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2015

IFRS Foundation releases training material for IFRS 9 and IFRS 15

27 Nov 2015

The IFRS Foundation's education initiative has releases slide decks to support those teaching IFRSs. The material provided now is for IFRS 9 'Financial Instruments' and IFRS 15 'Revenue from Contracts with Customers'. Both standards are effective for annual reporting periods beginning on or after 1 January 2018 with early application permitted.

The material for IFRS 9 is four parts: (1) Objective, scope, recognition and derecognition; (2) Classification and measurement; (3) Impairment; and (4) Hedging. For IFRS 15, a synopsis that highlights the main requirements of the standard accompanies the slide presentation. All materials provided as part of the education initiative can be used free of charge. It can be accessed through the press release on the IASB website.

18th ESMA enforcement decisions report released

25 Nov 2015

The European Securities and Markets Authority (ESMA) has published further extracts from its confidential database of enforcement decisions taken by European national enforcers. This batch deals with decisions in relation to IAS 1, IAS 19, IAS 27, IAS 34, IAS 36, IFRS 5, IFRS 10, and IFRS 13.

The European national enforcers of financial information monitor and review financial statements published by issuers with securities traded on a regulated European market and who prepare their financial statements in accordance with International Financial Reporting Standards (IFRS) and consider whether they comply with IFRS and other applicable reporting requirements, including relevant national law.

ESMA has developed a confidential database of enforcement decisions taken by individual European enforcers as a source of information to foster appropriate application of IFRS.

The publication of enforcement decisions is designed to inform market participants about which accounting treatments European national enforcers may consider as complying with IFRS, i.e. whether the treatments are considered as being within the accepted range of those permitted by IFRS. ESMA considers the publication of the decisions, together with the rationale behind them, will contribute to a consistent application of IFRS in the European Union.

Topics covered in the latest batch of extracts, covering the period from February 2014 to May 2015, include:

 

StandardTopic

IFRS 5Non-current Assets Held for Sale and Discontinued Operations

Presentation of licensed activities as discontinued operations

IAS 34 Interim Financial Reporting

Disclosures in interim financial statements

IAS 19Employee Benefits

Disclosures on post-employment benefit plans

IAS 34 Interim Financial Reporting
IAS 1 Presentation of Financial Statements

Going Concern disclosures

IFRS 10Consolidated Financial Statements

Control of an entity without holding any equity interest

IFRS 10Consolidated Financial Statements

De facto control

IAS 36Impairment of Assets

Impairment of goodwill

IFRS 13 Fair Value Measurement

Fair value measurement for fixed-rate loans

IAS 36Impairment of Assets

Carrying amounts of a cash-generating unit to be tested for impairment

IFRS 5Non-current Assets Held for Sale and Discontinued Operations
IAS 27
Separate Financial Statements

Presentation and disclosure of discontinued operations in separate financial statements

Click for access to the full report (link to ESMA website). The ESMA has also published an updated overview of all enforcement decisions ever published.

EFRAG issues feedback statement on the IASB's Exposure Draft of amendments to IAS 19 and IFRIC 14

25 Nov 2015

The European Financial Reporting Advisory Group (EFRAG) has published its feedback statement summarising the main comments received from constituents invited to respond to its draft comment letter in relation to the International Accounting Standards Board’s (IASB’s) Exposure Draft ED/2015/5 ‘Remeasurement on a Plan Amendment, Curtailment or Settlement/Availability of a Refund from a Defined Benefit Plan (Proposed amendments to IAS 19 and IFRIC 14)’.

On 18 June 2015, the IASB issued ED/2015/5 to address two issues submitted to the IFRS Interpretations Committee. The two issues were to clarify (1) the calculation of current service cost and net interest when an entity remeasures the net defined benefit liability (asset) when a plan amendment, curtailment or settlement occurs; and (2) whether a trustee's power to augment benefits or to wind up a plan affects the employer's unconditional right to a refund and thus, in accordance with IFRIC 14, restricts recognition of an asset.

EFRAG published its draft comment letter in July 2015 and its final comment letter in November 2015.

The feedback statement summarises the main comments received by EFRAG in relation to the draft comment letter and explains how those comments were considered by EFRAG in reaching its final position on the IASB ED set out in their final comment letter to the IASB.

The press release and full feedback statement are available on the EFRAG website.

Report from autumn 2015 IFASS meeting

25 Nov 2015

A report has been issued summarising the discussions at the meeting of the International Forum of Accounting Standard Setters (IFASS) held in London on 29 and 30 September 2015.

Highlights from the meeting included:

Global IFRS issues

Michel Prada, Chairman of the Trustees, IFRS Foundation, delivered the opening remarks. He spoke on the main strategic challenges to IFRS,the current structure and effectiveness review of the IFRS Foundation, and the role and responsibilities of accounting standard-setters in an IFRS world. After his speech when answering questions he spoke at some length about percieved U.S. influence on IFRS standard-setting.

