The Focal Point will be hosted by ACCA South Africa (ACCA SA), and joins other Focal Points in Australia, Brazil, China, India and the United States.

To measure and monitor the success of GRI’s presence in South Africa and to show how the application of the GRI Sustainability Reporting Framework contributes to changes in companies’ sustainability reporting and performance, GRI will conduct a baseline study from the start of January 2013 to June 2015.

Click for press release (link to GRI website).

Key findings are:

• Whilst there is still significant support  for the convergence process amongst banks, the majority surveyed consider the IASB and FASB are no longer on track to achieve this;
• Banks are putting their implementation efforts on standby as the process continues to be subject to delay;
• There is uncertainty about the ultimate outcome of financial instruments accounting change with an increase in the number of banks considering that the new requirements cannot be implemented in a way that will increase comparability between banks internationally; and
• The capital and pricing impacts of changes such as impairment, debt valuation adjustments and the treatment of liquidity portfolios will be significant.

Please click to download Third Global IFRS Banking Survey – Still far from land?

Earlier survey in the series aimed at capturing the views of the banking industry:

• The first survey conducted in August 2011: IFRS 9 Impairment Survey 2011 – A changing landscape
• The second survey conducted in March 2012: Global IFRS Banking Survey – Q1 2012 A changing landscape

Updates include:

• A high level summary presenting the current status of the insurance contracts project.
• A high level summary of the IASB's tentative decisions, showing where those decisions would affect the proposals in the Exposure Draft (ED) Insurance Contracts.
• A detailed summary of how and where the proposals in the ED would change as a result of the IASB's and FASB's tentative decisions.
• A podcast by Darrel Scott, IASB member and Andrea Pryde, Technical Principal on the developments made in the insurance contracts project during the meetings held in November 2012 and December 2012.

More information on the insurance contracts project can be found on our IAS Plus project page.

EFRAG welcomes the IASB’s decision to consider making limited amendments to IFRS 9 that are intended to address accounting mismatches arising from the application of different measurement models to financial assets and insurance liabilities. However, EFRAG also makes several suggestions regarding further improvements aiming at more clarity and at more useful information.

Regarding the main point of the IASB proposals, the introduction of a 'fair value through other comprehensive income' (FVOCI) measurement category for particular financial assets, EFRAG members did not reach a consensus:

With regards to the introduction of a third business model in IFRS 9, EFRAG TEG members have divergent views on the IASB’s proposals in the ED. Some EFRAG TEG members agree with the IASB’s proposals, whereas some other members believe that the measurement category at fair value through other comprehensive income (FV-OCI) should rather be introduced in IFRS 9 as an option at initial recognition for companies to avoid accounting mismatches like those arising from the interaction between the classification and measurement requirements in IFRS 9 and the future IFRS on insurance contracts. Some EFRAG TEG members are also concerned that the application of the new requirements is unclear. These members believe that there are uncertainties both with the dividing line between amortised cost and FV-OCI and between fair value through profit or loss and FV-OCI.

Comments on the letter are invited by 18 March 2013.

Click for:

• EFRAG press release with link to the draft comment letter (link to EFRAG website).
• Our previous story on the Exposure Draft ED/2012/4 Classification and Measurement: Limited Amendments to IFRS 9 (proposed amendments to IFRS 9 (2010)).
• Deloitte's IFRS in Focus newsletter on the proposals for limited amendments to IFRS 9.

On 29 December 2012, the European Union published Commissions Regulations endorsing the "package of five" standards on consolidation (IFRS 10, IFRS 11, IFRS 12, IAS 27 (2011) and IAS 28 (2011)), IFRS 13, IFRIC 20, and amendments to IFRS 1 (hyperinflation and fixed dates), IAS 12 (recovery of underlying assets) and IFRS 7/IAS 32 (offsetting). The "package of five" standards come with a European effective date of 1 January 2014. However, early application is permitted.

Please click for the EFRAG Endorsement Status Report as of 30 December 2012.

Overview of the pronouncements adopted today

The papers for the AAOIFI - World Bank Annual Conference on Islamic Banking and Finance held earlier this month and recently posted to the AAOIFI (Accounting and Auditing Organisation for Islamic Financial Institutions) website offer a good overview of current topics in Islamic Finance. However, they also illustrate that the definitions of Sharia-compliant operations are still diverse and can differ from jurisdiction to jurisdiction, which make a single approach to accounting difficult. Yet, as one of the speakers at the conference pointed out: "Ethics, transparency and accountability are values not alien to [the] Islamic world view." Please click for access to the conference papers on the AAOIFI website.

The need to harmonise the treatment of Islamic finance first in itself and then with international standards has lead to the publication of a series of papers over the last months. In September 2012, the Islamic Financial Services Board (IFSB) published a report from a high-level roundtable offered jointly with the International Organisation of Securities Commissions (IOSCO), which was to be a first step towards the development of international regulatory standards for Islamic capital market products. In November 2012, the Malaysian Accounting Standards Board (MASB) published a staff paper discussing Islamic finance, accounting treatments for various Islamic finance instruments, and the reasons why the MASB chose to require Islamic financial institutions to follow Malaysian Financial Reporting Standards, which are equivalent to IFRS.

