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IFRS Foundation announces new Vice-Chairs of the Trustees

10 Dec 2014

The Trustees of the IFRS Foundation have announced that the Monitoring Board has confirmed the appointments of Ronald Arculli and Harvey Goldschmid to serve as Vice-Chairs of the Trustees. The new Vice-Chairs will replace from 1 January 2015 Tsuguoki Fujinuma and Robert Glauber, who are stepping down at the end of their terms.

Mr Arculli is a former Chairman of Hong Kong Exchanges and Clearing Limited and a former Chairman of the World Federation of Exchanges. Mr Goldschmid is Dwight Professor of Law at Columbia University and a former Commissioner of the US Securities and Exchange Commission. Please click for the corresponding press release on the IASB website.

2015 IFRS 'Blue Book' now available

09 Dec 2014

The IFRS Foundation has published '2015 IFRS Consolidated without early application' - the 'Blue Book'.

This volume (nicknamed the "Blue Book") contains all official pronouncements that are mandatory on 1 January 2015. It does not include IFRSs with an effective date after 1 January 2015.

The following are the main changes made since 1 January 2014:

The Blue Book sells for £70 plus shipping (academic, developing country, and volume discounts apply). The publication can be purchased through the IASB web shop.

Summary of November GPF meeting now available

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.

Agenda for December 2014 EEG meeting

08 Dec 2014

The International Accounting Standards Board's Emerging Economies Group (EEG) is meeting in Jakarta, Indonesia on 11-12 December 2014. The meeting will be hosted by the Indonesian Financial Accounting Standards Board and will discuss a number of issues, including accounting for extractive industries, non-financial assets and foreign currency convertible bonds.

The agenda for the meeting is summarised below:

Thursday, 11 December 2014 (09:00-20:00)

  • Address by hosting country (Indonesia)
  • Address by EEG Chair (Wayne Upton)
  • Accounting for extractive industries (presentations and discussions)
  • Accounting for foreign currency convertible bonds (FCCBs)
  • Welcome dinner

Friday, 12 December 2014 (09:00-13:00)

  • IASB updates
  • Non-financial assets
  • Administrative issues - topics and venues for meetings next year
  • Discussion and approval of the communiqué
  • Summary of the meeting
  • Working lunch

Agenda papers for the meeting are available on the IASB website.

SEC officials discuss another potential alternative for using IFRS in the United States

08 Dec 2014

At the annual American Institute of Certified Public Accountants (AICPA) Conference on Current SEC and PCAOB Developments, Jim Schnurr, Chief Accountant of the US Securities and Exchange Commission (SEC) and Julie Erhardt, Deputy Chief Accountant of the SEC, discussed the possible path toward IFRS in the United States. Both mentioned potential IFRS alternatives, including the voluntary disclosure of IFRS-based financial reporting information in addition to the US GAAP-based information used for SEC filings.

At the US Chamber of Commerce conference last week, Mr Schnurr outlined three previous alternatives regarding the use of IFRS in the United States, including: (1) the outright adoption of IFRSs, (2) providing US registrants with the option to file IFRS financial statements, and (3) the so-called "condorsement" approach". During today's speech, Mr Schnurr provided an example of how IFRS could be incorporated in the US reporting system:

[W]e understand that some domestic issuers may, now or in the near future, prepare IFRS-based financial information in addition to the U.S. GAAP based information that they use for purposes of SEC filings. However, regulatory constraints may dissuade some issuers from providing this information, as current SEC rules would consider IFRS-based information to be a “non-GAAP” financial measure for a domestic issuer. Should IFRS-based information continue to be considered “non-GAAP” financial measures subject to the requirements for such measures, or should it be thought of differently? Under this line of thinking, issuers that do not believe IFRS-based information would be beneficial to investors would not be forced to undertake what we understand to be, in some cases, significant implementation costs. 

