The following is a summary of the revised work plan:

• Financial instruments:
  • Effective date of IFRS 9 - expected finalisation by end of calendar 2011
  • Impairment - confirmation of re-exposure, now due in the first half of 2012 (deferred from possible issue in Q4 2011)
  • Macro hedge accounting - an exposure draft on macro hedge accounting now due in first half of 2012 (deferred from possible issue in Q4 2011), finalisation of general hedge accounting project remains first half of 2012
  • General hedge accounting - an exposure draft on macro hedge accounting now due in first half of 2012 (deferred from possible issue in Q4 2011), finalisation of general hedge accounting project remains first half of 2012
  • Offsetting - finalised amendments to IFRS 7 and IAS 32 remain expected by end of 2011
• Other core projects– no changes to expected timing for:
  • Leases - re-exposure in first half of 2012, finalised IFRS in the second half of 2012)
  • Revenue recognition - re-exposure in calendar 2011, finalised IFRS in the second half of 2012
  • Insurance contracts - review draft or re-exposure in the first half of 2012, no target date set for a finalised IFRS
• Post-implementation reviews– the IASB has announced indicative timing for the following reviews:
  • IFRS 8 Operating Segments - review initiated in 2011, target completion in 2012
  • IFRS 3 Business Combinations - review to be initiated in 2012
• Agenda Consultation - decisions on the agenda expected to be made in 2012
• Other projects - no updates in relation to annual improvements (although the 2009 annual improvements are expected to be finalised in the first half of 2012), IFRS 1 amendments for government loans, or the exemption from consolidation for investment entities.

Click for IASB work plan as of 31 October (link to IASB website). We have updated our project pages to reflect the updated work plan and other known developments.

The aim of the Inquiry was to identify lessons for companies and auditors addressing going concern and liquidity risks and to recommend measures, if any, which are necessary to improve the existing reporting regime and related guidance for companies and auditors. The Panel recommends that for all businesses the going concern assessment should focus not only on short term liquidity risks but also on solvency risks that could threaten the company's survival over the business cycle or that could cause significant damage to the community and environment.

The terms of reference for the inquiry included consideration of whether the going concern and liquidity risk disclosures required by IFRS provided timely and relevant information for all stakeholders. The Panel's preliminary report makes a number of observations on IFRS related matters, including:

• The Panel agrees and believes that the indicative minimum review periods set out in IFRS and UK GAAP are more relevant to considering the period over which detailed budgets and forecasts should be prepared than to the period over which other aspects of a going concern review should extend (particularly that 'stress tests' should be applied considering relevant economic outlook and business cycles)
• Investors and quite a lot of others have raised questions about the suitability of IFRS accounts as a basis for assessing solvency - noting views such as in the finance sector the regulatory capital assessment rather than the IFRS accounts is the better starting point, that an IFRS balance sheet isn't that useful for assessing capital adequacy because it lacks prudence, or that the use of IFRS accounts requires adjustments for prudence to ensure that the measure of capital held is robust and able to withstand a reasonable range of stresses
• Capital management is important to investors — they want to understand how this is done, through the eyes of management. The IAS 1 disclosures are not generally providing what they want, though they could in principle be used to do so
• The going concern assessment is a forward looking process - whilst it builds on past data, it also includes looking at possible outcomes not yet experienced. This "does not sit well with the IFRS accounts which are essentially backwards looking"
• The incurred loss model is widely accepted to have been inappropriate and is being addressed. A number of respondents and commentators suggested that "there was a sense that IFRS engendered a compliance mentality and that a more principles based approach was appropriate"
• One area of concern to regulators is the inconsistency they observed in valuations of the same financial instruments using different models and there are "inherent issues with point estimates".

Click for:

• UK FRC announcement (link to the UK FRC website)
• Our United Kingdom country page.

 

The IASB intends to publish the traditional BV (the "Red Book") in the first quarter of 2012. The Blue Book will sell for £60 plus shipping (academic, developing country, and volume discounts apply). You will find more information and ordering details here.

We have posted Deloitte observer notes from the meeting (click through for direct access to the notes):

Tuesday, 1 November 2011

• Leases (IASB-FASB)
  • Lessor accounting: Disclosures
  • Transition: Other considerations
  • Transition: Sale and leaseback

 

Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers for the entire meeting. The next IASB meeting is scheduled to occur on 7 November 2011.

The CFA Institute undertook a study regarding the quality of existing financial instruments risk disclosures, addressing credit, liquidity, market and hedging activities risk disclosures under IFRS 7. The report proposes general and specific recommendations for improving these risk disclosures, including:

• Executive summary. An 'Executive Summary' of risk disclosures should be provided outlining details of entity-wide risk exposure and effectiveness of risk management mechanisms across different risk types considered to be significant for specific business models
• Differentiated market risk categories. The components of market risk should be differentiated into more specific categories (i.e. interest rate, foreign currency and commodity) and treated with the same level of distinctiveness for reporting purposes as is the case with credit and liquidity risk under IFRS 7
• Improved alignment of qualitative and quantitative disclosures. Qualitative disclosures should better explain quantitative measurements
• Standardisation and assurance of quantitative disclosures. Standardised and adequately audited quantitative disclosures are required to improve comparability
• Improved and integrated presentation of disclosures. Integrated, centralised and tabular risk disclosures should be provided. For example, the report recommends disclosure of: a) the integration of risk exposure and risk management information; and b) interaction of different risk factors
• Areas for improvement of specific risk disclosures. These include the need to provide: a) informative entity-specific qualitative disclosures; b) improved and more meaningful sensitivity analysis; c) sufficient disaggregation to inform on respective risk exposures; d) full disclosure of risks associated with counterparties; and e) risk information related to off-balance sheet exposures
• Communication and not mere compliance. The report states "a principles-based definition of disclosure is not the antidote to fears about boilerplate and uninformative disclosures".

Part 2 of the report will be released at a later time and will provide a user perspective on the disclosures of derivatives and hedging activities.

Click for access to the report (link to CFA Institute website).