Part I - IFRS

Conference addresses complexities of the new leasing standard

Jul 06, 2017

On July 6 2017, Accounting Today released an article that highlights a recent Financial Executives International conference where Deloitte & Touche LLP partners, Jeanne McGovern and Derek Bradfield, discussed the complexities of the new leasing standard.

In the article, Mr. McGovern says that “the FASB and IASB standards that came out in early 2016 fundamentally brought all leases on the balance sheet. While those standards are similar in that regard and were originally a convergence project for the IASB and FASB, they definitely diverged quite a bit and created a number of differences which create complications for global companies that report in both U.S. GAAP and IFRS.”

Also, audit committees are asking more and more questions and that they’ve learned their lesson from revenue: It’s better to start asking questions sooner rather than later. So, experts are warning companies not to procrastinate anymore. They need to be gathering a lot of information over the next 18 months to be ready for 2019.

Review the article on Accounting Today's website.

FinREC unveils 4 more revenue recognition working drafts

Jul 03, 2017

On July 3, 2017, the AICPA Financial Reporting Executive Committee (FinREC) issued another batch of working drafts of accounting issues related to the implementation of FASB’s new revenue recognition standard.

The AICPA is collecting feedback on the working drafts as part of its ongoing work to develop a new revenue recognition guide.

The four working drafts released are:

  • Airlines: Issue No. 2-1, Regional Contracts.
  • Gaming: Issue No. 6-5, The Timing for Recognition of the WAP Operator’s Liability for Base Progressive and Incremental Progressive Jackpot Amounts.
  • Health Care: Issue No. 8-8, Consideration of FASB ASC 606, Revenue From Contracts With Customers, for Third Party Settlement Estimates.
  • Telecommunications: Issue No. 15-10, Miscellaneous Fees.

The deadline for informal feedback on the implementation issues is September 1, 2017.

Review a press release on the Journal of Accountancy's website.

AICPA issues four revenue working drafts

Jul 03, 2017

On July 3, 2017, the AICPA’s revenue recognition task forces have released for public comment four working drafts on accounting issues associated with the implementation of the new revenue standard for airlines, gaming, health care, and telecommunications industries.

The working drafts address the following topics:

  • Regional contracts (airlines).
  • The timing for recognition of a wide-area progressive operator’s liability for base progressive and incremental progressive jackpot amounts (gaming).
  • Consideration of the new revenue standard in connection with third-party settlement estimates (health care).
  • Miscellaneous fees (telecommunications).

Comments on the working drafts are due by September 1, 2017.

For more information, see the revenue recognition page on the AICPA’s Web site.

The Bruce Column — Social and human capital accounting starts to accelerate change

Jun 29, 2017

It has been a slow burner. But, as our regular columnist Robert Bruce reports, the changed thinking that is being brought about by social and human capital accounting is now starting to take off. A new Guide issued by the CFO Leadership Network provides the details required to put it into action and practical examples.

There is a time when every­thing suddenly comes into focus. This is what appears to be happening in the field of social and human capital accounting. The business benefits are becoming clear and the practical ways to achieve them are moving into the main­stream. Social and human capitals are, in­evitably, seen as more sub­jec­tive than other capitals like financial, natural and man­u­fac­tured capitals. It was always going to take more time before they reached broad ac­cep­tance and ease of practical usage. But the launch and pub­li­ca­tion of the CFO Lead­er­ship Network’s Essential Guide to Social and Human Capital Accounting, under the aegis of the Prince of Wales’ Accounting for Sus­tain­abil­ity project, looks to be the long-awaited catalyst. It provides the tools and the guidance but, more im­por­tantly, it details case studies of what busi­nesses have already achieved. This is the body of practical ex­pe­ri­ence that or­gan­i­za­tions and business need.

It is a question of recog­niz­ing the role of social and human capital accounting, measuring its effects, and bringing it forward into de­ci­sion-mak­ing. Done properly this creates a rev­o­lu­tion. Pre­vi­ously unseen figures and factors change the thinking around a business. Examples abound in the Guide. British Land tackled skill shortages. National Grid invested in employee wellbeing and found that for every £1 invested it was getting back more than £2 return in reduced sickness absence costs. The Crown Estate set up a part­ner­ship to help job­seek­ers into sus­tain­able em­ploy­ment. It produced some £40m of societal value through savings on welfare and tax credits, increased tax and national insurance payments, and boosting local economies. All of these came from looking at the business from a different stand­point, through a new lens.

