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April

We support bringing the IPSASB within the governance framework of the IFRS Foundation

30 Apr 2014

Deloitte Touche Tohmatsu Limited has submitted a comment letter to the IPSASB Governance Review Group's consultation paper on the future governance of the International Public Sector Accounting Standards Board (IPSASB). We support bringing the IPSASB within the governance framework of the International Financial Reporting Standards Foundation as it would mitigate the threat of the politicisation of public-sector standard setting, reduce the overall cost of international accounting standard-setting, allow private and public sector standard-setters to follow the same due process, and provide a single oversight and monitoring framework ensuring consistency about which standards apply to any given reporting entity.

The IPSASB Governance Review Group consists of members from the International Monetary Fund (IMF), Organization for Economic Cooperation and Development (OECD), the World Bank, Financial Stability Board (FSB), the International Organization of Securities Commissions (IOSCO) and the International Organization of Supreme Audit Institutions (INTOSAI). The Review Group published its proposals in January 2014.

In our comment letter, we note that the sovereign debt crisis has placed increasing importance on the review of the governance of the IPSASB, and support the ongoing work of the IPSASB in establishing high-quality accounting standards for the public sector. In supporting the objective of bringing the IPSASB's governance within the governance framework of the IFRS Foundation, we believe the oversight and monitoring provided by the IFRS Foundation Trustees and IFRSF Monitoring Board would strengthen the IPSASB's independence.

Whilst we acknowledge that the 2010-2012 Strategy Review of the IFRS Foundation Trustees concluded that the short-term primary focus of the IFRS Foundation and the International Accounting Standards Board (IASB) should remain on developing standards for for-profit corporate entities, we think that it is appropriate to revisit this conclusion within its own due process arrangements. We note that the IFRS Foundation has announced a Strategic and Operational Review that will commence in 2015, and believe this would give the IFRS Foundation Trustees an opportunity to begin the discussion about bringing oversight of the IPSASB within its ambit. In the meantime, we support the IPSASB remaining under the auspices of the International Federation of Accountants (IFAC) to allow its standard-setting activities to continue within existing funding arrangements.

In terms of the potential impact on the membership of the IFRS Foundation Trustees, our comment letter notes the following:

In our view, the IFRS Foundation Trustees would be able to provide appropriate oversight of the work of the IPSASB, given that at least half of the Trustees have public sector/public policy experience. As such, we think that the Trustees already possess a broad understanding of the needs of users of public sector accounts. Any actual or perceived deficiencies could be addressed as new Trustees are appointed.

Similarly, we do not believe issues with membership and remit of the Monitoring Board are insurmountable as it "already represents the public interest (the members being primarily public authorities), and capital markets under their supervision are accessed by governments and other public sector entities".

We however note concerns regarding the impact on funding of an expanded IFRS Foundation:

More problematic might be funding expanded operations of the IFRS Foundation, if it is to address public sector standard-setting. The IFRS Foundation has struggled to establish a stable, independent funding base for its current private sector activities: adding public sector responsibilities could strain the funding challenges still further. Any involvement of IFAC Member Bodies in funding the IPSASB would likely be as contentious as it was when the IASC was being restructured in 1998-2000, and would need to be severed if the IPSASB were to be held to the same standards of independence as the IASB.

Notwithstanding these concerns, we believe that a common governance framework and due process, together with likely staff resource synergies, may represent a less significant incremental cost than establishing the IPSASB as a separate standard-setter, an option we see as "challenging at present and sub-optimal in the long run".

Click for access to the full comment letter.

IASB work plan update for April 2014

30 Apr 2014

Following its recent meeting, the International Accounting Standards Board (IASB) has updated its work plan. Significant updates include (1) the addition of the public consultation period for the macro hedge accounting discussion paper, (2) extension of redeliberations on insurance contracts and leases to the second quarter of 2014, (3) move of rate regulation project from a major project to a research project, and (4) move of the disclosure initiative from a narrow-scope project to a major project with an exposure draft on net debt (now called ‘reconciliation of liabilities from financing activities’) expected in the fourth quarter of 2014 and redeliberations on the amendments to IAS 1 to begin in the third quarter of 2014. The finalised standard for revenue recognition is expected to be issued in the second half of May 2014.

