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EFRAG suggests macro hedging option

23 Mar 2013

The European Financial Reporting Advisory Group (EFRAG) has submitted to the IASB a letter outlining the results of its analysis of the impact on macro hedge relationships of the consequential amendments proposed by the Review Draft (RD) 'IFRS 9 General hedge accounting' on existing macro hedge relationships under IAS 39, which was published by the IASB in September 2012. EFRAG suggests an option of either following IAS 39 or IFRS 9.

In September 2012, EFRAG initiated a field test together with the ANC, ASCG, FRC and OIC on the Review Draft general hedge accounting. The results of the field test were communicated to the IASB in January 2013 together with the announcement that EFRAG would be undertaking a further consultation regarding macro hedge accounting, which was initiated by publishing a draft comment letter shortly after. EFRAG has now submitted the results of this second consultation to the IASB.

The input received from constituents in this supplementary consultation led to the following results:

  • Significant uncertainty exists as to whether existing IAS 39 compliant portfolio hedge accounting practices will continue to be possible under the Review Draft.
  • There is a significant risk that entities will be required to change their IAS 39 compliant portfolio hedge accounting practices twice.
  • The term ‘macro hedging' would need to be defined as part of the development of the discussion paper on macro hedging.
  • The respondents in the field test confirmed that the Review Draft introduces important improvements in the hedge accounting requirements.

EFRAG has considered several approaches including those suggested by constituents on how the above issues might be best addressed and has come to the conclusion that the most straightforward and practical way of ensuring that existing IAS 39 compliant portfolio hedging practices would not be affected by the Review Draft would be to provide entities a simple choice to either (1) retain IAS 39 hedge accounting for all of their hedges until either they decide to apply IFRS 9 irreversibly or the project on macro hedging is completed or (2) to adopt irreversibly the requirements of the Review Draft as drafted (including the exception in paragraph 6.1.3 on portfolio fair value hedges of interest rate risk).

Please click for access to the full comment letter on the EFRAG website.

March 2013 IASB meeting notes — Part 3 (concluded)

22 Mar 2013

The IASB's March meeting was held in London on 19-21 March 2013. We have posted Deloitte observer notes from Wednesday's session on Conceptual framework (presentation and disclosure; elements of financial statements; capital maintenance).

Click through for direct access to the notes:

Wednesday, 20 March 2013

  • Conceptual framework (IASB)
    • Presentation and disclosure;
    • Elements of financial statements
    • Capital maintenance

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

Deloitte comment letter on equity method ED

22 Mar 2013

Deloitte's IFRS Global Office has submitted a letter of comment responding to the IASB exposure draft 'Equity Method: Share of Other Net Asset Changes'. While we welcome the initiative taken by the IASB to address the gap in the guidance on the application of the equity method of accounting, we do not agree with the proposed solution.

We recommend that any solution should based off the current practice which is consistent with the approach tentatively agreed upon by the IFRS Interpretations Committee. The IFRIC approach states that indirect increases in ownership interest are substantially different from indirect decreases in ownership interest and that both should be accounted for in a manner consistent with a direct change in ownership interest.

If the Board is not in favour of this approach and needs a shorter-term solution, we recommend an approach that favours recognition of the investor's share of equity transactions in the investor's profit or loss to recognition in the investor's equity.

More information and the full Deloitte comment letter can be found here.

March 2013 IASB meeting notes — Part 2 (continued)

21 Mar 2013

The IASB's March meeting is being held in London on 19-21 March 2013. We have posted Deloitte observer notes from Thursday's sessions on IAS 19 (defined benefit plans: employee contributions), annual improvements 2010-2012, IAS 1 (assessment of going concern), revenue recognition, and put options written on non-controlling interests.

Click through for direct access to the notes:

Thursday, 21 March 2013

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

IFRS Foundation appoints Trustee from Saudi Arabia

21 Mar 2013

The IFRS Foundation has announced the appointment of Dr Abdulrahman Al-Humaid as a Trustee of the IFRS Foundation. He is the first Trustee from the Middle East region.

Dr Al-Humaid chairs the Committee for Adopting International Accounting Standards of the Saudi Organization of Certified Public Accountants (SOCPA). He was Chairman of the SOCPA's Accounting Standards Committee from 1996 until 2002.

