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IFRS Interpretations Committee holds March 2018 meeting

14 Mar 2018

The IFRS Interpretations Committee met via video conference call on Tuesday 13 March 2018. We have posted Deloitte observer notes for the technical issues discussed during this meeting.

Finalisation of agenda decisions

The Committee finalised the three decisions relating to IFRS 15 Revenue for Contracts with Customers (Revenue recognition in a real estate contract; Revenue recognition in a real estate contract that includes the transfer of land; and Right to payment for performance completed to date) and will not take those items onto its agenda. As well as considering the specific issues, the Committee discussed more general comments about these agenda decisions, including the appropriateness of considering specific fact patterns. 

The Committee also finalised the decision not to add to its agenda a project in relation to the presentation of interest revenue for particular financial instruments.

Continuing discussions

In Committee continued its discussions of whether or how to clarify the meaning of the term ‘unavoidable costs’, which is used in the definition of an onerous contract in IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The Committee decided to develop a separate narrow scope proposal to amend IAS 37 that would specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’, with examples to illustrate the application of this.

New issues

The Committee decided to publish a tentative decision not to add to its agenda a project on IAS 7 Statement of Cash Flows - classification of short-term loans and credit facilities (Agenda Paper 6) because they think the requirements in the relevant Standard provide an adequate basis for an entity to determine the appropriate accounting.

The Committee decided to publish tentative decisions not to add two items to its agenda because they think there is insufficient evidence that the matter has widespread effect:

  • IFRS 9 Financial Instruments - classification of a particular type of dual currency bonds (Agenda Paper 8). How to assess whether a financial instrument has contractual cash flows that are solely payments of principal and interest on the principal amount outstanding when a bond has a par amount denominated in one currency and fixed interest coupon payments denominated in another currency.
  • IFRS 9 Financial Instruments hedge accounting with load following swaps (Agenda Paper 9). How should the term “highly probable” be applied, as it is used in IAS 39.88 and IFRS, to assess whether a hedging relationship qualifies for hedge accounting?

The Committee also considered two other issues. The staff will assess whether an interpretation is necessary in relation to IAS 12 Income Taxes Deferred tax – tax base of assets and liabilities (Agenda Paper 4) and how the exemption (in IAS 12.15 and IAS 12.24) to recognising a deferred tax asset or a deferred tax liability should be applied. The staff will bring back a revised draft agenda decision in relation to IAS 37 Provisions, Contingent Liabilities and Contingent Assets - payments relating to taxes other than income tax (Agenda Paper 7).  The issue relates to when an entity makes a voluntarily payment to a tax authority that will either be returned or used to settle the tax liability (which the entity has determined is not probable and therefore not recognised).

There are no new or ongoing matters that have yet to be presented to the Committee.

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


IFRS 2018 'Red Book' now available

13 Mar 2018

The International Accounting Standards Board (IASB) has announced that the 2018 edition of the Bound Volume of International Financial Reporting Standards (the 'Red Book') is now available.

The Red Book contains all official pronouncements as issued at 1 January 2018. Accordingly, the 2018 edition includes the following changes made since 1 January 2017: IFRS 17, amendments to IFRS 9 and IAS 28, Annual Improvements 2015–2017, IFRIC 23, and IFS Practice Statement 2.

eIFRS Professional and Comprehensive subscribers can access the electronic files of the 2018 IFRS Red Book via eIFRS (you will be required to provide your login details).

The Red Book is also available through the IASB's Web Shop. Copies are priced at £78 each, plus shipping.

London Stock Exchange introduces rules on corporate governance reporting for AIM companies

13 Mar 2018

The London Stock Exchange has announced that all AIM companies will need to report on their application of a recognised corporate governance code with effect from 28th September 2018.

Paragraph 26 to Part 1 of the AIM Rules for Companies has been updated and states that AIM companies will be required to include (on a website, free of charge):

  • details of a recognised corporate governance code that the board of directors of the AIM company has decided to apply;
  • how the AIM company complies with that code; and
  • where it departs from its chosen corporate governance code an explanation of the reasons for doing so.

The revised rules also indicate that this information should be reviewed annually and the website should include the date on which this information was last reviewed.
A footnote indicates that the implementation of this requirement will take effect from 28 September 2018. However, all new applicants from 30 March 2018 will be required to state which corporate governance code they intend to follow but otherwise will have until 28 September 2018 to comply.

The full document can be on accessed on the London Stock Exchange website here.  Our related Governance in brief publication is available here.

FRC compendium of Ethical and Auditing Standards 2018 now available

13 Mar 2018

The Financial Reporting Council (FRC) has announced that its compendium of ‘Ethical and Auditing Standards 2018’ is now available.

The compendium contains the FRC’s Ethical and Auditing Standards in issue at 1 January 2018.  Accordingly the compendium includes:

  • Ethical Standard;
  • International Standards on Auditing (UK); and
  • International Standard on Quality Control (UK) 1.

