March

IASB publishes proposed amendments to IAS 8 regarding agenda decisions

27 Mar, 2018

The International Accounting Standards Board (IASB) has published an exposure draft 'Accounting Policy Changes (Proposed amendments to IAS 8)', considering changes in accounting policies that result from agenda decisions published by the IFRS Interpretations Committee. Comments are requested by 27 July 2018.

 

Background

Applying IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, an entity changes an accounting policy only if the change is required by an IFRS or results in improving the usefulness of information provided to users of its financial statements. However, a common reason why an entity voluntarily changes an accounting policy is to reflect non-authoritative explanatory material included in agenda decisions published by the IFRS Interpretations Committee.

To facilitate voluntary changes in accounting policy that result from an agenda decision, the Board intends to amend IAS 8 to lower the impracticability threshold for retrospective application of such changes.

 

Suggested changes

The changes proposed in ED/2018/1 Accounting Policy Changes (Proposed amendments to IAS 8) are focused on a cost benefit analysis:

  • If an entity changes an accounting method as a result of an agenda decision by the IFRS Interpretations Committee, it does a cost-benefit assessment: If the entity's cost of determining the period-specific effects or the cumulative effect of the change exceeds the expected benefits to users of the financial statements, the new accounting policy need not be applied retrospectively.
  • In addition, the IASB proposes to include corresponding application guidance for the cost-benefit assessment in the standard.

 

Effective date

The exposure draft does not contain a proposed effective date, which the IASB intends to decide on after the exposure.

 

Additional information

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Standard-setters from Australia and Japan take up bilateral meetings

27 Mar, 2018

Representatives of the Australian Accounting Standards Board (AASB) and of the Accounting Standards Board of Japan (ASBJ) met on 22 and 23 March 2018 in Melbourne.

The standard-setters provided updates on their respective financial reporting frameworks, activities and exchanged views on the opportunities for cooperation.

They also discussed specific technical topics in which both Boards have interest:

  • IFRS implementation issues (particularly impairment testing),
  • virtual currencies,
  • intangibles (particularly good will),
  • business combinations under common control,
  • equity method of accounting, and
  • other comprehensive income.

AASB and ASBJ plan to continue these meetings.

Please click for the press release on the ASBJ website.

European Union formally adopts amendments to IFRS 9

26 Mar, 2018

The European Union has published a Commission Regulation endorsing 'Prepayment Features with Negative Compensation (Amendments to IFRS 9)'.

The amendments issued by the IASB in October 2017 address the concerns about how IFRS 9 Financial Instruments classifies particular prepayable financial assets.

The European Union effective date is the same as the IASB's (1 January 2019), i. e. one year after the first application of IFRS 9 in its current version. Early application is permitted so entities can apply the amendments together with IFRS 9 if they wish so.

The Commission Regulation 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 was published in the Official Journal of the European Union on 26 March 2018.

As a result of the EU's adoption, the EFRAG has updated its endorsement status report.

Updated IASB work plan — Analysis

23 Mar, 2018

Following the IASB's March 2018 meeting, we have analysed the IASB work plan to see what changes have resulted from the meeting and other developments in March. Changes are numerous, but most important this time is an unchanged entry: "March 2018" for the Conceptual Framework indicates, that the revised framework will indeed come out next week.

Below is an analysis of all changes made to the work plan since our last analysis on 23 February 2018.

Standard-setting project

  • Conceptual Framework — The revised framework is to be expected next week as the unchanged entry "March 2018" indicates

Maintenance projects

  • Accounting policies and accounting estimates (amendments to IAS 8) — After discussion at the March IASB meeting, the next milestone has changed from "exposure draft feedback" to "decide project direction". No date has been given.
  • Accounting policy changes (amendments to IAS 8) — the work plan states "March 2018" (unchanged entry) and a separate communication confirms that an exposure draft will be published on 27 March 2018.
  • Definition of a business (amendments to IFRS 3) — An IFRS amendment is expected in June 2018 (previously set to Q2 2018).
  • Disclosure initiative — Definition of material (amendments to IAS 1 and IAS 8) — this project has been changed from "standrd-setting" to "maintenance". Exposure draft feedback is still expected in April 2018.
  • Disclosure initiative — Targeted standards-level review of disclosures — newly added to the work plan. The Board will decide project direction in June 2018.
  • Improvements to IFRS 8 Operating Segments (amendments to IFRS 8 and IAS 34) — The Board discussed this topic at its March meeting. A feedback statement is now expected in H2 2018.

