September

EFRAG Board meeting October 2016

30 Sep, 2016

The European Fin­an­cial Re­port­ing Ad­vis­ory Group (EFRAG) will hold a Board meeting on 6 October 2016 in Brus­sels.

An agenda with supporting papers and details on how to register for the public meeting can be found on the EFRAG website.

Quantitative study on goodwill and goodwill impairment

30 Sep, 2016

In connection with the post-implementation review of IFRS 3, the European Financial Reporting Advisory Group (EFRAG) conducted a study to find out when goodwill impairment was recognised and whether there was a bubble of goodwill building up. EFRAG has now published the quantative data gathered during the research to facilitate the debate related to the accounting for goodwill by providing evidence on how goodwill and goodwill impairment have evolved over time.

The main findings in Europe were (there is also a comparison with data from the US, Australia, and Japan):

  • From 2005 to 2014, the total amount of goodwill recognised increased from 935 billion euros to 1.341 billion euros, representing an increase of 43%;
  • A small number of companies account for a large share of the carrying amount of goodwill;
  • The ratio goodwill to total assets has remained fairly stable over the years at approximately 3,7%. The ratio is significantly higher when entities in Financials industry are excluded but has been gradually decreasing since 2009;
  • The ratio goodwill to net assets has been decreasing since 2008, but it was still significant in 2014 (29%);
  • The amount of impairment losses recognised was at the highest level in 2008 and 2011, years when the performance of the financial markets was negative. On average, impairment losses represented 2,7% of the opening balance of goodwill;
  • Impairment losses are significantly concentrated in a small number of companies, particularly in the Telecommunications and Financials indus­tries; and
  • Absolute and relative levels of goodwill and impairment losses vary significantly across industries.

Please click to access the study and a corresponding press release on the EFRAG website. The ASBJ's research report on the same topic can be accessed here.

FRC/ICAS Steering Committee publishes report into the future of audit

29 Sep, 2016

A joint Financial Reporting Council (FRC) and Institute of Chartered Accountants of Scotland (ICAS) Steering Committee has published a report (“the report”) calling for a debate on the future of audit and the auditor skills required to meet this vision.

The report is based upon the findings of two reports, commissioned in 2013, that were issued by the ICAS and FRC in April 2016.  These indicated that “it is doubtful whether the profession currently has the skill base necessary to deliver an audit beyond the traditional financial statement audit”.  In order to evolve the audit to deliver “a more holistic assessment of a company’s strategy, business model, risk profile, operations and performance”, the report identifies that the auditor skill set needs to improve in the following areas:

  • advanced business acumen skills;
  • technology and data interrogation skills; and
  • soft skills.

The report also identifies a number of barriers to change which the Steering Committee believe need to be overcome to meet the future vision for audit.  These are identified as:

  • the problems of recruiting and developing audit team members;
  • the extent to which standardisation may impair the development of judgement and innovation; and
  • the perception of audit as a career choice.

The Steering Committee hopes that the report will help to initiate a “constructive” debate” and highlights that “it is essential that the profession engages stakeholders in the debate if it is to deliver a high quality public interest audit for the future”. 

The press release and the report, Auditor Skills in Changing Business World, are available on the ICAS website.  An event,which will discuss the report, will be held on 23 November 2016.

FRC consults on changes to FRS 102 to reflect recent changes in IFRS

27 Sep, 2016

The Financial Reporting Council (FRC) has today published a Consultation Document containing proposals to update Financial Reporting Standard (FRS) 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’ to reflect recent changes in International Financial Reporting Standards (IFRSs).

When FRS 102 was first issued by the FRC, the FRC indicated that the standard would be reviewed every three years.  This consultation is the first triennial review of the standard.

The Consultation Document proposes that limited amendments be made to FRS 102 to be effective from 1 January 2019.  Detailed proposals for these will be consulted on towards the end of the first quarter of 2017 in Financial Reporting Exposure Draft (FRED) Triennial review 2017 Phase 1 – Incremental improvements and clarifications.  These include amendments to:

  • incorporate relevant improvements from the 2015 Amendments to the IFRS for SMEs;
  • incorporate the control model of IFRS 10 Consolidated Financial Statements;
  • update definitions and the fair value hierarchy for greater consistency with IFRS 13 Fair Value Measurement; and
  • improve the separation of contracts for the purposes of recognising and measuring revenue, so that it is similar in this regard to IFRS 15 Revenue from Contracts with Customers.

Additionally, the Consultation Document proposes more significant amendments be made to FRS 102 to be effective from 1 January 2022.  Detailed proposals for these will be consulted on towards the end of the third quarter of 2017 in FRED Triennial review 2017 Phase 2 – Expected loss model and leases.  These include amendments to:

  • incorporate the expected loss model for impairment of financial assets, based on IFRS 9 Financial Instruments; and
  • update lease accounting by lessees for consistency with IFRS 16 Leases.

Comments on the Consultation Document are requested by 31 December 2016.  The press release and consultation document are available on the FRC website. 