The compendium also includes the new and revised ISAs (UK) issued in 2016-2017:

Effective for audits of financial statements for periods commencing on or after 15 December 2017:

  • ISA (UK) 250 (Revised December 2017) Section A—Consideration of Laws and Regulations in an Audit of Financial Statements; and
  • ISA (UK) 330 (Revised June 2017) The Auditor’s Responses to Assessed Risks.

New (issued in October 2016)
Effective for audits of financial statements for periods commencing on or after 1 January 2017:

  • ISA (UK) 800 (Revised) Special Considerations—Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks; and
  • ISA (UK) 805 (Revised) Special Considerations—Audits of Single Financial Statements and Specific Elements Accounts or Items of a Financial Statement.

Details of how to obtain the compendium are available on the FRC website.

IFRS conference in Frankfurt

12 Mar 2018

The IFRS Foundation has announced that its next IFRS conference in Europe will be held in Frankfurt, Germany on 28–29 June 2018.

The main conference programme includes:

Day 1

  • Chairman’s keynote
  • Keynote address by the CFO of SAP SE
  • IASB update
    • Major IFRS Standards (including insurance and rate-regulated activities)
    • Research projects
    • The importance of disclosures
  • Break-out sessions:
    • Implementation and Application of the Standards
    • IFRS Taxonomy
    • Implementing IFRS 16 Leases — Disclosures
    • Primary Financial Statements
    • Wider Corporate Reporting

Day 2

  • Panel discussion — Judgments and estimates
  • Conceptual Framework at a glance
  • Panel discussion — Technology and its impact on accounting
  • Break-out sessions:
    • Implementation and Application of the Standards (repeated from day 1)
    • Financial Instruments with Characteristics of Equity
    • IFRS 17 Insurance Contracts — Implementation: Hot Topics
    • Conceptual Framework in action
  • Q&A session with IASB Members and staff

There are also four pre-conference special interest workshops:

  • Investor-focused IFRS workshop and update
  • Guide to new IFRS Standards 
  • Effects of IFRS 17 Insurance Contracts   
  • Making Disclosure More Meaningful

More details, including registration information, are available on the conference website

Agenda and pre-meeting summaries for the March IASB meeting

12 Mar 2018

The IASB has posted the agenda for its next meeting, which will be held at its offices in London on 21 and 22 March 2018. We have posted our pre-meeting summaries for the meeting that allow you to follow the IASB’s decision making more closely. For each topic to be discussed we summarise the agenda papers made available by the IASB staff and point out the main issues to be discussed by the IASB and the staff recommendations.

The Board will discuss seven projects.      


Disclosure Initiative

The Board continues its discussion of the feedback on the Principles of Disclosure Discussion Paper. The objective of this meeting is for the Board to make decisions about the next steps in the project. The staff have identified topics 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, but for which the Board received significant feedback.


Dynamic Risk Management [Macro-hedging]

The staff will discuss the role of the target profile within the Dynamic Risk Management accounting model.

Rate-regulated Activities

The Board is being asked to decide on the definition of defined rate regulation (which sets the scope for the eventual new Standard), and the criteria for recognising regulatory assets and regulatory liabilities.

IFRS 8 Operating Segments

The staff have considered whether the Board should bring the project to conclusion without moving forward on any of the proposed amendments, proceed with all of the proposals or, as they recommend, proceed with a (modified) sub-set of the proposals.

Post-implementation review of IFRS 13 'Fair Value Measurement'

The Board discussed a summary of feedback on its Request for Information and an academic review in January 2018. At this meeting the staff are recommending that the Board consider disclosure issues as part of the Principles of Disclosure project. In general, however, the feedback indicates that IFRS 13 is working as intended and the staff recommend that no changes to IFRS 13 be considered at this time.

Management Commentary

In November 2017 the IASB decided to update its Management Commentary Practice Statement. Last week the Board announced the creation of a consultative group to support the project. At this meeting the staff will give a presentation that sets out the approach they propose taking in updating the Practice Statement.

Accounting Policies and Accounting Estimates

The Board will discuss a summary of the comments received on the exposure draft to clarify the definitions of an accounting policy and an accounting estimate.

More information

Our pre-meeting summaries are available on our March meeting note page and will be supplemented with our popular meeting notes after the meeting.

Use of financial accounting standards to meet TCFD recommendations

12 Mar 2018

The Climate Disclosure Standards Board (CDSB) has published 'Uncharted waters: How can companies use financial accounting standards to deliver on the TCFD’s recommendations?'. The publication explores how companies can use existing international accounting standards when implementing the Task Force on Climate-related Financial Disclosures (TCFD) recommendations and comes out as the European Commission calls for the review of current IFRS to assess their potential impact on sustainable investment.

