Each Deloitte e-learning module provides training in the background, scope and principles of each pronouncement, and provides practical insights into their application.

Details of the modules are as follows:

• IFRS 3 Business Combinations — Topics covered include the definition of a business combination, amounts included in consideration transferred, recognition and measurement principles, and accounting for goodwill.
• IFRS 11 Joint Arrangements — Topics covered include the concept of 'joint control', classifying joint arrangements in practical situations, and accounting treatments for joint arrangements
• IFRS 13 Fair Value Measurement — Topics covered include the identification of assets and liabilities, market characteristics and market participants, determining the highest and best use of non-financial assets, the measurement of liabilities, appropriate valuation techniques, determining the level in the hierarchy and the correct price, and disclosure
• IAS 1 Presentation of Financial Statements — Topics covered include financial statements, aggregation and set off, classifying items as current or non-current, classifying items between profit or loss and other comprehensive income, items disclosed on the face of the statement of changes in equity, items disclosed, and the notes, nature of information and key assumptions required to complete the set of financial statements
• IAS 16 Property, Plant and Equipment — Topics covered include the initial measurement of assets, accounting for dismantling costs, depreciation, subsequent measurement of property, plant and equipment and the impact of impairment
• IAS 27 Separate Financial Statements (2011) — Topics covered include when and how to apply the standard, and accounting for investments in subsidiaries, joint ventures and associates in the separate financial statements

(Note: Links above are direct links to each e-learning module.  You may be asked to register to access each module - no personally identifying information is requested in the registration process.)

The updated modules for IFRS 3, IFRS 11, IAS 1, IAS 16 and IAS 27 (2011) reflect the amendments arising from Annual Improvements 2009–2011 Cycle and Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance.  The new e-learning module on IFRS 13 takes about 2.5 hours to complete.

The IFRS e-learning modules are available free of charge and may be used and distributed freely, without alteration from the original form and subject to the terms of the Deloitte copyright over the material.

For details on the full range of e-learning modules go to Deloitte’s IFRS e-learning website. A listing of available e-learning modules is also available on our IAS Plus IFRS e-learning page.

Following the recommendation in the MB’s 2012 Final Report on the Review of the IFRS Foundation’s Governance, the MB began its process to expand its membership and develop the criteria for membership. The criteria and assessment processes for membership were completed at its 6 February 2013 meeting.

The nomination period continues until the end of June 2013. For more information, please view the Monitoring Board press release.

The topics discussed were as follows (click through to access detailed Deloitte observer notes for each topic):

Tuesday, 14 May 2013

New issues

• IFRS 7 Financial Instruments: Disclosures — Servicing agreements

IFRS IC/ IASB requests for further analysis

• IFRS 10 Consolidated Financial Statements — Effect of protective rights on an assessment of control

Annual Improvements (2011-2013 cycle)

• IFRS 1 First‑time Adoption of International Financial Reporting Standards — Meaning of effective IFRSs
• IFRS 3 Business Combinations — Scope exceptions for joint ventures
• IFRS 13 Fair Value Measurement — Portfolio netting exception
• IAS 40 Investment Property — Definition of a business

Wednesday, 15 May 2013 (09:00-11:50)

IFRS IC/ IASB requests for further analysis

• IFRS 5 Non‑current Assets Held for Sale and Discontinued Operations
  • Classification in conjunction with a planned IPO
  • Classification in conjunction with a planned IPO and change of disposal method

Limited scope amendments to IFRSs

• IAS 12 Income Taxes — Recognition of deferred tax assets for unrealised losses

Old issues to revisit

• IFRS 2 Share-based Payment — Transactions in which the manner of settlement is contingent on future events

New issues

• IFRS 13 Fair Value Measurement — Portfolios

Administrative session

• Committee work in progress
• Acknowledgements of retiring members

Click to view the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

Background

The genesis of the Interpretation is a request to the IFRS Interpretations Committee to determine whether, under certain circumstances, IFRIC 6 Liabilities Arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment should be applied to other levies charged for participation in a market on a specified date to identify the event that gives rise to a liability.

The specific examples provided to the Committee included the United Kingdom bank levy, fees paid to the Federal Government by pharmaceutical manufacturers in the United States, a bank levy in Hungary, and the railway tax in France.  The final Interpretation covers a broad range of levies, rather than a focus on levies charged to participate in a market.

The key issues considered by the Committee in developing the Interpretation included when a liability should be recognised and to the definition of a present obligation in IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

The Committee published a draft Interpretation in May 2012 and concluded redeliberations in the first quarter of 2013.  The IASB ratified the Interpretation at its April 2013 meeting.

Requirements of the Interpretation

IFRIC 21 identifies the obligating event for the recognition of a liability as the activity that triggers the payment of the levy in accordance with the relevant legislation. The Interpretation clarifies that 'economic compulsion' and the going concern principle do not create or imply that an obligating event has occurred.

IFRIC 21 provides the following guidance on recognition of a liability to pay levies:

• The liability is recognised progressively if the obligating event occurs over a period of time
• If an obligation is triggered on reaching a minimum threshold, the liability is recognised when that minimum threshold is reached.

