September

CDP publishes report on disclosure of carbon pricing

15 Sep, 2014

The Carbon Disclosure Project (CDP) has today published a report on the disclosures made to it by global organisations regarding their use of carbon pricing in business planning, as well as the extent to which companies see the increasing regulation of carbon as a business opportunity.

The report is based on disclosures made to CDP by companies around the world. It presents breakdowns of the companies that have disclosed the use of an internal price on carbon, both by geography and sector. It also provides excerpts from the disclosures made that provide insight into the use of carbon pricing by businesses as well as the implications of carbon pricing and associated policies.

The research shows that, in many jurisdictions, companies are ahead of their governments in planning for climate change risks, costs and opportunities. They are prepared for a global carbon market and would welcome more regulatory certainty with respect to climate change policy and carbon pricing.

The full report can be downloaded from the CDP website.

FRC publishes XBRL taxonomies for IFRS, FRS 101 and FRS 102

15 Sep, 2014

The Financial Reporting Council (FRC) has today published three finalised XBRL tagging conventions (taxonomies) which support XBRL reporting under EU-adopted IFRSs and the new UK GAAP standards.

These taxonomies have been developed to enable accounts to be filed electronically and to help users of annual reports extract and analyse data from them. They follow a similar approach in content, design and style to the existing UK GAAP and IFRS taxonomies already in use and are expected to be adopted by HMRC and Companies House in due course. The  Irish Revenue Commissioners are also expected to implement them once appropriate extensions have been made to incorporate Irish requirements.

As well as the taxonomies themselves, the FRC has published a Developer Guide and a Tagging Guide to help preparers implement the new taxonomies.

Click for:

  • The FRC's XBRL site, where the new taxonomies and supporting resources can be accessed.
  • The FRC's press release on this topic.
  • Our previous UK Accounting Plus news article.

We comment on the proposed amendments regarding the application of the investment entities exemption

15 Sep, 2014

We have published our comment letter on the IASB's Exposure Draft 'Investment Entities: Applying the Consolidation Exception (Proposed amendments to IFRS 10 and IAS 28)'.

We are concerned that two of the three proposals in the Exposure Draft result in arrangements being differentiated on a basis other than the relevance of the resulting information:

  • A subsidiary providing services that relate to the parent's investment activities. We believe that the proposals to subsume a service providing entity into a single fair value number will, for some arrangements, result in an inappropriate lack of transparency and that they will allow structuring opportunities.
  • Application of the equity method by a non-investment entity investor to an investment entity investee. We believe that an assumed difference in the ease of obtaining information is not sufficient reason to introduce a difference in the equity method of accounting for associates and joint ventures.

Click for the full comment letter.

Agenda for September 2014 IASB meeting

12 Sep, 2014

The International Accounting Standards Board (IASB) will meet at its offices in London on 22–24 September 2014. The IASB will discuss the disclosure initiative, the research project on post-employment benefits, insurance contracts, the conceptual framework, and issues from the IFRS Interpretations Committee.

The full agenda for the meeting, dated 12 September 2014, can be found here.  We will post any updates to the agenda, and our Deloitte observer notes from the meeting, on this page as they are available.

EFRAG draft comment letter on the proposed amendments regarding the recognition of deferred tax assets for unrealised losses

12 Sep, 2014

The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment letter on the amendments to IAS 12 'Income Taxes' that the IASB proposed in response to diversity in practice and that are relevant in circumstances in which the entity reports tax losses.

As the IASB concluded that diversity in practice around the recognition of a deferred tax asset that is related to a debt instrument measured at fair value is mainly attributable to uncertainty about the application of some of the principles in IAS 12, the proposed amendments consist of some clarifying paragraphs and an illustrating example.

EFRAG in its draft comment letter agrees with most of the proposals but has some concerns or wording suggestions as EFRAG believes that some of the amendments are difficult to read or would need further clarification. In relation to the new paragraph 29A the IASB proposes to add, EFRAG explicitly asks constituents for their view (should EFRAG agree or disagree) and presents two alternative answers as EFRAG is aware that there are significant different views on the issue.

