Latest IASB work plan tweaks delivery timeframes for a number of projects

31 May, 2013

The International Accounting Standards Board (IASB) has updated its work plan, following its recent meeting and the issue of a number of pronouncements. The timing of expected milestones have been deferred or clarified in relation to general hedge accounting, annual improvements and other narrow scope projects. Following the issue of the re-exposed leases proposals, the work plan formally schedules the expected commencement of redeliberations in the fourth quarter of 2013.

Summary of changes

Details of the changes are:

Updates to major projects

Updates to narrow-scope projects

  • Annual improvements 2010-2012 — target date for the final amendments arising from this cycle has been moved to the fourth quarter of 2013 (previously third quarter of 2013).  This now means that all outstanding annual improvements cycles will have their next due process document issued in the fourth quarter (i.e. finalised amendments for the 2010-2012 cycle and 2011-2013 cycle, and an exposure draft on the 2012-2014 cycle)
  • IAS 1 – Going concern disclosures — exposure draft is now expected in the fourth quarter of 2013 (previously third or fourth quarter of 2013)
  • IFRS 13 – Unit of account — target date for the exposure draft is now the third quarter of 2013 (previously second quarter of 2013)

Projects where due process documents are expected in the second quarter include an exposure draft on insurance contracts, a discussion paper on the conceptual framework project, a published report on the post-implementation review of IFRS 8 and finalised amendments on the novation of derivatives.  In addition, an exposure draft of proposed amendments to IAS 41 Agriculture on bearer plants is expected to be issued in the second or third quarter of 2013.

Click for IASB work plan dated 30 May 2013 (link to IASB website). We have updated our project pages to reflect the updated work plan and other known developments.

Updated EFRAG endorsement status report

30 May, 2013

The European Financial Reporting Advisory Group (EFRAG) has updated its report showing the status of endorsement, under the EU Accounting Regulation, of each IFRS, including standards, interpretations, and amendments. The latest report reflects the publication of 'Recoverable Amount Disclosures for Non-Financial Assets' (Amendments to IAS 36) by the IASB.

On 29 May 2013, the IASB published amendments to IAS 36 which provided guidance to address disclosure about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. The EFRAG has therefore updated its endorsement status report. Endorsement of these of the amendments for application in Europe might be expected in the first quarter of 2014.

Please click for the EFRAG Endorsement Status Report as of 30 May 2013.

Agenda for upcoming IFRS Advisory Council meeting

30 May, 2013

The IFRS Advisory Council is meeting in London on 10-11 June 2013. The agenda for the meeting has recently been made available. Topics to be discussed include the costs and benefits of IFRS adoption, project updates and discussion on various IASB projects, an evaluation of the post-implementation review process, the Accounting Standards Advisory Forum (ASAF), and the role and composition of the IFRS Advisory Council.

The full agenda for the meeting (as of 28 May 2013) is summarised below:


Monday, 10 June 2013

Public sessions (09:15-17:30)

  • Welcome and Chairman's preview
  • Overview of the last four months
  • IASB activities - work plan update, project update, implementation, other activities
  • Update on Trustee activities
  • Costs and benefits of IFRS adoption:
    • IFRS country profiles
    • Korean research
    • CERF/AcSB survey
  • Conceptual framework - project update
  • Review of IFRS for SMEs:
    • Project update
    • 'Proportionality' for small/mid-cap public companies
    • Breakout discussions
  • Post implementation reviews
    • Usefulness in IASB/IFRS Foundation meeting its strategic objectives
    • Coordination with FAF on converged standards


Tuesday, 11 June 2013

Public sessions (09:00-15:00)

  • Accounting Standards Advisory Forum (ASAF)
  • Role and composition of the IFRS Advisory Council
    • Workgroup update
    • XBRL overview
    • Should XBRL Advisory Council and IFRS Advisory Council be merged?
    • Other trends and developments that may have a significant impact
  • Financial instruments - classification and measurement
  • Insurance contracts
  • Sum up of discussion


Agenda papers from this meeting have not yet been released, but will be made available on the IASB's website prior to the meeting.  Deloitte observer notes from the meeting will be made available on our agenda page for this meeting.

Agenda for upcoming joint CMAC-GPF meeting

30 May, 2013

Representatives from the International Accounting Standards Board (IASB) will meet with both the Capital Markets Advisory Council (CMAC) and Global Preparers Forum (GPF) in London on Thursday, 13 June 2013. The agenda for the joint meeting has been released. The meeting will consist of a series of discussions and breakout sessions on disclosure, financial performance and leases.

