June

EBA stress test to include IFRS 9

08 Jun, 2017

The European Banking Authority (EBA) has published its 2018 EU-wide stress test draft methodology and templates. The exercise will cover 70% of the EU banking sector and will, for the first time, incorporate IFRS 9 'Financial Instruments'.

For banks starting to report under IFRS 9 in 2018, the 2018 EU-wide stress test takes into account the impact of the implementation of IFRS 9 on 1 January 2018 both in terms of starting point and projections.

The final methodology will be published as the exercise is launched, at the beginning of 2018, and the results to be published in mid-year 2018.

Please click for more information and links to all relevant documents on the EBA website.

New Interpretation on accounting for uncertainties in income taxes

07 Jun, 2017

The International Accounting Standards Board (IASB) has published IFRIC 23 'Uncertainty over Income Tax Treatments' developed by the IFRS Interpretations Committee to clarify the accounting for uncertainties in income taxes.

 

Background

The IFRS Interpretations Committee observed diversity in practice regarding the recognition and measurement of current tax, deferred tax liabilities and deferred tax assets as defined by paragraph 5 of IAS 12 Income Taxes, when there are uncertainties in the amount of income tax payable (recoverable). As a consequence, the Interpretations Committee decided to develop an interpretation.

 

Content of IFRC 23

Scope

The interpretation is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12.

Issues and consensus

Whether tax treatments should be considered collectively

An entity is required to use judgement to determine whether each tax treatment should be considered independently or whether some tax treatments should be considered together. The decision should be based on which approach provides better predictions of the resolution of the uncertainty.

Assumptions for taxation authorities' examinations

An entity is to assume that a taxation authority with the right to examine any amounts reported to it will examine those amounts and will have full knowledge of all relevant information when doing so.

Determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates

An entity has to consider whether it is probable that the relevant authority will accept each tax treatment, or group of tax treatments, that it used or plans to use in its income tax filing.

  • If the entity concludes that it is probable that a particular tax treatment is accepted, the entity has to determine taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatment included in its income tax filings.
  • If the entity concludes that it is not probable that a particular tax treatment is accepted, the entity has to use the most likely amount or the expected value of the tax treatment when determining taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates. The decision should be based on which method provides better predictions of the resolution of the uncertainty.

Effect of changes in facts and circumstances

An entity has to reassess its judgements and estimates if facts and circumstances change.

Disclosures

The interpretation does not contain any new disclosure requirements. Instead it highlights existing disclosure requirements in IAS 1 and IAS 12.

Effective date and transition

An entity applies IFRIC 23 for annual reporting periods beginning on or after 1 January 2019. Earlier application is permitted.

The requirements are applied by recognising the cumulative effect of initially applying them in retained earnings, or in other appropriate components of equity, at the start of the reporting period in which an entity first applies them, without adjusting comparative information. Full retrospective application is permitted, if an entity can do so without using hindsight.

 

Additional information

Please click for:

 

EFRAG Board membership rotation

07 Jun, 2017

The European Financial Reporting Advisory Group (EFRAG) has launched a call for candidates for candidates to serve as members of the EFRAG Board from 1 November 2017.

The current EFRAG Board has been in place since November 2014 and the implementation of the Maystadt recommendations; it is now approaching the end of its first three-year term.

Nominations for membership of the EFRAG Board should be sent at the latest by 4 September 2017 to nominations@efrag.org. Current EFRAG Board members are eligible for reappointment.

For more information, please see the press release on the EFRAG website.

Study on the impact of reporting frequency

07 Jun, 2017

The CFA Institute, a global association of investment professionals, has published 'Impact of Reporting Frequency on UK Public Companies'.

The study looks at the effects on UK corporate investments and capital markets of moving to required quarterly reporting in 2007 and then dropping this requirement in 2014. The authors found that the frequency of financial reports had no material impact on levels of corporate investment. However, mandatory quarterly reporting was associated with an increase in analyst coverage and an improvement in the accuracy of analyst earnings forecasts.

One of the focus points of the study was to investigate whether quarterly reporting encourage short-term thinking. On this aspect the study notes:

In short, contrary to the rationale behind the 2013 amendments to the EU Transparency Directive, moving from quarterly to semiannual reporting is not an effective remedy for undue corporate emphasis on short-termism. If quarterly reporting leads company executives to focus on profits during the next three months, then a shift to semiannual reporting might plausibly lead corporate executives to focus on profits during the next six months—not on corporate investments with good prospects over the next three to five years.

Please click to access the full study from the CFA Institute website.

EFRAG publishes May 2017 issue of 'EFRAG Update'

06 Jun, 2017

The European Financial Reporting Advisory Group (EFRAG) has published an 'EFRAG Update' summarising public technical discussions held and decisions made during May 2017.

The Update reports on the EFRAG Board meeting on 31 May, the EFRAG Board conference call on 3 May, the EFRAG TEG conference call on 24 May and the EFRAG TEG meeting on 10 and 11 May.

The Update also lists EFRAG publications issued in May:

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

Agenda for June 2017 joint CMAC-GPF meeting

05 Jun, 2017

Representatives from the International Accounting Standards Board (IASB) will meet with both the Capital Markets Advisory Council (CMAC) and Global Preparers Forum (GPF) in London on 15 and 16 June 2017. The agenda for the joint meeting has been released.

