April 2015 IASB meeting notes posted — Part 1

30 Apr, 2015

The IASB met at its offices in London on 27–29 April 2015. We have posted the Deloitte observer notes from the sessions on fair value measurement and IFRS implementation issues.

Click through for direct access to the notes:

Monday, 27 April 2015

Tuesday, 28 April 2015

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

EFRAG to hold a Board conference call to discuss draft endorsement advice on amendments regarding the application of the investment entities exemption

30 Apr, 2015

The European Financial Reporting Advisory Group (EFRAG) will hold a Board conference call on 8 May 2015 to discuss the EFRAG draft endorsement advice on 'Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)'.

The objective of the call is for the staff of EFRAG to present to the EFRAG Board a version of the draft endorsement advice.  The current version of the draft endorsement advice concludes:

EFRAG has concluded that the Amendments are not contrary to the principle of ‘true and fair view’ and meet the criteria of understandability, relevance, reliability and comparability required of the financial information needed for making economic decisions and assessing the stewardship of management. EFRAG’s reasoning is explained in Appendix 2.

Having considered all relevant aspects, EFRAG assesses that adopting the Amendments is conducive to the European public good in reducing costs to preparers by providing either certainty in the application of relevant IFRS or relief without imposing significant additional costs on users. Accordingly, EFRAG recommends their adoption. EFRAG’s reasoning is explained in Appendix 3.

Supporting papers for the call and details on how to register can be found on the EFRAG website.

FASB proposes ASU to defer the effective date of the new revenue standard

30 Apr, 2015

The FASB has issued a proposed ASU, 'Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date', which would defer for one year the effective date of the new revenue standard for public and nonpublic entities reporting under US GAAP.

For public business entities, as well as certain nonprofit entities and employee benefit plans, the effective date under the proposal would be annual reporting periods, and interim periods therein, beginning after 15 December 2017. The effective date for all other entities would be one year later than this (i.e., 15 December 2018). Early adoption would be permitted if certain conditions are met (detailed in the proposal). Comments on the proposed ASU are due by 29 May 2015.

On 28 April 2015, the IASB tentatively decided to defer by one year the effective date of IFRS 15 Revenue from Contracts with Customers, to 1 January 2018, but did not propose changing the standard’s early-adoption provisions. As a result, the effective date of IFRS 15 would generally align with that in the proposed ASU. In May 2015, the IASB is expected to issue an exposure draft with a 30-day comment period on the deferral.

For more information, see the press release and proposed ASU on the FASB’s website.

EFRAG publishes April 2015 issue of 'EFRAG Update'

29 Apr, 2015

The European Financial Reporting Advisory Group (EFRAG) has published an 'EFRAG Update' summarising public technical discussions held and decisions made during April 2015.

The Update reports on the meeting of the EFRAG Board on 22 April, the EFRAG Board conference call on 9 April, the EFRAG TEG conference call on 23 April, the meeting of the EFRAG Technical Expert Group (EFRAG TEG) on 1 - 2 April as well as the expected written procedures of the EFRAG Board in May.  The Update also lists EFRAG publications issued in April:

Please click to download the April EFRAG Update from the EFRAG website.

IASB will propose to defer the effective date of IFRS 15

28 Apr, 2015

In its afternoon session today on IFRS 15 issues, the IASB has just decided to propose to defer the effective date of IFRS 15 'Revenue from Contracts with Customers' to 1 January 2018.

In this decision, the IASB followed its staff's recommendation included in an agenda paper for the meeting. The staff had argued that since IFRS 15 is a converged standard with US GAAP it would be "less confusing for the market if both IFRS and US GAAP preparers apply the new Standard at the same time". The US FASB has recently tentatively decided to defer for one year the effective date of its new revenue standard (ASU 2014-09 Revenue from Contracts with Customers) for public and nonpublic entities reporting under US GAAP. The IASB staff had also pointed out that the IASB is considering proposing some limited clarifying amendments to IFRS 15, so a degree of uncertainty regarding what IFRS 15 will finally look like that cannot be completely removed until the IASB decides to either finalise, or not proceed with, these amendments. The staff also mentioned that even if these clarifying amendments have a different effective date than the standard itself, many entities might to wish to apply the amendments at the same time as they first apply IFRS 15 to avoid repeated changes of their accounting methods.

The IASB granted these points and decided to propose to defer the effective date of IFRS 15 by one year to 1 January 2018. The IASB staff has been asked to prepare an exposure draft to this effect, which will be a stand-alone exposure draft only dealing with the effective date so it can be processed more quickly. The exposure draft will have a comment period of no less than 30 days and is expected to be issued in May 2015.

EFRAG's recommendation to the European Commission to adopt IFRS 15 without deferral of the effective date is not negatively affected by today's decision of the IASB as EFRAG recommends adoption of IFRS 15 in the European Union "with the effective date set by the IASB".

Please see also our observer notes from the meeting,  Need to know newsletter on the IASB's tentative decision and the IASB's corresponding press release.

IASB member discusses financial instruments

24 Apr, 2015

In a report issued by the ‘Banking magazine: Association of Banks in Israel’, IASB member Sue Lloyd talks about IFRS 9, specifically looking at the new loan loss accounting model.

