The proposed interim release contains additional taxonomy concepts that reflect new IFRSs and improvements to IFRSs published by the IASB and technical updates and corrections. It includes (1) amendments reflecting the recent IAS 36 narrow-scope amendments; (2) a structural update of taxonomy modularisation changes; and (3) a new documentation linkbase.

This interim release is part of an accelerated timeline for the release of the IFRS Taxonomy 2014. The final version is expected to be published in early 2014. 

The Exposure Draft IFRS Taxonomy 2013 Interim Release Package is open for comment until 11 November 2013.

The press release is available on the IASB website.

Mr Hoogervorst opened his speech with general comments on the relationship between the European Union, the IASB and IFRS. He acknowledged that Europe's decision to adopt IFRS "gave IFRS the credibility and critical mass it needed to become the single set of global accounting standards". He also noted that IFRS have benefited European markets in that transparency has been increased and costs of capital  for listed companies have decreased since adoption. Mr Hoogervorst also commended the EU for its thorough endorsement procedure and recognised that the EU adopting IFRS without significant adaptations speaks highly of the quality of IFRS. He went on to discuss the adoption of IFRS in other countries, mentioning the jurisdiction profiles recently released by the IFRS Foundation.

Mr Hoogervorst then provided an update on the remaining IASB-FASB convergence projects:

• Revenue recognition: A new standard is expected within the next 3 months.
• Leases: The contentious issue is putting lease contracts on the balance sheet.
• Impairment: The FASB and IASB agree that an expected loss model is needed but have trouble agreeing on the mechanics. Mr Hoogervorst explains "One reason why we find it difficult to come to a common answer is that an expected loss model inherently has a relatively high degree of subjectivity, because it deals with uncertain outcomes in the future. There is no straightforward answer on how this can be done." He also confident that progress will be made at the September joint board meeting.
• Insurance contracts: The IASB's recent exposure draft is a step toward the ultimate goal of creating a more realistic view of the true performance of the insurance industry. Mr Hoogervorst cited the EIOPA's recent concern that some insurance companies will not be able to meet their capital requirements because of persistent low interest rates on the industry. There is concern that the ambiguity in current insurance reporting may keep this potential crisis from being fully exposed. 

After a brief excursion on the Conceptual Framework Discussion Paper, Mr Hoogervorst went on to discuss the importance of improving financial reporting disclosures — developing more concise, understandable and helpful documentation. He also mentioned the 10-point plan he presented in June 2013 to improve disclosures in financial reporting.

Please click for access to the full text of the speech on the IASB website.

In the lead up to the summit, the Financial Stability Board (FSB) had published a report which summarises the outcomes over the past five years of the fundamental reforms of the global financial system, which were launched by the G20 in 2008 in response to the global financial crisis.

The outcomes noted in the report are included in the preamble to the Declaration:

In the five years since we first met, coordinated action by the G20 has been critical to tackling the financial crisis and putting the world economy on a path to recovery. But our work is not yet complete and we agreed that it remains critical for G20 countries to focus all our joint efforts on engineering a durable exit from the longest and most protracted crisis in modern history.

In terms of accounting standards, the Declaration repeats the call for convergence in much the same terms as previously, but includes an explicit call for the convergence projects to be completed by the end of 2013.  Also included for the first time is specific reference to the need to improve risk disclosures by banks as recommended by the Enhanced Disclosure Task Force (EDTF) in October 2012, which were subject to a progress report from the task force in August 2013:

We underline the importance of continuing work on accounting standards convergence in order to enhance resilience of financial system. We urge the International Accounting Standards Board and the US Financial Accounting Standards Board to complete by the end of 2013 their work on key outstanding projects for achieving a single set of high-quality accounting standards. We encourage further efforts by the public and private sector to enhance financial institutions’ disclosures of the risks they face, including the ongoing work of the Enhanced Disclosure Task Force.

The Declaration touches on other important themes, such as:

• the high level of public debt and its sustainability in some countries, echoing earlier statements by the G20 Finance Ministers and Central Bank Governors which included discussion of the need for reform of public sector reporting, consistent with the broader G20 vision of open and transparent governments
• the focus of 'development for all', which links to the post-2015 development goals of the United Nations, the Rio+20 'The Future We Want' outcome document and other global initiatives around economic, social and environmental goals, which includes increasing moves towards greater sustainability reporting
• support for initiatives aimed at increasing extractive transparency, including voluntary participation in the Extractive Industries Transparency Initiative (EITI)
• approval of the OECD/G20 Action Plan on Base Erosion and Profit Shifting which seeks to improve the fairness and integrity of global tax systems, including the introduction of new transfer pricing documentation which would require entities to disclose income, economic activity and taxes paid using a common template.

The final Leaders Declaration is is available on the G20 website. In addition, there are various annexures available, such as the EDTF report and and the G20/OECD high-level principles of long-term investment financing by institutional investors.

An agenda for the meeting was not announced.  Interested listeners have the ability to dial into the Conference call.  For details, see the EFRAG website.

The article covers three key features from the exposure draft that may have the most impact to both preparers and investors. The three key features are:

1. how to report discount rate changes;
2. how to present insurance contract revenue and expenses; and
3. how to report changes in estimates of contract cash flows.

Click to view:

• Investor Perspectives The long and winding road: the IASB's project on insurance contracts (link to IASB website).
• IAS Plus article on the revised exposure draft on insurance contracts.
• IAS Plus project page on the IASB's project on insurance contracts.
• Archive of the Investor Perspectives series on the IASB's website.