The full agenda for the meeting (as of 28 May 2013) is summarised below:


Thursday, 13 June 2013 (9:30-17:00)

  • Welcome and general IASB/IFRIC Update
  • Disclosures - introduction and breakout session
    • GAAP vs NON-GAAP (totals, subtotals and potential disclosures)
    • Significant accounting policies
    • Detailed disclosure requirements vs. objectives
  • Financial performance - introduction and breakout session
    • The attributes of financial performance
    • What is profit/loss and other comprehensive income (OCI), and is recycling appropriate?
  • Leases - introduction and breakout session
    • Lease accounting: two types of leases
    • Disclosure of lease transactions


Agenda papers from this meeting have not yet been released, but  will be made available on the IASB's website prior to the meeting.

IASB amends IAS 36 regarding recoverable amount disclosures for non-financial assets

29 May, 2013

The International Accounting Standards Board, as a consequential amendment to IFRS 13 'Fair Value Measurement', modified some of the disclosure requirements in IAS 36 'Impairment of Assets' regarding measurement of the recoverable amount of impaired assets. However, one of the amendments potentially resulted in the disclosure requirements being broader than originally intended. The IASB has rectified this through the issue of 'Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36)'.

Exposure Draft ED/2013/1 Recoverable Amount Disclosures for Non-Financial Assets (Proposed amendments to IAS 36) was published on 18 January 2013. The amendments published today result from the proposals of the ED and the feedback received on it.

The amendments to IAS 36:

  • remove the requirement to disclose the recoverable amount of each cash-generating unit (group of units) for which the carrying amount of goodwill or intangible assets with indefinite useful lives allocated to that unit (group of units) is significant when compared to the entity’s total carrying amount of goodwill or intangible assets with indefinite useful lives
  • require an entity to disclose the recoverable amount of an individual asset (including goodwill) or a cash-generating unit for which the entity has recognised or reversed an impairment loss during the reporting period
  • require an entity to disclose additional information about the fair value less costs of disposal of an individual asset, including goodwill, or a cash-generating unit for which the entity has recognised or reversed an impairment loss during the reporting period, including:
    • the level of the fair value hierarchy (from IFRS 13) within which the fair value measurement is categorised
    • the valuation techniques used to measure fair value less costs of disposal
    • key assumptions used in the measurement of fair value measurements categorised within 'Level 2' and 'Level 3' of the fair value hierarchy
  • require an entity to disclose the discount rate used, where an entity has recognised or reversed an impairment loss during the reporting period and recoverable amount is based on fair value less costs of disposal determined using a present value technique (this amendment originated in the 2010-2012 cycle of annual improvements in the exposure draft published in May 2012).

The overall effect of the amendments is to reduce the circumstances in which the recoverable amount of assets or cash-generating units is required to be disclosed, clarify the disclosures required, and to introduce an explicit requirement to disclose the discount rate used in determining impairment (or reversals) where recoverable amount (based on fair value less costs of disposal) is determined using a present value technique.

Constituent comment on the original proposals was overall supportive of the amendments. One notable change from the exposure draft is the removal of the proposed illustrative example, responding to constituent concern about its usefulness and the potential for confusion, and in light of existing examples in IFRS 13. Other constituent comments around inconsistencies in the use 'costs to sell' and 'costs of disposal' have been referred to the IFRS Interpretations Committee for possible consideration as an annual improvement.

The amendments apply on a retrospective basis for annual periods beginning on or after 1 January 2014. An entity may apply the amendments earlier to any period in which it also applies IFRS 13.

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FRC publishes Audit Quality Inspections Annual Report 2012/13

29 May, 2013

The Financial Reporting Council (FRC) has published the Audit Quality Inspection Report for 2012/13 which provides an overview of the audit quality inspection work carried out by its Audit Quality Review (AQR) team. The report provides an assessment of audit quality and also provides key messages that audit firms should pay attention to if they are to improve their overall level of audit quality. The report indicates that there has been an improvement in the overall standard of audit work subject to inspection. However the report also highlights that there has been an increase in the proportion of audits of entities outside of the FTSE 350 as requiring significant improvements. Findings also indicate that there is a need for firms to increase their focus on professional scepticism and the effectiveness of their independence and ethical policies and procedures.