The same recognition principles are applied in interim financial reports.

The Interpretation provides numerous examples to provide guidance on its application.  For instance, the Interpretation provides the example of a levy that is triggered by operating as a bank at the end of the reporting period.  In applying the requirements of the Interpretation, the obligating event is considered to be operating as a bank on the last day of the reporting period and so the liability for the levy is not recognised prior to that date.  Furthermore, the levy would only be recognised in any interim report that covers the period including the last day of the annual reporting period.

A full summary and history of the Interpretation can be found on our summary page for IFRIC 21.

Changes made in finalising the Interpretation

The IFRS Interpretations Committee made a number of changes from the original proposals in Draft Interpretation DI/2012/1 Levies Charged by Public Authorities on Entities that Operate in a Specific Market as a result of its redeliberations, including:

• Broadening the scope to include all levies, rather than a focus on levies charged to participate in a market
• New guidance on how to account for levies that have a minimum threshold
• Removing guidance on determining whether a liability to pay a levy gives rise to an asset or expense
• Excluding emissions trading schemes from the scope of the Interpretation (as this topic is subject to an IASB project)

Interaction with other pronouncements and effective date

The Interpretation does not supersede IFRIC 6 Liabilities arising from Participating in a Specific Market — Waste Electrical and Electronic Equipment, which remains in force and is consistent with IFRIC 21.  The IFRS Interpretations Committee believes IFRIC 6 provides useful information on accounting for liabilities within its scope.

IFRIC 21 is effective for annual periods beginning on or after 1 January 2014. Initial application is in accordance with the requirements of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, i.e. the requirements are applied on a retrospective basis.

Please click for:

• Press release on the IASB website
• Our IAS Plus summary of IFRIC 21 Levies
• Information on the project leading to the issue of the Interpretation

The topics discussed were as follows (click through to access detailed Deloitte observer notes for each topic):

Tuesday, 14 May 2013

Tentative Agenda Decisions to finalise

• IAS 10 Events after the Reporting Period — Reissue of financial statements
• IAS 28/IFRS 3 Business Combinations — Associates and common control
• IAS 7 Statement of Cash Flows: Disclosures — Definition of cash equivalents
• IFRS 2 Share-based Payment — Timing of the recognition of intercompany recharges

IFRS IC/ IASB requests for further analysis

• IFRS 3 Business combinations — Input to IFRS 3 PIR
• IAS 19 Employee Benefits — Determination of discount rate
• IAS 28 Investments in Associates and Joint Ventures — Elimination of intercompany profits between an issuer and its joint venture

New issues

• IAS 32 Financial Instruments: Presentation — Classification of instruments when issuer has choice over how obligation is settled

Notes from the remaining sessions will be made available soon.

Click here to go to the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

The ED proposes a model under which credit losses would no longer be recognised if incurred. Instead entities would recognise expected credit losses on financial assets, and on commitments to extend credit, based upon current estimates of expected shortfalls in contractual cash flows as at the reporting date.  The draft comment letter states:  

We believe that the ED’s proposals strike a reasonable balance between costs of implementation and underlying economics and are likely to meet users’ need to provide expected credit losses. 

Although satisfied with the majority of the proposals the FRC draft comment letter makes a number of suggestions, not least, in their view, to ensure consistency of application in practice, on specific aspects of the proposals that the FRC feel will need to be clarified by the IASB.  Such suggested areas for improvement include: 

• Clarification of the concepts of ‘significant deterioration’ and ‘undue cost and effort’, the second of which may be interpreted differently by different constituents depending upon who they are.
• Clarification of the interest rates that can be used in the approach, ensuring that interest revenue and the credit losses are calculated using the same rate. 
• Clarification of how the model applies in the case of financial assets where a financial institution is applying forbearance and the modification does not result in a new asset. 

The FRC draft comment letter is consistent with the comments expressed by the European Financial Reporting Advisory Group (EFRAG) in their draft comment letter on 16 April 2013.  Both commented that the recognition of a portion of expected credit losses at initial recognition is not conceptually sound but is a pragmatic solution in the absence of a better model.  Both the FRC and EFRAG also acknowledge that the proposals in the ED overcome a number of operational challenges highlighted by constituents commenting on the 2009 ED. For example having to estimate the full expected cash flows for all financial instruments and the subjectivity in calculating expected losses in the “good book”.  The FRC comment that such simplifications will make application of the model easier to apply to all types of entities.  They note:   

We agree with the IASB that these operational simplifications would result in an improvement in financial reporting as they would ensure earlier recognition of expected credit losses, lead to a reduction in systematic overstatement of interest revenue, and provide useful information on credit deterioration. 

Additionally the draft comment letter goes on to explain that because of the extensive IT requirements which would be required , the FRC would expect to see a mandatory date set three years from the effective date of the standard to allow entities to make the necessary changes.  But the FRC also say that entities that have transitioned systems earlier should not be precluded from adopting the new standard before the mandatory effective date. 

Constituents are invited to send comments direct to the FRC by 14 June 2013.