Current status

The revised time table for the major projects is now as follows:

Project Current status Next project step Expected timing
Conceptual Framework — Comprehensive IASB project Redeliberations Exposure draft Q4 2014
Financial instruments — Impairment Redeliberations Finalised IFRS Q2 2014
Financial instruments — Macro hedge accounting Discussion paper Public consultation Q2 and Q3 2014*
Financial instruments — Limited reconsideration of IFRS 9 (classification and measurement) Redeliberations Finalised IFRS Q2 2014
Insurance contracts Re-exposure Redeliberations Q2 2014*
Leases Re-exposure Redeliberations Q2 2014*
Rate-regulated activities Research / deliberations Discussion paper Q2 or Q3 of 2014*
Disclosure initiative — Amendments to IAS 1 Exposure draft Redeliberations Q3 2014*
Disclosure initiative — Reconciliation of liabilities from financing activities Redeliberations Exposure draft Q4 2014*
Revenue recognition Redeliberations Finalised IFRS Q2 2014

* Indicates a change since the prior work plan update.
According to the April 2014 summary of the DPOC meeting, this may change to the beginning of the third quarter 2014.
Now a research project.

 

Changes concerning narrow scope projects are:

Click for the IASB work plan dated 30 April 2014 (link to IASB website). We have updated our project pages to reflect the updated work plan and other known developments.

Summary of the April 2014 Trustees' meeting

30 Apr 2014

The IFRS Foundation Trustees have published a summary of the conclusions from their meeting held in Sydney on 8–10 April 2014.

The summary of the meeting includes the following reports:

 

Report of the Trustees’ Executive session

  • Public consultation on the International Public Sector Accounting Standards Board (IPSASB) Governance Review
    To improve public sector accounting, the Trustees agreed to establish a joint monitoring and oversight body, consisting primarily of members of the IPSASB review group.
  • IFRS developments around the world
    • Saudi Arabia — Updated on developments from the Chairman’s meeting with the Gulf Co-operation Council Accounting and Auditing Organisation (GCCAAO).
    • United States — The Chairman discussed his meeting with US authorities, including the Securities and Exchange Commission (SEC).
    • Japan — Updated on developments regarding Japan’s transition to IFRS.
    • Europe — The Trustees discussed the EU’s contribution to the funding of the IFRS Foundation.
    • G20 — The Trustees discussed meetings held with representatives of the Australian Treasury and the Australian Securities and Investment Commission (ASIC) to promote a single set of global accounting standards.
  • Governance and control developments
    The Trustees reviewed the Foundation’s overall risk management and controls processes and procedures, which were considered to be generally effective. The Trustees asked the staff to start the preparatory work for the organisation’s next review of structure and effectiveness as soon as possible in the second half of 2014, rather than wait for 2015 when it was scheduled to start.
  • Communications strategy for 2014
    The Trustees discussed developing a revised overarching narrative for the organisation, enhanced co-ordination of policy-level outreach and media activity.
  • Presentations
    The Trustees received presentations from:
    • The Education and Content Services Committee
    • The Audit and Finance Committee

 

Report of the Chairman of the IASB

Hans Hoogervorst, Chairman of the IASB, provided the Trustees with an update on the IASB’s activities including its disclosure initiative and the joint leases project. Ian Mackintosh, Vice-Chairman of the IASB, provided an update on the revenue recognition project.

 

Report of the Chairman of the Due Process Oversight Committee

Scott Evans, Chairman of the Due Process Oversight Committee (DPOC) reported on the recent activities of the DPOC. See our previous news item on topics covered during the separate DPOC meeting.

 

Regional outreach activity

As part of the Trustees’ meeting, the IFRS Foundation hosted a joint event with the Institute of Chartered Accountants in Australia and CPA Australia at which the Trustees and the leadership of the IASB met with representatives of key stakeholders to discuss issues under the theme The future of global financial reporting.

 

The full summary of conclusions of the IFRS Foundation Trustees' meeting is available on the IASB website.

April 2014 IASB meeting notes — Part 3

30 Apr 2014

The IASB's meeting was held from 22–25 April 2014, some of it a joint meeting with the FASB. We have posted Deloitte observer notes from the IASB's sessions on equity method and the IFRS Interpretations Committee issues.