The full agenda for the meeting is sum­marised below:

Thursday, 15 June 2017 (10:10-17:15)

  • IASB update.
  • Principles of disclosures — staff presentation and breakout session related to the discussion paper.
  • Primary financial statements — staff presentation and breakout sessions related to the comparability and flexibility in performance reporting.
  • Fair value measurement — staff presentation and breakout session related to the post-implementation review of IFRS 13.

Friday, 16 June 2016 (09:00-12:00)

  • Impairment testing of goodwill — staff pre­sen­ta­tion and breakout sessions.
  • Operating segments — staff presentation related to preparers’ views on the proposals in the Exposure Draft, Improvements to IFRS 8 Operating Segments.

Agenda papers for this meeting are available on the IASB's website.

Pre-meeting summaries for the June 2017 IFRS Interpretations Committee meeting

05 Jun, 2017

The IFRS Interpretations Committee meets in London on Tuesday 13 June 2017. The Committee will discuss 11 issues — one on-going, five previously issued agenda decisions and five new.

On-going discussions

The Committee will consider a recommendation from the staff that the IASB finalise its narrow-scope amendments to IAS 23 Borrowing Costs in relation to completed qualifying assets.

Finalisation of draft agenda decisions

The Committee will consider the public feedback on four matters which it had tentatively decided not to add to its agenda:

  • IAS 41 Agriculture: Fair value of biological assets growing on bearer plants (Agenda Paper 6A)
  • IAS 19 Employee Benefits: Discount rates (Agenda Paper 6B)
  • IAS 33 Earnings per share: Tax consequences of dividends on participating equity instruments (Agenda Paper 6C)
  • IFRS 9 Financial Instruments: Clearing broker and centrally cleared client derivatives (Agenda Paper 6D)
  • IFRS 9 Financial Instruments: Modifications / exchanges of financial liabilities (Agenda Paper 6E)

In each case the staff are recommending that the Committee finalise the decision. The modifications issue has attracted an unusually high number of comment letters.

New issues

There are four new issues:

  • IFRS 3 Business Combinations: Acquisition of a group of assets (Agenda Paper 2)
  • IAS 38 Intangible Assets: Goods acquired for promotional (Agenda Paper 3)
  • IAS 37 Provisions, Contingent Liabilities and Contingent Assets: Costs considered in determining whether a contract is onerous (Agenda Paper 4)
  • IAS 28 Investments in Associates and Joint Ventures: Associate or joint venture and common control (Agenda Paper 8)

In each case the staff are recommending that the Committee not take the matter onto its agenda.

Additionally, the Committee will consider how to account for a change in accounting policy as a result of an agenda decision by the IFRS Interpretations Committee.  The staff are recommending a small amendment to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. (Agenda Paper 5)

The pre-meeting summaries for the meeting can be found here. We will update this page for our Deloitte observer notes from the meeting as they become available.

IASB announces timing of its website upgrade

02 Jun, 2017

The IASB has announced that its major website upgrade will occur next weekend, 10–11 June 2017. There is a potential for site slowness and outages during this period.

The IASB details the changes being made to its website in this press release. Regarding older content, it notes:

Because we store thousands of documents on our current server, we are migrating content to the new website in phases. Content yet to be migrated will remain in an archive of the current website, which will be available to access via archive.ifrs.org.

Since IAS Plus follows the work of the IASB very closely and traditionally offers many links to IASB content, we are watching the development of the new website very closely and will make sure that — around the time of the launch — our links to the IASB's website continue to work for you.

Communiqué and report from the May 2017 Emerging Economies Group meeting

02 Jun, 2017

The 13th meeting of the IASB's Emerging Economies Group (EEG) was held in Mumbai on 8-9 May 2017. For the first time ever, the IASB has published a full report from the meeting in addition to the usual communiqué.

Participants at the meeting, which was the first led by IASB member Amaro Gomes, discussed the implementation of and questions around IFRS 15 Revenue from Contracts with Customers. The report from the meeting includes three pages on the implementation timeline, the five-step revenue recognition model including specific questions around identifying the contract with the customer (step 1) and determining the transaction price (step 3), principal versus agent aspects, and the conceptual approach to IFRS 15. As participants felt it would be especially beneficial for other emerging economies to be able to read up on the discussion, it was decided to publish the detailed report.

Please click for access to the communiqué (one page) and the full report (five pages) on the IASB website.

The next meeting of the EEG will be held 4-5 December 2017 in São Paulo, Brazil.

Agenda for the June 2017 IFRS Interpretations Committee meeting

02 Jun, 2017

The IFRS Interpretations Committee will meet in London on Tuesday 13 June 2017. The agenda for the meeting is now available.

The IFRS Interpretations Committee will:

  • deliberate comment letters received on its Annual Improvements 2015–2017 related to IAS 23;
  • finalise agenda decisions on IAS 19, IAS 33, IAS 41, and IFRS 9; and
  • consider new issues on IAS 8, IAS 28, IAS 37, IAS 38, and IFRS 3.

The full agenda for the meeting can be found here. We will update this page for any changes to the agenda and our Deloitte pre-meeting summaries and observer notes from the meeting as they become available.

Four Trustees of the IFRS Foundation reappointed

01 Jun, 2017

The IFRS Foundation has announced the reappointments of Alan Beller, Werner Brandt, Takafumi Sato, and Kurt Schacht as Trustees of the IFRS Foundation.

All four of them will serve a second three-year term from 1 January 2018.

Please click to access the press release on the IASB website.

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.