The AQR team monitors the quality of the audits of listed and other major public interest entities and the policies and procedures supporting audit quality at the major firms in the UK.  Detailed findings from the inspection of individual audits showed:

  • There was a significant increase in audits assessed as good with limited improvements required (59% compared with 46% in 2011/2012).
  • There was a reduction in audits assessed as acceptable overall with improvements required (26% compared with 44% in 2011/12).
  • There was an increase in the number of audits assessed as requiring significant improvements (15% compared with 10% in 2011/12).  This increase was attributable to the audit of entities outside of the FTSE 350.

Alongside these key findings, the annual report also provides key messages that audit firms should pay attention to if they are to improve their overall audit quality.  These key areas, identified as requiring improvement are:

Focus on audit quality

  • The annual report notes that firms should have appropriate controls and procedures in place to ensure that efficiencies in audits, largely a result of fee pressure, are not being made at the expense of audit quality.  The annual report identifies that certain firms have pursued “offshoring” of certain audit procedures and questions whether such procedures allow a sufficient level of audit quality to be maintained. 

The need to maintain professional scepticism

  • Findings indicate that initiatives to reinforce professional scepticism are working but more needs to be done to ensure that this is fully embedded within audit procedures and is used in assessing key audit judgements. 

Audits of financial services entities

  • Findings indicate that firms should strengthen their testing in respect of loan loss provisioning and general IT controls. 

Group Audits

  • Findings indicate that where the work for group audits is performed predominantly by component auditors there is generally a lack of control, supervision and review by the group auditor.  The annual report recommends that group auditors are involved at all stages from the initial risk assessment during planning to the review of the component auditor work. 

Auditor independence and ethical issues

  • Findings indicate that firms continue to adopt a boilerplate approach to independence reporting.  Findings also indicate failures in the correct application of ethical procedures.  The annual report recommends that firms should review the adequacy of their independence and ethical procedures and ensure that the training that they provide to all levels of staff is sufficient. 

Audit quality monitoring

  • Findings indicate that the monitoring of internal audit quality may not be as robust as it could be and may be being performed to a lower set of standards and expectations than would be expected from an external provider.  The annual report recommends that firms reconsider the robustness of their monitoring processes and the extent to which they contribute to an improvement in overall audit quality.

The Financial Reporting Council has subsequently published Audit Quality Inspection reports on their website for the 'Big Four' accountancy firms in the UK; Deloitte LLP, Ernst & Young LLP, KPMG LLP and PricewaterhouseCoopers LLP. 

Click for:

FRC press release (link to FRC website)

Audit Quality Inspection Annual Report 2012/13 (link to FRC website)

Audit Quality Inspection Annual Report 'Big Four' (link to FRC website)

IASB releases Feedback Statement on disclosure

28 May, 2013

The International Accounting Standards Board (IASB) has published a Feedback Statement summarising the discussions at a forum hosted by the IASB on financial information disclosure, and outlining its response to the matters raised. The IASB wishes to act as a catalyst for collective action by preparers, regulators, the accounting profession, as well as the IASB, to address ongoing concerns about the quality and quantity of financial reporting disclosure. In its response, the IASB has indicated it will consider a number of initiatives, including narrow scope amendments to IAS 1 'Presentation of Financial Statements', seeking to develop educational material on materiality, and considering a project as part of its research agenda to address broader challenges associated with disclosure.

The disclosure discussion forum was held in London on 28 January 2013 and sought to foster dialogue between preparers, auditors, regulators, users of financial statements and standard-setters. The key objective of the forum was to get a clearer picture of the ‘disclosure problem’ and its causes, and involved around 120 people, mainly from the United Kingdom, but also involving representatives from wider Europe, the United States and Asia-Oceania.

Feedback Statement contains a summary of the discussions, the IASB's response, a summary of work already undertaken on disclosure, and the outcomes of the IASB's survey on disclosure launched in December 2012. The IASB states that the discussion forum makes it clear that users, preparers, standard-setters, auditors and regulators all contribute to the perceived problems about disclosure, and that each of these parties can contribute to improvements.

The Feedback Statement notes some of the steps that the IASB will be asked to consider in the near and medium term to take the lead in improving disclosure, relating to materiality, perceptions existing standards prevent the exercise of judgement, and a more general review of disclosure requirements.

