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February

New and revised pronouncements as at 31 March 2014

24 Feb 2014

Our popular summary of new and revised financial reporting requirements, updated for financial reporting periods ending on 31 March 2014. This listing can be used to perform a quick check that all the new financial reporting requirements have been fully considered in the reporting close process. We have highlighted the IASB mandatory adoption dates as well as those dates for which application is mandatory within the EU. Where an EU entity chooses to prepare financial statements in accordance with IFRSs as issued by the IASB, as well as in compliance with IFRSs as adopted by the EU, that entity should comply with the earlier IASB effective date for those items.

The information reflects developments to 30 June 2014 and will be updated through to June 2014 to reflect new and revised financial reporting requirements that need to be considered for financial reporting periods ending on 31 March 2014.

The information below is organised as follows:

 

Summary

During 2013-2014, a number of significant new and revised pronouncements will be applied by many entities on a mandatory basis for the first time. Where an EU entity chooses to prepare financial statements in accordance with IFRSs as issued by the IASB, as well as in compliance with IFRSs as adopted by the EU, that entity should comply with the earlier IASB effective date for those items. The table below provides a summary of these pronouncements, and which reporting periods they apply to:

PronouncementIASB Effective date*EU effective date*EU Mandatory at 31 March 2014?
1st qtrs.**2nd qtrs.***3rd qtrs.****Full yrs*****
NEW OR REVISED STANDARDS
IFRS 10 Consolidated Financial Statements
1 January 2013 1 January 2014 Yes No No No
IFRS 11 Joint Arrangements
1 January 2013 1 January 2014 Yes No No No
IFRS 12 Disclosure of Interests in Other Entities
1 January 2013 1 January 2014 Yes# No No No
IFRS 13 Fair Value Measurement
1 January 2013 1 January 2013 Yes - already adopted in Q1 2013 (January 2013) Yes Yes Yes
IAS 19 Employee Benefits
1 January 2013 1 January 2013 Yes - already adopted in Q1 2013 (January 2013) Yes Yes Yes
IAS 27 Separate Financial Statements (2011)
1 January 2013 1 January 2014 Yes No No No
IAS 28 Investments in Associates and Joint Ventures (2011)
1 January 2013 1 January 2014 Yes No No No
AMENDMENTS
Deferred Tax: Recovery of Underlying Assets (Amendments to IAS 12)
1 January 2012 1 January 2013 Yes - already adopted in Q1 2013 (January 2013) Yes Yes Yes
Presentation of Items of Other Comprehensive Income (Amendments to IAS 1)
1 July 2012 1 July 2012 Yes - already adopted in Q1 2013 (January 2013). Yes - already adopted in Q1 2012 (October 2012). Yes - already adopted in Q1 2012 (July 2012). Yes
Disclosures — Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7)
1 January 2013 1 January 2013 Yes - already adopted in Q1 2013 (January 2013) Yes Yes Yes
Government Loans (Amendments to IFRS 1)
1 January 2013 1 January 2013 Yes - already adopted in Q1 2013 (January 2013) Yes Yes Yes
Annual Improvements 2009-2011 Cycle
1 January 2013 1 January 2013 Yes - already adopted in Q1 2013 (January 2013) Yes Yes Yes
Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance
1 January 2013 1 January 2014 Yes No No No
Severe Hyperinflation and Removal of Fixed dates for first time adopters - (Amendments to IFRS 1)
1 July 2011 1 January 2013 Yes Yes Yes Yes
 Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32)
1 January 2014 1 January 2014 Yes No No No
 Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)
1 January 2014 1 January 2014 Yes No No No
 Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36)
1 January 2014 1 January 2014 Yes No No No
 Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39)
1 January 2014 1 January 2014 Yes No No No
INTERPRETATIONS
IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine
1 January 2013 1 January 2013 Yes - already adopted in Q1 2013 (January 2013) Yes Yes Yes
 IFRIC 21 Levies
1 January 2014 Not yet endorsed for use in the EU No No No No

* Generally annual reporting periods beginning on or after the date indicated, may only apply to first-time adopters in some limited cases (see below for full details).

** 1st quarter ending on 31 March 2014 (accounting period began on 1 January 2014).

*** 2nd quarter ending 31 March 2014 (accounting period began 1 October 2013).

**** 3rd quarter ending 31 March 2014 (accounting period began 1 July 2013).

***** 4th quarter ending 31 March 2014 (accounting period began 1 April 2013).

# No consequential amendments were made to IAS 34 Interim Financial Reporting on the issuance of IFRS 12 and, as such, the requirements of IFRS 12 do not directly apply to interim financial statements. However, entities should consider whether any details of interests in other entities should be disclosed as part of the general requirement of paragraph 15 of IAS 34 to disclose significant events and transactions in the period.

More information about these pronouncements, and all new and revised pronouncements, is set out below.

Financial statement considerations in adopting new and revised pronouncements

Where new and revised pronouncements are applied for the first time, there can be consequential impacts on annual financial statements, including:

  • Updates to accounting policies. The terminology and substance of disclosed accounting policies may need to be updated to reflect new recognition, measurement and other requirements, e.g. IFRS 10 contains a new definition and guidance around when control, IFRS 11 requires joint ventures to be equity accounted rather then accounted for using proportionate consolidation, and IAS 19 Employee Benefits may impact the measurement of certain employee benefits
  • Impact of transitional provisions. IAS 8 Accounting Policies, Changes in Estimates and Errors contains a general requirement that changes in accounting policies are retrospectively applied, but this does not apply to the extent an individual pronouncement has specific transitional provisions, e.g. IFRS 10 Consolidated Financial Statements contains specific transitional provisions dealing with making the 'control' assessment, and how to account for situations such as investees that were or were not previously consolidated under superseded pronouncements
  • Disclosures about changes in accounting policies. Where an entity changes its accounting policy as a result of the initial application of an IFRS and it has an effect on the current period or any prior period, IAS 8 requires the disclosure of a number of matters, e.g. the title of the IFRS, the nature of the change in accounting policy, a description of the transitional provisions, and the amount of the adjustment for each financial statement line item affected
  • Third statement of financial position. IAS 1 Presentation of Financial Statements requires the presentation of a third statement of financial position as at the beginning of the preceding period in addition to the minimum comparative financial statements in a number of situations, including if an entity applies an accounting policy retrospectively and the retrospective application has a material effect on the information in the statement of financial position at the beginning of the preceding period
  • Earnings per share (EPS). Where applicable to the entity, IAS 33 Earnings Per Share requires basic and diluted EPS to be adjusted for the impacts of adjustments result from changes in accounting policies accounted for retrospectively and IAS 8 requires the disclosure of the amount of any such adjustments.

