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IFAC video interview with Hans Hoogervorst on the IASB's priorities to 2021

Dec 13, 2016

On December 13, 2016, the International Federation of Accountants (IFAC) released a short video of IASB Chairman Hans Hoogervorst discussing the 2015 Agenda consultation and the IASB's priorities for the next five years.

Questions discussed are:

  • Why does the IASB do an agenda consultation?
  • What are the IASB's main priorities for the next five years?
  • Why has the IASB chosen "Better communication" as a theme?
  • What will be the biggest challenges for the IASB?
  • What role does the research programme play in standard-setting?
  • How does the IASB support implementation of the standards?

Review the short video (6 minutes) on the IFAC's website.

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CAQ issues publication on revenue for audit committees

Dec 13, 2016

On December 13, 2016, the Center for Audit Quality (CAQ) of the American Institute of Certified Public Accountants (AICPA) released the publication "Preparing for the New Revenue Recognition Standard: A Tool for Audit Committees".

The publication is a tool to help audit committees assess a company’s implementation of the new revenue recognition standard. It is organized into four sections:

  • Understanding the New Revenue Recognition Standard – What Is It?
  • Evaluating the Company’s Impact Assessment – How Will Revenue Recognition Change?
  • Evaluating the Implementation Project Plan – How Do We Need to Prepare?
  • Other Implementation Considerations – What Else Do We Need to Consider?

In addition to key questions for audit committees, the tool offers a list of resources on revenue recognition.

Review the publication on the CAQ's website.

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IASB Chairman speaks on fair value accounting and long-term investments

Dec 13, 2016

On December 13, 2016, the International Accounting Standards Board (IASB) released a speech by IASB Chairman, Hans Hoogervorst, given at the ANC Symposium on Accounting Research, where he was invited to participate in a roundtable on performance and the public European good. However, he used his openening statement to address a different topic.

Given the symposium was being held in Paris, Mr. Hoogervorst commented on what he called "French accounting tradition’s problematic relationship with fair value accounting". He explained that the assumption that the IASB was made up of "market fundamentalists" was wrong as the vast majority of the IASB's accounting standards were cost-based. However, Mr. Hoogervorst argued, in some case fair value accounting would be the right choice:

At the same time, I firmly believe that cost-based accounting is inadequate for reflecting the performance of long-term equity investments. Quite the opposite — the longer term an investment, the less relevant its original price becomes. I fail to see how investors would benefit from a balance sheet that shows the original price of an equity investment acquired 20 years ago.

Mr. Hoogervorst admitted that market-based valuations of equity could lead to more short-term volatility in the information reported in financial statements. However, he expressed the belief that this volatility reflected the risks associated with such investments and that presenting these equities at cost would not make the volatility go away. He concluded:

Long-term investment should not be encouraged by artificial accounting stability in the numbers. Long-term investment is best served by transparency that the public can trust.

Review Mr. Hoogervorst's prepared statement on the IASB's website.

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6th ANC Symposium on Accounting Research

Dec 12, 2016

On December 12, 2016, the Autorité des Normes Comptables (ANC), the French standard-setter, hosted its 6th Symposium on Accounting Research in Paris. We have prepared a report from the symposium that explored the general theme of "Accounting and performance".

The mainstay of the symposium were presentations of six research papers each followed by roundtables on the topic presented and key speeches summing up the discussions.