In her speech, Ms Erhardt examined IFRS-readiness of investors, issuers, and securities regulators today compared to 10 years ago, when the SEC staff began to look at whether accepting IFRS financial statements from foreign private issuers without a reconciliation to US GAAP should be recommended to the Commission. She concluded that members of these three groups are ready for the most part; they have sophisticated knowledge and experience with IFRSs though some groups (particularly retail investors) may not be "as comfortable" with IFRS as US GAAP. Ms Ernhardt discussed the SEC staff and its acceptance of IFRS financial statements from foreign private issuers without reconciliation to US GAAP:

I believe . . . that foreign private issuers may be subject to different disclosure requirements from those of U.S. issuers because effectively in exchange for this differential disclosure U.S. investors are able to achieve international diversity in their investment portfolios by buying and selling securities of foreign companies within the protections of the U.S. capital markets system.  As a point of fact I do not think this differential disclosure line of thinking would apply in considering whether to provide an IFRS reporting option to U.S. issuers, although of course other lines of thinking would come into play in considering this. 

Both speakers echoed that the IFRS dialog should continue in the United States. Mr Schnurr stated that he hoped to be ready in the "next few months" to discuss with the SEC Chair and Commissioners all of the alternatives and the related problems and concerns to reach a final recommendation. He stated:

Chair White and I both recognize that any continued uncertainty around IFRS results in uneasiness for investors across the globe. Therefore, it is a priority of mine to bring a recommendation to the Commission in the near future with the hope of resolving, or at least lessening, this uncertainty.

Both speeches are available on the SEC's website:

FRC calls for high quality disclosure in the reporting of complex supplier arrangements by retailers and other businesses

08 Dec 2014

The Financial Reporting Council (FRC) has today called on Boards of retailers, suppliers and other businesses to provide high quality disclosures around complex supplier arrangements highlighting that “investors need to receive enough clear and relevant information to be able to evaluate a company’s performance and financial position where such amounts are, or could become, material”.

The FRC defines ‘complex supplier arrangements’ as consisting of fees, contributions, discounts, multiple offers and volume rebates – all of which require significant management judgement when estimating amounts to be included in accounts receivable and payable for both annual and interim reporting.

The FRC comments

Complex supplier arrangements such as fees and discounts may have a significant impact on the reported margins and other results of a company and on investors’ views of its performance.  Where this is the case, it is essential that investors are able to understand the basis and extent of judgement and estimation involved and the potential uncertainties affecting the accounts and future prospects.  Today’s announcement is a reminder to Boards of retail companies in particular of what they should consider and encourages them to review their reporting in this area as many have already announced.

The announcement follows a recent Financial Reporting Lab report which called on companies to provide additional disclosures to investors on how companies account for their material transactions and business streams.

The FRC indicates that their Conduct Committee will expect to see such high quality disclosure in the forthcoming annual and interim reports and accounts and will include the quality of such reporting as an area of focus when it reviews audits and accounts in 2015.

The full press release can be found on the FRC website.

IASB publishes editorial corrections

08 Dec 2014

The International Accounting Standards Board (IASB) has published its third batch of editorial corrections for 2014. The corrections impact consequential amendments, stand-alone standards, and the IASB's "A Guide Through IFRS 2014", "2014 IFRS (Blue Book)", and "2014 IFRS (Red Book)".

Editorial corrections to consequential amendments affect the following standards:

Editorial corrections affect the following individual pronouncements:

Editorial corrections to the 2014 IFRS (Red Book), A Guide through IFRS 2014 and 2014 IFRS (Blue Book) affect the following standards:

Editorial corrections do not change the meaning or application of pronouncements, but instead correct inadvertent errors.  Full details of the editorial corrections are available on the IASB website.

We comment on IOSCO's non-GAAP financial measures proposals

06 Dec 2014

Deloitte Touche Tohmatsu Limited has responded to the International Organization of Securities Commissions' Consultation 'Proposed Statement on Non-GAAP Financial Measures'. We support addressing the issue of non-GAAP financial measures at a global level as it is pervasive, and believe it is in the best interests of global securities markets if the proposed statement applied consistently in all IOSCO jurisdictions and is not overlaid with local guidance.

The comment letter makes a number of additional points, including:

  • For the proposed statement to have maximum effect, we encourage IOSCO to develop a common definition of 'non-GAAP financial measure' and to determine which such measures should be subject to the common discipline
  • It is important for the efficient operation of global capital markets that national and regional guidance is consistent and does not contradict the requirements of globally-recognised financial reporting frameworks
  • We agree that the proposed statement should apply to 'any non-GAAP financial measure wherever the measure is disclosed outside of the financial statements' as it recognises standard-setters' responsibility in relation to financial statements, and is a way of achieving consistency in the use of non-GAAP financial measures across the annual report as a whole, but suggest that IOSCO works with the IASB to clarify what is considered to be an 'IFRS measure'
  • We encourage IOSCO to determine a consistent scope, application and enforcement of the proposed statement, as it is assumed that it would encompass information on websites and other non-regulated information, and some securities market regulators regulate press releases and web-based material, but others do not.