Saudi Arabia requires IFRSs for banking and insurance companies, and is considering full convergence. The SOCPA has approved an IFRS transition plan that will require listed entities to report using the "national standards that are closely converged with full IFRSs." Additionally, unlisted entities will be required to report under IFRS for SMEs as adopted in Saudi Arabia. A specific date for the IFRS transition plan has not yet been established.

Dr Al-Humaid’s appointment begins with immediate effect. His term will expire on 31 December 2015 and can be renewed once for a further three-year period.

Please click for the IFRS Foundation press release on the IASB website.

March 2013 IASB meeting notes — Part 1

20 Mar 2013

The IASB's March meeting is being held in London on 19-21 March 2013. We have posted Deloitte observer notes from Tuesday's sessions on IAS 41 (bearer biological assets), IFRS for SMEs, conceptual framework, and fair value measurement.

Click through for direct access to the notes:

Tuesday, 19 March 2013

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

Deloitte comment letter on impairment disclosures ED

19 Mar 2013

Deloitte's IFRS Global Office has submitted a letter of comment responding to the IASB Exposure Draft 2013/1 'Recoverable Amount Disclosures for Non-Financial Assets'.

We support the amendments to IAS 36 proposed in the exposure draft. However, we offer some recommendations for drafting changes to add clarity.

Click to access the comment letter.

Philippe Maystadt appointed as Special Advisor to enhance EU’s role in promoting accounting standards

19 Mar 2013

European Commissioner for Internal Market and Services Michel Barnier has appointed Philippe Maystadt as Special Advisor. The primary role as Special Adviser will be to enhance the EU’s part in promoting high-quality accounting standards.

Philippe Maystadt, a former President of the European Investment Bank, will be responsible "to reinforce the EU's contribution to [IFRSs], and to improve the governance of the institutions developing these standards".

In particular, he will "focus on a review of the governance of EU bodies in the field of financial reporting and accounting (the European Financial Reporting Advisory Group (EFRAG) and the Accounting Regulatory Committee)." Further, his role as Special Advisor will include (1) advising the commission when it endorses new IFRSs and (2) recommending improvements to the current system, in particular, bringing together different viewpoints from the EU to develop a “single EU voice”.

Mr Maystadt’s report on his review will be presented to Commissioner Barnier and Finance Ministers during the November 2013 ECOFIN Council meeting.

More information is available on the EU website.

ASAF membership announced

19 Mar 2013

The IFRS Foundation has announced the membership of the newly founded Accounting Standards Advisory Forum (ASAF) that is designed to formalise and streamline the relationships between the IFRS Foundation and IASB with the global standard-setting community, in order to bring important regional perspectives to the IASB’s technical work and to offer feedback on the most important issues of the day.

The ASAF is comprised of 12 members and a non-voting chair. The following members have been appointed today (the two 'world at large' seats were given to the Asia/Oceania region and Europe):


Geographical region ASAF member
Africa South African Financial Reporting Standards Council, supported by the Pan African Federation of Accountants (PAFA)
Americas Group of Latin American Standard Setters (GLASS), represented by the Brazilian Committee of Accounting Pronouncements
Canadian Accounting Standards Board
United States Financial Accounting Standards Board (FASB)
Asia/Oceania Accounting Standards Board of Japan (ASBJ)
Australian Accounting Standards Board (AASB)
Chinese Accounting Standards Committee (CASC)
Asia Oceania Standard Setters Group (AOSSG), represented by the Hong Kong Institute of Certified Public Accountants (HKICPA)
Europe Accounting Standards Committee of Germany (ASCG)
European Financial Reporting Advisory Group (EFRAG)
Spanish Accounting and Auditing Institute
United Kingdom Financial Reporting Council (FRC)

The first meeting of the ASAF will be held on 8 and 9 April 2013 in London.

The IASB points out that the ASAF will replace multiple Memoranda of Understanding (MoU) it has previously entered into with national accounting standard-setters in Brazil, China, Japan and the United States. These will be replaced by the single agreement to be signed by all ASAF members, and accommodating regional standard-setting bodies (AOSSG, EFRAG, GLASS and PAFA) within that arrangement. Nevertheless, the IFRS Foundation will continue to facilitate through various mechanisms a dialogue with the broader international accounting standard-setting community.

Please click for IFRS Foundation press release (link to IASB website) and more information about the ASAF on IAS Plus.