Finally, the Association of Chartered Certified Accountants (ACCA) followed suit with a report published on its website calling on the International Accounting Standards Board (IASB) and the Islamic finance industry to work together to develop guidance, standards and educate the investor community on key issues. ACCA points out that:

• the IASB should consider issuing guidance on the application of IFRSs to the accounting for certain Islamic financial products;
• it should also consider issuing guidance on additional disclosures in relation to Sharia-compliant operations;
• the IASB should work with leading Islamic Finance standard-setters and regulators in establishing differences and developing harmonised solutions; and
• the Islamic Finance Institutes (IFIs) should support the IASB by forming an expert advisory group.

The IASB has responded to the repeated calls and has asked the MASB to help with setting up an expert advisory group on Islamic accounting. This development was first announced at the fourth meeting of the Asian-Oceanian Standard-Setters Group (AOSSG) at the end of November 2012 in Kathmandu where the IASB staff briefed the members on the plans. The IASB has since confirmed these plans in the feedback-statement to the agenda consultation:

The IASB could benefit from learning more about Islamic (Shariah-compliant) transactions and instruments - neither the IASB nor our staff have expertise in this area. The IASB is establishing a consultative group to assess the relationship between Shariah-compliant transactions and instruments and IFRS and to help educate the IASB, mainly through public education sessions. Work undertaken by some standard-setters suggests that IFRS provides relevant information about Shariah-compliant transactions and that there is little, if anything, the IASB would need to do to bring this sector of the economy within IFRS. However, the IASB needs more information before it can make that assessment itself. We have asked the Malaysian Accounting Standards Board to assist us with setting up this group, reflecting the helpful analysis they provided to the AOSSG on Shariah-compliant matters.

More information on developments in Islamic accounting and useful links are available on our dedicated IAS Plus page.

Most of the respondents welcomed the discussion paper on business combinations under common control (BCUCC) as an introduction to an important debate; however, they raised a number of concerns and suggested that more work was needed:

• There were mixed views on whether the DP achieved all of its objectives. Although there was agreement about the DP stimulating debate on BCUCC.
• A number of respondents noted that the scope of the DP was too narrow and additional issues should have been considered (especially other types of transactions under common control).
• Respondents also expressed the view that the project should include in its scope how to account for BCUCC in the separate financial statements.
• Many respondents stated that the project’s effective development would be greatly aided by considering real-life examples of BCUCC.
• Most respondents asked for a common definition of BCUCC transactions to be provided.
• Mixed views were expressed about the approach taken in the DP. Some supported the approach taken. Others expressed the view that the analysis should not have been limited to the current IFRS literature, but rather should have taken it as a starting point.
• The majority agreed that the information needs of users are an important consideration when determining an accounting method for BCUCC.
• Regarding the accounting methods used in practice, almost all respondents noted that either predecessor or acquisition accounting are prevalent.
• Generally respondents supported diversity of accounting treatment when facts and circumstances merit it. However, it was a common view that whatever method is chosen, it should be applied consistently.
• Some respondents held the view that the economic substance of BCUCC transactions should determine the accounting method and the recognition of certain items as part of equity.

EFRAG and the OIC agreed that further work in their overall project on BCUCC is needed and would encompass the review of real- life examples to see whether they provide a basis for categorizing BCUCC into different types of transactions, for which different accounting treatments should apply. If this is successful, indicators of difference in economic substance may be eventually drawn from this exercise. Also, EFRAG and OIC will work further on defining what a business combination under common control is.

Please click for the following information on the EFRAG website:

• Press release
• Feedback statement

As a result of the agenda consultation 2011 the IASB concluded that a new research phase would be included in the process for developing standards. The use of research and gathering evidence is not new to the IASB, but the IASB now intends to place its research on a more structured footing to make it easier for the IASB to gain access to the wealth of expertise and information that exists in the research community.

Peter Clark, the IASB's Research Director, has written a short article summarising how the IASB intends to approach research and what role academics can play in the IASB’s research. Academics can for example help the IASB by bringing financial reporting problems to the IASB's attention - for instance by contributing to the public agenda consultation, which is intended to take place every three years going forward. Also, the IASB has identified several research topics it intends to work on:

• Bearer biological assets
• Rate-regulated activities
• Equity method in separate financial statements
• Conceptual Framework
• Emissions trading schemes
• Business combinations under common control
• Discount rates
• Equity method of accounting
• Intangible assets, including extractive activities and research & development activities
• Financial instruments with the characteristics of equity
• Foreign currency translation
• Non-financial liabilities
• Income taxes
• Post-employment benefits
• Share-based payments
• Islamic (Shariah-compliant) transactions and instruments
• Disclosure

When academics are researching an area of interest to the IASB, such as those identified above, the IASB would welcome information about that research.

The IASB is well aware that rigorous empirical research requires a long lead time and that academics may be reluctant to research topics that do not provide adequate incentives, for example a reasonable prospect of being able to publish the output of the research in a form that will provide them sufficient credit. The IASB will consult academics to seek ways of overcoming these impediments.

Please click to download Peter Clark's thoughts and comments on the IASB's new research phase and the opportunities it offers for academics: The IASB’s research activities.