Need to know on this consultation can be found here.

IASB Chairman's welcome address at the World Standard-setters meeting

26 Sep, 2016

In his opening remarks at the 2016 Word Standard-setters (WSS) meeting that is currently taking place in London, IASB Chairman Hans Hoogervorst spoke on IASB developments in the last 12 months, the Board's priorities for 2017 and beyond, and the cooperation between national standard-setters and the IASB.

Before beginning his technical remarks, however, Mr Hoogervorst said a few words on the recently passed away Director of International Activities at the IASB and Chairman of the IFRS Interpretations Committee, Wayne Upton. He reminded the audience that Mr Upton was, at different times, Research Director, Chair of the IFRS Interpretations Committee, Chair of the Emerging Economies Group, and Coordinator of the Islamic Finance Consultative Group. Mr Hoogervorst then led the audience in a few moments of silence remembering Wayne Upton.

IASB developments in the last 12 months

Looking back on the year that has passed since the last WSS meeting, Mr Hoogervorst noted that technically it had been a very busy year. He mentioned the issuance of IFRS 16 in January 2016 that finally brought most leases onto the balance sheet as a highlight. He also noted that this standard is the first to have benefitted from the recommendations of the Effects Analysis Working Group.

Regarding progress towards global standards, Mr Hoogervorst stressed that the year had been Asia's year. He noted the quickly increasing number of Japanese companies voluntarily applying IFRSs, China's reaffirmed commitment to achieve full convergence with IFRSs, India's move to Ind AS as an important step towards full convergence, and the fact that Saudi Arabia is currently moving to IFRSs.

The Board's priorities for 2017 and beyond

Mr Hoogervorst noted that the top priorities for 2017 and beyond would of course include the completion of the remaining major projects: Conceptual Framework, where completion of redeliberations is expected by the end of the year, and insurance contracts, where the issuance of a final standard is currently expected in March 2017. He also noted the overriding priority of "better communication" the IASB will be focusing on going forward and explained that this does not mean that the IASB intends to cut back the information provided, nor to dramatically increase it. Rather, this focus aims at better presentation of information, better grouping of information together, and additional consideration of the form information is made available. As projects and developments that are expected to contribute to better communication Mr Hoogervorst mentioned primary financial statements, the disclosure initiative, digital reporting, and non-financial reporting.

Cooperation between national standard-setters and the IASB

As regards the cooperation with national standard-setters, Mr Hoogervorst explained how the relationship between the standard-setters and the IASB had matured and mentioned WSS, ASAF (including AOSSG, EFRAG, GLASS, and PAFA), IFASS. He stressed, however, that it continued to be important for the IASB to hear from the standard-setting community how cooperation could be deepened even more. Suggestions he made included supporting consistent application and closer cooperation through the research agenda.

Please note that the IASB is not intending to publish a transcript of Mr Hoogervorst's speech on its website.

IASB updates work plan

24 Sep, 2016

Following its September 2016 meeting, the IASB has updated its work plan. Of the progress or slippage that can be traced the most noticeable is the expected point of time the final standard on insurance contracts will be published: March 2017.

Changes to the work plan include:

Major projects

Implementation projects

Research projects

Post-implementation reviews

  • A post-implementation review of IFRS 13 Fair Value Measurement has been initiated. A decision on the project direction is expected "within 6 months".

The revised IASB work plan is available on the IASB's website.

EFRAG publishes September 2016 issue of 'EFRAG Update'

23 Sep, 2016

The European Financial Reporting Advisory Group (EFRAG) has published an 'EFRAG Update' summarising public technical discussions held and decisions made during September 2016.

The Update reports on the EFRAG Board meeting on 7 and 8 September, the EFRAG Technical Expert Group (EFRAG TEG) meeting on 15 September and the EFRAG Consultative Forum of Standard Setters’ (EFRAG CFSS) and the EFRAG TEG meeting on 14 September.

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

New and revised pronouncements as at 30 September 2016

23 Sep, 2016

Our popular summary of new and revised financial reporting requirements, updated for financial reporting periods ending on 30 September 2016. This listing can be used to perform a quick check that new financial reporting requirements such as new and revised accounting standards and interpretations, and amendments to standards and interpretations, have been fully considered in the reporting close process. We have highlighted the IASB mandatory adoption dates as well as those dates for which application is mandatory within the EU. Where an EU entity chooses to prepare financial statements in accordance with IFRSs as issued by the IASB, as well as in compliance with IFRSs as adopted by the EU, that entity should comply with the earlier IASB effective date for those items. The information below can also be used to assist with the disclosure requirements under paragraph 30 of IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors', which requires entities to disclose any new IFRSs that are in issue but not yet effective and which are likely to impact the entity. For accounts approved after December 2016, please also refer to subsequent versions of this document for any new and revised IFRSs that have additionally been issued that might require disclosure in the accounts under IAS 8:30.