    IIRC publishes background papers in lead up to consultation draft of integrated reporting framework

    18 Mar 2013

    The International Integrated Reporting Council (IIRC) has published on its website 'background papers' on two aspects of integrated reporting (stylised as '<IR>'): the concepts of 'capitals' and 'materiality'. The papers are a precursor to the publication of a consultation draft of the IIRC's Integrated Reporting Framework, which is expected in mid-April 2013.

    The IIRC's intention to publish the papers was signalled earlier in the year, and have the objective of providing additional background information for stakeholders to assist them in responding to the forthcoming consultation draft.  The papers have been prepared by the IIRC's Technical Collaboration Groups (TCGs) and do not necessarily reflect the views of the IIRC or the member organisations from which the participants of the TCGs were sourced.

    Both background papers also are not designed as authoritative documents, but as guides and information.  Accordingly, they outline a number of matters where debate is continuing, and also outline issues and areas for further development.


    The preparation of the background paper on capitals was lead by the Association of Chartered Certified Accountants (ACCA) and the Netherlands Institute of Chartered Accountants (NBA).

    The paper explores the concept of multiple capitals being incorporated into the consultation draft of the <IR> framework by the IIRC.  Largely consistent with the IIRC's September 2011 discussion paper, the background paper discusses various 'capitals' that "represent stores of value that are the basis of an organization’s value creation", namely: financial capital, manufactured capital, intellectual capital, human capital, social and relationship capital, and natural capital.  Some of these were described using different terminology in the discussion paper.

    The paper identifies a number of extracts from academic and professional literature that define and discuss each of the capitals considered by the IIRC, and also summarises responses to the discussion paper.  It also outlines examples of the interrelationships between the capitals, e.g. an investment in better training for employees will decrease financial capital but increase human capital.

    Some of the observations made in the background paper include:

    • The TCG considered whether the term "resources and relationships" should be used instead of "capitals" but supported the continued use of "capitals"
    • The concepts of multiple capitals is new and will evolve progressively over time, including through the IIRC's pilot programme
    • It is not the objective of <IR> to require the measurement of all capitals, and in some cases "uses of and effects on the capitals are best (and in some cases can only be) reported on in the form of narrative rather than through metrics"
    • Capitals an organisation uses or affects may be owned by the organisation (e.g. intellectual property), owned by others, or may not be owned at all in a legal sense (e.g. access to unpolluted air)
    • There is debate about the relationship between intellectual capital, human capital, and social and relationship capital.  The TCG concluded that bringing together three capitals into one would not help understanding of the capitals model, but did recommend some modification to the description of 'intellectual capital'
    • A comparison and analysis of the differences between the <IR> framework and other notions of capital is also provided, including of the IASB's Conceptual Framework and practices in sustainability reporting under the Global Reporting Initiative (GRI) guidelines.

    The background paper contains a useful summary of the matters discussed, including recommended categorisation and changes to the descriptions of the capitals.


      The preparation of the background paper on Materiality was lead by the American Institute of Certified Public Accountants (AICPA).

      The background paper explores the concepts of materiality for purposes of developing an integrated reporting framework, covering the following:

      • Defining materiality for < IR > and distinguishing it from materiality as it relates to financial reporting and sustainability reporting
      • Discussing the importance of materiality
      • Discussing the application of the materiality determination process in <IR>
      • Discussing disclosure considerations in an integrated report
      • Discussing potential constraints in the current environment.

      The paper contains the following definition:

      For the purposes of < IR >, a matter is material if it is of such relevance and importance that it could substantively influence the assessments of providers of financial capital with regard to the organization’s ability to create value over the short, medium and long term. In determining whether or not a matter is material, senior management and those charged with governance should consider whether the matter substantively affects, or has the potential to substantively affect, the organization’s strategy, its business model, or one or more of the capitals it uses or affects.

      The definition has been derived in the context of integrated reports being "principally aimed at providers of financial capital in order to support their financial capital allocation assessment", particularly those who take a longer term view of an organisation's performance.

      The paper outlines three steps in the process of determining whether a matter is material: (1) identify relevant matters for inclusion in the integrated report (2) assess the importance of the matter and (3) prioritise material matters.

      A further paper on the 'business model' concept is also expected in due course.

      Click for access to the background papers (link to the IIRC website).

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