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2012

IFRS compliance, presentation and disclosure checklist for 2012

17 Dec 2012

Deloitte's IFRS Global Office has published the IFRS Compliance, Presentation and Disclosure Checklist for 2012. The checklist summarises the recognition, measurement, presentation and disclosure requirements set out in IFRSs in issue as of 30 June 2012.

IFRSs include Standards as issued by the International Accounting Standards Board (IASB) and the former International Accounting Standards Committee and Interpretations as issued by the IFRS Interpretations Committee and the former Standing Interpretations Committee. It may be used as a guide to assist in considering compliance with the requirements of the IFRSs. It is not a substitute for understanding such pronouncements and seeking the advice of a qualified professional adviser.

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Deloitte comment letter on the proposal to establish an Accounting Standards Advisory Forum

17 Dec 2012

Deloitte’s IFRS Global Office has submitted a letter of comment to the IFRS Foundation on its Invitation to Comment 'Proposal to Establish an Accounting Standards Advisory Forum'.

We support the proposal to establish an Accounting Standards Advisory Forum as being an appropriate means to utilise the technical skills and experience that exist in national and regional standard-setting bodies in the development and implementation of IFRSs. We encourage the Trustees to establish the Forum as quickly as possible.

We see the Forum as assisting the IASB to accomplish two distinct but related aims: the development of high-quality financial reporting standards; and assist in facilitating the incorporation/ endorsement of such standards without modification in the financial reporting framework of individual jurisdictions. We suggest establishing an objective for the Forum that clearly identifies these two aims.

For the composition of the ASAF we suggest engaging a network of national standard-setters, regional groups of standard-setters and bodies involved with standard-setting from those jurisdictions that have incorporated IFRSs into their financial reporting framework and those considering such an action. However, we do not fully agree with the form the ASAF is designed to have:

Whilst we recognise the desire of the IFRS Foundation to make the Forum an efficient body, we think that it is possible to achieve efficiency with a body of more than 12 members. As such, we do not support the explicit size and distribution of seats proposed in the Invitation to Comment, which we see as overly mechanistic and promoting (wittingly or unwittingly) a perception of exclusivity—something we see as undesirable.

Also, we suggest appointing co-chairs (one from the IASB and one from the other Forum members) as it would be a visible indicator of the collaborative nature of the Forum. We also think that Forum member organisations should be allowed to send other representatives than the designated representative if this seems helpful for particular technical discussions of the Forum.

We also point out that it is unclear who will appoint the Forum. The Invitation to Comment was issued by the IFRS Foundation Trustees, but is silent on whether the Trustees or the IASB will appoint members.

Click for access to the comment letter.

Emerging Economies Group meeting focuses on common control transactions

17 Dec 2012

The IASB has publicly released a communiqué from a meeting of the Emerging Economies Group (EEG) held in Sao Paulo, Brazil on 4-5 December 2012. The main topic discussed at the meeting was transactions under common control, and the meeting also included brief discussions on hybrid financial instruments and impairment of financial assets.

Delegates attended the meeting from Argentina, Brazil, China, India, Indonesia, Korea, Mexico, Russia and South Africa.  The IASB was represented by Mr. Ian Mackintosh (IASB vice-chair), Mr. Amaro Gomes (IASB board member) and Mr. Wayne Upton (IASB Director of International Activities and Chair of the IFRS Interpretations Committee).

The EGG is designed to enhance the voice of emerging economies in the process of setting IFRSs, including discussing specific accounting issues from emerging economies’ perspectives.

Whilst the communiqué does not provide a lot of detail on the discussions around the various issues, the following papers have also been made available on the IASB's website, and provide additional background information (bolded links are to the IASB's website):

  • Transactions under common control - an in-depth paper prepared by the Korean Accounting Standards Board (KASB) discussing various accounting issues arising from both business combinations and other transactions involving parties under common control, including the definition and boundaries of common control transactions, types of common control transactions, and accounting for such transactions in consolidated and separate financial statements
  • Hybrid/compound financial instruments - a paper prepared by the Brazilian Accounting Standards Board outlining issues identified in classifying particular types of hybrid financial instruments commonly issued in Brazil and other emerging economies under IAS 32 Financial Instruments: Presentation
  • Impairment of financial instruments - another paper prepared by the Brazilian Accounting Standards Board outlining developments  in the IASB's project on financial instrument impairment, including general and specific issues arising in emerging economies of adopting the proposed 'three bucket' model.

The meeting also included general discussion on activities of the EEG and other matters.

The next EEG meeting will be held in Korea in May 2013.  Click for EEG Communiqué (link to IASB website).

Latest IASB 'Investor Perspectives' published

16 Dec 2012

The International Accounting Standards Board (IASB) has released another edition in its 'Investor Perspectives' series. In this edition, Patrick Finnegan (member of the IASB) discusses the proposed limited amendments to the classification and measurement requirements in IFRS 9 'Financial Instruments'.