Click through for direct access to the notes:

Wednesday, 23 April 2014

Friday, 25 April 2014

You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting. Notes from the remaining sessions will be posted in due course.

IFRS Foundation responds to the IPSASB governance review

30 Apr 2014

In a response to the Organisation for Economic Co-operation and Development’s public consultation paper “The Future Governance of the International Public Sector Accounting Standards Board (IPSASB),” the IFRS Foundation (IFRSF) agreed that there are challenges for the IPSASB in achieving the acceptance of national authorities and that the governance of the IPSASB should be strengthened to overcome those challenges.

Of the options provided in the public consultation paper, the IFRSF believe that the practical option is to have a single monitoring and oversight board, while the IPSASB remains under the auspices of the IFAC. To gain greater acceptance, the IFRSF stated the monitoring and oversight be “provided by the international treaty and other organisations represented on the IPSASB Governance Review Group, with the possible addition of the United Nations.” Another advantage to this option is that the current funding could be maintained. Also, the IFRSF suggested that the monitoring and oversight board should be responsible for creating operating procedures, consultative arrangements and due process.

The IFRS Foundation plans to conduct its next strategic review in 2015, when it may consider whether to expand its scope of activities to include the IPSASB.

For more information, see the full response on the IASB website.

NHF consults on revised guidance on impairment of social housing assets

30 Apr 2014

Following consideration of responses to the Exposure Draft (“ED”) on the revised Housing Statement of Recommended Practice (“the Housing SORP”), The National Housing Federation (NHF), along with the SORP Working Party, have published a further ED that significantly revises the proposed guidance in the Housing SORP relating to impairment of social housing assets. Comments on these revised proposals are invited until 4 June 2014.

The original ED was issued by the NHF in December 2013 with a comment period which closed on 14 February 2014.  The impact assessment performed by the NHF, along with the responses to the original ED indicated that that “the sector was deeply concerned about proposals on the impairment of social housing assets”.

The key changes proposed to the original guidance related to impairment are:

that assessment should reflect that social housing assets are held for their (public) service potential, not only their income generating capacity;

clarity that impairment should not be routine, i.e. as soon as a development is delivered this should not trigger a write-down in value; and

more flexibility in the definition of what constitutes a cash generating unit, e.g. allowing consideration of whole development programmes.

As a result of this additional consultation, the NHF comment that “the final SORP will be delayed until September 2014”.

Click for:

FRC announces long-term project into the use of digital media by companies

30 Apr 2014

The Financial Reporting Council (FRC) has today announced a long-term project into the use of digital media by companies in their corporate reporting. The aim of the project is “to understand how technology is, and can be used, to enhance communications with the investment community”.

The project, expected to last 18 months, will be undertaken by the Financial Reporting Lab and will look into: 

  • how companies are currently using digital media (websites, videos, apps, social media blogs etc) to report externally to investors, how investors are using the digital media produced by companies and areas that companies should focus their attention on;  
  • barriers to the use of digital media in corporate reporting; and
  • how companies may use digital media and technology to report to investors in the future. 

The FRC invites listed companies, investors and analysts to express their interest in taking part in the project by 30 May.  The first part of the project (first bullet above) will be undertaken in the summer with a report of findings expected to be published “towards the end of this year”.

 A press release with further details can be obtained from the FRC website.

Summary of the April 2014 DPOC meeting

30 Apr 2014

The IFRS Foundation has published a summary of the 8 April 2014 Due Process Oversight Committee (DPOC) meeting that was held in Sydney during the Trustees' meeting.

Topics discussed during the DPOC meeting were:

 

Update on technical activities

Updates were given on the progress of the major projects as well as implementation and maintenance projects on the IASB's work plan.