Research papers

  • The first research paper was dedicated to non-GAAP financial indicators and the question of whether they are representative strategic governance. The paper is available in French original and English translation on the ANC's website.
  • The second research paper discussed the theoretical foundations of the accounting representation of performance in a stakeholder and territorial approach. A French version and an English translation can be accessed on the ANC's website.
  • The third research paper on the impact of accounting and prudential standards for financial intermediaries on long-term capital investment is again available in French and English on the ANC's website. The roundtable discussed the question of whether the long-term perspective can or must be integrated. Key speaker Linda Mezon (AcSB, Canada) concluded the session by providing insights from the Canadian perspective. She explained that in Canada it is believed that one can only get so many uses out of financial statements, therefore financial statements in Canada are understood not to be "be all and say all". Rather, financial statements are seen as a starting point on which others can build. She concluded that building too many expectations into financial statements bears the danger of making them not useful for anybody.
  • The presentation of the fourth research paper “Marking to Market versus Taking to Market” (French version and English translation) was followed by a roundtable that discussed alternatives to mark to market and relevance and fairness.
  • The fifth research paper used a study a sample of European companies over ten years to discuss performance measures and components of OCI and their volatility and impact (French version and English translation).
  • The sixth and final research paper was dedicated to recognizing environmental issues in performance measurement. This paper is also available in French and English.
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SEC moves to identify 'high-quality' non-GAAP measures

Dec 12, 2016

On December 12, 2016, Accounting Today released a summary of the panel discussion at the December 2016 AICPA conference on current SEC and PCAOB developments, which was put together by Christine Davine, deputy managing partner of Deloitte & Touche LLP’s National Office, to get the perspectives of various types of constituents on non-GAAP metrics.

In the article, Devine mentions that one of the key takeaways from the panel, it’s that non-GAAP measures are not prohibited and that you're allowed to use them. Also, investors and analysts and registrants find quite a bit of value in non-GAAP measures, but they need to be high quality.

Review the article on Accounting Today's website.

FRC (United Kingdom Financial Reporting Council) Image

Quick overview of key attributes and approaches to reporting business models

Dec 09, 2016

In October 2016, the UK Financial Reporting Council's (FRC) Financial Reporting Lab published a report on business model reporting, which provides valuable insight for companies on the importance of business model information to investors and the type of information they are seeking. The findings have now been condensed into a single page graphic overview.

The UK Strategic Report Regulations, applicable for periods ending on or after September 30, 2013, introduced a requirement for quoted companies to disclose their business model. This brought a requirement to disclose the business model into law for the first time, having been required under the UK Corporate Governance Code since 2010 (on a ‘comply or explain’ basis), and is seen as having codified common market practice.

The new EU Directive on Disclosure of Non-Financial and Diversity Information, expected to come into effect for reporting years commencing on or after January 1, 2017, will also introduce the requirement for companies across Europe, within the scope of the Directive, to disclose their business models. Companies across the EU may find this Lab report helpful as they consider their disclosures.

No definition of business model is provided in either the UK regulations or the EU Directive, and no commonly agreed definition currently exists in academic research or business literature. In practice, discussions on business model often drift into strategy, with the lines between them blurred. At the request of the then Department for Business, Innovation and Skills (BIS), the FRC published non-mandatory Guidance on the Strategic Report in June 2014 which recommends the following information be described in the business model disclosure:

  • how the entity generates or preserves value over the longer term;
  • how the entity captures that value;
  • what the entity does and why it does it;
  • what makes the entity different from, or the basis on which it competes with, its peers;
  • high level understanding of how the entity is structured;
  • high level understanding of the markets in which it operates and how it engages with those markets; and
  • broad understanding of the nature of the relationships, resources and other inputs that are necessary for the success of the business.

This report examines the views of company and investor participants on the key attributes of business model reporting, the value and use of business model reporting, together with illustrative examples of reporting favored by investors.

Please click for the following information on the FRC website:

IFRS  - Speech Image

Hans Hoogervorst discusses pension liability

Dec 08, 2016

On December 8, 2016, the International Accounting Standards Board (IASB) released a speech by IASB Chairman, Hans Hoogervorst, where he spoke about pension liabilities and the effect of a low interest rate environment. The speech was given at the Institute of Pension Education in Rotterdam.

In his speech, Mr. Hoogervorst noted the need for the IASB to develop additional guidance on pension scheme designs to adapt to recent developments. In addition, he commented that the IASB’s liability measurement approach is well accepted and that they “reject calls to fundamentally change pension accounting to eliminate or reduce pension deficits.” Further, he provided his views on macro-economic policies. He stated:

A return to more normal interest rates will reduce the pension liability and will be beneficial for the long-term health of the pension system. But even then, short-term pain seems inevitable, because a lot of damage has been done. While the pension liability will be reduced, there will probably be short-term harm to both your bond and stock portfolios. This is another reason why I do not believe that our accounting for the pension liability exaggerates the problem.