The information below reflects developments to 12 December 2016 and will be updated through to December 2016 to reflect new and revised financial reporting requirements that need to be considered for financial reporting periods ending on 30 September 2016. For accounts approved after December 2016, please also refer to subsequent versions of this document for any new and revised IFRSs that have additionally been issued that might require disclosure in the accounts under IAS 8:30.

The information below is organised as follows:

Summary

The table below provides a summary of the pronouncements which will be mandatorily applied by entities for the first time at 30 September 2016, for various quarterly reporting periods.  Where an EU entity chooses to prepare financial statements in accordance with IFRSs as issued by the IASB, as well as in compliance with IFRSs as adopted by the EU, that entity should comply with the earlier IASB effective date for those items. The table below provides a summary of these pronouncements, and which reporting periods they apply to:

Pronouncement IASB Effective date* EU effective date* EU Mandatory at 30 September 2016?
1st qtrs.** 2nd qtrs.*** 3rd qtrs.**** Full yrs*****
IFRS 14 Regulatory Deferral Accounts
1 January 2016 IASB effective date is 1 January 2016. # # # # #
 Defined Benefit Plans: Employee Contributions (Amendments to IAS 19)
1 July 2014 Effective in the EU for annual periods beginning on or after 1 February 2015, however, earlier application is permitted so EU companies can adopt in accordance with the IASB effective date (1 July 2014). Already adopted in prior year (July 15) Already adopted in prior year (April 15) Yes Yes
 Annual Improvements 2010-2012 Cycle
1 July 2014^ All amendments are effective in the EU for annual periods beginning on or after 1 February 2015, however, earlier application is permitted so EU companies can adopt in accordance with the IASB effective date (1 July 2014). Already adopted in prior year (July 15) Already adopted in prior year (April 15) Yes Yes
 Annual Improvements 2011-2013 Cycle
1 July 2014 The amendments are effective in the EU for annual periods beginning on or after 1 January 2015, however, earlier application is permitted so EU companies can adopt in accordance with the IASB effective date (1 July 2014). Already adopted in prior year (July 15) Already adopted in prior year (April 15) Already adopted in prior year (Jan 15 Yes
Annual Improvements 2012-2014 Cycle
1 January 2016 1 January 2016 Yes Yes Yes No
 Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)
1 January 2016 1 January 2016 Yes% Yes% Yes% No
Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38)
1 January 2016 1 January 2016 Yes Yes Yes No
 Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41)
1 January 2016 1 January 2016 Yes Yes Yes No
 Equity Method in Separate Financial Statements (Amendments to IAS 27) 1 January 2016 1 January 2016 Yes Yes Yes No
Disclosure Initiative (Amendments to IAS 1)  1 January 2016 1 January 2016 Yes Yes Yes No
Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)  1 January 2016 Effective for annual periods beginning on or after 1 January 2016.   Yes Yes Yes No

* Generally annual reporting periods beginning on or after the date indicated, may only apply to first-time adopters in some limited cases (see below for full details).

** 1st quarter ending on 30 September 2016 (accounting period began on 1 July 2016).

*** 2nd quarter ending 30 September 2016 (accounting period began 1 April 2016).

**** 3rd quarter ending 30 September 2016 (accounting period began 1 Jan 2016).

***** 4th quarter ending 30 September 2016 (accounting period began 1 Oct 2015).

# The European Commission has decided not to propose IFRS 14 Regulatory Deferral Accounts for endorsement in the EU because very few European companies would fall within its scope.

Annual improvements to IFRSs 2010-2012 Cycle issued in December 2013 amended a number of standards. The amendments to IFRS 2 apply prospectively to share-based payment transactions with a grant date on or after 1 July 2014. The amendments to IFRS 3 apply prospectively to business combinations for which the acquisition date is on or after 1 July 2014. All the other amendments have a mandatory effective date of periods beginning on or after 1 July 2014. Earlier application is permitted in all instances (subject to EU endorsement). Where applicable, entities should disclose if certain amendments within the improvements are effective whilst others are not.

% The amendments apply prospectively to acquisitions of interests in joint operations in which the activities of the joint operations constitute businesses, as defined in IFRS 3, for those acquisitions occurring from the beginning of the first period in which the amendments apply. Amounts recognised for acquisitions of interests in joint operations occurring in prior periods are not adjusted.

More information about these pronouncements, and all new and revised pronouncements, is set out below.

