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June 2015

ASAF membership update

Jun 24, 2015

On June 24, 2015, the IFRS Foundation Trustees announced the new composition of the Accounting Standards Advisory Forum (ASAF) for the next three years. The ASAF organization is chaired by the IASB and includes 12 other members from various locations around the world.

The Accounting Standards Board will continue to be part of the ASAF.

For more information, see the press release on the IASB’s website.

Chief Accountant of the SEC believes former SEC Chairman's call for burying IFRS was "premature"

Jun 08, 2015

On June 5, 2015, at a financial reporting conference in California, Jim Schnurr, Chief Accountant of the Securities and Exchange Commission (SEC) confirmed that the SEC does not intend to bury the objective of a single set of high-quality, globally accepted accounting standards.

Mr. Schnurr stated that there is continued support for a single set of high-quality, globally accepted accounting standards.

In my opinion, in the near term, FASB and IASB should continue to focus on converging the standards. The boards should renew their commitment to cooperate and develop standards that eliminate differences between IFRS and U.S. GAAP whenever it meets the needs of its constituents and improves the quality of financial reporting. I recognize the boards will not always be able to eliminate differences during the standard-setting process, primarily because they serve different constituents that have different needs. However, when differences in standards arise, the boards should monitor the implementation of those standards with the objective of learning from the implementation and re-engaging with each other with the goal of converging to the standard with the highest quality financial reporting outcome.

Please click to access the full text of Mr Schnurr's speech on the SEC website. All conference materials are available on the conference Web site.

European Commission concludes evaluation of the use of IFRS in EU

Jun 18, 2015

On June 18, 2015, the European Commission published a report on the evaluation of its Regulation on the application of International Financial Reporting Standards (IFRS). The evaluation aimed at establishing whether the initial objectives are still relevant and at identifying areas for improvement in the functioning of theRegulation, if needed.

The key findings of the evaluation launched in August 2014 show that IFRSs were successful in creating a common accounting language for capital markets. Preparers claimed mostly positive experiences regarding their application of IFRSs and stated that in most cases benefits outweighed costs. Investors also largely supported IFRS for improving the transparency and comparability of financial statements. 

Please click for the following information on the European Commission's website:

European Commission consults on corporate tax transparency

Jun 17, 2015

On June 17, 2015, the European Commission launched a public consultation on corporate tax transparency in the EU. This consultation aims to find out whether requiring companies to disclose more information about the taxes they pay could help tackle tax avoidance and aggressive tax practices in the EU.

This consultation aims to find out whether requiring companies to disclose more information about the taxes they pay could help tackle tax avoidance and aggressive tax practices in the EU. For instance, companies could be required to disclose the taxes they pay, in every country where they operate.

Please click to access the consultation page with additional information on the European Commission's website.

FEE supports IFRS 9 deferral for insurance companies

Jun 22, 2015

On June 22, 2015, the Federation of European Accountants (FEE) responded to the European Financial Reporting Advisory Group (EFRAG) draft endorsement advice on IFRS 9 "Financial Instruments".

The principal comment in the comment letter FEE submitted, however, relates to the potential deferral of IFRS 9 for insurance business activities while the International Accounting Standards Board (IASB) finalizes its forthcoming insurance standard. The letter states:

We agree with EFRAG that the European Commission should ask the IASB to defer the effective date of application of IFRS 9 for institutions with significant insurance activities, or alternatively identify and assess any other workable solutions to address accounting mismatches that may obscure performance reporting by those institutions. FEE stresses the importance of having an international solution for this matter. A Europe-only deferral would de facto be a carve-out from full IFRS, which in our view should generally be avoided as they do not come without consequences.

FEE also states that any deferral of IFRS 9 should be limited in duration and optional.

Please click to access the full comment letter on the FEE Web site.

Hans Hoogervorst speaks about historical cost and fair value

Jun 29, 2015

On June 29, 2015, at the IFRS Foundation's IFRS conference held in Paris, the International Accounting Standards Board Chairman Hans Hoogervorst spoke about the question of how assets and liabilities should be measured, a topic he called "one of the most difficult topics in accounting".

Mr. Hoogervorst referred to the recently published Exposure Draft on the new Conceptual Framework which includes a chapter on measurement offering a description of different measurement bases, the information that they provide and their advantages and disadvantages. In this chapter, the IASB has divided the measurement techniques into two categories: historical cost and current value.

Mr. Hoogervorst pointed out that "the dichotomy between historical cost and fair value is not as stark as one would expect". He listed four aspects where the assumed stability of historical cost and the often cited vulnerability of current value are not necessarily that far apart. He cited (i) the fact that, for many transactions, historical cost starts and ends with fair value (or values that come very close to it); (ii) that, despite its name, historical cost gets updated too (depreciation/amortization); (iii) that the alleged stability resulting from historical cost accounting can be extremely misleading; and (iv) that the stability of historical cost can be interrupted by steep cliff effects.