  • Regarding macro hedge accounting, the DPOC was informed that the IASB would shortly publish a Discussion Paper.
  • On insurance contracts the DPOC was updated on progress following the responses, outreach and fieldwork that had been undertaken on the proposals in the IASB's revised Exposure Draft. The DPOC was told that while there was broad support for the proposals, there remain some significant areas of concern, in particular around complexity and accounting mismatches. The DPOC was also informed that in February 2014, the FASB decided that it would not pursue convergence in this area, but instead would make limited, targeted improvements to its existing standards on insurance.
  • The DPOC noted that discussions were continuing on leases. While there was praise for the Boards' efforts to respond to concerns regarding the proposals issued in the original ED (issued in 2010), there remained considerable concern about the cost and complexity of the proposals in the second ED.
  • On rate-regulated activities, the DPOC was updated on the progress of the comprehensive project. At its meeting in April 2014, the IASB would consider the due process steps taken so far on the research project and the staff would be seeking permission to start balloting the DP.
  • On revenue recognition, the DPOC was informed that balloting was complete on the proposed new standard and was expected to be issued in the second quarter of 2014. Good progress was being made in working to establish the revenue implementation group.
  • On the conceptual framework project, it was noted that many respondents to the discussion paper had expressed the view that the IASB should reconsider a number of aspects of the Framework that had been published in 2010, in particular the treatment of prudence, reliability and stewardship.

The implementation and maintenance projects the DPOC was updated on were the disclosure initiativebearer plants, and equity method in separate financial statements. The DPOC noted that the timelines for a number of projects had slipped. This was in part attributed to the priority given to the macro hedging project.

 

IFRS 9 Financial Instruments

The DPOC received a report on the lifecycle of the due process to date on the development of the final version of IFRS 9. The DPOC was informed that the IASB's plan was to publish the final version of IFRS 9 by the end of the second quarter or early in the third quarter of 2014. The DPOC was informed that the IASB had decided on a mandatory effective date for IFRS 9 of 1 January 2018, which balanced the desire to have the new model effective, the timeline for entities to put the necessary systems changes into place, and the desire to allow time to progress the insurance contracts project.

On impairment, the DPOC received a report summarising the due process to date on the project. The DPOC was reminded that, at its meeting in January 2014, the IASB representatives had confirmed that the FSB now accepted that there would not be convergence on impairment, but wanted to see the impairment proposals in place as soon as possible. The DPOC was also informed that the IASB was considering to establish an Impairment Implementation Group, similar in concept to the Revenue Implementation Group that was being set up.

The DPOC also received a report summarising the due process to date on the project on classification and measurement. While originally it was hoped the project would bring the requirements in IFRSs and US GAAP closer together, the DPOC was informed that the FASB had made a number of tentative decisions since December 2013 that indicated that it would abandon convergence.

 

Effects Analysis Consultative Group

The DPOC received a progress report on the work of the Effects Analysis Consultative Group (EACG), which had been set up to advise the IASB in developing an agreed methodology for field testing and effects analyses. The DPOC was content with the general direction of the draft report, but did have some specific questions and requests. The plan is for the EACG to finalise its report by the middle of June 2014 and, after consulting the IASB and the Advisory Council, to submit a final report to the DPOC in July 2014.

 

XBRL

The DPOC received a progress report on the IASB's proposals to revise the due process for updating the IFRS Taxonomy. The DPOC questioned the proposal for IFRS Taxonomy consultation documents to have only 60-day comment periods but was otherwise content with the proposals as outlined.

 

Reporting of Outreach and Fieldwork and review of correspondence

The DPOC received an update on the staffs continuing efforts to improve the transparency of the reporting of feedback from outreach with investors and other users of financial statements and the reporting of the results of fieldwork undertaken on particular projects. The DPOC also noted that no new correspondence cases had been submitted since the January 2014 meeting.

 

Update on consultative groups

The DPOC considered an update on the proposed memberships of a number of consultative groups: The size of the SMEIG will be increased to a maximum of 30 members as from July 2014 with a number of places kept vacant in case suitable candidates were identified at a later date; a new consultative group, the IFRS Taxonomy Consultative Group, will be set up; and the membership of the revenue implementation group that is being set up in conjunction with the FASB will be announced around the time the standard is issued.

 

Education materials

The DPOC received an update report on the material that the IFRS Education Initiative was developing in 2014 and the level of review that the staff planned should take place in each case. The DPOC was satisfied with the level of planned review for each product.

Please click for the full summary of the meeting on the IASB's website.

