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February 2016

FASB adds four projects to research agenda

Feb 03, 2016

On February 3, 2016, as result of a survey of different advisory groups, the Financial Accounting Standards Board (FASB) decided to add four new financial reporting issues in its upcoming agenda discussion paper expected in the first half of 2016.

The issues to be added are:

  • Pensions and other postretirement employee benefit plans;
  • Intangible assets;
  • Distinguishing liabilities from equity; and
  • Financial performance reporting.

With the exception of intangible assets, which the IASB currently does not address in its research projects, these issues correspond with those raised by the IASB's agenda consultation respondents. Although a full analysis of the 118 responses on the IASB's Web site is not available yet, projects on Pensions and other postretirement employee benefit plans and Distinguishing liabilities from equity rank high among the research projects currently on the IASB's agenda.

Please click for the following information on the FASB's Web site:

FASB issues ASU on leases

Feb 25, 2016

On February 25, 2016, the Financial Accounting Standards Board (FASB) issued its new leases standard, ASU 2016-02. The ASU introduces a lessee model that brings most leases on the balance sheet and aligns many of the underlying principles of the new lessor model with those in the new revenue recognition standard, ASC 606, Revenue From Contracts With Customers.

The ASU introduces a lessee model that brings most leases on the balance sheet and aligns many of the underlying principles of the new lessor model with those in the new revenue recognition standard, ASC 606, Revenue From Contracts With Customers. The new leases standard represents a wholesale change to lease accounting and will most likely result in significant implementation challenges during the transition period and beyond.

The new guidance will be effective for public business entities for annual periods beginning after December 15, 2018 (i.e., calendar periods beginning on January 1, 2019), and interim periods therein. For all other entities, the ASU will be effective for annual periods beginning after December 15, 2019 (i.e., calendar periods beginning on January 1, 2020), and interim periods thereafter. Early adoption will be permitted for all entities.

The leases project was part of a convergence effort between the IASB and FASB; however, the IASB’s counterpart standard, IFRS 16, contains notable differences from ASU 2016-02. For instance, the IASB’s standard has a single lessee accounting model while the FASB’s has a dual lessee accounting model. However, both standards require that assets and liabilities be recognized (with limited exceptions).

For more information, see the press release, FASB in Focus newsletter, ASU, cost-benefit analysis, and video discussion by FASB Vice-Chairman Jim Kroeker and Board members Tom Linsmeier and Hal Schroeder on the FASB’s Web site. In addition, don’t miss Deloitte US's Heads Up on the new standard, which will be available shortly.

From incurred to expected—two years to go

Feb 19, 2016

On February 19, 2016, the IFRS Foundation released its latest video in Debrief series where Sue Lloyd, Member of the International Accounting Standards Board, explains the background to IFRS 9 and its different components – and gives an update on what has happened in the period since the Board completed the Standard in 2014.

Focusing on the impairment element of the Standard, it also covers how the accounting for loan loss provisioning will change from an incurred to an expected loan loss model and gives an update on how the Standard relates to activity by other organizations such as banking regulators.

Watch the video on the IASB's Web site.

Hans Hoogervorst reappointed as IASB Chairman, Ian Mackintosh to retire as Vice-Chairman at end of first term

Feb 12, 2016

On February 12, 2016, the Trustees of the IFRS Foundation, responsible for the governance and oversight of the International Accounting Standards Board (IASB), announced the reappointment of Hans Hoogervorst as IASB Chairman for a second, five-year term with effect from July 1, 2016. At the same time, the Trustees announced that Ian Mackintosh has decided not to seek a second term, and will step down as IASB Vice-Chairman when his first term expires on June 30, 2016.

The IFRS Foundation is currently undertaking a review of its structure and effectiveness, while the Board is reviewing its Agenda for the next five years. These reviews are exploring possible changes to the composition and the size of the Board and its work in the coming years. In that context, Mr Mackintosh has proposed that he retire from the Board in 2016. The Trustees intend to discuss the review of structure and effectiveness in the coming months.

Review the press release on the IASB's Web site.

IASB updates work plan

Feb 19, 2016

On February 19, 2016, following its February 2016 meeting, the International Accounting Standards Board (IASB) released an updated work plan.