Financial statement considerations in adopting new and revised pronouncements

Where new and revised pronouncements are applied for the first time, there can be consequential impacts on annual financial statements, including:

  • Updates to accounting policies. The terminology and substance of disclosed accounting policies may need to be updated to reflect new recognition, measurement and other requirements, e.g IAS 19 Employee Benefits may impact the measurement of certain employee benefits.
  • Impact of transitional provisionsIAS 8 Accounting Policies, Changes in Estimates and Errors contains a general requirement that changes in accounting policies are retrospectively applied, but this does not apply to the extent an individual pronouncement has specific transitional provisions.
  • Disclosures about changes in accounting policies. Where an entity changes its accounting policy as a result of the initial application of an IFRS and it has an effect on the current period or any prior period, IAS 8 requires the disclosure of a number of matters, e.g. the title of the IFRS, the nature of the change in accounting policy, a description of the transitional provisions, and the amount of the adjustment for each financial statement line item affected
  • Third statement of financial positionIAS 1 Presentation of Financial Statements requires the presentation of a third statement of financial position as at the beginning of the preceding period in addition to the minimum comparative financial statements in a number of situations, including if an entity applies an accounting policy retrospectively and the retrospective application has a material effect on the information in the statement of financial position at the beginning of the preceding period
  • Earnings per share (EPS). Where applicable to the entity, IAS 33 Earnings Per Share requires basic and diluted EPS to be adjusted for the impacts of adjustments result from changes in accounting policies accounted for retrospectively and IAS 8 requires the disclosure of the amount of any such adjustments.

Whilst disclosures associated with changes in accounting policies resulting from the initial application of new and revised pronouncements are less in interim financial reports under IAS 34 Interim Financial Reporting, some disclosures are required, e.g. description of the nature and effect of any change in accounting policies and methods of computation.

 

New or revised standards

The information below can be used to assist with the disclosure requirements under paragraph 30 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, which requires entities to disclose any new IFRSs that are in issue but not yet effective and which are likely to impact the entity

New or revised pronouncement When EU effective Application at 30 September 2016 to
1st qtrs 2nd qtrs 3rd qtrs Full yrs

IFRS 9 Financial Instruments (2009)

IFRS 9 introduces new requirements for classifying and measuring financial assets, as follows:

  • Debt instruments meeting both a 'business model' test and a 'cash flow characteristics' test are measured at amortised cost (the use of fair value is optional in some limited circumstances)
  • Investments in equity instruments can be designated as 'fair value through other comprehensive income' with only dividends being recognised in profit or loss
  • All other instruments (including all derivatives) are measured at fair value with changes recognised in the profit or loss
  • The concept of 'embedded derivatives' does not apply to financial assets within the scope of the Standard and the entire instrument must be classified and measured in accordance with the above guidelines. 

IFRS 9 (2014) was issued on 24 July 2014 and supersedes IFRS 9 (2009), but this version of the standard remains available for application if the relevant date of initial application is before 1 February 2015.

Issued: 12 November 2009 (articlenewsletter)

No stated effective date (see notes in prior column).  Optional Optional Optional Optional

IFRS 9 Financial Instruments (2010)

A revised version of IFRS 9 incorporating revised requirements for the classification and measurement of financial liabilities, and carrying over the existing derecognition requirements from IAS 39 Financial Instruments: Recognition and Measurement.

The revised financial liability provisions maintain the existing amortised cost measurement basis for most liabilities. New requirements apply where an entity chooses to measure a liability at fair value through profit or loss – in these cases, the portion of the change in fair value related to changes in the entity's own credit risk is presented in other comprehensive income rather than within profit or loss.

IFRS 9 (2014) was issued on 24 July 2014 and supersedes IFRS 9 (2009), but this version of the standard remains available for application if the relevant date of initial application is before 1 February 2015.

Issued: 28 October 2010 (articlenewsletter)

No stated effective date (see notes in prior column).  Optional Optional Optional Optional

IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39) (2013)

A revised version of IFRS 9 which:

  • Introduces a new chapter to IFRS 9 on hedge accounting, putting in place a new hedge accounting model that is designed to be more closely aligned with how entities undertake risk management activities when hedging financial and non-financial risk exposures
  • Permits an entity to apply only the requirements introduced in IFRS 9 (2010) for the presentation of gains and losses on financial liabilities designated as at fair value through profit or loss without applying the other requirements of IFRS 9, meaning the portion of the change in fair value related to changes in the entity's own credit risk can be presented in other comprehensive income rather than within profit or loss
  • Removes the mandatory effective date of IFRS 9 (2013), IFRS 9 (2010) and IFRS 9 (2009), leaving the effective date open pending the finalisation of the impairment and classification and measurement requirements. Notwithstanding the removal of an effective date, each standard remains available for application.

IFRS 9 (2014) was issued on 24 July 2014 and supersedes IFRS 9 (2009), but this version of the standard remains available for application if the relevant date of initial application is before 1 February 2015.

Issued: 19 November 2013 (articlenewsletter)

No stated effective date (see notes in prior column).  Optional Optional Optional Optional

 IFRS 9 Financial Instruments (2014)

A finalised version of IFRS 9 which contains accounting requirements for financial instruments, replacing IAS 39 Financial Instruments: Recognition and Measurement. The standard contains requirements in the following areas:

  • Classification and measurement. Financial assets are classified by reference to the business model within which they are held and their contractual cash flow characteristics. The 2014 version of IFRS 9 introduces a 'fair value through other comprehensive income' category for certain debt instruments. Financial liabilities are classified in a similar manner to under IAS 39, however there are differences in the requirements applying to the measurement of an entity's own credit risk.
  • Impairment. The 2014 version of IFRS 9 introduces an 'expected credit loss' model for the measurement of the impairment of financial assets, so it is no longer necessary for a credit event to have occurred before a credit loss is recognised
  • Hedge accounting. Introduces a new hedge accounting model that is designed to be more closely aligned with how entities undertake risk management activities when hedging financial and non-financial risk exposures
  • Derecognition. The requirements for the derecognition of financial assets and liabilities are carried forward from IAS 39.