Read the entire column on our Global IAS Plus website.

EFRAG discussion paper on goodwill impairment testing

Jun 29, 2017

On June 29, 2017, the European Financial Reporting Advisory Group (EFRAG) issued a discussion paper on goodwill impairment testing. In connection with the post-implementation review of IFRS 3, EFRAG has been conducting research into a number of potential amendments to the goodwill impairment test with the view to enhancing its application and effectiveness and reducing complexity.

The scope of the publication, Goodwill Impairment: Can it be improved? is limited to impairment testing and it does not seek to address broader topics such as identification and measurement of acquired intangible assets in a business combination or the extent to which these should be separated from or subsumed into goodwill. Ideas presented in the paper focus on how to allocate goodwill to CGUs, when to determine the recoverable amount, and how to determine the recoverable amount. EFRAG asks European constituents for their views on the advantages and disadvantages of the potential amendments presented in this context.

Re­view the press re­lease on EFRAG's web­site. The deadline for comments to EFRAG is December 31, 2017.

IASB chair speaks on financial stability, insurance contracts and better communication in financial reporting

Jun 29, 2017

At the IFRS Foundation's conference in Amsterdam, IASB chair Hans Hoogervorst discussed how accounting standards can help financial stability, the new insurance contracts Standard (IFRS 17) and the IASB's effort to improve financial reports so they are a better communication tool between companies and investors.

Mr Hooger­vorst began by noting that although fostering financial stability is not the primary goal of accounting standards, the trans­parency of financial state­ments resulting from the accounting standards is a "crucial in­gre­di­ent for achieving financial stability". He discussed the work of the IASB in recent years to issue standards that lead to high-qual­ity accounting, which then leads to better insights of a company's per­for­mance, the ability to discover problems more timely and an early warning system to detect changes in a company's risks and per­for­mance, amongst other benefits.

In addition, Mr Hooger­vorst talked about IFRS 17 Insurance Contracts that was issued about one month ago and how it is finally an international standard that will reduce the in­com­pa­ra­bil­ity between national GAAPs for insurance. He also noted that IFRS 17 will improve financial stability in six areas:

First of all, the insurance liability will be properly measured and regularly updated, giving much better in­for­ma­tion. The build-up of un­sus­tain­able equity positions will become visible much more quickly.

Second, the cost of options and guar­an­tees will be regularly updated and fully reflected in the financial state­ments.

Third, companies will also provide updated in­for­ma­tion on the risk margin they hold for their insurance products.

Fourth, the losses embedded in onerous groups of contracts will have to be recog­nized im­me­di­ately. Contracts can be grouped, but in a way that ensures that the losses embedded in onerous groups of contracts will not be averaged with groups of prof­itable contracts.

Fifth, IFRS 17 ends up-front profit taking and revenue will only be recog­nized as the service is provided.

Finally, IFRS 17 will also make it easier for investors to judge the per­for­mance of any insurance company. Currently, many investors base their analysis on Solvency II, which is the pru­den­tial standard for the European Union. But Solvency II is almost entirely focused on the balance sheet. It makes no dis­tinc­tion between profits earned in the past and profits to be earned in the future. It does not convey in­for­ma­tion about prof­itabil­ity over time.

In his remarks about the IASB's role in improving com­mu­ni­ca­tion through financial reporting, Mr Hooger­vorst noted that this will be a central theme in the IASB's work plan. Instead of working on major cross-cut­ting Standards, the Board will focus on improving the primary financial state­ments, making dis­clo­sures more effective and improving the com­pa­ra­bil­ity and use of non-GAAP measures.

A full tran­script of Mr Hooger­vorst's remarks is available on the IASB website.

IASB issues "Investor Update" newsletter

Jun 28, 2017

The IASB has issued the thirteenth edition of its newsletter 'Investor Update', which provides investors with quick access to information about current accounting and financial reporting topics.

This issue features:

  • An overview of the Dis­cus­sion Paper on prin­ci­ples of dis­clo­sure
  • An interview with Geoff Robinson, Executive Director, UBS In­vest­ment Bank
  • A call for views on the post-im­ple­men­ta­tion review of IFRS 13 and the Prin­ci­ples of Dis­clo­sure dis­cus­sion paper
  • In­for­ma­tion on investor materials and current events.

The Investor Update newslet­ter is available on the IASB’s website.