Mr. Hoogervorst also stated that it would not do to abandon historical costs completely in favor of fair value. Instead, he noted in "very broad brushstrokes indeed" the following general conclusions as to when the different categories of measurement bases should be applied: (i) if the nature of business activities is to use assets in combination with other assets to produce goods or services, this generally points in the direction of historical cost; (ii) if the nature of business activities is to trade assets or liabilities in active markets, this would generally point in the direction of current value measurement; (iii) if the characteristics of an asset of a liability are such that they are highly sensitive to market factors or to other risks in the item, this would generally point in the direction of current value measurement.

He also noted of course that more factors than these will need to be taken into consideration, such as the cost of performing the measurement, the degree of measurement uncertainty, faithful presentation and the avoidance of accounting mismatches. He encouraged his audience to comment on the proposals in the IASB's Exposure Draft.

The full transcript of Chairman Hoogervorst’s speech is available on the IASB’s website.

IASB completes post-implementation review of IFRS 3

Jun 17, 2015

On June 17, 2015, the International Accounting Standards Board (IASB) announced that it has completed its post-implementation review (PIR) of IFRS 3 "Business Combinations". The review concluded that there is general support for IFRS 3 and its related Standards; however, there are several aspects where additional research is needed.

The PIR report assessed in­for­ma­tion gathered from academic lit­er­a­ture as well as feedback from investors and other financial statement users and preparers, auditors, and reg­u­la­tors. It showed general support for the “usefulness of reported goodwill, other intangible assets and goodwill impairment.” However, views were mixed on certain elements of the standard.

On the basis of the PIR report, the IASB added to its agenda two research projects that will focus on:

  • Effectiveness and complexity of testing goodwill for impairment.
  • Subsequent accounting for goodwill.
  • Challenges related to applying the definition of a business.
  • Identification and fair value measurement of intangible assets such as customer relationships and brand names.

For more information, see the press release and the PIR report on the IASB’s website.

IASB issues “Investor Perspectives” on prudence

Jun 11, 2015

On June 11, 2015, the International Accounting Standards Board (IASB) released a new edition in its “Investor Perspectives” series. In this edition, IASB member Steve Cooper discusses the concept of prudence.

On May 28, 2015, the IASB issued an exposure draft on the conceptual framework, which reintroduced an explicit reference to prudence and states that the exercise of prudence supports neutrality.

For more in­for­ma­tion, see the June 2015 edition of the Investor Per­spec­tives newslet­ter on the IASB’s website.

IASB issues work plan update

Jun 30, 2015

On June 30, 2015, following its June meeting, the IASB updated its work plan. The revised plan announces that the exposure draft (ED) on elimination of gains and losses arising from "downstream" transactions and the draft IFRIC interpretation on accounting for uncertainties in income taxes will now be issued in the third quarter of 2015 (delayed from the second quarter of 2015), and extends redeliberations for several projects to the third quarter of 2015.

The revised IASB work plan is available on the IASB's Web site.

IASB proposes amendments to IAS 19 and IFRIC 14 on pension accounting

Jun 18, 2015

On June 18, 2015, the International Accounting Standards Board (IASB) published an Exposure Draft (ED) of proposed amendments to IAS 19 "Employee Benefits" and IFRIC 14 "IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction". The amendments address two issues submitted to the IFRS Interpretations Committee. Comments are requested by October 19, 2015.

Requests were submitted to the IFRS Interpretations Committee to clarify:

  • the calculation of current service cost and net interest when an entity remeasures the net defined benefit liability (asset) when a plan amendment, curtailment or settlement occurs; and
  • whether a trustee's power to augment benefits or to wind up a plan affects the employer's unconditional right to a refund and thus, in accordance with IFRIC 14, restricts recognition of an asset.

As both issues relate to IAS 19 and as the IASB believes that a single package of amendments carried out at the same time would reduce the administrative burden on those responding to both issues, the IASB decided to deal with the two issues in one narrow-scope Exposure Draft.

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IFRS Foundation publishes proposal related to IFRS Taxonomy 2015

Jun 17, 2015

On June 17, 2015, the IFRS Foundation published “Proposed Update 1 to the IFRS Taxonomy” for public comment.

The taxonomy updates contain additional taxonomy concepts that reflect new IFRSs and improvements to IFRSs, technical updates, and corrections.

Comments on the proposed update are due by August 17, 2015.

For more information, see the press release on the IASB’s Web site.

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Correction list for hyphenation

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