includes the decommissioning costs in the cost of the item of of property, plant and equipment). The submitted fact pattern assumed that lease payments and decommissioning costs were deductible for tax purposes when paid and identified different approaches in practice.

The Committee discussed the submission at its meetings in March 2018 and June 2018 and came to the conclusion that the matter was relevant and widespread, as there are various kinds of contracts and fact patterns affected. Moreover, the question as to whether tax deductions are attributable to a contract, a (single) asset/liability, or rather to cash flows, and as to which consequences this may have for determining temporary differences, is fundamental within IAS 12. Therefore, the Committee recommended that the IASB develop clarifying amendments to IAS 12.

The IASB discussed the issue in October 2018 (general discussion of the issue and agreement with the IFRS Interpretations Committee's recommendation) and January 2019 (transition, retrospective application, and early application) and has now published an exposure draft of proposed clarifying amendments.

 

Suggested changes

The main change proposed in ED/2019/5 Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Proposed amendments to IAS 12) is a proposed exemption from the initial recognition exemption provided in IAS 12.15(b) and IAS 12.24. Accordingly, the initial recognition exemption would not apply to transactions in which both deductible and taxable temporary differences arise on initial recognition that result in the recognition of deferred tax assets and liabilities of the same amount. This is also explained in the newly inserted paragraph IAS 12.22A.

    Comments on the proposed changes are requested by November 14, 2019.

     

    Effective date and transition

    The exposure draft does not contain a proposed effective date as the IASB intends to decide on this after exposure. The proposed amendments would be applied retrospectively in accordance with IAS 8 and early adoption would be permitted.

    For practical and cost reasons, some simplification is provided for the assessment of the probability that a taxable profit will be available against which the deductible temporary difference can be utilized. A similar simplification is proposed for first-time adopters.

     

    Additional information

     

    IFRS - AcSB Image

    AcSB Exposure Draft – Amendments to IFRS 17

    Jul 17, 2019

    On July 17, 2019, the Accounting Standards Board (AcSB) issued its Exposure Draft that corresponds to the IASB’s Exposure Draft on this topic. Comments are requested by September 25, 2019.

    The AcSB would like input from Canadian respondents on the following additional question regarding the proposed amendments:

    The IASB has developed the proposed amendments in accordance with its due process for application around the world. Assuming the Exposure Draft proposals are finalized and approved by the IASB in accordance with its due process, do you think that the proposals are appropriate for application in Canada? If not, please specify which aspects of the proposals, and what circumstances, make the accounting requirements proposed in the Exposure Draft inappropriate.

    Review the press release and Exposure Draft on the AcSB's website.

    FRC (United Kingdom Financial Reporting Council) Image

    FRC consults on enhanced ethical and auditing standards

    Jul 15, 2019

    On July 15, 2019, the Financial Reporting Council (FRC) issued a consultation proposing important changes to the UK’s Ethical and Auditing Standards. The FRC proposes to set more stringent ethical rules for auditors, in response to findings from recent audit enforcement cases and from audit inspections. Comments are request by September 27, 2019.

    In response to feedback from investors, the FRC also proposes to enhance the quality and content of auditor’s reports in order to improve transparency about what is found in the course of an audit.

    Key changes proposed include:

    • A clearer and stronger ‘objective, reasonable and informed third party test’ which requires audit firms to consider whether a proposed action would affect their independence from the perspective of public interest stakeholders rather than another auditor.
    • Enhancing the authority of the Ethics Partner function within audit firms, in order to ensure firm wide focus on ethical matters and the public interest, and to require reporting to those charged with governance where an audit firm does not follow the Ethics Partner’s advice.
    • The list of prohibited non-audit services that auditors of Public Interest Entities (PIEs) can provide to audited bodies has been replaced with a much shorter list of permitted services, all of which are ‘closely related’ to an audit or required by law and/or regulation. No other services can be provided.
    • The requirement for the auditors of all UK listed entities to include in their published auditor’s reports the performance materiality threshold used in the audit.

    Review the press release and consultation paper on the FRC's website.

    IFRS - AcSB Image

    AcSB and OIC hold joint meeting

    Jul 15, 2019

    On July 15, 2019, the Canadian Accounting Standards Board (AcSB) and the Italian standard-setter Organismo Italiano di Contabilità (OIC) held a joint meeting in Rome. The meeting was the second bilateral meeting between the two standard-setters.

    In addition to giving updates on their respective standard-setting activities at the meeting, the two boards exchanged views on the IASB’s current project on proposed amendments to IFRS 17 and on rate-regulated activities. In addition, the AcSB and the OIC discussed implementation activities regarding IFRS 16 Leases.