Whilst disclosures associated with changes in accounting policies resulting from the initial application of new and revised pronouncements are less in interim financial reports under IAS 34 Interim Financial Reporting, some disclosures are required, e.g. description of the nature and effect of any change in accounting policies and methods of computation.

 

New or revised standards

New or revised pronouncementWhen EU effectiveApplication at 31 March 2014 to
1st qtrs2nd qtrs3rd qtrsFull yrs

IFRS 9 Financial Instruments (2009)

IFRS 9 introduces new requirements for classifying and measuring financial assets, as follows:

  • Debt instruments meeting both a 'business model' test and a 'cash flow characteristics' test are measured at amortised cost (the use of fair value is optional in some limited circumstances)
  • Investments in equity instruments can be designated as 'fair value through other comprehensive income' with only dividends being recognised in profit or loss
  • All other instruments (including all derivatives) are measured at fair value with changes recognised in the profit or loss
  • The concept of 'embedded derivatives' does not apply to financial assets within the scope of the Standard and the entire instrument must be classified and measured in accordance with the above guidelines.

Note: This Standard is superseded by IFRS 9 (2010) and and IFRS 9 (2013), but all standards remain available for application (see IFRS 9 (2013) below for more information regarding the adoption options).

Note: On 16 December 2011, the IASB issued Mandatory Effective Date and Transition Disclosures (Amendments to IFRS 9 and IFRS 7), which amended the effective date of IFRS 9 to annual periods beginning on or after 1 January 2015 (originally 1 January 2013), and modified the relief from restating comparative periods and the associated disclosures in IFRS 7. The release of IFRS 9 (2013) on 19 November 2013 contained consequential amendments which removed the mandatory effective date of IFRS 9 (2009). At its November 2013 meeting, the IASB tentatively decided that the mandatory effective date of IFRS 9 will be no earlier than annual periods beginning on or after 1 January 2017.  The IASB then tentatively decided at its February 2014 meeting to select an effective date of 1 January 2018 as the effective date for mandatory application of IFRS 9.

Issued: 12 November 2009 (article, newsletter)

The IASB tentatively decided at its February 2014 meeting to select an effective date of 1 January 2018 as the effective date for mandatory application of IFRS 9.  Not yet endorsed for use in the EU. 

IFRS 9 Financial Instruments (2010)

A revised version of IFRS 9 incorporating revised requirements for the classification and measurement of financial liabilities, and carrying over the existing derecognition requirements from IAS 39 Financial Instruments: Recognition and Measurement.

The revised financial liability provisions maintain the existing amortised cost measurement basis for most liabilities. New requirements apply where an entity chooses to measure a liability at fair value through profit or loss – in these cases, the portion of the change in fair value related to changes in the entity's own credit risk is presented in other comprehensive income rather than within profit or loss.

Note: This Standard supersedes IFRS 9 (2009) and is superseded by IFRS 9 (2013), but all standards remain available for application (see IFRS 9 below for more information regarding the adoption options).

Note: On 16 December 2011, the IASB issued Mandatory Effective Date and Transition Disclosures (Amendments to IFRS 9 and IFRS 7), which amended the effective date of IFRS 9 to annual periods beginning on or after 1 January 2015 (originally 1 January 2013), and modified the relief from restating comparative periods and the associated disclosures in IFRS 7. The release of IFRS 9 (2013) on 19 November 2013 contained consequential amendments which removed the mandatory effective date of IFRS 9 (2010) and permitted an entity to apply the requirements on the presentation of gains and losses on financial liabilities designated as at fair value through profit or loss without applying the other requirements. At its November 2013 meeting, the IASB tentatively decided that the mandatory effective date of IFRS 9 will be no earlier than annual periods beginning on or after 1 January 2017.  The IASB then tentatively decided at its February 2014 meeting to select an effective date of 1 January 2018 as the effective date for mandatory application of IFRS 9.

Issued: 28 October 2010 (article, newsletter)

The IASB tentatively decided at its February 2014 meeting to select an effective date of 1 January 2018 as the effective date for mandatory application of IFRS 9.  Not yet endorsed for use in the EU. 

IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39) (2013)

A revised version of IFRS 9 which:

  • Introduces a new chapter to IFRS 9 on hedge accounting, putting in place a new hedge accounting model that is designed to be more closely aligned with how entities undertake risk management activities when hedging financial and non-financial risk exposures
  • Permits an entity to apply only the requirements introduced in IFRS 9 (2010) for the presentation of gains and losses on financial liabilities designated as at fair value through profit or loss without applying the other requirements of IFRS 9, meaning the portion of the change in fair value related to changes in the entity's own credit risk can be presented in other comprehensive income rather than within profit or loss
  • Removes the mandatory effective date of IFRS 9 (2013), IFRS 9 (2010) and IFRS 9 (2009), leaving the effective date open pending the finalisation of the impairment and classification and measurement requirements. Notwithstanding the removal of an effective date, each standard remains available for application.

Note: At its November 2013 meeting, the IASB tentatively decided that the mandatory effective date of IFRS 9 will be no earlier than annual periods beginning on or after 1 January 2017.  The IASB then tentatively decided at its February 2014 meeting to select an effective date of 1 January 2018 as the effective date for mandatory application of IFRS 9.

Note: This Standard supersedes IFRS 9 (2009) and IFRS 9 (2010), but these standards remain available for application. The various standards also permit various transitional options. Accordingly, entities can effectively choose which parts of IFRS 9 they apply, meaning they can choose to apply: (1) the classification and measurement requirements for financial assets (2) the classification and measurement requirements for both financial assets and financial liabilities (3) the classification and measurement requirements and the hedge accounting requirements. In addition, entities may choose to apply only the requirements for presenting in other comprehensive income the 'own credit' gains or losses on financial liabilities designated under the fair value option without early applying the other requirements of IFRS 9, and entities can elect to apply the hedge accounting requirements of IAS 39 Financial Instruments: Recognition and Measurement instead of IFRS 9. The IASB has proposed in ED/2012/4 Classification and Measurement: Limited Amendments to IFRS 9 to remove the choice of which version of IFRS 9 may be applied once the remaining financial instrument projects are finalised.

