News

Deloitte Comment Letter Image

Deloitte comment letter on impairment disclosures ED

19 Mar, 2013

Deloitte's IFRS Global Office has submitted a letter of comment responding to the IASB Exposure Draft 2013/1 'Recoverable Amount Disclosures for Non-Financial Assets'.

We support the amendments to IAS 36 proposed in the exposure draft. However, we offer some recommendations for drafting changes to add clarity.

Click to access the comment letter.

European Union Image

Philippe Maystadt appointed as Special Advisor to enhance EU’s role in promoting accounting standards

19 Mar, 2013

European Commissioner for Internal Market and Services Michel Barnier has appointed Philippe Maystadt as Special Advisor. The primary role as Special Adviser will be to enhance the EU’s part in promoting high-quality accounting standards.

Philippe Maystadt, a former President of the European Investment Bank, will be responsible "to reinforce the EU's contribution to [IFRSs], and to improve the governance of the institutions developing these standards".

In particular, he will "focus on a review of the governance of EU bodies in the field of financial reporting and accounting (the European Financial Reporting Advisory Group (EFRAG) and the Accounting Regulatory Committee)." Further, his role as Special Advisor will include (1) advising the commission when it endorses new IFRSs and (2) recommending improvements to the current system, in particular, bringing together different viewpoints from the EU to develop a “single EU voice”.

Mr Maystadt’s report on his review will be presented to Commissioner Barnier and Finance Ministers during the November 2013 ECOFIN Council meeting.

More information is available on the EU website.

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ASAF membership announced

19 Mar, 2013

The IFRS Foundation has announced the membership of the newly founded Accounting Standards Advisory Forum (ASAF) that is designed to formalise and streamline the relationships between the IFRS Foundation and IASB with the global standard-setting community, in order to bring important regional perspectives to the IASB’s technical work and to offer feedback on the most important issues of the day.

The ASAF is comprised of 12 members and a non-voting chair. The following members have been appointed today (the two 'world at large' seats were given to the Asia/Oceania region and Europe):

 

Geographical region ASAF member
Africa South African Financial Reporting Standards Council, supported by the Pan African Federation of Accountants (PAFA)
Americas Group of Latin American Standard Setters (GLASS), represented by the Brazilian Committee of Accounting Pronouncements
Canadian Accounting Standards Board
United States Financial Accounting Standards Board (FASB)
Asia/Oceania Accounting Standards Board of Japan (ASBJ)
Australian Accounting Standards Board (AASB)
Chinese Accounting Standards Committee (CASC)
Asia Oceania Standard Setters Group (AOSSG), represented by the Hong Kong Institute of Certified Public Accountants (HKICPA)
Europe Accounting Standards Committee of Germany (ASCG)
European Financial Reporting Advisory Group (EFRAG)
Spanish Accounting and Auditing Institute
United Kingdom Financial Reporting Council (FRC)

The first meeting of the ASAF will be held on 8 and 9 April 2013 in London.

The IASB points out that the ASAF will replace multiple Memoranda of Understanding (MoU) it has previously entered into with national accounting standard-setters in Brazil, China, Japan and the United States. These will be replaced by the single agreement to be signed by all ASAF members, and accommodating regional standard-setting bodies (AOSSG, EFRAG, GLASS and PAFA) within that arrangement. Nevertheless, the IFRS Foundation will continue to facilitate through various mechanisms a dialogue with the broader international accounting standard-setting community.

Please click for IFRS Foundation press release (link to IASB website) and more information about the ASAF on IAS Plus.

 

    IIRC (International Integrated Reporting Committee) (green) Image

    IIRC publishes background papers in lead up to consultation draft of integrated reporting framework

    18 Mar, 2013

    The International Integrated Reporting Council (IIRC) has published on its website 'background papers' on two aspects of integrated reporting (stylised as '<IR>'): the concepts of 'capitals' and 'materiality'. The papers are a precursor to the publication of a consultation draft of the IIRC's Integrated Reporting Framework, which is expected in mid-April 2013.

    The IIRC's intention to publish the papers was signalled earlier in the year, and have the objective of providing additional background information for stakeholders to assist them in responding to the forthcoming consultation draft.  The papers have been prepared by the IIRC's Technical Collaboration Groups (TCGs) and do not necessarily reflect the views of the IIRC or the member organisations from which the participants of the TCGs were sourced.

    Both background papers also are not designed as authoritative documents, but as guides and information.  Accordingly, they outline a number of matters where debate is continuing, and also outline issues and areas for further development.

    Capitals

    The preparation of the background paper on capitals was lead by the Association of Chartered Certified Accountants (ACCA) and the Netherlands Institute of Chartered Accountants (NBA).