    Review the press release on the OIC's website.

    US_SEC Image

    Statement on LIBOR transition

    Jul 12, 2019

    On July 12, 2019, the Securities and Exchange Commission (SEC) published a statement by the staffs of the Divisions of Corporation Finance, Investment Management, and Trading and Markets, and the Office of the Chief Accountant on managing the transition from LIBOR.

    The statement covers:

    • Alternative reference rates
    • Managing the transition from LIBOR
    • Division specific guidance

    Review the full statement on the SEC's website.

    PCAOB (US Public Company Accounting Oversight Board) (dark gray) Image

    PCAOB posts CAM resources for investors and audit committees

    Jul 11, 2019

    On July 11, 2019, the Public Company Accounting Oversight Board (PCAOB) released two new resources on critical audit matters (CAMs), one specifically for investors and the other for audit committees.

    These resources advance the PCAOB’s strategic priority of cultivating effective communications with stakeholders, as well as providing timely, relevant, and useful information to them.

    In May, Erin Dwyer joined the PCAOB as a direct point of contact for and liaison to investors, audit committees, and preparers. Erin shares some additional information about her role and these CAMs-related resources in this short video.

    Review the resources on the PCAOB's website:

    Canada Image

    Anti-money laundering rules for cryptocurrency dealers finalized by Canadian government

    Jul 10, 2019

    On July 10, 2019, the Canadian Department of Finance published amendments to regulations made under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act 2019 (PCMLTFA), which will apply to dealers in virtual currency and foreign money services businesses (MSBs) that service Canadian customers beginning June 1, 2020.

    This update includes:

    • Background on the Regulation and definition of virtual currency
    • Dealers in virtual currency that offer services to Canadian clients will generally be considered MSBs under the PCMLTFA and therefore subject to similar customer due diligence, recordkeeping, monitoring and reporting requirements as other reporting entities
    • Regulation of foreign cryptocurrency exchanges as foreign MSBs
    • Reporting and recordkeeping requirements for virtual currency transactions

    Review the regulation on the Canada Gazette's website and a summary on Osler LLP's website.

    FASB (US Financial Accounting Standards Board) (lt blue) Image

    FASB consults on the amortization of goodwill

    Jul 09, 2019

    On July 9, 2019, the Financial Accounting Standards Board (FASB) issued an invitation to comment "Identifiable Intangible Assets and Subsequent Accounting for Goodwill", which notes that the FASB has been considering whether to change the subsequent accounting for goodwill for cost-benefit reasons. US GAAP currently requires a goodwill impairment model.

    The International Accounting Standards Board (IASB) has also been discussing restoring amortization of goodwill. In December 2017, the Board decided tentatively not to reintroduce amortization and to focus on improving the impairment model instead. It confirmed this decision at its June 2019 meeting. However, the paper was the most heavily debated paper during the session as improving the impairment model has turned out to be very difficult, and the final decision was very close. The Board finally decided by a vote of 8 to 6 to confirm its preliminary view not to reintroduce amortization and to retain an impairment-only model.

    The FASB's invitation to comment offers a comprehensive analysis of the subsequent accounting for goodwill as well as a comparison with the IASB approach and the approach of the Japanese standard-setter ASBJ.

    Comments on the the FASB's invitation to comment are due by October 7, 2019.

    Review the press release, a short explanatory video, and the invitation to comment on the FASB's website.

    CAQ Image

    Investor relations: Get up to speed now on critical audit matters

    Jul 09, 2019

    On July 9, 2019, the Center for Audit Quality (CAQ) released a list of frequently asked questions about critical audit matters (CAMs) to help inform investor relations (IR) professionals as they prepare for those conversations

    Starting in the summer of 2019, auditors will be required to communicate CAMs in their auditor’s reports. Investors with questions about CAMs may turn to a company’s IR group for answers.

    Review the publication on the CAQ's website.

    IFRS - IASB Image

    Speech by CFO of BMW: Relevance of financial reporting in today's global environment

    Jul 05, 2019

    On July 5, 2019, the In­ter­na­tional Ac­count­ing Stan­dards Board (IASB) posted a copy of the speech by the CFO of BMW regarding the relevance of financial reporting in today's global environment.

    Dr. Nicolas Peter, Chief Financial Officer of BMW AG, gave the keynote address at a stakeholder event in Munich on June 26, 2019, jointly hosted by the Trustees of the IFRS Foundation and the Deutsche Rechnungslegungs Standards Committee (DRSC, the German accounting standard-setter). In his speech, Dr. Peter outlines the importance of IFRS Standards to BMW AG and the global financial market, and discusses some of the challenges for the future.

    Here is the link to the speech on the IASB web­site.

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