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January 2019

AcSB Exposure Draft – Onerous Contracts – Cost of Fulfilling a Contract (Proposed amendments to IAS 37)

Jan 10, 2019

On January 10, 2019, the Accounting Standards Board (AcSB) issued its Exposure Draft that corresponds to the IASB’s Exposure Draft on this topic. Stakeholders are encouraged to submit their comments by April 15, 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.

AICPA issues revenue working draft for broker-dealers

Jan 10, 2019

On January 10, 2019, the AICPA’s Financial Reporting Executive Committee released for public comment a working draft for broker-dealers that addresses an illustrative note to financial statements that is associated with the implementation of the new revenue standard.

Topics addressed in the working draft include:

  • Significant judgments
  • Investment banking
  • Asset management
  • Costs of obtaining or fulfilling a contract with a customer
  • Disaggregated revenue from contracts with customers

Comments on the working draft are due by March 4, 2019.

Review the revenue recognition resource page on the AICPA’s website.

Chair of the Trustees speaks about Asia and IFRS Standards

Jan 30, 2019

On January 30, 2019, the International Accounting Standards Board (the Board) released a speech given by the Chair of the Trustees Erkki Liikanen at a stakeholder event in connection with the meeting of the IFRS Foundation Trustees taking place in Kuala Lumpur. Mr. Liikanen talked about the contribution of Malaysia and the Asia-Oceania region to the IFRS Foundation’s work and outlined the key priorities for the Foundation.

In his speech, Mr. Liikanen noted that voices from across the Asia-Oceania region are well represented at all levels of the IFRS Foundation and the various advisory bodies. As an example of valuable contributions from the region, Mr. Liikanen cited the MASB’s work on how to value specific biological assets that led to amendments to IAS 16 and IAS 41.

Turning to future challenges for the IFRS Foundation, Mr. Liikanen made out three key priorities:

  • The Foundation needs to consolidate and build upon the achievements of recent years. He warned against movements away from global achievements and in this context mentioned the recent European Commission's Fitness Check (which, however, showed that a large majority of respondents were against an EU set of standards).
  • The Foundation also needs to ensure that IFRS® Standards remain relevant in a changing world. In this context, Mr. Liikanen noted that investors are not only interested in the pure financial statements anymore but also want to know about non-financial information.
  • And finally the Foundation is faced with the question of remaining relevant in a digital world. Mr. Liikanen notes that the Foundation will continue to explore how technological developments affect the way financial information is consumed and how technology-related innovations affect the standard-setting process.

Review the full transcript of the speech on the Board's website.

EC expert group issues report on disclosure of climate-related information

Jan 10, 2019

In January 2019, the Technical Expert Group on Sustainable Finance set up by the European Commission (EC) published its first report on companies' disclosure of climate-related information. It contains recommendations that will allow the EC to update its non-binding guidelines on non-financial reporting with specific reference to climate-related information, in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) established by the Financial Stability Board.

The report marks another step in the implementation of the EC's action plan on sustainable finance published in March 2018 and follows up on the EC's legislative proposal on the disclosure of climate-related information presented in May 2018.

The report contains proposals for disclosing not just how climate change might influence the performance of a company, but also the impact of the company itself on climate change.

The guidance proposed in the report intends to assist companies in developing high quality climate-related disclosures that comply with the Non-Financial Reporting Directive and address the recommendations of the TCFD. Specific disclosures and guidance are described under each element of the Non-Financial Reporting Directive requirements, including metrics for all in-scope companies, for non-financial companies, and for banks and insurance companies. In doing so, the report distinguishes between three types of disclosure:

  • Type 1 disclosures – those that companies should disclose (high expectation that all reporting companies disclose them)
  • Type 2 disclosures – those that companies should consider disclosing (expected of companies with significant exposure to climate-related risks and opportunities)
  • Type 3 disclosures – those that companies may consider disclosing (additional or innovative disclosures that provide more enhanced information)

The EC will take the report into consideration when it updates the non-binding guidelines on non-financial disclosure that accompany the Non-Financial Reporting Directive.

Stakeholders are invited to provide with written comments on the report by February 1, 2019.

Review the Report on Climate-related Disclosures on the EC website.

Forum on integrated thinking at the World Economic Forum in Davos

Jan 17, 2019

On January 22-25, 2019, the World Economic Forum (WEF) will hold its annual meeting. This meeting is an annual opportunity for leaders across business and government to come together to discuss solutions to the world’s most pressing economic and social challenges. Deloitte joins these global leaders and participates in discussions and events designed to develop meaningful and measurable solutions to these challenges.

While sustainable profit flows from the pursuit of a broader social purpose, translating it into something that is measurable in as simple and understandable way as we measure profit is not a small challenge. Metrics that explain this remain the "soft underbelly" of corporate communications.

Among Deloitte's WEF Davos activities is therefore a breakfast forum on Inclusive Capitalism on Thursday, January 24.

Panellists Mary Shapiro (Bloomberg/SASB Foundation), Mark Hawkins (Salesforce), Nils Bolmstrand (Nordea Asset Management AB), and Jessica Fries (A4S) will discuss how capital market participants can come together to make the world's financial systems more resilient for achieving sustainable value creation and long-term societal well-being. The discussion will be chaired by Deloitte's Global Chairman David Cruickshank.

Review additional information on Deloitte's WEF Davos activities, including the breakfast forum. All livestream events can be followed through Twitter and Facebook and the events will also be available for subsequent playback.

FRC Lab report on artificial intelligence in corporate reporting

Jan 22, 2019

In January 2019, the Financial Reporting Lab of the UK Financial Reporting Council (FRC) published a new report that considers how technology might impact the production, distribution and consumption of corporate reporting.