    The paper explores the concept of multiple capitals being incorporated into the consultation draft of the <IR> framework by the IIRC.  Largely consistent with the IIRC's September 2011 discussion paper, the background paper discusses various 'capitals' that "represent stores of value that are the basis of an organization’s value creation", namely: financial capital, manufactured capital, intellectual capital, human capital, social and relationship capital, and natural capital.  Some of these were described using different terminology in the discussion paper.

    The paper identifies a number of extracts from academic and professional literature that define and discuss each of the capitals considered by the IIRC, and also summarises responses to the discussion paper.  It also outlines examples of the interrelationships between the capitals, e.g. an investment in better training for employees will decrease financial capital but increase human capital.

    Some of the observations made in the background paper include:

    • The TCG considered whether the term "resources and relationships" should be used instead of "capitals" but supported the continued use of "capitals"
    • The concepts of multiple capitals is new and will evolve progressively over time, including through the IIRC's pilot programme
    • It is not the objective of <IR> to require the measurement of all capitals, and in some cases "uses of and effects on the capitals are best (and in some cases can only be) reported on in the form of narrative rather than through metrics"
    • Capitals an organisation uses or affects may be owned by the organisation (e.g. intellectual property), owned by others, or may not be owned at all in a legal sense (e.g. access to unpolluted air)
    • There is debate about the relationship between intellectual capital, human capital, and social and relationship capital.  The TCG concluded that bringing together three capitals into one would not help understanding of the capitals model, but did recommend some modification to the description of 'intellectual capital'
    • A comparison and analysis of the differences between the <IR> framework and other notions of capital is also provided, including of the IASB's Conceptual Framework and practices in sustainability reporting under the Global Reporting Initiative (GRI) guidelines.

    The background paper contains a useful summary of the matters discussed, including recommended categorisation and changes to the descriptions of the capitals.

      Materiality

      The preparation of the background paper on Materiality was lead by the American Institute of Certified Public Accountants (AICPA).

      The background paper explores the concepts of materiality for purposes of developing an integrated reporting framework, covering the following:

      • Defining materiality for < IR > and distinguishing it from materiality as it relates to financial reporting and sustainability reporting
      • Discussing the importance of materiality
      • Discussing the application of the materiality determination process in <IR>
      • Discussing disclosure considerations in an integrated report
      • Discussing potential constraints in the current environment.

      The paper contains the following definition:

      For the purposes of < IR >, a matter is material if it is of such relevance and importance that it could substantively influence the assessments of providers of financial capital with regard to the organization’s ability to create value over the short, medium and long term. In determining whether or not a matter is material, senior management and those charged with governance should consider whether the matter substantively affects, or has the potential to substantively affect, the organization’s strategy, its business model, or one or more of the capitals it uses or affects.

      The definition has been derived in the context of integrated reports being "principally aimed at providers of financial capital in order to support their financial capital allocation assessment", particularly those who take a longer term view of an organisation's performance.

      The paper outlines three steps in the process of determining whether a matter is material: (1) identify relevant matters for inclusion in the integrated report (2) assess the importance of the matter and (3) prioritise material matters.

      A further paper on the 'business model' concept is also expected in due course.

      Click for access to the background papers (link to the IIRC website).

      European Union Image

      EMIR technical standards enter into force

      17 Mar, 2013

      The European Market Infrastructure Regulation (EMIR) was passed in 2012, but most provisions only apply after technical standards enter into force. Technical standards on OTC derivatives, reporting to trade repositories and requirements for trade repositories and central counterparties entered into force on 15 March 2013. EMIR gave rise to the IASB's project on the novation of derivatives as EMIR brings about hedge accounting questions.

      EMIR implements a central clearing for certain classes of OTC derivatives and requires the novation of the derivatives in question to these central counterparties (CCP). The IASB's project on the novation of derivatives is dedicated to the question whether the novation of OTC derivatives in these circumstances would result in the discontinuing of hedge accounting.

      On 28 February 2013, the IASB issued ED/2013/2 Novation of Derivatives and Continuation of Hedge Accounting. The exposure draft proposes changes to IAS 39 and the forthcoming hedge accounting chapter of IFRS 9 to permit the continuation of hedge accounting where hedging instruments are novated to a central counterparty as a result of laws or regulations around OTC derivatives. ED/2013/2 proposes that the novation of a hedging instrument should not be considered an expiration or termination giving rise to the prospective discontinuation of hedge accounting if all of the following (summarised) criteria are met:

      • the novation is required by laws or regulations
      • the novation results in a central counterparty becoming the new counterparty to each of the parties to the novated derivative
      • the changes in terms of the novated derivative are limited to those necessary to effect the terms of the novated derivative.