Issued: 19 November 2013 (article, newsletter)

The IASB tentatively decided at its February 2014 meeting to select an effective date of 1 January 2018 as the effective date for mandatory application of IFRS 9.  Not yet endorsed for use in the EU. 

IFRS 10 Consolidated Financial Statements

Requires a parent to present consolidated financial statements as those of a single economic entity, replacing the requirements previously contained in IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation - Special Purpose Entities.

The Standard identifies the principles of control, determines how to identify whether an investor controls an investee and therefore must consolidate the investee, and sets out the principles for the preparation of consolidated financial statements.

The Standard introduces a single consolidation model for all entities based on control, irrespective of the nature of the investee (i.e. whether an entity is controlled through voting rights of investors or through other contractual arrangements as is common in 'special purpose entities'). Under IFRS 10, control is based on whether an investor has:

  • Power over the investee
  • Exposure, or rights, to variable returns from its involvement with the investee, and
  • The ability to use its power over the investee to affect the amount of the returns.

Note: Although the EU regulation adopting this standard/amendment has set a later effective date for mandatory application, earlier adoption is permitted. Entities early adopting this standard must also adopt the other standards included in the 'suite of five' standards on consolidation, joint arrangements and disclosures: IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, IAS 27 Separate Financial Statements (2011) and IAS 28 Investments in Associates and Joint Ventures (2011).

Issued: 12 May 2011 (article, newsletter)

Applicable to annual reporting periods beginning on or after 1 January 2014
(see note regarding early adoption)
Mandatory Optional Optional Optional

IFRS 11 Joint Arrangements

Replaces IAS 31 Interests in Joint Ventures. Requires a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing its rights and obligations and then account for those rights and obligations in accordance with that type of joint arrangement.

Joint arrangements are either joint operations or joint ventures:

  • A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement (joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint operators recognise their assets, liabilities, revenue and expenses in relation to its interest in a joint operation (including their share of any such items arising jointly)
  • A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (joint venturers) have rights to the net assets of the arrangement. A joint venturer applies the equity method of accounting for its investment in a joint venture in accordance with IAS 28 Investments in Associates and Joint Ventures (2011). Unlike IAS 31, the use of 'proportionate consolidation' to account for joint ventures is not permitted.

Note: Although the EU regulation adopting this standard/amendment has set a later effective date for mandatory application, earlier adoption is permitted. Entities early adopting this standard must also adopt the other standards included in the 'suite of five' standards on consolidation, joint arrangements and disclosures: IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities, IAS 27 Separate Financial Statements (2011) and IAS 28 Investments in Associates and Joint Ventures (2011).

Issued: 12 May 2011 (article, newsletter)

Applicable to annual reporting periods beginning on or after 1 January 2014
(see note regarding early adoption)
Mandatory Optional Optional Optional

IFRS 12 Disclosure of Interests in Other Entities

Requires the extensive disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with, interests in other entities and the effects of those interests on its financial position, financial performance and cash flows.

In high-level terms, the required disclosures are grouped into the following broad categories:

  • Significant judgements and assumptions - such as how control, joint control, significant influence has been determined
  • Interests in subsidiaries - including details of the structure of the group, risks associated with structured entities, changes in control, and so on
  • Interests in joint arrangements and associates - the nature, extent and financial effects of interests in joint arrangements and associates (including names, details and summarised financial information)
  • Interests in unconsolidated structured entities - information to allow an understanding of the nature and extent of interests in unconsolidated structured entities and to evaluate the nature of, and changes in, the risks associated with its interests in unconsolidated structured entities

IFRS 12 lists specific examples and additional disclosures which further expand upon each of these disclosure objectives, and includes other guidance on the extensive disclosures required.

Note: Although the EU regulation adopting this standard/amendment has set a later effective date for mandatory application, earlier adoption is permitted. Entities are encouraged to voluntarily provide the information required by IFRS 12 prior to its adoption. Providing some of the disclosures required by IFRS 12 does not compel an entity to comply with all of the requirements of the IFRS or to also apply the other standards included in the 'suite of five' standards on consolidation, joint arrangements and disclosures: IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IAS 27 Separate Financial Statements (2011) and IAS 28 Investments in Associates and Joint Ventures (2011).

Issued: 12 May 2011 (article, newsletter)

Applicable to annual reporting periods beginning on or after 1 January 2014
(see note regarding early adoption)
Mandatory Optional Optional Optional

IFRS 13 Fair Value Measurement

Replaces the guidance on fair value measurement in existing IFRS accounting literature with a single standard.

The IFRS is the result of joint efforts by the IASB and FASB to develop a converged fair value framework. The IFRS defines fair value, provides guidance on how to determine fair value and requires disclosures about fair value measurements. However, IFRS 13 does not change the requirements regarding which items should be measured or disclosed at fair value.

IFRS 13 applies when another IFRS requires or permits fair value measurements or disclosures about fair value measurements (and measurements, such as fair value less costs to sell, based on fair value or disclosures about those measurements). With some exceptions, the standard requires entities to classify these measurements into a 'fair value hierarchy' based on the nature of the inputs:

  • Level 1 - quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date
  • Level 2 - inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly
  • Level 3 - unobservable inputs for the asset or liability

Entities are required to make various disclosures depending upon the nature of the fair value measurement (e.g. whether it is recognised in the financial statements or merely disclosed) and the level in which it is classified.

Issued: 12 May 2011 (article, newsletter)

Applicable to annual reporting periods beginning on or after 1 January 2013 See note 1 below - already adopted in Q1 2013 (January 2013) Mandatory Mandatory Mandatory

IFRS 14 Regulatory Deferral Accounts

IFRS 14 permits an entity which is a first-time adopter of International Financial Reporting Standards to continue to account, with some limited changes, for 'regulatory deferral account balances' in accordance with its previous GAAP, both on initial adoption of IFRS and in subsequent financial statements.

Note: Entities which are eligible to apply IFRS 14 are not required to do so, and so can chose to apply only the requirements of IFRS 1 First-time Adoption of International Financial Reporting Standards when first applying IFRSs. However, an entity that elects to apply IFRS 14 in its first IFRS financial statements must continue to apply it in subsequent financial statements. IFRS 14 cannot be applied by entities that have already adopted IFRSs.