Ms Lloyd began by stating the reasons why IFRS 9 is an improvement over IAS 39, such as combining all aspects of financial instruments accounting into one standard and enhanced disclosures. Next, she describes the loan model under IFRS 9 which requires “financial institutions and other companies to estimate and account for expected credit losses from when they first lend money or invest in a financial instrument.” She notes that although the IASB and FASB have worked together to create a converged model, the FASB has taken a different approach. Lastly, she comments that the implementation of the expected loss model for loan loss provisions will require significant changes to financial institutions and other companies' systems and processes, which is the reason why the IASB set the mandatory effective date to 1 January 2018.

For more in­for­ma­tion, see the report on the IASB’s website.

ITG discusses implementation of impairment requirements in IFRS 9

24 Apr, 2015

On 22 April 2015, the IFRS Transition Resource Group for Impairment of Financial Instruments (‘ITG’) held its first meeting. The ITG is a discussion forum established by the International Accounting Standards Board (IASB) to provide support for stakeholders on implementation issues arising from the new impairment requirements following the issue of IFRS 9 'Financial Instruments' (2014).

 Topics discussed at the meeting included:

  • Forecasts of future economic conditions.
  • Loan commitments — scope.
  • Expected credit losses — measurement date.
  • Assessment of significant increase in credit risk for guaranteed debt instruments.
  • The maximum period to consider when measuring expected credit losses.
  • Revolving credit facilities.
  • Measurement of expected credit losses for an issued financial guarantee contract.
  • Measurement of expected credit losses in respect of a modified financial asset.

For more information, and a summary of the discussions at the meeting, see the meeting summary on the IASB's website.

IASB publishes update on the conceptual framework project

24 Apr, 2015

The staff of the IASB has published a document setting out the key tentative decisions made by the IASB up to the end of March 2015 that affect the proposals in the discussion paper on the conceptual framework.

On 18 July 2013, the IASB issued Discussion Paper A Review of the Conceptual Framework for Financial Reporting to consider areas where revisions and amendments of the existing conceptual framework was needed. At its January 2015 meeting the IASB substantially completed its redeliberations on the Discussion Paper and published a first summary of tentative decisions. In March 2015, the IASB discussed issues that have arisen in drafting the Conceptual Framework exposure draft. This new update includes the tentative decisions made in March. An exposure draft is expected in the second quarter of 2015.

For more information, see the document on the IASB’s website. In addition, Deloitte has followed the redeliberations of the IASB and all tentative decisions to date; see our conceptual framework project page for details.

FRC publishes scope of Audit Quality Reviews for 2015/16

23 Apr, 2015

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 2015/16.

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 2015/16 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 “priority sectors” which, consistent with its Plan and Budget 2015/16 are, insurance, food, drink and consumer goods manufacturers and retailers, companies servicing the extractive industries and business services for the 2015/16 financial year. 

As well as being the subject of the AQR review, these priority sectors will also be the subject of the Corporate Reporting Review team of the FRC’s Conduct Committee during 2015/16 when reviewing the directors’ reports and accounts of public and large private companies for compliance with the law.   

Further information on priority sectors and the scope of the AQR reviews for 2015/16 can be obtained from the FRC website.

ICAEW responds to the IASB’s Exposure Draft proposing amendments to IAS 7

23 Apr, 2015

The Institute of Chartered Accountants in England and Wales (ICAEW) has issued its comment letter on the IASB exposure draft (ED) proposing amendments that would improve disclosure in financial statements on an entity’s financing activities and liquidity.

On 18 December 2014, the IASB issued ED/2014/6 Disclosure Initiative (Proposed amendments to IAS 7). The main objectives of the proposal are to (1) improved information about an entity's financing activities, excluding equity items and (2) Improved disclosures about the liquidity of an entity.
In its comment letter, the ICAEW “supports the IASB’s decision to improve the information provided to users of financial statements on an entity’s debt and liquidity” and indicate that the proposed new disclosures, particularly the ‘financing activities reconciliation’ are a “step in the right direction” towards meeting investors’ needs in this area.  However, the ICAEW does express some concerns, particularly in relation to the ‘financing activities’ reconciliation, indicating that it considers that it is “too prescriptive and may not ultimately provide investors with the information they need”.  In particular, the ICAEW is concerned that the proposed reconciliation, as defined “will not capture all the relevant components of an entity’s debt”.  The ICAEW also proposes that an entity should have “greater flexibility to define (and disclose) what it considers ‘net debt’ and provide a reconciliation on that basis” as it believes that “this would provide a more accurate and complete analysis of an entity’s net debt position and therefore potentially be of more use to investors”.  A number of other concerns are expressed on the ‘financing activities’ reconciliation in the full comment letter as well as comments on liquidity proposed in paragraph 50A.

On a wider note, whilst the ICAEW are supportive of these proposals and the approach taken by the IASB under the Disclosure Initiative to address disclosure issues in a timely manner rather than waiting on the finalisation of the planned disclosure framework, they encourage the IASB to focus on finalising the disclosure framework and revised conceptual framework.  Once finalised, the ICAEW comments that these frameworks will “be critical to the longer term aim of ensuring that disclosures are only introduced when they are needed”.

The full comment letter is available on the ICAEW website.

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