FEE believes IPSASB governance reform proposals could be more "innovative"

30 Apr 2014

The Federation of European Accountants (Fédération des Experts-comptables Européens, FEE) has responded to the IPSASB Governance Review Group consultation paper on the future governance of the International Public Sector Accounting Standards Board (IPSASB). FEE assesses advantages and challenges of each option presented in the consultation paper and concludes that a more innovative approach might be required.

FEE welcomes the consultation as the Eurostat report on the suitability of IPSASs for EU Member States had shown that the lack of oversight is an area of significant concern and a reform of the IPSASB governance could promote a more widespread adoption of the IPSASB standards.

The consultation paper contained a number of possible options for strengthening the IPSASB's governance arrangements:

  • Monitoring and oversight of the IPSASB by the IFRS Foundation’s Monitoring Board and Trustees
    FEE believes that this option could add to the credibility of acting in the public interest and could ensure the independence of the IPSASB. However, it would need to be developed in co-operation with the IFRS Foundation and would need a review of the IFRSF constitution, so it does not seem to be available as a near term solution.
  • Separate monitoring and oversight boards for the IPSASB, while it remains under the auspices of the IFAC
    This option is regarded as a practical and straightforward solution that would require limited investments of resources and time. However, FEE believes that it would not address concerns over accountability, independence and conflicts of interests.
  • Re-establishing the IPSASB outside of IFAC with its own monitoring and oversight bodies
    This is seen as the optimal solution by FEE as it would create a truly independent standard-setter, however, questions of financing, staffing and the need to reform the IPSASB governance within a reasonable time frame would make this solution impracticable.

Given the challenges associated with all of the options, FEE believes that other approaches should be investigated. According to FEE, one possible solution might be a hybrid model that would combine expanding the responsibilities of the IFRS Foundation's Monitoring Board and establishing a new IPSASB oversight body within the remit of IFAC. FEE argues that a monitoring body and an oversight body do not have the same objectives and could therefore well be located in different structures where the expertise on the matters is already available:

The IFRS Foundation's monitoring board has well established competence, resources, procedures and credibility for insuring the public interest of accounting and financial reporting standard setting activities for the private sector, most of which would be readily applicable to the setting of public sector accounting standards.

[...]

Establishing a new oversight body for the IPSASB, while it remains under the auspices of IFAC (a public sector version of the PIOB), would have the following advantages:

  • The members of such a body could be selected fully on the basis of their background and expertise in public sector accounting issues;
  • Such a body could be established reasonably quickly without requiring significant constitutional and organisational changes to the IFRS Foundation and to IFAC's constitution and organisation.

Please click for the full consultation response on the FEE website.

Expert Group on the evaluation of the European IAS Regulation

30 Apr 2014

The European Commission (EC) has decided to evaluate whether the initial objectives of its IAS Regulation are still relevant and identify areas for improvement in the functioning of the Regulation, if needed. The EC is therefore calling for applications with a view to selecting members of an informal 'Expert Group on the evaluation of the IAS Regulation'.

The European Commission's expert group is intended to advise and assist the EC in conducting the retrospective evaluation of the IAS Regulation. The Commission currently envisages that it would have a public consultation and possibly targeted workshops. It will seek to draw on the expertise of the group to advise it in respect of such activities and others as required by the Commission.

The evaluation of the IAS Regulation is also intended to integrate the recommendations of the special advisor Mr Maystadt on how the EU's contribution to International Financial Reporting Standards (IFRSs) can be reinforced and how the governance of the European bodies involved in developing these standards can be improved. The evaluation is designed to to complement Mr Maystadt's recommendations by providing factual data about the IFRS experience in Europe so far.

The expert group will be composed of approximately 18 members drawn from organisations reflecting interests from preparers of financial statements, investors, financial analysts, accountants, auditors, and other stakeholders (companies, associations, non-governmental-organisations, trade unions, universities, research institutes, civil society, Union agencies, Union bodies and international organisations) and Member State authorities, including supervisors and national standard-setters. The call for applications was published with a view to selecting members of the group from organisations. Selection of Member State authorities follows a different procedure.

Please click for access to the call for applications on the EC website.

Note: The deadline for application for the expert group on the evaluation of the IAS Regulation has been extended to 3 June 2014.

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