Issued: 30 January 2014 (article

Applicable to an entity's first annual IFRS financial statements for a period beginning on or after 1 January 2016 Not yet endorsed for use in the EU. IASB effective date is 1 January 2016.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 provides a single, principles based five-step model to be applied to all contracts with customers.

The five steps in the model are as follows:

  • Identify the contract with the customer
  • Identify the performance obligations in the contract
  • Determine the transaction price
  • Allocate the transaction price to the performance obligations in the contracts
  • Recognise revenue when (or as) the entity satisfies a performance obligation.

Guidance is provided on topics such as the point in which revenue is recognised, accounting for variable consideration, costs of fulfilling and obtaining a contract and various related matters.  New disclosures about revenue are also introduced.

Issued: 28 May 2014 (article) 

Applicable to an entity's first annual IFRS financial statements for a period beginning on or after 1 January 2017 Not yet endorsed for use in the EU.  Endorsement expected Q2 2015. IASB effective date is 1 January 2017.

IAS 19 Employee Benefits (2011)

An amended version of IAS 19 Employee Benefits with revised requirements for pensions and other post-retirement benefits, termination benefits and other changes.

The key amendments include:

  • Requiring the recognition of changes in the net defined benefit liability (asset) including immediate recognition of defined benefit cost, disaggregation of defined benefit cost into components, recognition of remeasurements in other comprehensive income, plan amendments, curtailments and settlements (eliminating the 'corridor approach' permitted by the existing IAS 19)
  • Introducing enhanced disclosures about defined benefit plans
  • Modifying accounting for termination benefits, including distinguishing benefits provided in exchange for service and benefits provided in exchange for the termination of employment and affect the recognition and measurement of termination benefits
  • Clarifying various miscellaneous issues, including the classification of employee benefits, current estimates of mortality rates, tax and administration costs and risk-sharing and conditional indexation features
  • Incorporating other matters submitted to the IFRS Interpretations Committee.

Issued: 16 June 2011 (article, newsletter)

Applicable to annual reporting periods beginning on or after 1 January 2013 See note 1 below - already adopted in Q1 2013 (January 2013) Mandatory Mandatory Mandatory

IAS 27 Separate Financial Statements (2011)

Amended version of IAS 27 which now only deals with the requirements for separate financial statements, which have been carried over largely unchanged from IAS 27 Consolidated and Separate Financial Statements. Requirements for consolidated financial statements are now contained in IFRS 10 Consolidated Financial Statements.

The Standard requires that when an entity prepares separate financial statements, investments in subsidiaries, associates, and jointly controlled entities are accounted for either at cost, or in accordance with IFRS 9 Financial Instruments / IAS 39 Financial Instruments: Recognition and Measurement.

The Standard also deals with the recognition of dividends, certain group reorganisations and includes a number of disclosure requirements.

Note: Although the EU regulation adopting this standard/amendment has set a later effective date for mandatory application, earlier adoption is permitted. Entities early adopting this standard must also adopt the other standards included in the 'suite of five' standards on consolidation, joint arrangements and disclosures: IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities and IAS 28 Investments in Associates and Joint Ventures (2011).

Issued: 12 May 2011 (article, newsletter)

Applicable to annual reporting periods beginning on or after 1 January 2014
(see note regarding early adoption)
Mandatory Optional Optional Optional

IAS 28 Investments in Associates and Joint Ventures (2011)

This Standard supersedes IAS 28 Investments in Associates and prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures.

The Standard defines 'significant influence' and provides guidance on how the equity method of accounting is to be applied (including exemptions from applying the equity method in some cases). It also prescribes how investments in associates and joint ventures should be tested for impairment.

Note: Although the EU regulation adopting this standard/amendment has set a later effective date for mandatory application, earlier adoption is permitted. Entities early adopting this standard must also adopt the other standards included in the 'suite of five' standards on consolidation, joint arrangements and disclosures: IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial Statements (2011).

Issued: 12 May 2011 (article, newsletter)

Applicable to annual reporting periods beginning on or after 1 January 2014
(see note regarding early adoption)
Mandatory Optional Optional Optional

 

Amendments

New or revised pronouncementWhen effectiveApplication at 31 March 2014 to
1st qtrs2nd qtrs3rd qtrsFull yrs

Deferred Tax: Recovery of Underlying Assets (Amendments to IAS 12)

Amends IAS 12 Income Taxes to provide a presumption that recovery of the carrying amount of an asset measured using the fair value model in IAS 40 Investment Property will, normally, be through sale.

As a result of the amendments, SIC-21 Income Taxes — Recovery of Revalued Non-Depreciable Assets would no longer apply to investment properties carried at fair value. The amendments also incorporate into IAS 12 the remaining guidance previously contained in SIC-21, which is accordingly withdrawn.

Although the EU regulation adopting this standard/amendment has set a later effective date for mandatory application, earlier adoption is permitted

Issued: 20 December 2010 (newsletter)

Applicable to annual periods beginning on or after 1 January 2013 See note 1 below - already adopted in Q1 2013 (January 2013) Mandatory Mandatory Mandatory

 

Presentation of Items of Other Comprehensive Income (Amendments to IAS 1)

Amends IAS 1 Presentation of Financial Statements to revise the way other comprehensive income is presented.

The amendments:

  • Preserve the amendments made to IAS 1 in 2007 to require profit or loss and OCI to be presented together, i.e. either as a single 'statement of profit or loss and comprehensive income', or a separate 'statement of profit or loss' and a 'statement of comprehensive income' – rather than requiring a single continuous statement as was proposed in the exposure draft
  • Require entities to group items presented in OCI based on whether they are potentially reclassifiable to profit or loss subsequently. i.e. those that might be reclassified and those that will not be reclassified
  • Require tax associated with items presented before tax to be shown separately for each of the two groups of OCI items (without changing the option to present items of OCI either before tax or net of tax).

Issued: 16 June 2011 (article, newsletter)

Applicable to annual reporting periods beginning on or after 1 July 2012 [Note 1] [Note 1] [Note 1] Mandatory

Disclosures — Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7)

Amends the disclosure requirements in IFRS 7 Financial Instruments: Disclosures to require information about all recognised financial instruments that are set off in accordance with paragraph 42 of IAS 32 Financial Instruments: Presentation.