Research projects

  • Business combinations under common control — A discussion paper is expected in H1 2019 (pushed back from H2 2018).
  • Disclosure initiative — Principles of disclosure — After this topic was discussed at the March IASB meeting, the next milestone on the work plan was changed from "decide project direction" to "discuss remaining issues" in June 2018.
  • Discount rates — Research summary is expected in June 2018 (updated from Q2 2018).
  • Financial instruments with characteristics of equity — A discussion paper is expected in June 2018 (updated from Q2 2018).
  • Post-implementation review of IFRS 13 Fair Value Measurement — After a discussion at its March meeting, the IASB added an expected date of H2 2018 for its feedback statement.
  • Share-based payment — Research summary is expected in June 2018 (updated from Q2 2018).

Other projects

  • IFRS Taxonomy Update—2017 Annual Improvements — The final update was removed from the IASB’s work plan, as the 2018 IFRS Taxonomy was issued on 16 March 2018.
  • IFRS Taxonomy Update — Common Practice (IFRS 13) — A proposed updated is expected in June 2018 (updated from Q2 2018).
  • IFRS Taxonomy Update — Prepayment features with negative compensation (amendments to IFRS 9) — This was removed from the IASB’s work plan, as the Update was published on 16 March 2018.

The above is a faithful comparison of the IASB work plan at 23 February 2018 and at 23 March 2018. For access to the current IASB work plan at any time, please click here.

Speeches at the EU conference on Sustainable Finance

23 Mar, 2018

On 22 March 2018, the European Commission hosted a high-level conference on its strategy to reform the financial system in support of the EU's climate and sustainable development agenda.

The event was jointly hosted by Commission President Jean-Claude Juncker and Vice-President Valdis Dombrovskis. Speakers included French President Emmanuel Macron and Michael Bloomberg, the United Nations Secretary-General's Special Envoy for Climate Action as well as European Commission Vice-President Jyrki Katainen, Commissioner for Climate action and Energy Miguel Arias Cañete and Commissioner for Environment Karmenu Vella.

Speakers referred to the Commission's action plan on sustainable finance and some also mentioned the fitness check on public reporting by companies launched on Wednesday but remained vague on details.

The following information can be accessed on the European Commission website (in the English language if not indicated otherwise):

March 2018 IASB meeting notes posted

22 Mar, 2018

The IASB met at its offices in London on 21 and 22 March 2018. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

The board discussed the following topics:

Wednesday 21 March

Disclosure Initiative

The Board continued its discussion of the feedback on the Principles of Disclosure Discussion Paper. The Board unanimously approved all the staff recommendations on the next steps in the project. The Board have therefore categorised topics into those that they think are directly related to improving disclosures in financial statements, topics that they think are more relevant to the Primary Financial Statements project, topics that are unlikely to be contributing to the disclosure problems, those that can be dealt with separately from the main disclosure problem and topics that the DP did not address that the Board will now consider further.    

Thursday 22 March

Dynamic Risk Management [Macro-hedging]

The Board decided that target profile represents the objective that management is working towards for a given asset profile unanimously and that the notionals of the asset profile and the target profile are required to be the same, but not the tenors.

Rate-regulated Activities

The Board supported the direction the staff are taking towards the definition of defined rate regulation (which sets the scope for the eventual new Standard) and also supported the criteria for recognising regulatory assets and regulatory liabilities.

Accounting Policies and Accounting Estimates

The Board discussed a summary of the comments received on the exposure draft to clarify the definitions of an accounting policy and an accounting estimate. No decisions were made.

IFRS 8 Operating Segments

The Board considered a revised package of amendments but decided that they would not bring sufficient improvements to justify proceeding with them (or any amendments) at this time.

Board members were concerned about how this decision would be communicated. It will need to be emphasised that many of the concerns that were identified when the PIR was undertaken in 2012 have been worked through by preparers. By deciding not to proceed with these minor amendments the Board is responding to these changed circumstances. The Board also noted that the work from the PIR and exposure draft would not be lost. If the FASB’s work leads the IASB to consider making changes to IFRS 8 in relation to aggregation, these amendments could be considered at that time. It is just that the Board could not justify making the amendments on their own.

Post-implementation review of IFRS 13 Fair Value Measurement

The Board decided that the PIR provided evidence that IFRS 13 is working as intended. The Board also decided that feedback on disclosure issues should be considered in the Principles of Disclosure project, and aggregation in the Primary Financial Statements project. The Board and staff will liaise with the valuation profession on guidance the valuation profession could provide on areas identified in the PIR. The Board decided to conclude the PIR and not to propose any changes to IFRS 13.   

Management Commentary

The IASB is updating its Management Commentary Practice Statement. Board members said that the Practice Statement should address long-term value creation, linkage and providing context to the current performance. The Board plans to be cautious about the language it uses in communicating about the project and how it fits into broader corporate reporting. Applications for the IASB’s consultative group on this project close on 20 April 2018.