      The ED currently only applies to novations that occurred as a result of laws and regulations. It does not apply to instruments novated voluntarily as a pre-emptive measure in expectation of corresponding laws and regulations.

      Please click for:

      EFRAG (European Financial Reporting Advisory Group) (dk green) Image

      EFRAG makes its 'Insider' publication publicly available

      15 Mar, 2013

      Since 2010 the European Financial Reporting Advisory Group (EFRAG) has been sending out its 'EFRAG Insider' to a restricted list of recipients informing them about current developments in all EFRAG activities. EFRAG has now decided to make this newsletter publicly available going forward.

      EFRAG Insider is written in easy and accessible language and offers a high level overview of financial reporting projects and standards while highlighting the most topical subjects. The newsletter also offers information on activities of the EFRAG Chairman and the TEG members as well as on international exchanges with other organisations involved in developing consistent IFRS.

      The first publicly available issue of EFRAG Insider is available through the press release on the EFRAG website.

      IFRS IC (IFRS Interpretations Committee) (blue) Image

      March IFRS Interpretations Committee meeting notes - Part 2 (Concluded)

      14 Mar, 2013

      We've posted additional Deloitte observer notes from the remaining sessions of the IFRS Interpretations Committee meeting which was held on 12-13 March 2013.

      FRC Image
      UKGAAP Image

      UK replaces local GAAP with new standard based on IFRS for SMEs

      14 Mar, 2013

      The UK’s Financial Reporting Council (FRC) has published FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', which will replace current UK GAAP with effect for periods beginning on or after 1 January 2015.

      FRS 102 is derived from the IASB’s IFRS for SMEs, reflecting a simplified version of full IFRSs, but incorporates changes made by the FRC, one of which widens the scope of the standard significantly compared to the IFRS for SMEs. This has the effect that any entity not required to apply full IFRSs will be able to apply FRS 102.

      Following on from FRS 100 Application of Financial Reporting Requirements and FRS 101 Reduced Disclosure Framework, which were published in November 2012, FRS 102 completes the main package to replace UK GAAP as it currently exists. In due course a separate standard will follow for insurers and amendments to the financial instruments section are also expected.

      Although all UK reporters could elect to follow full IFRSs when current UK GAAP disappears, the relative brevity of FRS 102, at less than 250 pages in length, will appeal to many. Regardless of their choice, the introduction of more detailed requirements around accounting for financial instruments may pose challenges for some reporters.

      Key changes that FRS 102 will introduce to UK accounting include the following:

      • derivatives can no longer be held off balance sheet and will be measured at fair value through profit or loss. Those reporters who have adopted FRS 26 will already be familiar with such requirements;
      • goodwill and intangibles can no longer have indefinite lives and must be amortised. In the absence of a reliable estimate the life is presumed to be a maximum of five years – a significantly shorter period than the existing presumption of 20 years or less; and
      • the multi-employer exemption permitting defined benefit plans to be accounted for as defined contribution plans will no longer be available to entities under common control.

      The mandatory effective date of FRS 102 is for accounting periods beginning on or after 1 January 2015, although early adoption is permitted for periods ending on or after 31 December 2012.

      Please click for

      IFRS IC (IFRS Interpretations Committee) (blue) Image

      March IFRS Interpretations Committee meeting notes - Part 1

      14 Mar, 2013

      We've posted Deloitte observer notes from some of the sessions from the IFRS Interpretations Committee meeting which was held on 12-13 March 2013.

      IASB (International Accounting Standards Board) (blue) Image

      Summary of redeliberations in the revenue recognition project

      13 Mar, 2013

      An updated staff summary of redeliberations in the revenue recognition project has been made available on the IASB's website, outlining the decisions made by the IASB and FASB in redeliberations since the issue of ED/2011/6 'Revenue from Contracts with Customers' in 2011. As all substantive redeliberations are now complete, the staff will now commence drafting the final revenue standard, which is currently expected to be finalised before the end of June.

      The document prepared by the staff contains a paragraph-by-paragraph summary of the impacts of the redeliberations on the proposals in ED/2011/6 issued in November 2011.  The paper provides links to the agenda papers related to each topic noted, and also notes any differences between the IASB and FASB in conclusions reached.

      ED/2011/6 is the second exposure draft issued in the revenue recognition project, following ED/2010/6 Revenue from Contracts with Customers which was issued in June 2010.  The current expectation is that a finalised revenue recognition standard will be completed in the second quarter of 2013 and be applied for reporting periods beginning on or after 1 January 2017. The IASB and FASB have decided that early application would not be permitted.

      Click for access to the staff redeliberation summary (link to IASB website).

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