The amendments also require disclosure of information about recognised financial instruments subject to enforceable master netting arrangements and similar agreements even if they are not set off under IAS 32. The IASB believes that these disclosures will allow financial statement users to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with an entity's recognised financial assets and recognised financial liabilities, on the entity's financial position.

Issued: 16 December 2011 (article, newsletter)

Applicable to annual periods beginning on or after 1 January 2013 and interim periods within those periods See note 1 below - already adopted in Q1 2013 (January 2013) Mandatory Mandatory Mandatory

Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32)

Amends IAS 32 Financial Instruments: Presentation to clarify certain aspects because of diversity in application of the requirements on offsetting, focused on four main areas:

  • the meaning of 'currently has a legally enforceable right of set-off'
  • the application of simultaneous realisation and settlement
  • the offsetting of collateral amounts
  • the unit of account for applying the offsetting requirements.

Issued: 16 December 2011 (article, newsletter)

Applicable to annual periods beginning on or after 1 January 2014 Mandatory Optional Optional Optional

Government Loans (Amendments to IFRS 1)

Amends IFRS 1 First-time Adoption of International Financial Reporting Standards to address how a first-time adopter would account for a government loan with a below-market rate of interest when transitioning to IFRSs. The amendments mirror the requirements for existing IFRS preparers in relation to the application of amendments made to IAS 20 Accounting for Government Grants and Disclosure of Government Assistance in relation to accounting for government loans.

First-time adopters of IFRSs are permitted to apply the requirements in paragraph 10A of IAS 20 only to new loans entered into after the date of transition to IFRSs. The first-time adopter is required to apply IAS 32 Financial Instruments: Presentation to classify the loan as a financial liability or an equity instrument at the transition date. However, if it did not, under its previous GAAP, recognise and measure a government loan at a below-market rate of interest on a basis consistent with IFRS requirements, it would be permitted to apply the previous GAAP carrying amount of the loan at the date of transition as the carrying amount of the loan in the opening IFRS statement of financial position. An entity would then apply IAS 39 or IFRS 9 in measuring the loan after the transition date.

Issued: 13 March 2012 (article, newsletter)

Applicable to annual periods beginning on or after 1 January 2013 See note 1 below - already adopted in Q1 2013 (January 2013) [Note 2] [Note 2] [Note 2]

Annual Improvements 2009-2011 Cycle

Makes amendments to the following standards:

  • IFRS 1 — Permit the repeated application of IFRS 1, borrowing costs on certain qualifying assets
  • IAS 1 — Clarification of the requirements for comparative information
  • IAS 16 — Classification of servicing equipment
  • IAS 32 — Clarify that tax effect of a distribution to holders of equity instruments should be accounted for in accordance with IAS 12 Income Taxes
  • IAS 34 — Clarify interim reporting of segment information for total assets in order to enhance consistency with the requirements in IFRS 8 Operating Segments

Issued: 17 May 2012 (article, newsletter)

Applicable to annual periods beginning on or after 1 January 2013 See note 1 below - already adopted in Q1 2013 (January 2013) Mandatory Mandatory Mandatory

Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance

Amends IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities to provide additional transition relief in by limiting the requirement to provide adjusted comparative information to only the preceding comparative period. Also, amendments to IFRS 11 and IFRS 12 eliminate the requirement to provide comparative information for periods prior to the immediately preceding period.

As issued by the IASB the amendments have a mandatory effective date of 1 January 2013, or if the standards themselves are adopted earlier the amendments shall be applied for that earlier period. These amendments were endorsed by the EU on 4 April 2013 with a mandatory effective date of accounting periods starting on or after 1 January 2014.

Issued: 28 June 2012 (article, newsletter)

Applicable to annual periods beginning on or after 1 January 2014. Mandatory Optional Optional Optional

Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)

Amends IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial Statements to:

  • provide 'investment entities' (as defined) an exemption from the consolidation of particular subsidiaries and instead require that an investment entity measure the investment in each eligible subsidiary at fair value through profit or loss in accordance with IFRS 9 Financial Instruments or IAS 39 Financial Instruments: Recognition and Measurement
  • require additional disclosure about why the entity is considered an investment entity, details of the entity's unconsolidated subsidiaries, and the nature of relationship and certain transactions between the investment entity and its subsidiaries
  • require an investment entity to account for its investment in a relevant subsidiary in the same way in its consolidated and separate financial statements (or to only provide separate financial statements if all subsidiaries are unconsolidated).

Issued: 31 October 2012 (article, newsletter)

Applicable to annual periods beginning on or after 1 January 2014 Mandatory Optional Optional Optional

Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36)

Amends IAS 36 Impairment of Assets 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.

Issued: 29 May 2013 (article, newsletter)

Applicable to annual periods beginning on or after 1 January 2014 Mandatory Optional Optional Optional

Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39)

Amends IAS 39 Financial Instruments: Recognition and Measurement to make it clear that there is no need to discontinue hedge accounting if a hedging derivative is novated, provided certain criteria are met.

A novation indicates an event where the original parties to a derivative agree that one or more clearing counterparties replace their original counterparty to become the new counterparty to each of the parties. In order to apply the amendments and continue hedge accounting, novation to a central counterparty (CCP) must happen as a consequence of laws or regulations or the introduction of laws or regulations.

Issued: 27 June 2013 (article, newsletter)

Applicable to annual periods beginning on or after 1 January 2014 Mandatory Optional Optional Optional

Defined Benefit Plans: Employee Contributions (Amendments to IAS 19)

Amends IAS 19 Employee Benefits to clarify the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service. In addition, it permits a practical expedient if the amount of the contributions is independent of the number of years of service, in that contributions, can, but are not required, to be recognised as a reduction in the service cost in the period in which the related service is rendered.

EU endorsement expected Q4 2014.

Issued: 21 November 2013 (article, newsletter)

Not yet endorsed for use in the EU. IASB effective date is 1 July 2014.