Reports from regional groups

Representatives from the Asian-Oceanian Standard-Setters Group (AOSSG), the European Financial Reporting Advisory Group (EFRAG), the Group of Latin-American Accounting Standard Setters (GLASS), and Pan-African Federation of Accountants (PAFA) explained recent developments in each of the groups.

IPSASB matters

Participants were updated on IPSASB developments since March 2015. One focus of attention was the IPSASB’s social benefits project.

Administrative matters

The next IFASS meeting will be held in Toronto on 4 and 5 April 2016.

The IFASS Chairman confirmed that she will step down after the Toronto IFASS meeting in 2016. She summarised the nomination and appointment process of the next IFASS Chairman, including a proposed timetable. A representative from the German standard-setter advised that his jurisdiction would be nominating Liesel Knorr, Past President of the Accounting Standards Committee of Germany, as a candidate for the position of IFASS Chairman.

IASB work and research programmes

IASB staff representatives rprovided an update on the IASB’s current agenda projects and identified activities that representatives could undertake to support the IASB’s project activities and the development of IFRSs. They also noted that the IASB is aware that, while its standards are principles based, many of them are very long. The staff is thinking how to simplify the IASB’s guidance and is examining FASB’s simplification project. Participants noted that simplification is harder for the IASB to accomplish versus the FASB, because of the translation problem.

Report back on IFASS member projects

Representatives from Japan and EFRAG provided an update on the goodwill project being conducted by EFRAG, the Italian standard-setter and the Japanese standard-setter. They also asked for input on the next steps to be undertaken. On an informal show of hands most participants appeared to prefer the amortisation approach.

IFRS implementation issues

The IASB Director of Implementation Activities initiated a discussion on ways of improving the IASB’s knowledge of application issues at the local-jurisdiction level. Participants were doubtful that completely consistent application is possible on each and every issue. Differing tax and other legislation would be a hindrance. The Chairman suggested that helpful hints on contentious issues emanating from local jurisdictions should be shared with IFRIC and the IASB staff. She also added that local jurisdictions could hold education and discussion sessions on issues and send those on which there is no consensus to IASB and IFRIC.

FASB Proposals to Revise Financial Statement Presentation of Not-for-Profit Organisations (NFPO)

FASB representatives provided an overview of the FASB’s April 2015 Exposure Draft proposing several improvements to the financial statement presentation requirements for not-for-profit organisations. On an informal show of hands, participants appeared to indicate that there is a need for international standards for reporting by NFPOs. Many indicated that they favoured customisation of international standards to deal with local situations. The IPSASB incoming Chair said that IPSASB would consider this issue further and report back to the group.

Topical Issues

Participants then discussed three topical issues:

  • Core inventories (presented by India)
  • U.K. GAAP: Adapting IFRS for domestic needs (presented by the UK)
  • Types of reporting frameworks used by entities raising capital in non-traditional markets (presented by Canada)

New IFASS member projects

Three new projects were introduced during this meeting, all undertaken by EFRAG:

  • Reporting income and expense in profit or loss or OCI
  • The statement of cash flows – Issues for financial institutions
  • Use of financial information by investors

Please click for the full report from the meeting.

FRC’s Financial Reporting Lab issues report on disclosure of dividend policy and practice

25 Nov 2015

The Financial Reporting Council’s (FRC's) Financial Reporting Lab has published a report on the disclosure of dividend policy and practice by companies. The report covers issues relevant to all sizes of listed company and focuses primarily on disclosures in the annual report, although a range of company communications are considered. It is intended to act as practical guidance to assist listed companies in providing dividend disclosures to investors and incorporates best practice examples.

Both companies and investors agree that dividend policy and practice disclosures are fundamental to evaluate investment decisions and to assess management’s stewardship. The FRC’s Financial Reporting Lab project on the disclosure of dividend policy and practice was prompted by an interest from a group of long-term institutional investors in the capital maintenance regime and then broadened to cover best practice disclosure of dividend policy and practice.