In this regard, the key responses the IASB intends to consider are as follows:

Short term

  • Narrow scope amendments to IAS 1 - this will be considered by the IASB in the second half of 2013, and will look at proposals such as:
    • adding an explanation in IAS 1 similar to more recent standards explaining that too much detail can obscure useful information, i.e. why materiality should "filter out entity-specific information that is not relevant to the users of the financial statements of a particular entity"
    • clarifying that materiality applies to the whole financial statements and that information which is not material need not be presented in the primary financial statements or disclosed in the notes
    • clarifying that some disclosures specified in standards are simply not important enough to justify separate disclosure for a particular entity
    • making it clear that preparers should exercise judgement in presenting their financial reports
    • remove the perception of a 'normal order of presentation' of financial statements, making it easier for entities to provide more contextual and holistic information
    • reducing restrictions on how accounting policies should be presented, allowing important accounting policies to be given greater prominence in financial reports
    • adding additional explanations with examples of how IAS 1 requirements are designed to shape financial statements instead of specifying precise terms that must be used, including whether subtotals of IFRS numbers such as EBIT (earnings before interest
      and tax) and EBITDA (earnings before interest, tax, depreciation
      and amortisation) should be acknowledged in IAS 1)
    • adding a requirement that entities disclose and explain their net debt reconciliation
  • Educational material on materiality - the IASB plans to start a project on materiality with a view to creating either general application guidance or education material. Such a project will look at how materiality is applied in practice and whether more guidance should be added to IAS 1. This project will be started in the second half of 2013
  • Disclosure requirements in new exposure drafts - the IASB intends to draft future exposure drafts using less prescriptive language, and have clear disclosure objectives, whilst avoiding requirements that would affect the auditability of the standards. The IASB also considers that it has already "made considerable progress in this regard in its recent Standards".

Medium term

  • Research project on disclosure - the IASB will be asked to commence a research project reviewing IAS 1, IAS 7 and IAS 8, with the goal of replacing all of those standards and 'in essence' creating a disclosure framework. This work may build on the IASB's previous work on the financial statement presentation project (suspended in 2010), and consider how this project might be developed in parallel with the work on the Conceptual Framework project
  • Review of existing disclosure requirements - a systematic review of all existing standards may be undertaken in light of the revised Conceptual Framework and any work arising from the research project on disclosure. The IASB has signalled that it intends to consider whether there are ways to accelerate this standards-level review of general disclosure requirements, notwithstanding a preference to complete its work on disclosure principles as part of its Conceptual Framework project (although any disclosure related principles developed will not have a direct effect on current disclosure requirements). The review is expected to be undertaken over the next two years.

The Feedback Statement also indicates an intention to develop additional outreach events, and briefly discusses broader issues such as technology, the impact of disclosures on smaller listed entities, country-by-country reporting, and integrated reporting.

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May 2013 IASB meeting notes — Part 4 (Final)

27 May, 2013

The IASB's meeting was held in London on 21-24 May 2013. We have posted the final Deloitte observer notes from Friday's session on limited amendments to IFRS 9, where the IASB and FASB discussed feedback received by the IASB on its exposure draft ED/2012/4 'Classification and Measurement: Limited Amendments to IFRS 9'.

Click through for direct access to the notes:

Friday, 24 May 2013

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

EFRAG does not support interim standard on rate regulation

25 May, 2013

The European Financial Reporting Advisory Group Technical Expert Group (EFRAG TEG) has published a draft comment letter on the IASB's exposure draft ED/2013/5 'Regulatory Deferral Accounts'. In the proposed comment letter the EFRAG makes clear that it does not agree with the pursuance of this interim project.

The draft comment letter on the Exposure Draft (ED), which was published by the IASB on 25 April 2013, states:


EFRAG does not support the ED because:
  • It results in a lack of comparability between (a) entities that take advantage of the ED and (b) entities that already apply IFRS or do not wish to apply the ED; and
  • It is not limited to facilitating first-time adoption but maintains previous accounting policies for an indefinite period. Other interim standards such as IFRS 4 and IFRS 6 have shown that there was no such thing as a short-term interim standard.

Nevertheless, the EFRAG has also analysed the proposed standard in order to support the IASB in its efforts and has found cross-cutting measurement issues with IFRS 3, IFRS 9 and IAS 39, IAS 12, IAS 28, and IAS 36. The EFRAG also found presentation issues in connection with IFRS 10, IAS 1, and IAS 8. Furthermore, certain difficulties that application of the proposals may raise were identified.

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

EFRAG is seeking for comments on the letter by 21 August 2013.

May 2013 IASB meeting notes — Part 3

24 May, 2013

The IASB's meeting was held in London on 21-24 May 2013. We have posted Deloitte observer notes from Wednesday's session on novation of derivatives and continuation of hedge accounting (IAS 39); Thursday's sessions on macro hedge accounting and revenue recognition; and Friday's joint IASB/FASB session on revenue recognition.

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