Annual Improvements 2010-2012 Cycle

Makes amendments to the following standards:

  • IFRS 2 — Amends the definitions of 'vesting condition' and 'market condition' and adds definitions for 'performance condition' and 'service condition'
  • IFRS 3 — Require contingent consideration that is classified as an asset or a liability to be measured at fair value at each reporting date
  • IFRS 8 — Requires disclosure of the judgements made by management in applying the aggregation criteria to operating segments, clarify reconciliations of segment assets only required if segment assets are reported regularly
  • IFRS 13 — Clarify that issuing IFRS 13 and amending IFRS 9 and IAS 39 did not remove the ability to measure certain short-term receivables and payables on an undiscounted basis (amends basis for conclusions only)
  • IAS 16 and IAS 38 — Clarify that the gross amount of property, plant and equipment is adjusted in a manner consistent with a revaluation of the carrying amount
  • IAS 24 — Clarify how payments to entities providing management services are to be disclosed

EU endorsement expected Q4 2014.

Issued: 12 December 2013 (newsletter)

Not yet endorsed for use in the EU. IASB effective date is 1 July 2014.

Annual Improvements 2011-2013 Cycle

Makes amendments to the following standards:

  • IFRS 1 — Clarify which versions of IFRSs can be used on initial adoption (amends basis for conclusions only)
  • IFRS 3 — Clarify that IFRS 3 excludes from its scope the accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself
  • IFRS 13 — Clarify the scope of the portfolio exception in paragraph 52
  • IAS 40 — Clarifying the interrelationship of IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property

EU endorsement expected Q4 2014.

Issued: 12 December 2013 (newsletter)

Not yet endorsed for use in the EU. IASB effective date is 1 July 2014.

 Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)

Amends IFRS 11 Joint Arrangements to require an acquirer of an interest in a joint operation in which the activity constitutes a business (as defined in IFRS 3 Business Combinations) to: 

  • apply all of the business combinations accounting principles in IFRS 3 and other IFRSs, except for those principles that conflict with the guidance in IFRS 11
  • disclose the information required by IFRS 3 and other IFRSs for business combinations. 

The amendments apply both to the initial acquisition of an interest in joint operation, and the acquisition of an additional interest in a joint operation (in the latter case, previously held interests are not remeasured).

Note: The amendments apply prospectively to acquisitions of interests in joint operations in which the activities of the joint operations constitute businesses, as defined in IFRS 3, for those acquisitions occurring from the beginning of the first period in which the amendments apply. Amounts recognised for acquisitions of interests in joint operations occurring in prior periods are not adjusted.

Issued: 6 May 2014 (article).

Applicable to annual periods beginning on or after 1 January 2016 (see note in previous column).  Not yet endorsed for use in the EU.

Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38)

Amends IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets to:

  • clarify that a depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is not appropriate for property, plant and equipment
  • introduce a rebuttable presumption that an amortisation method that is based on the revenue generated by an activity that includes the use of an intangible asset is inappropriate, which can only be overcome in limited circumstances where the intangible asset is expressed as a measure of revenue, or when it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated
  • add guidance that expected future reductions in the selling price of an item that was produced using an asset could indicate the expectation of technological or commercial obsolescence of the asset, which, in turn, might reflect a reduction of the future economic benefits embodied in the asset.

Issued: 12 May 2014 (article)

Applicable to annual periods beginning on or after 1 January 2016 (IASB effective date).  Not yet endorsed for use in the EU.

Editorial Corrections (various)

The IASB periodically issues Editorial Corrections and changes to IFRSs and other pronouncements. Since the beginning of calendar 2012, such corrections have been made in February 2012, July 2012, March 2013, September 2013, November 2013 and March 2014.

Note: For details of these editorial corrections, see our IASB editorial corrections page.

As minor editorial corrections, these changes are effectively immediately applicable under IFRS See comment in previous column

Severe Hyperinflation and Removal of Fixed dates for first time adopters - (Amendments to IFRS 1)

On 20 December 2010, the IASB amended IFRS 1 to:

  • provide relief for first-time adopters of IFRSs from having to reconstruct transactions that occurred before their date of transition to IFRSs.
  • provide guidance for entities emerging from severe hyperinflation either to resume presenting IFRS financial statements or to present IFRS financial statements for the first time.

Issued: 20 December 2010 (newsletter)

Applicable to annual periods beginning on or after 1 January 2013 with early application permitted. See note 1 below - already adopted in Q1 2013 (January 2013) Mandatory Mandatory Mandatory

Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41)

The amendments bring bearer plants, which no longer undergo significant biological transformation, into the scope of IAS 16 so that they are accounted for in the same way as property, plant and equipment.

For the purpose of bringing bearer plants from the scope of IAS 41 into the scope of IAS 16 and therefore enabling entities to measure them at cost subsequent to initial recognition or at revaluation, a definition of a 'bearer plant' is introduced into both standards. A bearer plant is defined as "a living plant that:

  1. is used in the production or supply of agricultural produce;
  2. is expected to bear produce for more than one period; and
  3. has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales."

The scope sections of both standards are then amended to clarify that biological assets except for bearer plants are accounted for under IAS 41 while bearer plants are accounted for under IAS 16.

The amendments also clarify that produce growing on bearer plants continues to be accounted for under IAS 41 and that government grants related to bearer plants no longer fall into the scope of IAS 41 but need to be accounted for under IAS 20 Accounting for Government Grants and Disclosure of Government Assistance.

Issued: 30 June 2014 (article)

 

Not yet endorsed for use in the EU.  The amendments are effective for annual periods beginning on or after 1 January 2016 (IASB effective date). Earlier application is permitted

 

New and revised Interpretations

New or revised pronouncementWhen effectiveApplication at 31 March 2014 to
1st qtrs2nd qtrs3rd qtrsFull yrs

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine

Clarifies the requirements for accounting for stripping costs associated with waste removal in surface mining, including when production stripping costs should be recognised as an asset, how the asset is initially recognised, and subsequent measurement.

The Interpretation requires stripping activity costs which provide improved access to ore are recognised as a non-current 'stripping activity asset' when certain criteria are met. The stripping activity asset is depreciated or amortised on a systematic basis, over the expected useful life of the identified component of the ore body that becomes more accessible as a result of the stripping activity, using the units of production method unless another method is more appropriate.

Issued: 19 October 2011 (article, newsletter)

Applies to annual periods beginning on or after 1 January 2013 See note 1 below - already adopted in Q1 2013 (January 2013) Mandatory Mandatory Mandatory

IFRIC 21 Levies

Provides guidance on when to recognise a liability for a levy imposed by a government, both for levies that are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and those where the timing and amount of the levy is certain.

The Interpretation 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. It 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.

EU endorsement expected Q2 2014.