The following topics are discussed:

  • The IASB's rationale for replacing IAS 39 Financial Instruments: Recognition and Measurement
  • The current classification and measurement requirements of IFRS 9
  • The reasons for proposing changes to IFRS 9
  • Details of the proposed limited scope amendments to IFRS 9 outlined in ED/2012/4 Classification and Measurement: Limited Amendments to IFRS 9, including the proposed 'fair value through other comprehensive income' (FVOCI) category

Click to view Patrick Finnegan: IFRS 9—Limited Amendments, Significant Improvements (link to IASB website). All Investor Perspectives are archived on the IASB's website.

Additional notes from the December 2012 IASB meeting

14 Dec 2012

The IASB's December meeting is being held in London on 13-17 December 2012, some of it a joint meeting with the FASB. We have posted Deloitte observer notes from Thursday's sessions on IAS 12 and IFRIC update and Friday's sessions on Macro hedge accouting and Impairments.

Click through for direct access to the notes:

Thursday, 13 December 2012

Friday, 14 December 2012

You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

EFRAG draft comment letter on acceptable methods of depreciation and amortisation

14 Dec 2012

The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment letter on the IASB's Exposure Draft ED/2012/5 'Clarification of Acceptable Methods of Depreciation and Amortisation (Proposed Amendments to IAS 16 and IAS 38)' which was published on 4 December 2012.

EFRAG supports efforts to clarify current requirements on using revenue-based methods of depreciation and amortisation. However, EFRAG noted a contradiction to be addressed by the IASB:

[W]e believe that the IASB should remove the seeming contradiction between the standard and the Basis for Conclusions by reflecting the reasoning — that there are circumstances where revenue might be an appropriate proxy for the use of an asset — presented in paragraphs BC3 to BC5 in the body of the standard.

Click for:

  • EFRAG press release with link to the draft comment letter (link to EFRAG website).
  • Our previous story on the Exposure Draft ED/2012/5 Clarification of Acceptable Methods of Depreciation and Amortisation (Proposed Amendments to IAS 16 and IAS 38).

Comments on the letter are invited by 11 March 2013.

New EFRAG TEG composition as of April 2013 announced

14 Dec 2012

The European Financial Reporting Advisory Group (EFRAG) has announced the composition of the EFRAG Technical Expert Group (TEG) to take effect as of April 2013. Among the three newly appointed members is Andreas Barckow, leader of Deloitte Germany's IFRS Centre of Excellence and member of Deloitte's Global IFRS Leadership Team (GILT).

It is through the TEG that the EFRAG operates. TEG makes its decisions independently of the EFRAG Supervisory Board and all other interests. The 12 voting members are selected from a range of professional and geographical backgrounds from throughout Europe. Members of the EFRAG Technical Expert Group are required to act in the public interest and not to consider themselves as representing sectoral or national interests.

EFRAG's goals pursued through the TEG are:

  • to provide technical expertise to the European Commission concerning the use of IAS/IFRS within Europe,
  • to participate in IASB's standard setting process,
  • to coordinate within the EU the development of views concerning international accounting standards.

In addition to Andreas Barckow, Marios Cosma (Cyprus) and Bill Hicks (UK) were appointed. The existing EFRAG TEG members Gabi Ebbers and Araceli Mora were reappointed. Françoise Flores was reappointed as the EFRAG Chairman.

Please click for the EFRAG press release announcing the appointments and offering comments by Hans van Damme, Acting Chair of the Nominating Committee of the EFRAG Supervisory Board, and Françoise Flores (link to EFRAG website).

    Notes from the December 2012 IASB meeting

    13 Dec 2012

    The IASB's December meeting is being held in London on 13-17 December 2012, some of it a joint meeting with the FASB. We have posted Deloitte observer notes from Thursday's sessions on conceptual framework.

    Click through for direct access to the notes:

    Thursday, 13 December 2012

    You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

    IASB proposes clarifications on when unrealised profits are eliminated when equity accounting

    13 Dec 2012

    The International Accounting Standards Board has published ED/2012/6 'Sale or Contribution of Assets Between and Investor and its Associate or Joint Venture (Proposed Amendments to IFRS 10 and IAS 28)'. The Exposure Draft proposes to clarify when unrealised profits and losses on transactions between an investor and an associate should be fully recognised: requiring full recognition in relation to transactions involving businesses, but requiring partial elimination in the case of asset sales.

    The Exposure Draft proposes amendments to both IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures (2011). No amendments are proposed to IAS 27 Consolidated and Separate Financial Statements and IAS 28 Investments in Associates as these pronouncements will be superseded from 1 January 2013, i.e. before the amendments proposed in the Exposure Draft can be finalised.