Note: Depending on the chosen approach to applying IFRS 9, the transition can involve one or more than one date of initial application for different requirements.

Note: IFRS 9 (2014) supersedes IFRS 9 (2009), IFRS 9 (2010) and IFRS 9 (2013), but these standards remain available for application if the relevant date of initial application is before 1 February 2015.

Issued: 25 July 2014 (Summary of IFRS 9,articlenewsletter)

Effective for annual period beginning on or after 1 January 2018.  Optional Optional Optional Optional

IFRS 14 Regulatory Deferral Accounts

IFRS 14 permits an entity which is a first-time adopter of International Financial Reporting Standards to continue to account, with some limited changes, for 'regulatory deferral account balances' in accordance with its previous GAAP, both on initial adoption of IFRS and in subsequent financial statements.

Note: Entities which are eligible to apply IFRS 14 are not required to do so, and so can chose to apply only the requirements of IFRS 1 First-time Adoption of International Financial Reporting Standards when first applying IFRSs. However, an entity that elects to apply IFRS 14 in its first IFRS financial statements must continue to apply it in subsequent financial statements. IFRS 14 cannot be applied by entities that have already adopted IFRSs.

Issued: 30 January 2014 (Summary of IFRS 14article)

 

Applicable to an entity's first annual IFRS financial statements for a period beginning on or after 1 January 2016 IASB effective date is 1 January 2016.  The European Commission has decided not to propose IFRS 14 Regulatory Deferral Accounts for endorsement in the EU because very few European companies would fall within its scope.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 provides a single, principles based five-step model to be applied to all contracts with customers.

The five steps in the model are as follows:

  • Identify the contract with the customer
  • Identify the performance obligations in the contract
  • Determine the transaction price
  • Allocate the transaction price to the performance obligations in the contracts
  • Recognise revenue when (or as) the entity satisfies a performance obligation.

Guidance is provided on topics such as the point in which revenue is recognised, accounting for variable consideration, costs of fulfilling and obtaining a contract and various related matters.  New disclosures about revenue are also introduced.

Issued: 28 May 2014 (Summary of IFRS 15articlenewsletterrevenue resources) 

Applicable to an entity's first annual IFRS financial statements for a period beginning on or after 1 January 2018.  See related news article. Optional Optional Optional Optional

IFRS 16 Leases

IFRS 16 specifies how an IFRS reporter will recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17.
Issued: 13 January 2016 (Summary of IFRS 16articleIFRS 16 resources)
Applicable to annual reporting periods beginning on or after 1 January 2019 

Not yet endorsed for use in the EU.

 

New or revised interpretations

New or revised interpretation When effective Application at 30 September 2016:

IFRIC 22 Foreign Currency Transactions and Advance Consideration

The interpretation addresses foreign currency transactions or parts of transactions where:

  • there is consideration that is denominated or priced in a foreign currency;
  • the entity recognises a prepayment asset or a deferred income liability in respect of that consideration, in advance of the recognition of the related asset, expense or income; and
  • the prepayment asset or deferred income liability is non-monetary.

The Interpretations Committee came to the following conclusion:

  • The date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability.
  • If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt.

Issued: 8 December 2016 (article) 

Effective for annual reporting periods beginning on or after 1 January 2018. Earlier application is permitted.  Not yet endorsed for use in the EU.

Amendments

New or revised pronouncement When effective Application at 30 September 2016 to
1st qtrs 2nd qtrs 3rd qtrs Full yrs

Defined Benefit Plans: Employee Contributions (Amendments to IAS 19)

Amends IAS 19 Employee Benefits to clarify the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service. In addition, it permits a practical expedient if the amount of the contributions is independent of the number of years of service, in that contributions, can, but are not required, to be recognised as a reduction in the service cost in the period in which the related service is rendered.