Comments on the draft comment letter are due by 28 November 2014. It is available on the EFRAG website.

EFRAG updates endorsement status report for IFRS 10/IAS 28 amendments

12 Sep, 2014

The European Financial Reporting Advisory Group (EFRAG) has updated its endorsement status report to include 'Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)', which was issued by the International Accounting Standards Board (IASB) on 11 September 2014.

The endorsement status report, dated 11 September 2014, is available here.

IASB finalises amendments on sales or contributions of assets between an investor and its associate/joint venture

11 Sep, 2014

The International Accounting Standards Board (IASB) has published 'Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)'. The amendments address a conflict between the requirements of IAS 28 'Investments in Associates and Joint Ventures' and IFRS 10 'Consolidated Financial Statements' and clarify that in a transaction involving an associate or joint venture the extent of gain or loss recognition depends on whether the assets sold or contributed constitute a business. They are effective for annual periods beginning on or after 1 January 2016, with earlier application being permitted.

 

Background

IAS 28 Investments in Associates and Joint Ventures (2011) currently requires that gains and losses resulting from transactions between an entity and its associate or joint venture are recognised in the entity's financial statements only to the extent of unrelated investors' interests in the associate or joint venture. However, IFRS 10 Consolidated Financial Statements requires full profit or loss recognition when a parent loses control of a subsidiary. In considering the conflict, the IASB concluded that a full gain or loss should be recognised on the loss of control of a business, whether the business is housed in a subsidiary or not. At the same time, the gain or loss resulting from the sale or contribution of a subsidiary that does not constitute a business as defined in IFRS 3 Business Combinations to an associate or joint venture should only be recognised to the extent of unrelated investors' interests in the associate or joint venture.

In developing the amendment, the IASB focused on the conceptual basis considered when developing the requirements of IFRS 3, which considers the gaining or losing of control as a significant economic event that triggers remeasurement and gain/loss recognition. Consideration was also given as to whether all sales and contributions between an investor and an associate should give rise to fully recognised gains and losses, which was viewed as more robust from a conceptual point of view. However, this idea was considered to be too broad for a narrow-scope project. Therefore, the amendments require full gain or loss recognition for transactions between investors and associates only where a sale of contribution of assets constitutes a business.

 

Amendments

Amendments to IAS 28:

  • The requirements on gains and losses resulting from transactions between an entity and its associate or joint venture have been amended to relate only to assets that do not constitute a business.
  • A new requirement has been introduced that gains or losses from downstream transactions involving assets that constitute a business between an entity and its associate or joint venture must be recognised in full in the investor's financial statements.
  • A requirement has been added that an entity needs to consider whether assets that are sold or contributed in separate transactions constitute a business and should be accounted for as a single transaction.

Amendments to IFRS 10:

  • An exception from the general requirement of full gain or loss recognition has been introduced into IFRS 10 for the loss control of a subsidiary that does not contain a business in a transaction with an associate or a joint venture that is accounted for using the equity method.
  • New guidance has been introduced requiring that gains or losses resulting from those transactions are recognised in the parent's profit or loss only to the extent of the unrelated investors' interests in that associate or joint venture. Similarly, gains and losses resulting from the remeasurement at fair value of investments retained in any former subsidiary that has become an associate or a joint venture that is accounted for using the equity method are recognised in the former parent's profit or loss only to the extent of the unrelated investors' interests in the new associate or joint venture.

 

Dissenting opinions

Three IASB members have voted against the publication of the amendments. One member disagrees with introducing another accounting difference that is dependent on the interpretation of the definition of a business when the line between what constitutes a business versus a collection of assets is frequently unclear, often based on judgement and represents an interpretation challenge in practice. Two members believe that amendments do not fully address the concerns they were intended to address.

 

Effective date

The amendments are effective for annual periods beginning on or after 1 January 2016. Earlier application is permitted.

The IASB has decided that the amendments should apply prospectively to transactions that occur in annual periods beginning on or after the date that the amendments become effective as the Board believes that the benefits of comparative information would not exceed the cost of providing it.