Issued: 20 May 2013 (article, newsletter)

Not yet endorsed for use in the EU. IASB effective date is 1 January 2014.

 

Notes

Note 1. This pronouncement has already been implemented in previous periods by entities with this reporting date (where it applied to the entity).

Note 2. This pronouncement only applies to first-time adopters of IFRSs and must be applied by such entities on a mandatory basis.

Note 3. This pronouncement only applies to first-time adopters of IFRSs and can be optionally applied by such entities.

CIPFA/LASAAC consults on accounting for schools in local authorities

24 Feb 2014

The Chartered Institute of Public Finance and Accountancy (CIPFA) and the Local Authority (Scotland) Accounts Advisory Committee (LASAAC) are consulting on accounting for schools in local authorities. Comments are invited until 4 April 2014.

A joint HM Treasury and CIPFA/LASAAC working group (“the working group”) was set up in May 2013 to review the accounting for local authority maintained schools in England and Wales.  The working group report (‘The Accounting Treatment of Local Authority Maintained Schools in England and Wales’) concluded that community schools, voluntary controlled, voluntary aided and foundation local authority maintained schools (“local authority maintained schools”) are separate entities controlled by local authorities.  Under IFRS 10 Consolidated Financial statements these local authority maintained schools would need to be included in the local authority group financial statements.  It was also concluded that academies and free schools are not under local authority control.  Under IFRS 10, academies and free schools would not be required to be included in the local authority group financial statements. 

The working group considered whether an adaption to IFRS 10 as adopted by the Code of Practice on Local Authority Accounting in the United Kingdom (“the Code”) was required to allow local authority maintained schools to be included in the local authority single entity financial statements.  The working group highlighted that “this treatment is used by many local authorities at the moment when accounting for schools under existing consolidation standards” and considered “that there might be benefits of a more consistent approach”.   It was considered that requiring inclusion within the group accounts local authorities would incur “a substantial amount of time and expense”.  

In the consultation, CIPFA/LASAAC are therefore consulting on the proposal that the results of local authority maintained schools should be included within the separate financial statements of local authorities.  They also propose a similar accounting treatment for community special, foundation special and local authority maintained nursery schools.  The consultation also seeks the views of respondents on the working group’s assessment that “the inclusion of schools in the local authority’s single entity accounts, instead of their group accounts, is unlikely to alter decision making”.  The proposals adapt the definition of the local authority single entity financial statements in Chapter 9 of the Code. 

CIPFA/LASAAC highlight in their consultation recognise that local authorities will also need to consider IFRS 12 Disclosure of Interests in Other Entities disclosures for local authority maintained schools.  To ensure “that the disclosures required by IFRS 12 do not overburden local authority financial statements with excess information”, they have proposed additional provisions “to encourage local authorities only to report those transactions which materially impact on the presentation of a true and fair view of local authority performance, financial position and cash flows and to report disclosures on schools in aggregate”. 

All of the proposed changes are presented as an Appendix E to the Code. 

The consultation follows an earlier consultation by CIPFA/LASAAC of proposed changes to the Code to incorporate the requirements of IFRS 13 Fair Value Measurement and a number of other international standards such as IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entites, IAS 27 Separate Financial Statements (as amended in 2011) and IAS 28 Investments in Associates and Joint Ventures (as amended in 2011) into the Code.  

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G20 Finance Ministers and Central Bank Governors drop accounting convergence from their communiqué

24 Feb 2014

Over past years, the G20 used to call for convergence of accounting standards in the final communiqués published after their summits. The newest communiqué published after the meeting of G20 Finance Ministers and Central Bank Governors in Sydney does not contain a call for converged accounting standards anymore.

In past years, the communiqués always saw a paragraph such as “We underline the importance of continuing work on accounting standards convergence in order to enhance resilience of financial system. We urge the International Accounting Standards Board and the US Financial Accounting Standards Board to complete by the end of 2013 their work on key outstanding projects for achieving a single set of high-quality accounting standards.” (2013 G20 summit in St. Petersburg). However, the communiqué published after the G20 Finance Ministers and Central Bank Governors met in Sydney on 22 and 23 February 2014 keeps mute on the topic.

Recent decisions in January and February 2014 mean that only two of the four major convergence projects – revenue recognition (currently expected to be finalised towards the end of the first quarter of 2014) and leases (no timing available yet, redeliberations will be resumed in March) – remain on the IASB/FASB convergence agenda.

Please click for the communiqué on the G20 website.

ESMA comment letter on the equity method in separate financial statements

21 Feb 2014

The European Securities and Markets Authority (ESMA) has issued their comment letter on the International Accounting Standard Board’s (IASB’s) Exposure Draft ED/2013/10 'Equity Method in Separate Financial Statements (proposed amendments to IAS 27)' that was published on 2 December 2013.

ED/2013/10 proposes to change IAS 27 Separate Financial Statements to:

  • Permit the equity method as one of the options to account for an entity's investments in subsidiaries, joint ventures and associates in the entity's separate financial statements.
  • Require applying the change retrospectively when an entity elects to change to the equity method.

ESMA, consistent with the European Financial Reporting Advisory Group (EFRAG), comment that they would have “expected the IASB to provide more in-depth technical arguments supporting the re-introduction of the equity method as a measurement basis for subsidiaries, joint ventures and associates in the separate financial statements”.

ESMA also agrees with EFRAG that “introducing options in the standards does not constitute a positive development for IFRSs” and note that “options can lead to more diversity of reporting practices which impairs overall comparability between entities”.

Further comments and the full comment letter can be accessed from the ESMA website below. 

February 2014 IASB meeting notes — Part 2

21 Feb 2014

The IASB's meeting was held in London on 19−20 February 2014. We have posted Deloitte observer for Thursday's sessions on bearer plants, fair value measurement, impairment, the effective date of IFRS 9, and limited amendments to IFRS 9.

FRC publishes scope of Audit Quality Reviews for 2014/15

21 Feb 2014

The Financial Reporting Council (FRC) has published the scope of independent inspections of individual entities to be undertaken by their Audit Quality Review (AQR) team in 2014/15.

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 audit firms in the UK. The overall objective of their work is “to monitor and promote improvements in the quality of auditing of listed and other major public interest entities”.  The scope of review for 2014/15 includes all UK incorporated companies with listed equity and/or listed debt and those of significant interest to the public. 

