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October 2017

AcSB Exposure Draft – Definition of Material

Oct 23, 2017

On October 23, 2017, the Accounting Standards Board (AcSB) issued an Exposure Draft that corresponds to the IASB’s Exposure Draft on this topic. Stakeholders are encouraged to submit their comments by January 15, 2018.

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 Exposure Draft on the AcSB's website.

AcSB Response – Discussion Paper – Principles of Disclosure

Oct 16, 2017

On October 16, 2017, the Accounting Standards Board (AcSB) submitted a comment letter responding to the IASB’s Discussion Paper issued in March 2017.

The AcSB is supportive of the IASB’s Principles of Disclosure project, however they disagree with the IASB’s preliminary view that a general disclosure standard should allow an entity to include information in its financial statements that it has identified as non-IFRS information. In particular, they think the IASB should develop strict boundaries that prohibit the use of non-IFRS information that is inconsistent with or contradicts IFRS information.

Non-IFRS information should not be included in the financial statements, as it could undermine other information in the financial statements that conforms with IFRS Standards. The AcSB thinks that allowing non-IFRS information to be included in the financial statements could further reduce the relevance of financial statements, and would contradict the IASB’s objective, in the Disclosure Initiative project, of better communication.

Review the press release and letter on the AcSB's website.

AcSB Response – Property, Plant and Equipment— Proceeds before Intended Use (Proposed amendments to IAS 16)

Oct 19, 2017

On October 19, 2017, the Accounting Standards Board (AcSB) submitted a comment letter responding to the IASB’s Exposure Draft issued in June 2017. The letter disagrees with the proposal because it would not provide entities with sufficient guidance to determine the costs related to the selling items produced before an asset is available for use.

Several concerns were raised, including how the resulting profit margin may not be a meaningful measure for users to predict future profitability and cash flows. The AcSB strongly encourages the IASB to consider further developing this proposal in order to provide relevant information to users.

Review the AcSB letter posted by the IASB.

AICPA issues 20 revenue working drafts

Oct 03, 2017

On October 3, 2017, the American Institute of Certified Public Accountants’ (AICPA) revenue recognition task forces released for public comment 20 working drafts on accounting issues associated with the implementation of the new revenue standard for airlines, asset management, construction, gaming, health care, oil and gas, power and utilities, and telecommunications entities.

The working drafts address the following topics:

Comments on the working drafts are due by December 1, 2017. For more information, see the revenue recognition page on the AICPA’s Web site.

FASB releases investor podcast on revenue recognition for airlines entities

Oct 02, 2017

On October 2, 2017, the Financial Accounting Standards Board (FASB) released an investor podcast on the impact of revenue recognition on entities in the airlines industry.

Topics discussed during the investor podcast include the following:

  • Overview of the new revenue guidance
  • Loyalty points
  • Ancillary services and change fees
  • Breakage for unused tickets
  • Transition to the new guidance

View the podcast on the FASB’s YouTube channel.

FASB releases investor podcast on revenue recognition for health care services entities

Oct 12, 2017

On October 12, 2017, the Financial Accounting Standards Board (FASB) released an investor podcast on the impact of revenue recognition on entities in the health care services industry.

Topics discussed during the investor podcast include the following:

  • Overview of the new revenue guidance
  • Presentation of bad debt on the income statement
  • Implicit price concessions
  • Disclosures
  • Transition to the new guidance

Review the podcast on the FASB’s YouTube channel.

IASB Agenda Paper: Definition of a business

Oct 16, 2017

On October 16, 2017, the International Accounting Standards Board (IASB) released a comparison between FASB Amendments and IASB tentative decisions on the definition of a business.

The agenda paper:

  • compares the Board’s tentative decisions with the FASB Amendments;
    Agenda ref 13A;
  • explains the main differences;
  • reports feedback from Accounting Standards Advisory Forum (ASAF) members on the Board’s tentative decisions: and
  • recommends clarifying that the cash acquired should be excluded from the gross assets acquired considered in the screening test.

Appendix A of this paper includes a table that shows a summary of all the Board’s tentative decisions against the FASB decisions.

Review the agenda paper on the IASB's website.