Review the full tran­script on the IASB’s website.


New Interpretation on foreign currency transactions and advance consideration

Dec 08, 2016

On December 8, 2016, the International Accounting Standards Board (IASB) published IFRIC 22, "Foreign Currency Transactions and Advance Consideration" developed by the IFRS Interpretations Committee to clarify the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency.

Content of IFRIC 22

Issue and scope of the interpretation

The interpretation addresses foreign currency transactions or parts of transactions where:

  • there is consideration that is denominated or priced in a foreign currency;
  • the entity recognizes a prepayment asset or a deferred income liability in respect of that consideration, in advance of the recognition of the related asset, expense or income; and
  • the prepayment asset or deferred income liability is non-monetary.


The Interpretations Committee came to the following conclusion:

  • The date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability.
  • If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt.

Effective date

IFRIC 22 is effective for annual reporting periods beginning on or after January 1, 2018. Earlier application is permitted.


On initial application, entities apply the interpretation either:

  • retrospectively in accordance with IAS 8; or
  • prospectively to all foreign currency assets, expenses and income in the scope of the interpretation initially recognised on or after the beginning of the reporting period an entity first applies the interpretation in or the beginning of a prior reporting period presented as comparative information.

Review the press release on the IASB's website.


IASB finalizes amendments to IAS 40 regarding transfers of investment property

Dec 08, 2016

On December 8, 2016, the International Accounting Standards Board (IASB) published "Transfers of Investment Property (Amendments to IAS 40)" to clarify transfers of property to, or from, investment property.

The amendments in Transfers of Investment Property (Amendments to IAS 40) are:

  • Paragraph 57 has been amended to state that an entity shall transfer a property to, or from, investment property when, and only when, there is evidence of a change in use. A change of use occurs if property meets, or ceases to meet, the definition of investment property. A change in management’s intentions for the use of a property by itself does not constitute evidence of a change in use.
  • The list of evidence in paragraph 57(a) – (d) was designated as non-exhaustive list of examples instead of the previous exhaustive list.

The amendments are effective for periods beginning on or after January 1, 2018. Earlier application is permitted. An entity applies the amendments to changes in use that occur on or after the beginning of the annual reporting period in which the entity first applies the amendments. Retrospective application is also permitted if that is possible without the use of hindsight.

Review the press release on the IASB's website.


IASB concludes the 2014-2016 annual improvements cycle

Dec 08, 2016

On December 8, 2016, the International Accounting Standards Board (IASB) issued "Annual Improvements to IFRS Standards 2014–2016 Cycle". The pronouncement contains amendments to three International Financial Reporting Standards (IFRSs) as result of the IASB's annual improvements project.

The Annual Improvements to IFRS Standards 2014–2016 Cycle makes amendments to the following standards:

IFRS Subject of amendment

IFRS 1 First-time Adoption of International Financial
Reporting Standards

Deleted the short-term exemptions in paragraphs E3–E7 of IFRS 1, because they have now served their intended purpose

IFRS 12 Disclosure of Interests in Other Entities

Clarified the scope of the standard by specifying that the disclosure requirements in the standard, except for those in paragraphs B10–B16, apply to an entity’s interests listed in paragraph 5 that are classified as held for sale, as held for distribution or as discontinued operations in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

IAS 28 Investments in Associates and Joint Ventures

Clarified that the election to measure at fair value through profit or loss an investment in an associate or a joint venture that is held by an entity that is a venture capital organisation, or other qualifying entity, is available for each investment in an associate or joint venture on an investment-by-investment basis, upon initial recognition

The amendments to IFRS 1 and IAS 28 are effective for annual periods beginning on or after January 1, 2018 and the amendment to IFRS 12 for annual periods beginning on or after January 1, 2017.

Review the press release on the IASB'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.