    The matter dealt with in the proposed limited scope amendment initially arose from a request to the IFRS Interpretations Committee to clarify the meaning of 'non-monetary asset' used in SIC-13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers and IAS 28 (2011) (the requirements of SIC-13 were incorporated into this standard).

    The Committee's consideration of this issue subsequently broadened to the apparent conflict between the requirements of SIC-13, which requires the elimination of unrealised profits on the contribution of assets to a joint venture, and IFRS 10/IAS 27 (2008) which require the full recognition of a gain/loss on loss of control of a subsidiary.

    In developing the proposed amendment, the Committee and IASB focused on the conceptual basis considered when developing the requirements of IFRS 3 Business Combinations, which considers the gaining or losing of control as a significant economic event that triggers remeasurement and gain/loss recognition.

    Because those requirements were developed in the context of transactions involving businesses, the proposed amendments in the Exposure Draft propose to require full gain or loss recognition for transactions between investors and associates only where a sale of contribution of assets constitutes a business.

    The requirement to fully recognise gains/losses in transactions involving businesses would apply regardless of the legal form of the transaction in which such a business was transferred, e.g. through the sale of a group of assets and liabilities, through the sale and purchase of an investment in a subsidiary, or in some other manner.  Existing guidance on 'linked transactions' in IFRS 10 would be explicitly extended to these types of transactions as well.

    The Basis for Conclusions accompanying the proposed amendments notes that consideration was given as to whether all sales and contributions between an investor and an associate should give rise to fully recognised gains and losses as "the most robust [alternative] from a conceptual point of view".

    However, because the premise behind the proposals for full recognition noted above are linked to the existence of a business and the IASB's considerations in the business combinations project, this proposal was considered too broad for a narrow scope amendment as it would involve multiple cross-cutting issues.  These issues might include the conceptual basis of the equity method, i.e. whether it is considered a 'one line consolidation' or a 'measurement basis'.

    Accordingly, the exposure draft would retain and clarify the existing requirements for partial gain recognition for sales or contributions of assets that do not constitute a business.

    The amendments, if finalised as proposed, would be applied on a prospective basis only, on the basis of the discrete and non-recurring nature of affected transactions and associated cost-benefit grounds.

    ED/2012/6 is open for comment until 23 April 2013.  Click for IASB press release (link to IASB website).

    IASB publishes limited scope amendment proposals for IFRS 11

    13 Dec 2012

    The International Accounting Standards Board has published ED/2012/7 'Acquisition of an Interest in a Joint Operation (Proposed Amendment to IFRS 11)', the latest in a series of proposed narrow scope amendments to IFRSs. The Exposure Draft proposes to amend IFRS 11 'Joint Arrangements' to clarify that a joint operator accounts for the acquisition of an interest in a joint operation which is a business by applying IFRS 3 'Business Combinations' and other relevant standards.

    IFRS 11, and IAS 31 Interests in Joint Ventures which it replaces from 1 January 2013, currently do not provide specific guidance on how a joint operator should account for the acquisition of an interest in a joint operation where the activity of the joint operation constitutes a business.

    As a result, diversity in practice has arisen, with accounting outcomes depending on whether the transactions is considered a business combinations or acquisition of groups of assets.  The differences in treatment between the two approach include the recognition or non-recognition of goodwill and deferred taxes, and the capitalisation or expensing of acquisition-related costs.

    The issue was initially considered by the IFRS Interpretations Committee, which considered proposing an annual improvements to IFRS 3 or developing application guidance, before deciding on proposed amendments to IFRS 11.

    The amendments would clarify that IFRS 3 and other relevant standards would be applied to acquisitions of interests in joint operations that are businesses.  Accordingly, such acquisitions would be accounted for using the acquisition method under IFRS 3, to the extent of the joint operator's interest in the joint operation, resulting in:

    • measuring most identifiable assets and liabilities at fair value
    • expensing acquisition-related costs (other than debt or equity issuance costs)
    • recognising deferred taxes
    • recognising any goodwill or bargain purchase gain.

    The amendments would apply to the acquisition of an interest in an existing joint operation and also to the acquisition of an interest in a joint operation on its formation, unless the formation of the joint operation coincides with the formation of the business.  No specific guidance is provided in relation to the acquisition of an additional interest in a joint operation in which the acquirer already has an interest.

    The ED also proposes a consequential amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards to extend and clarify the operation of the business combination exemptions in Appendix C, so that they include past acquisitions of interests in joint operations in which the activity of the joint operation constitutes a business.

    The amendments, if finalised as proposed, would be applied on a prospective basis only, in order to avoid the use of hindsight.

    ED/2012/7 is open for comment until 23 April 2012.  Click for IASB press release (link to IASB website).

    Correction list for hyphenation

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