Issued: 21 November 2013 (articlenewsletter)

Effective in the EU for annual periods beginning on or after 1 February 2015, however, earlier application is permitted so EU companies can adopt in accordance with the IASB effective date (1 July 2014). Already adopted in prior year (July 15) Already adopted in prior year (April 15) Mandatory Mandatory

Annual Improvements 2010-2012 Cycle

Makes amendments to the following standards:

  • IFRS 2 — Amends the definitions of 'vesting condition' and 'market condition' and adds definitions for 'performance condition' and 'service condition'
  • IFRS 3 — Require contingent consideration that is classified as an asset or a liability to be measured at fair value at each reporting date
  • IFRS 8 — Requires disclosure of the judgements made by management in applying the aggregation criteria to operating segments, clarify reconciliations of segment assets only required if segment assets are reported regularly
  • IFRS 13 — Clarify that issuing IFRS 13 and amending IFRS 9 and IAS 39 did not remove the ability to measure certain short-term receivables and payables on an undiscounted basis (amends basis for conclusions only)
  • IAS 16 and IAS 38 — Clarify that the gross amount of property, plant and equipment is adjusted in a manner consistent with a revaluation of the carrying amount
  • IAS 24 — Clarify how payments to entities providing management services are to be disclosed

Issued: 12 December 2013 (articlenewsletter)

All amendments are effective in the EU for annual periods beginning on or after 1 February 2015, however, earlier application is permitted so EU companies can adopt in accordance with the IASB effective date (1 July 2014). Already adopted in prior year (July 15) Already adopted in prior year (April 15) Mandatory Mandatory

Annual Improvements 2011-2013 Cycle

Makes amendments to the following standards:

  • IFRS 1 — Clarify which versions of IFRSs can be used on initial adoption (amends basis for conclusions only)
  •  
  • IFRS 3 — Clarify that IFRS 3 excludes from its scope the accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself
  •  
  • IFRS 13 — Clarify the scope of the portfolio exception in paragraph 52
  •  
  • IAS 40 — Clarifying the interrelationship of IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property

Issued: 12 December 2013 (articlenewsletter)

The amendments are effective in the EU for annual periods beginning on or after 1 January 2015, however, earlier application is permitted so EU companies can adopt in accordance with the IASB effective date (1 July 2014). Already adopted in prior year (July 15) Already adopted in prior year (April 15) Already adopted in prior year (Jan 15) Mandatory

 Annual Improvements 2012-2014 Cycle

Makes amendments to the following standards:

  • IFRS 5 — Adds specific guidance in IFRS 5 for cases in which an entity reclassifies an asset from held for sale to held for distribution or vice versa and cases in which held-for-distribution accounting is discontinued
  • IFRS 7 — Additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset, and clarification on offsetting disclosures in condensed interim financial statements
  • IAS 9 — Clarify that the high quality corporate bonds used in estimating the discount rate for post-employment benefits should be denominated in the same currency as the benefits to be paid
  • IAS 34 — Clarify the meaning of 'elsewhere in the interim report' and require a cross-reference

Issued: 25 September 2014 (article)

Applicable to annual periods beginning on or after 1 January 2016.   Mandatory Mandatory Mandatory Optional

 Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)

Amends IFRS 11 Joint Arrangements to require an acquirer of an interest in a joint operation in which the activity constitutes a business (as defined in IFRS 3 Business Combinations) to: 

  • apply all of the business combinations accounting principles in IFRS 3 and other IFRSs, except for those principles that conflict with the guidance in IFRS 11
  • disclose the information required by IFRS 3 and other IFRSs for business combinations. 

The amendments apply both to the initial acquisition of an interest in joint operation, and the acquisition of an additional interest in a joint operation (in the latter case, previously held interests are not remeasured).

Note: The amendments apply prospectively to acquisitions of interests in joint operations in which the activities of the joint operations constitute businesses, as defined in IFRS 3, for those acquisitions occurring from the beginning of the first period in which the amendments apply. Amounts recognised for acquisitions of interests in joint operations occurring in prior periods are not adjusted.

Issued: 6 May 2014 (article).

Applicable to annual periods beginning on or after 1 January 2016 (see note in previous column).  Mandatory Mandatory Mandatory Optional

Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38)

Amends IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets to:

  • clarify that a depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is not appropriate for property, plant and equipment
  • introduce a rebuttable presumption that an amortisation method that is based on the revenue generated by an activity that includes the use of an intangible asset is inappropriate, which can only be overcome in limited circumstances where the intangible asset is expressed as a measure of revenue, or when it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated
  • add guidance that expected future reductions in the selling price of an item that was produced using an asset could indicate the expectation of technological or commercial obsolescence of the asset, which, in turn, might reflect a reduction of the future economic benefits embodied in the asset.

Issued: 12 May 2014 (article)

Applicable to annual periods beginning on or after 1 January 2016  Mandatory Mandatory Mandatory Optional

Editorial Corrections (various)

The IASB periodically issues Editorial Corrections and changes to IFRSs and other pronouncements. Since the beginning of calendar 2012, such corrections have been made in February 2012, July 2012, March 2013, September 2013, November 2013 and March 2014, September 2014, December 2014, March 2015, April 2015, September 2015, December 2015, March 2016, May 2016, September 2016 and December 2016.

Note: For details of these editorial corrections, see our IASB editorial corrections page.

As minor editorial corrections, these changes are effectively immediately applicable under IFRS See comment in previous column

 Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41)

The amendments bring bearer plants, which no longer undergo significant biological transformation, into the scope of IAS 16 so that they are accounted for in the same way as property, plant and equipment.