The Conceptual Framework project is now in the analysis stage (previously in public consultation). The Disclosure initiative — principles of disclosure project is now in the drafting discussion paper stage (previously in analysis).

Updates regarding the im­ple­men­ta­tion projects are:

  • Annual improvements 2015-2017 — exposure draft is no longer expected after six month, instead the Board will decide the direction of the project within the next six months.

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

Reactions to the proposed amendments intended to address concerns about the different effective dates of IFRS 9 and the forthcoming new insurance contracts standard

Feb 08, 2016

On December 9, 2015, the IASB published ED/2015/11 'Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance Contracts' (Proposed amendments to IFRS 4)'. The comment deadline for this ED has now ended.

ED/2015/11 proposed two options for entities that issue insurance contracts within the scope of IFRS 4:

  • an option that would permit entities to reclassify, from profit or loss to other comprehensive income, some of the income or expenses arising from designated financial assets; this is the so-called overlay approach;
  • an optional temporary exemption from applying IFRS 9 for entities whose predominant activity is issuing contracts within the scope of IFRS 4; this is the so-called deferral approach.

The comment letters on the ED made available on the IASB's Web site seem to focus on two questions:

  1. Is one of the two approaches preferable?/ Can one or the other be dropped altogether?
  2. How can predominance best be determined for the deferral approach?/ What is the appropriate level for assessing predominance?

On the first question, the vast majority of respondents state that both approaches are needed. They claim that both the overlay approach and the temporary exemption from applying IFRS 9 are needed as these address different issues depending on the type of business activities and group structures. On the ends of the spectrum are the insurance industry on the one side, and user organizations on the other side. The insurance industry is asking for a deferral of IFRS 9 until the insurance standard is completed; they mostly cite cost reasons. Some user groups are asking for the overlay approach only, some very few even argue that it is best to do nothing; these respondents mainly cite lack of comparability if multiple options exist.

One level down, it is especially the deferral approach that triggers suggestions for refinement. While most respondents agree that assessing predominance is the right approach, the IASB's proposal to assess predominance "at the reporting entity level" causes confusion. Most respondents seem to believe that the IASB sees the group level as the reporting entity level. Others believe that "reporting entity level" is an empty phrase that could also mean lower levels than the group level. The question of how to treat conglomerates is important in both cases. Therefore, respondents assuming that the IASB intends testing at the group level often argue that a testing "below the reporting entity level" is needed; respondents assuming an assessment at a lower level often wonder of the implications for the group. The two possibilities that seem to emerge are:

  • Assessment is at the group level and results are cascaded down - this would leave pure insurance companies that are subsidiaries of conglomerates without the option of deferral while companies that are not subsidiaries of conglomerates would have the option.
  • Assessment is at a lower level than the group level, however, there is the question of roll-up - this could either mean that groups need to consolidate IFRS 9 and IAS 39 numbers or that qualifying subsidiaries would need to keep two sets of books - an IAS 39 one for reporting to their users and an IFRS 9 one for reporting within the group.

Expectations are currently (as communicated at the October 2015 IASB meeting) that the IASB will begin re-deliberation of the exposure draft in the second quarter of 2016. Final amendments are expected in the third quarter of 2016.

Report of the IFRS Foundation Trustees January meeting

Feb 05, 2016

On February 5, 2016, the report of the IFRS Foundation Trustees meeting in London held on January 26–28, 2016 was released.

Meeting ac­tiv­i­ties included the following:

  • Executive session — The Trustees discussed a number of important strategic issues:
    • Review of structure and effectiveness of the IFRS Foundation
    • Strategic Plan 2016 
    • Working with National Standard-Setters and regional bodies
    • Other issues.
    • Committee reports
  • IASB Chairman’s report — The Chair of the IASB provided the Trustees with an update on a number of the IASB’s technical ac­tiv­i­ties.
  • Report of the Due Process Oversight Committee (DPOC) — The Trustees received a report about the DPOC’s January 2016 meeting.
  • Investors in financial reporting event — The IFRS Foun­da­tion, with the CFA Institute, hosted an event 'Investors in Financial Reporting’.

The full report on the IFRS Foun­da­tion trustees’ meeting is available on the IASB’s Web site.

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