Please click to access the detailed notes taken by Deloitte observers for the entire meeting.

Deloitte publishes guide to new revenue standard

22 Mar, 2018

Deloitte has issued 'Revenue from Contracts with Customers — A guide to IFRS 15'. As the IASB's new revenue standard is now effective (for periods beginning on or after 1 January 2018 with earlier adoption permitted), this detailed guide helps entities consider the impact of the new standard. In some cases, IFRS 15 will require significant changes to systems and may significantly affect other aspects of operations.

This 254-page guide is intended to assist preparers and users of financial statements to understand the impact of IFRS 15 and includes a high-level executive summary of the new requirements, followed by a specific focus on the important issues and choices available for entities on transition to the new standard. More specifically, the guide covers:

  • all of the requirements of IFRS 15, supplemented by interpretations and examples to give clarity to those requirements;
  • pointers regarding practical issues that are likely to arise;
  • illustrative disclosures for entities that have adopted IFRS 15;
  • and a comparison with US Generally Accepted Accounting Principles (US GAAP).

Please click to download Revenue from Contracts with Customers — A guide to IFRS 15.

EFRAG publishes remaining two IFRS 17 briefing papers

22 Mar, 2018

In February, the European Financial Reporting Advisory Group (EFRAG) published a first of a series of three background briefing papers on IFRS 17 'Insurance Contracts'. Papers two and three are now also available.

The two new two papers address the release of the contractual service margin and transition requirements. The series is intended to provide simplified information on controversial areas of IFRS 17 to enable constituents to understand the issues and be in a position to comment on EFRAG's draft endorsement advice (currently expected in Q3 2018). All papers are available on the EFRAG website:

EC launches fitness check on public reporting by companies

21 Mar, 2018

The European Commission (EC) has published a consultation document 'Fitness Check on the EU Framework for Public Reporting by Companies' The document seems oddly tilted against the use of IFRSs as issued by the IASB.

In the section "The EU financial reporting framework for listed companies", the document notes different levels of commitment to require IFRS as issued by the IASB around the globe and asks whether it is "still appropriate that the IAS Regulation prevents the Commission from modifying the content of IFRS". It also asks whether EU endorsement process is appropriate to ensure that IFRSs do not pose an obstacle to broader EU policy objectives such as sustainability and long-term investments. In each case, "yes" can be checked without further substantiation, "no" needs to be substantiated. 

The questionnaire also asks how the EU can ensure that IFRSs do not pose an obstacle to sustainability and long-term investments. Again the only answers offered are (a) "By retaining the power to modify the IFRS standards in well-defined circumstances" and (b) "By making explicit in the EU regulatory framework that in order to endorse IFRS that are conducive to the European public good, sustainability and long term investment must be considered". "Other" opinions must be specified, unless they are "Don't know".

Please see the full consultation document on the EC website. Comments are requested by 21 July 2018.

Report on the February 2018 IFRS Advisory Council meeting

21 Mar, 2018

The IFRS Advisory Council met in London on 27–28 February 2018. Significant topics on the agenda included (1) the value and effectiveness of the IASB's approach to effects analysis, (2) the effectiveness of the Board’s current conference strategy, (3) an academic liaison strategy, (4) the 2018 review of the ASAF, (5) progress on the Foundation’s Emerging Economies engagement, and (6) the Board’s proposed social media strategy.

The report notes the following discussions:

  • Value and effectiveness of the IASB's approach to effects analysis — Council members advised how the IFRS Foundation could improve the effectiveness of its Effect Analysis work.
  • Effectiveness of the Board’s current conference strategy — Council members noted that conferences are one tool the Foundation can use to support its goals, but discussed other less-costly ways to achieve the Foundation's objectives.
  • Academic liaison strategy — Council members considered and discussed research, strategic ideas, recognition, and other objectives.
  • 2018 review of the ASAF — Council members discussed the dividing views on two key questions: (1) Should ASAF be formally incorporated into the IFRS Foundation’s Constitution? and (2) Should consultation with ASAF be a mandatory due process step in the Due Process Handbook?
  • Progress on the Foundation’s Emerging Economies engagement — Council members received an update and encouraged the Foundation to continue to expand their engagement in emerging economies.
  • Board’s proposed social media strategy — Council members encouraged a "push only" media strategy rather than a (more extensive) two-way social media debate.

The next meeting of the IFRS Advisory Council is scheduled for 4–5 September 2018, in London. The full meeting summary and podcast related to the council’s February meeting are available on the IASB's 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.