Read the full comment letter in our publications section.

Agenda for December 2014 IASB meeting

05 Dec 2014

The International Accounting Standards Board (IASB) will meet at its offices in London on 16 December 2014. Part of the meeting will be held jointly with the Financial Accounting Standards Board (FASB) to discuss the leases project. Additionally, the IASB will discuss the IFRS for SMEs, IFRS IC issues, the post-implementation review of IFRS 3, and the disclosure initiative.

The full agenda for the meeting, dated 5 December 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.

Report from recent IFASS meeting released

04 Dec 2014

A report has been issued summarising the discussions at the meeting of the International Forum of Accounting Standard Setters (IFASS) held in London on 30 September and 1 October 2014.

Highlights from the meeting included:

IASB research programme

Participants discussed the role of research in the standard‐setting process, the role of national standard setters and the priority and longer‐term projects on the IASB's research programme. Projects discussed were:

  • Dynamic risk management,
  • Business combinations under common control,
  • Discount rates,
  • Equity method of accounting,
  • Financial instruments with characteristics of equity,
  • Foreign currency translation,
  • Income taxes,
  • Liabilities – amendments to IAS 37,
  • Performance reporting,
  • Rate‐regulated activities,
  • Post‐employment benefits, and
  • Extractive activities / Intangible assets / R&D activities.

The Chairman also asked participants to advise the IASB of potential research topics not on the list yet.

IPSASB matters

Participants discussed the IPSASB's Conceptual Framework project as the IPSASB's main strategic project at present and other current projects. It was stated stated that guidance on social benefits is a big gap in IPSASB's literature. In connection with the question of IPSASB governance it was mentioned that it is likely that IPSASB will remain under the aegis of IFAC with a separate oversight board.

Administrative matters

The next IFASS meeting's location was moved from Jordan to Dubai; the timing (23-24 March 2015) was not changed.

Report back on IFASS member projects

Participants discussed four projects run by IFASS members: 'Goodwill impairment and amortisation' (OCI, EFRAG, ASBJ), 'The equity method' (EFRAG), 'Cash flow statement issues' (FRC), and 'Separate Financial Statements' (EFRAG, ICAC, OIC, RJ).

Economic consequences of IFRS adoption in Korea

The Chairman of the Korea Accounting Standards Board explained that the adoption of IFRSs in Korea was proceeding well. He provided details of the IFRS adoption process in Korea, compared Korean GAAP with IFRSs and gave details of a relevant literature review.

Changes to the Interpretations Committee processes

The IASB representative explained that the IASB is seeking better evidence of diversity in practice and asked participants to share examples of such diversity with the IASB staff. He also mentioned that the IASB is seeking to get a local perspective on how jurisdictions gather feedback and asked asked to be advised if there is an overlap as to whom the IASB asks for feedback as the IASB relies on feedback from many sources. Participants discussed NIFRICs (negative IFRIC agenda decisions) at length, which are seen by some as being equivalent to authoritative literature. The IASB representative explained that in some instances, NIFRICs could be regarded as educational material in nature. Participants felt that the discussion was in danger of undermining the concept of principle‐based standards as it was important to be sure what is authoritative and what is educational. The IFASS Chairman commented that the Interpretations Committee could indicate in the NIFRICs that the Committee's comments should be viewed as being educational in nature but are not authoritative.

Topical Issues

Participants then discussed several topical issues:

  • Retirement benefit plans,
  • Presentation of reversals of acquisition step‐ups,
  • Income recognition during the construction phase in the case of service concession
    arrangements, and
  • EU Expert Group on the evaluation of the IAS Regulation.

New IFASS member projects

Participants discussed three new projects taken up by IFASS members: 'The Financial Reporting Lab' (FRC) including information on the Lab's purpose, structure and current projects; 'Not‐for‐profit reporting in the private and public sectors' (AcSB), which was supplemented by participants with information about the reporting regimes in various jurisdictions; and 'Classification of claims' (EFRAG), which was greeted by participants as "very helpful in dealing with an age‐old problem".

Please click for the full report (link to the website of the Malaysian Accounting Standards Board).

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.