Click for:

• FRC press release with links to draft comment letter (link to FRC website)
• Deloitte ‘Need to Know’ newsletter on the IASB Exposure Draft
• Our previous story on the Exposure Draft ED 2013/3 Financial Instruments: Expected Credit Losses

The FRC’s Executive Director of Codes and Standards, Melanie McLaren, states:

The endeavours of the IASB to improve lease accounting are to be applauded.  The FRC supports the overall aims of the IASB project and so welcomes this revised Exposure Draft as a step forward in that process.  In principle, we agree that IAS 17 should be replaced so as to provide better information to users on the liabilities associated with leases.

Additionally, the FRC is seeking feedback from UK constituents regarding the proposals set forth in the exposure draft and whether the benefits outweigh the costs. Also, the FRC will host a discussion forum on the exposure draft that will include the IASB staff on 10 July at 9:00 BST. The forum will provide UK constituents an opportunity to voice their views on the exposure draft and aid the FRC in developing a response to the IASB.

More information on how to provide feedback to the FRC and participate in the discussion forum is available in the press release on the FRC website.

Re-exposing the revised proposals on lease accounting is a significant point in the long debate over whether all leases should be recorded on balance sheet. The arguments still turn on two differing views. The first view is that leasing is a form of hidden leveraging that should not be allowed to remain off balance sheet. This is a big issue both conceptually and economically. It is estimated that some $1.5trillion would be brought onto the balance sheets of US companies alone. The second view is whether the economics of leasing are really not that clear cut and current operating leases are similar to simple service, or executory-type, contracts.

The IASB argue that all leases convey a right of use of the leased asset and that right and a matching liability should be recorded on balance sheet. The IASB’s original lease exposure draft published in August 2010 (the “2010 ED”) proposed that lessees should apply a single model, the ‘right-of-use model’, to all leases within the scope of the proposals. In the 2010 ED, the lease asset would have been amortised generally on a straight-line basis, whilst the liability was amortised using the effective interest rate method. In the income statement, the 2010 ED would have resulted in an accelerated pattern of expense recognition for all leases. However, many constituents indicated that the expense recognition pattern proposed in the 2010 ED did not reflect the economics for all types of leases. The 2013 proposals attempt to respond to these criticisms, introducing a new dividing line, which is likely to generate significant debate given that one of the project’s original objectives was to remove the existing “bright-line” between operating and finance leases. The IASB is now proposing two types of leases for expense recognition purposes in an attempt to respond to concerns expressed about the 2010 ED. This revised model results in what looks like operating lease accounting for property leases, while most equipment leases will be subject to the same front-loaded expense recognition pattern that generated concern in response to the 2010 ED. To some these are practical steps, to others they are a blurring of conceptual coherence. Some of the other concerns which respondents to the original exposure draft raised have been addressed like those around variable payments. But even so, what will be important will be the effects.

There would be significant changes to the financial reporting of leases which may have a significant knock-on effect on some key KPIs such as gearing ratios, debt-covenants and anything which is an earnings-related measure. On top of that there may well be a need to capture additional data about leases in reporting systems and also there may be considerable deferred tax implications to book when the eventual standard is first applied. The debate, of course, will not just be about whether the proposals on the table are sufficiently practicable, and not only about their conceptual merits, and not just the impact on the KPIs, but critically: ‘Is this better than what we have today?’

Click for:

• More information on Exposure Draft ED/2013/6 Leases
• IAS Plus project page on the IASB’s leases project

Background

Lease accounting, particularly for lessees, was criticised in the financial crisis for not recognising contractual commitments under lease contracts in a way that was transparent and useful to users. As a result, lease accounting was revisited and at the same time lessor accounting was evaluated in an attempt to achieve symmetry between lessee and lessor accounting.

A first Exposure Draft ED/2010/9 Leases was released in August 2010 and was built on a Discussion Paper issued in March 2009 to gather constituent views on the treatment of leases in the financial statements of lessees and lessors. The 2010 ED proposed a finance lease accounting approach for all lessees with an corresponding approach which reflected symmetry in the lessor model.

Feedback on the 2010 ED indicated that the profit or loss impact of the lessee model did not reflect useful information as a result of so-called “front-loading” to profit or loss. Front-loading is caused by the combination of a decreasing interest charge over time as the lease liability is repaid and the straight line amortisation of the right-of-use asset. The re-exposed ED includes proposals to mitigate the front-loading of profit or loss for specific types of leases.

For lessors, feedback indicated that the current model does reflect decision useful information to users which has resulted in a reassessment of the symmetrical approach in the 2010 ED.

Summary of main proposals

As this is one of the convergence projects, the FASB has issued a corresponding ED. Comments on both proposals close on 13 September 2013.

Additional information

• Press release on the IASB’s website (link to IASB website)
• Exposure Draft ED/2013/6 Leases (link to IASB website, includes access to the Basis for Conclusions and the Illustrative Examples)
• IASB Snapshot introducing the ED (link to IASB website)
• Deloitte IFRS podcast — Revised lease accounting proposals interview
• IAS Plus project page on  the IASB’s leases project
• Upcoming webcasts:
  • 20 May 2013 (08:30 BST), hosted by the IASB
  • 20 May 2013 (15:30 BST), jointly hosted by the IASB and FASB