For the purpose of bringing bearer plants from the scope of IAS 41 into the scope of IAS 16 and therefore enabling entities to measure them at cost subsequent to initial recognition or at revaluation, a definition of a 'bearer plant' is introduced into both standards. A bearer plant is defined as "a living plant that:

  1. is used in the production or supply of agricultural produce;
  2. is expected to bear produce for more than one period; and
  3. has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales."

The scope sections of both standards are then amended to clarify that biological assets except for bearer plants are accounted for under IAS 41 while bearer plants are accounted for under IAS 16.

The amendments also clarify that produce growing on bearer plants continues to be accounted for under IAS 41 and that government grants related to bearer plants no longer fall into the scope of IAS 41 but need to be accounted for under IAS 20 Accounting for Government Grants and Disclosure of Government Assistance.

Issued: 30 June 2014 (article)

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

 Equity Method in Separate Financial Statements (Amendments to IAS 27)

Amends IAS 27 Separate Financial Statements to permit investments in subsidiaries, joint ventures and associates to be optionally accounted for using the equity method in separate financial statements.

Issued: 18 August 2014 (article)

Applicable to annual periods beginning on or after 1 January 2016.   Mandatory Mandatory Mandatory Optional

 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)

Amends IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures (2011) to clarify the treatment of the sale or contribution of assets from an investor to its associate or joint venture, as follows:

  • require full recognition in the investor's financial statements of gains and losses arising on the sale or contribution of assets that constitute a business (as defined in IFRS 3 Business Combinations)
  • require the partial recognition of gains and losses where the assets do not constitute a business, i.e. a gain or loss is recognised only to the extent of the unrelated investors’ interests in that associate or joint venture.

These requirements apply regardless of the legal form of the transaction, e.g. whether the sale or contribution of assets occurs by an investor transferring shares in an subsidiary that holds the assets (resulting in loss of control of the subsidiary), or by the direct sale of the assets themselves.

Issued: 11 September 2014 (articlenewsletter)

Applicable on a prospective basis to a sale or contribution of assets occurring in annual periods beginning on or after 1 January 2016 (IASB effective date).  Effective date deferred indefinitely (see article)  EU endorsement halted.
Disclosure Initiative (Amendments to IAS 1) 

Amends IAS 1 Presentation of Financial Statements to address perceived impediments to preparers exercising their judgement in presenting their financial reports by making the following changes:

  • clarification that information should not be obscured by aggregating or by providing immaterial information, materiality considerations apply to the all parts of the financial statements, and even when a standard requires a specific disclosure, materiality considerations do apply;
  • clarification that the list of line items to be presented in these statements can be disaggregated and aggregated as relevant and additional guidance on subtotals in these statements and clarification that an entity's share of OCI of equity-accounted associates and joint ventures should be presented in aggregate as single line items based on whether or not it will subsequently be reclassified to profit or loss;
  • additional examples of possible ways of ordering the notes to clarify that understandability and comparability should be considered when determining the order of the notes and to demonstrate that the notes need not be presented in the order so far listed in paragraph 114 of IAS 1.

Issued: 18 December 2014 (articlenewsletter).

Effective for annual periods beginning on or after 1 January 2016.   Mandatory Mandatory Mandatory Optional
 Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) 

Amends IFRS 10 Consolidated Financial StatementsIFRS 12 Disclosure of Interests in Other Entities and IAS 28 Investments in Associates and Joint Ventures (2011) to address issues that have arisen in the context of applying the consolidation exception for investment entities by clarifying the following points:

  • The exemption from preparing consolidated financial statements for an intermediate parent entity is available to a parent entity that is a subsidiary of an investment entity, even if the investment entity measures all of its subsidiaries at fair value.
  • A subsidiary that provides services related to the parent's investment activities should not be consolidated if the subsidiary itself is an investment entity.
  • When applying the equity method to an associate or a joint venture, a non-investment entity investor in an investment entity may retain the fair value measurement applied by the associate or joint venture to its interests in subsidiaries.
  • An investment entity measuring all of its subsidiaries at fair value provides the disclosures relating to investment entities required by IFRS 12.
Issued: 18 December 2014 (articlenewsletter).
 Effective for annual periods beginning on or after 1 January 2016. 
Mandatory Mandatory Mandatiry Optional
Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)

Amends IAS 12 Income Taxes to clarify the following aspects:

  • Unrealised losses on debt instruments measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference regardless of whether the debt instrument's holder expects to recover the carrying amount of the debt instrument by sale or by use.
  •  
  • The carrying amount of an asset does not limit the estimation of probable future taxable profits.
  •  
  • Estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible temporary differences.
  •  
  • An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law restricts the utilisation of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type.
Issued:  19 January 2016 (article)
Effective for annual periods beginning on or after 1 January 2017
Not yet endorsed for use in the EU.
Disclosure Initiative (Amendments to IAS 7)
 
Amends IAS 7 Statement of Cash Flows to clarify that entities shall provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities.
Issued: 29 January 2016 (articlepublication)
Effective for annual periods beginning on or after 1 January 2017
Not yet endorsed for use in the EU.
Clarifications to IFRS 15 'Revenue from Contracts with Customers' 
 