IASB Chairman speaks on "The Future of Financial Reporting" at the Australian Accounting Standards Board forum

Oct 10, 2017

On October 10, 2017, the Australian Accounting Standards Board (AASB) hosted a forum featuring special guest IASB Chairman, Hans Hoogervorst, who delivered a presentation on the "big picture" and the IASB’s plans for global financial reporting.

The forum also featured a panel discussion on users of financial statements, further financial information to be reported and an analysis of financial information.

Review a summary of the key discussion points and the slides for the presentation on the AASB's website.

IASB finalizes amendments to IFRS 9 regarding prepayment features with negative compensation and modifications of financial liabilities

Oct 12, 2017

On October 12, 2017, the International Accounting Standards Board (IASB) published "Prepayment Features with Negative Compensation (Amendments to IFRS 9)" to address the concerns about how IFRS 9 "Financial Instruments" classifies particular prepayable financial assets. In addition, the IASB clarifies an aspect of the accounting for financial liabilities following a modification.

 

Changes

The amendments in Prepayment Features with Negative Compensation (Amendments to IFRS 9) are:

Changes regarding symmetric prepayment options

Under the current IFRS 9 requirements, the SPPI condition is not met if the lender has to make a settlement payment in the event of termination by the borrower (also referred to as early repayment gain).

Prepayment Features with Negative Compensation amends the existing requirements in IFRS 9 regarding termination rights in order to allow measurement at amortised cost (or, depending on the business model, at fair value through other comprehensive income) even in the case of negative compensation payments.

Under the amendments, the sign of the prepayment amount is not relevant, i. e. depending on the interest rate prevailing at the time of termination, a payment may also be made in favour of the contracting party effecting the early repayment. The calculation of this compensation payment must be the same for both the case of an early repayment penalty and the case of a early repayment gain.

During redeliberations, the IASB decided not to confirm the second eligibility condition (insignificant fair value of the prepayment feature at initial recognition) proposed in ED/2017/3.

Clarification regarding the modification of financial liabilities

The final amendments also contain (in the Basis for Conclusions) a clarification regarding the accounting for a modification or exchange of a financial liability measured at amortised cost that does not result in the derecognition of the financial liability. The IASB clarifies that an entity recognises any adjustment to the amortised cost of the financial liability arising from a modification or exchange in profit or loss at the date of the modification or exchange. A retrospective change of the accounting treatment may therefore become necessary if in the past the effective interest rate was adjusted and not the amortised cost amount.

 

Effective date and transition requirements

The amendments regarding prepayment features with negative compensation are to be applied retrospectively for fiscal years beginning on or after January 1, 2019, i. e. one year after the first application of IFRS 9 in its current version. Early application is permitted so entities can apply the amendments together with IFRS 9, if they wish so. Additional transitional requirements and corresponding disclosure requirements must be observed when applying the amendments for the first time.

The clarification regarding the modification of financial liabilities should be applied at the same time as the adoption of IFRS 9, i.e. January 1, 2018. 

 

Additional information

 

IASB finalizes amendments to IAS 28 regarding long-term interests in associates and joint ventures

Oct 12, 2017

On October 12, 2017, the International Accounting Standards Board (IASB) published "Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28)" to clarify that an entity applies IFRS 9 "Financial Instruments" to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied.

 

Changes

The amendments in Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28) are:

  • Paragraph 14A has been added to clarify that an entity applies IFRS 9 including its impairment requirements, to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied.
  • Paragraph 41 has been deleted because the Board felt that it merely reiterated requirements in IFRS 9 and had created confusion about the accounting for long-term interests.

The ammendments are accompanied by an illustrative example.

 

Dissenting opinion

The final amendments contain a dissenting opinion as one Board member disagrees amending IAS 28 without also specifying the types of interests that an entity accounts for using the equity method and the types of interests that an entity accounts for applying IFRS 9.

 

Effective date and transition requirements

The amendments are effective for periods beginning on or after January 1, 2019. Earlier application is permitted. This will enable entities to apply the amendments together with IFRS 9, if they wish so, but leaves other entities the additional implementation time they had asked for.

The amendments are to be applied retrospectively, but they provide transition requirements similar to those in IFRS 9 for entities that apply the amendments after they first apply IFRS 9. They also include relief from restating prior periods for entities electing, in accordance with IFRS 4 Insurance Contracts, to apply the temporary exemption from IFRS 9. Full retrospective application is permitted if that is possible without the use of hindsight.

 

Additional information

 

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.