IASB abandons PDF viewer approach

Jun 27, 2017

Saved links to PDF documents on the new IASB website now return a "No valid document" comment without indicating why the document is no longer available nor where it can be found now. Deloitte Global has investigated the issue and found that the IASB has abandoned the PDF viewer approach it had adopted when moving to its new website.

PDFs are now directly available again, however, you have to revisit the IASB news item or other place in the site where you orig­i­nally found the document.

Updated IASB work plan — Analysis

Jun 26, 2017

Following its June 2017 meeting, the IASB has updated its work plan. Identified below are the changes since last month’s version of the work plan as well as some general observations regarding the new format of the work plan the IASB has chosen since it moved to its new website.

General remarks

On moving to the new website, the IASB made several changes to the pre­sen­ta­tion of the work plan:

  • The new format has gone back to in­di­cat­ing exact timing - by in­di­cat­ing the half year, quarter or even month a de­vel­op­ment is expected to occur. This is much to be lauded, since it makes tracking de­vel­op­ments (and progress and delay) much easier for users.
  • The new work plan has slightly changed cat­e­gories: stan­dard-set­ting projects, main­te­nance projects, research projects, and other projects. Taxonomy projects have become "other"; post-im­ple­men­ta­tion reviews are now "research".
  • The IASB has split up the annual im­prove­ment process into in­di­vid­ual "projects". Although the idea is still to treat certain im­prove­ments through the annual im­prove­ments process, it can no longer be traced on the face of the work plan whether a project is part of the annual im­prove­ment process and which cycle it belongs to. The ex­pec­ta­tion is that the IASB wants to allow itself more flex­i­bil­ity in deciding which im­prove­ment goes into which cycle.
  • The IASB has stopped dating its work plan and there is no longer a PDF version of the work plan available. There a many minor changes between Board meetings (down to spelling) and to report on every little change would distract from the big picture. The intention is therefore to continue to analyze changes on a monthly basis i.e.,after each meeting.

Below is an analysis of all changes made to the work plan since the last update in May 2017. For this analysis, changes have been ignored where the "within three months" to "after six months" clas­si­fi­ca­tion trans­lated smoothly into the new format of fixed dates.

Stan­dard-set­ting projects

Main­te­nance projects

Research projects

  • Goodwill and im­pair­ment — this project was to see a decision on the project direction after 6 months and will now see a dis­cus­sion paper in H1 2018
  • Post-im­ple­men­ta­tion review — IFRS 13 — this project is now con­sid­ered a research project
  • Post-im­ple­men­ta­tion review — IFRS 10-12 — this project is no longer appears in the IASB work plan (was supposed to be initiated after 6 months)
  • Dis­clo­sure ini­tia­tive — Prin­ci­ples of dis­clo­sure — this project was to see a decision on the project direction after 6 months and will now see a feedback statement on the dis­cus­sion paper in H1 2018

Other projects

  • proposed taxonomy update regarding common practice in con­nec­tion with IFRS 13 — expected in H1 2018
  • proposed taxonomy update on IFRS 17 — this project was to see a final update is expected within six months, however, as the next project step a feedback statement on the proposed update in Q4 2017 has been inserted

The above is a faithful com­par­i­son of the IASB work plan at May 18, 2017 and at June 28, 2017. For access to the current IASB work plan at any time, please click here.

New SEC chair says that the substantial decline in the number of U.S. IPOs and publicly listed companies in recent years is of great concern to him

Jun 22, 2017

On June 22, 2017, the Securities and Exchange Commission (SEC) released a speech by SEC Chairman, Jay Clayton, where he discusses how fewer publicly listed companies ultimately results in fewer opportunities for Main Street Americans to share in the economy’s growth, at a time when they are asked to do more on their own to save and invest for their future and their children’s futures.

Some companies have shifted capital raising activities to the private markets, where many Main Street Americans have limited access. High-quality companies may choose to go public at a later stage, after much of their early growth has already been achieved. Other companies may choose to stay private. 

In his speech, Mr. Clayton remarks that under his direction and the direction of Bill Hinman, Director of the Division of Corporation Finance, the SEC staff is actively exploring ways in which they can improve the attractiveness of listing on our public markets, while maintaining important investor protections. He looks forward to hearing the views of the panelists – not only on the causes of the decline in IPO activity and the substantial decline in the number of public companies, but also on potential ways to reverse those trends. He expects that the Committee will have valuable recommendations on this topic.

Review the speech on the SEC's website.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.