The report explains what artificial intelligence (AI) is, where its use might make sense in corporate reporting, and explores some of the possible and current use cases for the technology. For each use case it considers what is currently being achieved and what might be achieved in the future. The report finds:

  • Production – AI can enhance efficiency by replacing mechanistic human processing of underlying transactions and transforming that data into accounting and management information; ultimately feeding into annual reports.
  • Distribution – AI can support auditors and boards in the internal and external validation processes needed to ensure that the annual report is credible and compliant in an efficient and effective way.
  • Consumption – Investors are already using AI to enhance effectiveness of investment analysis by extracting meaning and value, not only from company reporting, but also from various sources of alternative data.

Overall, the report concludes hat it is not a question of whether AI will become important for corporate reporting, but when.

Review the report Artificial Intelligence – How does it measure up? on the FRC's website.

IASB decides on further potential amendments to IFRS 17

Jan 23, 2019

At its meeting on January 23, 2019, the International Accounting Standards Board (the Board) discussed IFRS 17, "Insurance Contracts" and 5 of the 25 concerns regarding the standard that were identified in October 2018 as candidates for potential amendments.

Applying the criteria for evaluating proposed amendments agreed on in October 2018, the Board came to the following conclusions:

Issue identified at the October IASB meeting

Agenda paper with detailed description (link to IASB website)

Staff recommendation

 Board decision

3 — Acquisition cash flows for renewals outside the contract boundary

Agenda paper 2A

To allocate to any anticipated contract renewals part of the insurance acquisition cash flows directly attributable to newly issued contracts and therefore to capitalise them

13/14 support staff recommendation

12 — Reinsurance contracts held: initial recognition when underlying insurance contracts are onerous

Agenda paper 2B, Agenda paper 2C

To recognise immediate gains on (previously or simultaneously entered) reinsurance contracts, if and to the extent that immediate losses on insurance contracts are recognised; require an entity to apply the expanded exception when the entity
measures insurance contracts applying the PAA

14/14 support staff recommendation

8 — Contractual service margin: limited applicability of risk mitigation exception (some aspects already discussed at the December 2018 meeting)

Agenda paper 2D

To expand the scope of the risk mitigation exception for insurance contracts with direct participation features

14/14 support staff recommendation

13 — Reinsurance contracts held: ineligibility for the variable fee approach

7 — Contractual service margin: coverage units in the general model

Agenda paper 2E

To amend IFRS 17 so that in the general model the contractual service margin should be allocated on the basis of coverage units that are determined by considering both insurance coverage and any investment return service

13/14 support staff recommendation 

The staff notes that papers on the remaining topics from the list of issues presented at the October meeting will be presented to the Board in the first quarter of 2019.

Review the press release on the Board's website.

IASB issues podcast on IFRS 17 discussions at the January IASB meeting

Jan 30, 2019

On January 30, 2019, the International Accounting Standards Board (the Board) released a podcast recorded by Darrel Scott, Board member, and Roberta Ravelli, technical staff, reporting on the discussion at the January 2019 meeting of the Board about IFRS 17, "Insurance Contracts".

Listen to the 7-minute podcast on the Board's website.

IASB member discusses materiality

Jan 28, 2019

On January 28, 2019, the International Accounting Standards Board (the Board) released an article by Board member Gary Kabureck, where he discusses the development of disclosure materiality.

Mr. Kabureck began by discussing how the December 2014 amendments to IAS 1 marked the "first foray into addressing disclosure materiality". He stated IFRS disclosure requirements used phrases, such as "At a minimum an entity shall disclose", which were interpreted in practice in a way that was not intended by the Board and actions were taken to clarify that materiality concept always overrules these certain phrases.

Next, he discussed key messages in the September 2017 IFRS Practice Statement Making Materiality Judgements, which provides an outline for making materiality judgements and assessing their implications. He noted that the Practice Statement helps preparers define who the target audience for a company’s financial reporting is and what information is needed. Also, the Practice Statement makes it clear that "materiality is assessed in the context of the financial statement taken as a whole".

Further, Mr. Kabureck commented on the revised definition of "material" issued in October 2018. The amendments conformed the definition of material among various IFRS Standards. He mentioned that the revision to the definition from "could influence" to "could reasonably be expected to influence" provided a more accurate representation of the Board’s intention.

Lastly, he expressed the need to analyse how Standards are drafted and how to amend certain Standards with known issues.

Review the article on the Board’s website.

IASB to consider further potential amendments to IFRS 17

Jan 11, 2019

In January 2019, the International Accounting Standards Board (the Board) released the agenda papers for their upcoming meeting. The Board will discuss 5 of the 25 concerns regarding IFRS 17, "Insurance Contracts" that were identified in October 2018 as candidates for potential amendments. The staff recommends several amendments to the standard.

Applying the criteria for evaluating proposed amendments agreed on in October 2018, the Board is asked to consider the following aspects of IFRS 17:

Issue

Agenda paper with detailed description (link to IASB website)

Comment

Acquisition cash flows for renewals outside the contract boundary

Agenda paper 2A

The staff recommends five amendments to the standard

Reinsurance contracts held: initial recognition when underlying insurance contracts are onerous

Agenda paper 2B, Agenda paper 2C

The staff recommends two amendments to the standard

Contractual service margin: limited applicability of risk mitigation exception (some aspects already discussed at the December 2018 meeting)

Agenda paper 2D The staff recommends one amendment to the standard

Reinsurance contracts held: ineligibility for the variable fee approach

Contractual service margin: coverage units in the general model

Agenda paper 2E

The staff recommends six amendments to the standard

The staff notes that papers on the remaining topics from the list of issues presented at the October meeting will be presented to the Board in the first quarter of 2019.

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.