Reviews are performed on a risk-based approach and take into account “focus sectors” which the FRC has identified as “support services” and “information technology” (specifically software companies) for the 2014/15 financial year.  Additionally there will be a specific focus on banks and building societies as indicated in the FRC draft Plan and Budget published in December 2013.  As well as being the subject of the AQR review, these focus sectors will also be the subject of the Corporate Reporting Review team of the FRC’s Conduct Committee during 2014/15 when reviewing the directors’ reports and accounts of public and large private companies for compliance with the law.  

Further information on focus sectors and the scope of the AQR reviews for 2014/15 can be obtained from the FRC website.

FEE voices concerns regarding the development and implementation of EPSAS

21 Feb 2014

The Federation of European Accountants (Fédération des Experts-comptables Européens, FEE) has responded to the European Commission/Eurostat consultation on a possible future implementation of 'European Public Sector Accounting Standards' (EPSAS) in European Union (EU) member states.

In a cover letter attached to the response to the December 2013 consultation, which mainly focussed on EPSAS governance principles and structures, FEE has added general thoughts on the development and implementation of EPSAS for the EU.

FEE states that it has always supported accruals-based accounting in the public sector and fully supports its implementation at all levels of government. FEE also believes that a single set of high quality principle-based standards could greatly contribute to stability and sustainability of public finance. Yet FEE points out that international standards in this area already exist: International Public Sector Accounting Standards (IPSAS). These are based on International Financial Reporting Standards (IFRS), which have been endorsed for use in the EU, and have been developed through a thorough due process including public consultation that also offers stakeholders in Europe the opportunity to participate.

Nevertheless, an earlier consultation led to the conclusions that (1) it seemed that IPSAS cannot easily be implemented in EU Member States as it stands currently and (2) the IPSAS standards represent a suitable framework for the future development of EPSAS. Therefore, the European Commission suggested proceeding with the development of these EU-focussed separate standards.

FEE sees this way forward with some concern and after due consideration and debate with the profession across Europe notes the following points related to the development and implementation of EPSAS:

  • It does not seem to be efficient to duplicate the organisation and the effort of creating public sector standards for the EU when global standards are already available. FEE believes there might be other, more time- and cost-efficient solutions available for making accruals accounting mandatory in the EU and ensuring that Member States use the same model - among them an EU endorsement of IPSAS.
  • Given that the EU's legislative process requires that 28 Member States need to agree to any new legislative acts, the development of a timely and harmonised solution seems doubtful. It also seems likely that as consequence of compromises a large number of Member State options would be included in the final EPSAS.
  • Developing EPSAS within the EU's legislative process would also make the standard setting process vulnerable to political tinkering as representatives from Member States might want to push forward their domestic agenda regarding public sector accounting.

In addition to these general concerns, FEE also voices concerns regarding the EPSAS governance structure proposed by the European Commission. These are included in the answers to the questionnaire that is attached to the cover letter. Please click for the cover letter and questionnaire on the FEE website.

February 2014 IASB meeting notes — Part 1

20 Feb 2014

The IASB's meeting was held in London on 19-20 February 2014. We have posted Deloitte observer notes from Wednesday's session on rate-regulated activities.

Click through for direct access to the notes:

Wednesday, 19 February 2014

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

FRC issues comment letter on IASB's Exposure Draft ED/2013/11 Annual Improvements to IFRSs 2012— 2014 Cycle

20 Feb 2014

The Financial Reporting Council (FRC) has issued their final comment letter on the International Accounting Standard Board's (IASB's) Exposure Draft ED/2013/11 'Annual Improvements to IFRSs 2012–2014 Cycle' which was published on 11 December 2013. The FRC “supports the proposed amendments to International Financial Reporting standards (IFRSs) as part of the annual improvements project” but has expressed “reservations” over the detail of some of the proposed changes.

The IASB uses the annual improvements project to make necessary, but non-urgent, amendments to IFRSs that will not be included as part of another major project.  The ED proposes amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, IFRS 7 Financial Instruments: Disclosures, IAS 19 Employee Benefits and IAS 34 Interim Financial Reporting.  

The FRC has questioned whether there is a need for the proposed clarification in IFRS 5 concerning the reclassification of non-current assets or disposal groups between held for sale and held for distribution.  Whilst acknowledging that IFRS 5 is silent in respect of the measurement requirements on reclassifications, the FRC comment “in our view such transactions should be rare in practice and adding a new rule to IFRS 5 may be a disproportionate response”. 

Reservations are also expressed over the proposed amendment to IAS 19.  The proposed amendment to IAS 19 clarifies that the high quality corporate bonds used in estimating the discount rate for post-employment benefits should be denominated in the same currency as the benefits to be paid (thus, the depth of the market for high quality corporate bonds should be assessed at currency level). 

The FRC “understand the IASB’s rationale for making the change and generally agree that in some jurisdictions, such as those within the Eurozone, the proposed clarification may be beneficial”.  However they express concern “that the use of a discount rate of a foreign currency bond might be seen to be incompatible with other required inputs such as inflation or might lead to uncertainty as to which inflation rate to apply” in the context of paragraph 78 of IAS 19.  Consistent with the views expressed by the European Financial Reporting Advisory Group (EFRAG) in their draft comment letter, the FRC would recommend that further work is carried out before finalising the amendment “to ensure there are no unintended consequences and to ensure there is common understanding of mutually compatible inflation, discount rates and other assumptions where the discount rate is derived from a bond issued in a foreign currency”. 

Further comments are made regarding the changes proposed to paragraph B30A of IFRS 7 and also in relation to transitional provisions where the FRC recommends prospective rather than retrospective application of the proposed amendment to IAS 34. 

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IASB decides on final effective date of IFRS 9

20 Feb 2014

In its afternoon session today, which focusses on IFRS 9 issues (impairment and classification and measurement), the IASB has just decided in an 11-5 vote that the effective date for IFRS 9 shall be 1 January 2018.

The original effective date of IFRS 9 Financial Instruments was 1 January 2013 and later amended to be 1 January 2015. In November 2013, the IASB removed the mandatory effective date completely and decided to revisit the effective date when all phases of the project are complete and a final version of IFRS 9 is issued.

Today's decision is intended to align the effective dates of the requirements for financial instruments and the requirements for insurance contracts. Should the completion of the insurance contracts project be delayed, a solution for insurance contracts will be sought separately.

Deloitte observer notes from the meeting are available here.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.