The report covers the following topics:

  • The importance of good dividend policy disclosure – consensus is that dividend disclosures are not being clearly articulated and that there is frequently a disconnect between any description of the dividend policy and how that policy has been implemented in practice.
  • The characteristics of good dividend policy disclosure i.e. what ‘good’ looks like. This should cover why the particular policy has been chosen, what the policy will mean in practice and the timeframe over which the particular dividend policy is likely to apply. Companies should also seek to address any risks and constraints associated with their policy in their disclosure.
  • Dividend declaration disclosures– investors have expressed a desire to see the quality of information in dividend disclosures enhanced to include information including:
    • the period to which the dividend relates;
    • the amount per share and aggregate amount;
    • the remaining steps necessary to approve the dividend e.g. shareholder vote at AGM;
    • the level of resources available to the parent including detail on how the dividend will be funded.
  • What investors want from disclosures on dividend resources available to the parent - including elements of distributable profits disclosure. The FRC has confirmed their understanding that there is no requirement under the Companies Act 2006 to disclose the amount of distributable profits. However, as the level of realised profits can be significantly different to the balance in retained earnings, participants in the FRC Lab’s project indicated that the parent company’s statement of changes in equity is a useful place to provide such a disclosure as it can clarify the distributable/non-distributable split of the company’s reserves and/or profit. An example of such a disclosure can be found in Appendix 4 of the report.
  • The placement of disclosures - currently disclosures on dividends are spread across a wide range of company information with investors focusing primarily on preliminary announcements, presentations and annual report disclosures. Appendix 2 of the report highlights the importance of the interaction between the dividend and reporting cycles when providing dividend disclosure. 

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FRC believes Conceptual Framework must 'embrace asymmetric prudence'

25 Nov 2015

The Financial Reporting Council (FRC) has commented on the IASB's exposure draft ED/2015/3 'Conceptual Framework for Financial Reporting'.

The FRC calls on the IASB to reconsider its proposed Conceptual Framework so that it properly reflects the importance of stewardship, prudence and reliability, which it considers to be fundamental to financial reporting. The FRC stresses that prudence is more than taking a cautious approach to accounting. Rather prudence prudence requires a greater readiness to recognise losses than profits:

The reintroduction to the Conceptual Framework of a specific reference to prudence is very welcome. However, the treatment of it in the Exposure Draft — as support for the idea of neutrality — is wholly inadequate. The essence of prudence is the idea referred to in the Basis for Conclusions as ‘asymmetric prudence’ — a lower threshold for the recognition of liabilities and losses than for assets and gains — which is absent from the text of the draft Conceptual Framework itself.

The FRC adds that the term 'neutrality' that is used in the framework might be misleading and suggests it should be replaced 'unbiased'.

Finally, the FRC notes that it is "particularly odd" that the IASB acknowledges that the concept of asymmetric prudence is reflected in current accounting standards (for example in IFRS 15), but has omitted it from its draft Framework.

Please click to access the full comment letter and a corresponsing press release on the FRC website.

We comment on the proposed changes to the Conceptual Framework

25 Nov 2015

We have published our comment letters on the IASB's EDs 2015/3 'Conceptual Framework for Financial Reporting' and 2015/4 'Updating References to the Conceptual Framework (Proposed amendments to IFRS 2, IFRS 3, IFRS 4, IFRS 6, IAS 1, IAS 8, IAS 34, SIC-27 and SIC-32)'.

In our comment letter on ED/2015/3, we note that we think further improvements are necessary before the revised Conceptual Framework is issued. Please click to access the full comment letter.

In our comment letter on ED/2015/4, we agree with the proposed amendments to reference to the Conceptual Framework and with the Board’s proposed means of transition. Please click to access the full comment letter.

European Union formally adopts amendments to IFRS 11

25 Nov 2015

The European Union has published a Commission Regulation endorsing the May 2014 amendments to IFRS 11 that clarify the accounting for acquisitions of an interest in a joint operation when the operation constitutes a business.

Commission Regulation (EC) No 2015/2173 of 24 November 2015 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council published in the Official Journal on 25 November 2015 adopts Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11) issued by the IASB in May 2014. The EU effective date is the same as the IASB's effective date (annual periods beginning on or after 1 January 2016 with earlier appication permitted).

EFRAG has updated its endorsement status report to reflect that the European Union has published Commission Regulations adopting Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) (yesterday) and Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11) (today) for use in the European Union.

CFA institute and IASB discuss agenda consultation

24 Nov 2015

The CFA Institute and IASB have posted a webcast which features IASB member Patrick Finnegan discussing the IASB’s 2015 Agenda Consultation.

Specifically, Mr Finnegan discussed:

  • “the IASB’s current Agenda Consultation;
  • where the IASB stands on previously identified investor priorities, such as financial statement presentation and disclosures; and
  • how other corporate reporting initiatives and technology are influencing the IASB’s strategy and agenda-setting process.”

The webcast is available on the CFA Institute’s website.

ECON announces public hearing on IFRS 9

24 Nov 2015

The Committee on Economic and Monetary Affairs (ECON) of the European Parliament announces that it will hold a public hearing on IFRS 9 'Financial Instruments' on 1 December 2015.

The hearing (from 15:00 to 16:30) will see presentations by invited experts followed by a discussion between ECON members and the experts. The hearing will be webstreamed on http://europarltv.europa.eu.

The ECON is currently paying close attention to IFRS 9 and its possible endorsement. Only recently, the Committee commissioned four studies on the standard.

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.