The paper summarises the Task Force’s final recommendations on future-oriented climate-related financial disclosures, identifies financial accounting standards and other mainstream reporting materials that could aid companies in responding to various aspects of the TCFD recommendations, and considers what more needs to be done and how to align the TCFD core elements and recommended disclosures with existing financial accounting standards and materials. The paper focuses on IFRS 7, IFRS 9, IFRS 15, IFRS 17 and IAS 36 and IAS 37, exploring some of the main points applied to traditional financial instruments and how they could potentially help organisations disclose climate-related risks and opportunities within their mainstream reports.

Please click to access the full report on the CDSB website.

IASB to set up consultative group for updating the Management Commentary Practice Statement

10 Mar 2018

In November 2017, the IASB formally added a project to revise its Management Commentary Practice Statement to its agenda. The IASB is now seeking participants for a consultative group that will advise the Board on this project.

The Board is seeking candidates who have:

  1. a deep understanding of the information that existing and potential investors, lenders and other creditors need from management commentary and of areas of current practice where those needs are, or are not, being met; or
  2. expertise in developing or implementing management commentary regimes designed to meet those needs.

The Board expects to hold at least four consultative group meetings during the course of the project.

Please see the press release on the IASB website for more information. The deadline for applications is 20 April 2018.

IFIAR publishes report of 2017 survey inspection findings

09 Mar 2018

The International Forum of Independent Audit Regulators (IFIAR) has published ‘International Forum of Independent Audit Regulators – 2017 Survey of Inspection Findings’ (“the report”). IFIAR highlights that “although the frequency of findings from inspections of individual audit engagements has reduced on an overall basis compared to the last survey, progress is not experienced in all jurisdictions or at the same rate”. It further comments that “these results affirm IFIAR’s views that the global networks must continue in their efforts to strengthen their systems of quality control and drive consistent execution of high quality audits throughout the world”.

IFIAR comprises 52 independent audit regulators from jurisdictions in Africa, the Americas, Asia, Europe, the Middle East and Oceania. IFIAR provides a forum for regulators to share knowledge of the audit market and share the practical experience gained from their independent audit regulatory activity.   The Financial Reporting Council (FRC) is a member.

The report summarises the key inspection findings from the audits of listed public interest entities (including systematically important financial institutions) and firm systems of quality control submitted by 42 of IFIAR’s members. Findings were submitted from the most recent audit inspection reports of members during the twelve months ended 30 June 2017. IFIAR collected information about two categories of activities; inspections performed on firm-wide systems of quality control and inspections of individual audit engagements.

IFIAR has challenged the global audit networks to reduce the percentage of listed PIE audits that have inspection findings by at least 25 per-cent (to 29 per-cent or less) over a four year period using the 2015 survey results as a baseline. This report reflects the networks’ progress at the measurement period’s mid-point and indicates that there is a 30 per-cent rate of findings.

The report identifies that in the area of firm-wide systems of quality control “for all but one quality control inspection theme, the rate of firms inspected with at least one finding reported in the 2017 increased compared to the 2016 survey results”. The quality control elements with the highest rates of inspection findings include engagement performance, independence and ethical requirements, human resources and monitoring.

With regards to inspections of individual audit engagements, “forty percent of the audits inspected had at least one finding”. The two areas with the highest rate and greatest number of findings in the 2017 survey were accounting estimates and internal control testing. The report highlighted that “revenue Recognition findings levels were comparatively lower” in the 2017 survey.

In June 2017 the Financial Reporting Council (FRC) published its own report of audit quality inspection work carried out by its Audit Quality Review (AQR) team.

Click for (all links to IFIAR website):

Hyperinflationary economies - updated IPTF watch list available

09 Mar 2018

IAS 29 'Financial Reporting in Hyperinflationary Economies' defines and provides general guidance for assessing whether a particular jurisdiction's economy is hyperinflationary. But the IASB does not identify specific jurisdictions. The International Practices Task Force (IPTF) of the Centre for Audit Quality (CAQ) monitors the status of 'highly inflationary' countries. The Task Force's criteria for identifying such countries are similar to those for identifying 'hyperinflationary economies' under IAS 29.

The IPTF's discussion document for the 21 November 2017 meeting is now available and states the following view of the Task Force:

Countries with three-year cumulative inflation rates exceeding 100%:

  • South Sudan
  • Suriname
  • Venezuela

Countries with projected three-year cumulative inflation rates exceeding 100%:

  • Angola
  • Libya
  • Argentina

Countries where the three-year cumulative inflation rates had exceeded 100% in recent years:

  • Sudan

Countries with recent three-year cumulative inflation rates exceeding 100% after a spike in inflation in a discrete period:

  • Ukraine

Countries with projected three-year cumulative inflation rates between 70% and 100% or with a significant (25% or more) increase in inflation during the current period

  • Democratic Republic of Kongo
  • Egypt
  • Yemen

The full list, including exact numbers, detailed explanations of the calculation of the numbers, and observations of the Task Force are available on the CAQ website. We also offer an overview of the IPTF's assessment of hyperinflationary jurisdictions at the end of our summary of IAS 29.

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