Amends IFRS 15 in three areas:
  • Identification of performance obligations – changes clarify the application of the concept of 'distinct‘ in this context.
  • Whether an entity is acting as principal or agent – changes clarify the application of the principal of ‘control’ in making this determination.
  • Licensing – changes assist in determining whether an entity’s activities ‘significantly affect’ intellectual property during the period for which it has been licensed to a customer. 
The amendments also provide some transition relief for modified contracts and completed contracts.
Issued: 12 April 2016 (articlenewsletter)
Effective for annual periods beginning on or after 1 January 2018
Not yet endorsed for use in the EU.
Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2)
 
Amends IFRS 2 to clarify the classification and measurement of share-based payment transactions with respect to:
  • the accounting for cash-settled share-based payment transactions that include a performance condition;
  • the classification of share-based payment transactions with net settlement features; and
  • the accounting for modifications of share-based payment transactions from cash-settled to equity-settled.

Issued: 20 June 2016 (article, newsletter)

Effective for annual periods beginning on or after 1 January 2018.  Earlier application is permitted.  Not yet endorsed for use in the EU.
Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance Contracts' (Amendments to IFRS 4)
Amends IFRS 4 Insurance Contracts provide two options for entities that issue insurance contracts within the scope of IFRS 4:
  • an option that permits entities to reclassify, from profit or loss to other comprehensive income, some of the income or expenses arising from designated financial assets; this is the so-called overlay approach;
  • an optional temporary exemption from applying IFRS 9 for entities whose predominant activity is issuing contracts within the scope of IFRS 4; this is the so-called deferral approach.
The application of both approaches is optional and an entity is permitted to stop applying them before the new insurance contracts standard is applied.
Issued: 12 September 2016 (article, newsletter)

Overlay approach to be applied when IFRS 9 is first applied. Deferral approach effective for annual periods beginning on or after 1 January 2018 and only available for three years after that date.

Not yet endorsed for use in the EU.

Annual Improvements 2014-2016 Cycle
Makes amendments to the following standards:
  • IFRS 1 - Deletes the short-term exemptions in paragraphs E3–E7 of IFRS 1, because they have now served their intended purpose
  • IFRS 12 - Clarifies the scope of the standard by specifying that the disclosure requirements in the standard, except for those in paragraphs B10–B16, apply to an entity’s interests listed in paragraph 5 that are classified as held for sale, as held for distribution or as discontinued operations in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
  • IAS 28 - Clarifies that the election to measure at fair value through profit or loss an investment in an associate or a joint venture that is held by an entity that is a venture capital organisation, or other qualifying entity, is available for each investment in an associate or joint venture on an investment-by-investment basis, upon initial recognition

Issued: 8 December 2016 (article)

The amendments to IFRS 1 and IAS 28 are effective for annual periods beginning on or after 1 January 2018, the amendment to IFRS 12 for annual periods beginning on or after 1 January 2017.  Not yet endorsed for use in the EU.

'Transfers of Investment Property (Amendments to IAS 40)'
The amendments to IAS 40 Investment Property:
  • Amends paragraph 57 to state that an entity shall transfer a property to, or from, investment property when, and only when, there is evidence of a change in use. A change of use occurs if property meets, or ceases to meet, the definition of investment property. A change in management’s intentions for the use of a property by itself does not constitute evidence of a change in use.
  • The list of examples of evidence in paragraph 57(a) – (d) is now presented as a non-exhaustive list of examples instead of the previous exhaustive list.

Issued: 8 December 2016 (article)

The amendments are effective for periods beginning on or after 1 January 2018. Earlier application is permitted. An entity applies the amendments to changes in use that occur on or after the beginning of the annual reporting period in which the entity first applies the amendments. Retrospective application is also permitted if that is possible without the use of hindsight.  Not yet endorsed for use in the EU.

 

European Union formally adopts amendments to IFRS 10, IFRS 12 and IAS 28

23 Sep, 2016

The European Union has published a Commission Regulation endorsing the December 2014 amendments to IFRS 10, IFRS 12 and IAS 28 that address issues that have arisen in the context of applying the consolidation exception for investment entities.

Commission Regulation (EC) No 2016/1703 of 22 September 2016 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 23 September 2016 adopts Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) issued by the IASB in December 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 application permitted).

EFRAG has updated its IFRS endorsement status report to reflect the development.

September 2016 IASB meeting notes posted — Part 2 (concluded)

22 Sep, 2016

The IASB met at its offices in London on 20 and 22 September 2016. We have posted the remaining Deloitte observer notes from the five sessions on the Conceptual Framework held today.

Please click through for direct access to the notes:

Thursday, 22 September 2016

  • Conceptual Framework:
    • The reporting entity
    • Presentation and disclosure
    • Asymmetry in treating gains and losses
    • Definition of equity and supporting discussion
    • Materiality

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

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.