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Annual improvements — 2010-2012 cycle

Date recorded:

The IASB published its Exposure Draft (ED) Annual Improvements to IFRSs 2010–2012 Cycle (ED/2012/1) in May 2012, which proposed a total of 11 amendments to Standards. The comment period ended on 5 September 2012 and the IASB received 84 comment letters.

At its meeting in June 2013, the IASB discussed and agreed a sweep issue that had been raised during the drafting of the final amendment to IFRS 2 Share-based Payment. Subject to this matter, the 2010–2012 Cycle of Annual Improvements to IFRSs would contain eight amendments (detailed below) and amendments to the Basis for Conclusions of IFRS 13 Fair Value Measurement.

  • IFRS 3 Business Combinations—Accounting for contingent consideration in a business combination;
  • IFRS 8 Operating Segments—Aggregation of operating segments;
  • IFRS 8 Operating Segments—Reconciliation of the total of the reportable segments’ assets to the entity’s assets;
  • IFRS 13 Fair Value Measurement—Short-term receivables and payables;
  • IAS 16 Property, Plant and Equipment—Revaluation method—proportionate restatement of accumulated depreciation;
  • IAS 38 Intangible Assets—Revaluation method—proportionate restatement of accumulated depreciation; and
  • IAS 24 Related Party Disclosures—Key management personnel.

All of these issues were discussed at the Interpretations Committee and staff presented a summary of the amendments, taking into account modifications resulting from the comment letter analysis and the discussions of the Interpretations Committee and the IASB.

Questions proposed to the Board:

1. Does the IASB agree that the amendments to be finalised as part of the 2010–2012 Cycle of Annual Improvements to IFRSs meet the criteria given in the updated Due Process Handbook for Annual Improvements to IFRSs?

In January 2013, the Trustees approved the updated IASB and IFRS Interpretations Committee Due Process Handbook (the ‘updated Due Process Handbook’). The proposals in the ED, however, were assessed against the previous version of the Due Process Handbook. The criteria for deciding if an issue is addressed by amending Standards within an annual improvement is 

  • One or both of the following characteristics must be present:
    • clarifying the wording
    • correcting relatively minor unintended consequences, oversights or conflicts between existing requirements of Standards
    • Annual Improvements should be well-defined and narrow in scope.

Staff are of the opinion the final amendments satisfy the annual improvement criteria.

Members agreed with staff recommendations here. A board member raised his concern around the inconsistency with regards to IFRS 8 and are there any plans to address issues around segmentation presentation. Staff have identified a number of projects that include this topic that will be brought to the board at a later date. Another board member discussed that the issue with segmentation is a more short term issue but there is a more long term general issue about the amount of guidance given from a disclosure perspective which staff should also consider.

Does the IASB agree that the amendments to be finalised as part of the 2010–2012 Cycle of Annual Improvements to IFRSs do not need to be re-exposed before finalisation?

The updated Due Process Handbook includes the criteria by which the IASB assesses whether the proposals can be finalised or whether they should be re-exposed. Staff propose the final amendments as part of the 2010- 2013 Cycle of Annual improvements to IFRS, as discussed above, should be finalised without re-exposure.

There were 3 substantial issues the ISAB identified and tentatively decided to proceed with two outside the cycle of Annual improvements to IFRSs. These two were ‘IAS 1 Presentation of Financial Statements—Current/non-current classification of liabilities’ and ‘12 Income Taxes—Recognition of deferred tax assets for unrealised losses’.

For the proposed amendment ‘IAS 7 Statement of Cash Flows—Interest paid that is capitalised’, the substantial issue resulted in the IASB’s tentative decision not to proceed with the proposed amendment at all.

Members agreed that the amendments to be finalised as part of the 2010–2012 Cycle of Annual Improvements to IFRSs do not need to be re-exposed before finalisation.

2. Does the IASB agree with changing the mandatory effective date of the amendments to 1 July 2014?

The updated Due Process Handbook requires that the mandatory effective date is set so that jurisdictions have sufficient time to incorporate the new requirements into their legal systems and those applying IFRS have sufficient time to prepare for the new requirements. Annual Improvements are by definition clarifying or correcting in nature, well-defined and sufficiently narrow in scope. Consequently, staff think that a period of at least six months between issuing the final amendments and the mandatory effective date is sufficient.  Taking into consideration various discussions previously had, and the IASB’s tentative decision in May 2013 to no longer link the mandatory effective date of the proposed amendment to IFRS 3 to the mandatory effective date of IFRS 9, staff propose to change the mandatory effective date for the amendments to 1 July 2014.

Members agreed with Staff on the effective date to be 1st July 2014.

3. Is the IASB satisfied that all required due process steps applicable so far have been complied with?

The staff paper included a summary of the due process steps taken since publishing the ED. Staff used the Due Process Protocol ‘Finalisation of a Standard, Practice Guidance or Conceptual Framework chapter’ that is consistent with the updated Due Process Handbook. 

Members were satisfied all the required due process steps applicable had been complied with.

4. Does the IASB agree that we can proceed with the drafting and the balloting of the final amendments?

Members agreed for staff to proceed with the drafting and balloting of the final amendments.

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