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Summary of November GPF meeting now available

  • GPF meeting (mid blue) Image

09 Dec 2014

Minutes of the meeting of the Global Preparers Forum (GPF) with representatives of the International Accounting Standards Board (IASB) held in London on Thursday, 6 November 2014 are now available. The meeting discussed a broad range of topics, including a number of IASB active and research projects, and IFRS Interpretations Committee issues.

The following are some of the highlights of the matters discussed at the meeting:

  • IFRS taxonomy. Some concern was expressed that the IASB's new approval process for taxonomy updates as new standards or amendments are issued may be seen by some regulators as an endorsement of those taxonomy elements and lead to restrictions on where and how information is disclosed in financial statements
  • Leases. In addition to concerns raised about the IASB and FASB proposals for leases being significantly different, there was a suggestion the IASB should form a transition resource group on leases because of possible different interpretations of some areas of application of the forthcoming standard
  • Foreign exchange restrictions in hyperinflationary economies. GPF members shared their experiences with this topic, particularly since the third official exchange rate mechanism was introduced in Venezuela earlier this year. There was a suggestion that some kind of blended or weighted average rate might best reflect the economics of the situation in some cases, and that a narrow-scope amendment to IAS 21 The Effects of Changes in Foreign Exchange Rates may be needed to allow entities to reflect the economics of exchangeability in these situations
  • Foreign exchange translation of revenue. The meeting discussed a recent IFRS Interpretations Committee issue where an entity enters into a foreign currency sales contract and receives a non-refundable payment in advance of the delivery of goods or services. Over half of the GPF members had experience of sales contracts under which payments were received in advance, and most of these member record revenue in profit or loss using the exchange rate at the date of revenue recognition, with only a few using the rate at the date of the advance cash receipt (considered consistent with US GAAP and with treating the deferred revenue as a non-monetary item)
  • Research agenda. There were some suggestions about involving preparers in technical decisions arising at the research stage of projects to provide guidance on operability, and it was noted it would be more important to involve prepares at an earlier stage if there is a significant cost or cost benefit consideration associated with the project
  • Emissions trading schemes. GPF members noted a variety of approaches are being used to account for emissions trading schemes.  Many stressed that when looking at how to account for a scheme, the unit of account should be the scheme as a whole, rather than an approach similar to that in withdrawn IFRIC 3 Emission Rights which focused on individual components at a point in time. Many accrue a liability through the period, typically based on the expected cost of the additional allowances required. Options on how to account for surplus allowances were also discussed
  • Equity method of accounting. The majority of GPF members preferred the equity method of account to either cost or fair value, but there was some discussion as to whether the equity method is appropriate for all associate entities, perhaps requiring a review of the meaning significant influence. Some members considered the equity method useful where the business model means the operations of the investee are 'embedded' within the operations of the investors, but it may not be appropriate if the holding is temporary or the investment is not held for the purpose of the business. Difficulties in applying the equity method were discussed, including the need to obtain information to determine elimination entries, and whether elimination entities should be required (as prices are negotiated on an arm's length basis)
  • Disclosure initiative. GPF members discussed cohesiveness in presentation and disclosure of financial statements and disclosure of cash flow information. There was support for including a communication principle in IFRS to promote the linkage of information in financial statements, but there was some caution that cohesiveness should not be prescriptive requiring the classification and grouping of information in a particular way. GPF members gave cost and benefit perspectives on the disclosure of some key cash flow measures, with most stating additional disclosures about cash flows would require systems changes and would be a cost burden.

The full report is available on the IASB website.

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