The IASB issued (1) Recoverable Amount Disclosures for Non-Financial Assets (Proposed amendments to IAS 36) on 29 May 2013 to narrow the application of the requirement to disclose the recoverable amount of an asset, and clarify the disclosures when an asset has been impaired, and (2) Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39 'Financial Instruments: Recognition and Measurement') on 27 June 2013 to provide relief for novation of derivatives.

Please click for the EFRAG Endorsement Status Report as of 6 September 2013.

Some of the main relevant topics in connection with financial reporting made include:

• valuation of complex financial instruments, notably in illiquid markets,
• timely and sufficient recognition of impairment losses of financial assets measured at amortised cost,
• valuation of goodwill and deferred tax assets in light of profitability prospects, and
• overall transparency of financial information provided to the market.

As regards the valuation of complex financial instruments, some hope is put on IFRS 13 Fair Value Measurement, however, the report stresses that "[r]igorous application of the new requirements is necessary in order to accurately represent the fair value of complex financial products in financial reports".

The ESAs also believe that the new expected losses model regarding the impairment of financial assets will contribute to restoring confidence in financial reports as the "too little too late" problem regarding the recognition of impairment losses will be alleviated.

Lastly, the ESAs are convinced that increased transparency leading to more confidence will be achieved within a comparatively short time frame: "New accounting standards, currently under discussion, regarding classification and measurement of financial assets, impairment and hedge accounting should help to increase the level of transparency of financial reports by decreasing the number of classification categories and impairment models and aligning risk management practices more closely with financial reporting."

The full report is available on the ESMA website. Chapter 5 of the report is dedicated to Risks to confidence in balance sheet valuations and risk disclosures. The EBA has published a press release on the publication of the report on its website.

In December 2012, the European Commission (EC) published a Proposal for a Regulation of the European Parliament and of the Council on establishing a Union programme to support specific activities in the field of financial reporting and auditing for the period of 2014-2020. In March 2013, this was followed by a draft report to the Committee on Economic and Monetary Affairs (ECON), which again was followed by suggested amendments to the draft report submitted by various members of ECON. In a letter to the ECON rapporteur, FEE has not only reacted to the report and individual suggested amendments but to the debate as a whole.

FEE’s letter is structured around six strong statements:

• The strategic dimension of global financial reporting standards should be taken into account – FEE stresses that global standards are critical to enhance transparency and reduce cost to all market participants and that from an EU standpoint, globally accepted standards contribute significantly to attracting foreign investment at a time it is most needed. Having specific EU financial reporting standards or different EU interpretations of IFRS would be detrimental to Europe.
• The debate should be objective and duly informed – FEE bemoans that “it is highly regrettable that the debate on global financial reporting standards and the body that Europe has entrusted to set these standards (the IASB) is often compromised by matters that are only loosely related to the issue or are based on ill-informed and unsubstantiated arguments, promoted by a small but vocal minority”. FEE claims that while founded criticism is healthy, criticism based on misunderstandings or misinterpretation will undermine Europe’s credibility on the world stage.
• It is counterproductive to undermine the IASB – According to FEE anybody criticizing the IASB as a whole should also reflect on the available alternatives. Currently, the IASB is the only body that has the global credibility and expertise to set high quality standards. Tinkering with its independence, which is essential to investors’ confidence, would result in a loss of credibility.
• Europe should not move backwards – FEE reminds EP members that a European standard setter producing European standards would not only be costly but it would isolate Europe on the world stage, which would not contribute to Europe’s economic recovery. In addition, FEE points out that the EU has a poor record in harmonising accounting rules as shown by the recent debate on the accounting directives.
• IFRS have improved financial reporting and enhance transparency – FEE reiterates that there is no credible objective evidence that IFRS have contributed to the financial crisis. On the contrary, the use of fair value and comprehensive disclosures has helped to identify the problems that were building up in the financial system.
• The Parliament should provide legal certainty – FEE stresses that bodies committed to working in the public interest need clarity and visibility on their financing over a sufficient period of time. Also, their independence is an essential foundation of their value. Therefore, FEE claims, it would be highly inappropriate to make their funding conditional on them taking specific actions on the technical front, as this would severely compromise their independence.

FEE requests that EP members take these principles into consideration when discussing the issue further and concludes: “Financial reporting should not be used as a scapegoat for other problems.”

Please click for the following additional information:

• Proposal for a Regulation of the European Parliament and of the Council on establishing a Union programme to support specific activities in the field of financial reporting and auditing for the period of 2014-2020 (December 2012, link to EC website)
• Draft report to the Committee on Economic and Monetary Affairs (March 2013, link to EP website)
• Amendments suggested by ECON members (June 2013, link to EP website)
• FEE letter commenting on the above (September 2013, link to FEE website)

The points made in the comment letter include:

• We agree with the proposal to limit the scope of the interim Standard to first-time adopters of IFRSs as including entities currently using IFRSs could create unnecessary diversity in practice amongst those entities
• We agree that adoption of the interim Standard should be optional
• In terms of the scope of the proposed interim Standard, we agree the scope criterion that price must be restricted by an authorised body, but believe the second scope criterion could better be incorporated through a requirement to recognise an asset only when recovery is probable
• We recommend that the IASB clarify the interaction of any interim Standard with the following:
  • IFRS 3 Business Combinations, in respect of situations such as an entity that does not recognise regulatory deferral account balances acquires an entity that is subject to rate regulation and recognises regulatory deferral accounts
  • paragraph D17 of IFRS 1 First-time Adoption of International Financial Reporting Standards: specifically, whether a parent should continue to recognise regulatory deferral account balances if its regulated subsidiary has adopted IFRSs at an earlier date and has not recognised such balances
• We agree that regulatory deferral account balances, and the effect of movements thereof on profit or loss, should be presented separately, and agree with the requirement to present earnings per share figures before and after movements in regulatory account balances.

Click for the full comment letter.