 

Additional information

Click for:

New EFRAG 'Short Discussion Series' paper on the presentation of reversals of acquisition step-ups

11 Sep, 2014

The European Financial Reporting Group (EFRAG) has issued a fourth 'Short Discussion Series (SDS) paper. The series addresses topical and problematic issues with the aim of stimulating debate among European constituents and of helping the IASB to address cross-cutting dilemmas in financial reporting.

The new paper discusses the presentation and disclosure of information on the reversal of step-ups recognised in a business combination. 

IFRS 3 Business Combinations generally requires identifiable assets acquired and liabilities assumed to be measured at their acquisition-date fair value, which may result in upward adjustments to the carrying amounts in the acquiree's financial statements (so-called 'step-ups'). In the paper, EFRAG discusses whether and to what degree information about the impact of a subsequent reversal of the step-ups may be relevant to users and how this information should be presented. The discussion is structured into the following chapters:

  • The case for fair value in IFRS 3
  • Is the an issue with step-ups?
  • Is this only an issue in a business combination?
  • What assets should be considered?
  • Discussion of alternatives:
    • Presenting the impact of the step-ups in a separate line item of the statement of comprehensive income
    • Offsetting the revenue and cost of goods sold for the performance completed by the acquiree until the acquisition date
    • Presenting cost of goods sold based on the acquiree’s carrying amounts in profit or loss and the reversal of the step-ups in other comprehensive income
    • Disclosing sufficient information to enable users to make the adjustment
    • Voluntary provision of information
  • Practical problems

Questions to constituents to guide the discussion are included in the paper as well.

The discussion paper is open for comment until 31 December 2014. Click for press release and the discussion paper on the EFRAG website.

Earlier papers in the series were:

Agenda for October 2014 IFRS Advisory Council meeting

11 Sep, 2014

An agenda has been released for the upcoming meeting of the IFRS Advisory Council, which is being held in London on 13-14 October 2014. In addition to a number of reports and updates, the meeting will focus on the IASB's disclosure initiative project (including the materiality project), consider the future of corporate reporting in light of recent initiatives, discuss the implications of long-term investing on the Conceptual Framework, and consider a number of other matters.

A summary of the agenda (as at 10 September 2014) is set out below:

Monday 13 October 2014 (09:00-17:30)

  • Welcome and Chairman's preview
  • Overview of last four months
  • IASB activities
    • Work plan update
    • Key issues
    • ASAF update
    • Other activities
  • Disclosure initiative
    • Performance reporting project
    • '10-point plan' revisited
    • Links with related projects
  • Trustee activities - seeking input on key issues
  • Review of structure and effectiveness of the IFRS Foundation
  • IASB research project on materiality (includes presentation, break-out discussions and later report back)
  • Future of corporate reporting
    • Corporate Reporting Dialogue
    • Enhanced Disclosure Task Force
    • Global Reporting Initiative

Tuesday 14 October 2014 (09:00-15:15)

  • Sum up of materiality session
  • Investor liaison strategy update
  • IFRS content services
  • Long-term investing - implications for the Conceptual Framework
  • Sum up of discussions

Agenda papers for the meeting will be available in due course on the IASB website.

EFRAG Update detailing July through September developments

10 Sep, 2014

The European Financial Reporting Advisory Group (EFRAG) has released a new issue of its 'EFRAG Update' newsletter, summarising the discussions held at the EFRAG TEG conference call of 24 July and the EFRAG TEG meeting of 3-5 September 2014.

Highlights included the issuance of two endorsement advice letters on (1) the amendments to IFRS 11 regarding the acquisitions of interests in joint operations and (2) the amendments to IAS 16 and IAS 38 on acceptable methods of depreciation and amortisation. In addition, the EFRAG TEG approved:

  • a feedback statement on the EFRAG/ANC/FRC research paper The Role of the Business Model in Financial Statements;
  • a feedback statement on the EFRAG Short Discussion Series paper The Equity Method: a measurement basis or one-line consolidation? and
  • a draft comment letter in response to the IASB Exposure Draft Recognition of Deferred Tax Assets for Unrealised Losses (draft comment letter not published yet).

Additional topics discussed in the newsletter are:

Please click for the new issue of the EFRAG Update (link to EFRAG website).

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