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FASB proposes scope clarification of offsetting disclosures

Nov 29, 2012

On November 22, 2012, the FASB issued proposed Accounting Standards Update, "Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities." The proposed ASU would clarify which instruments and transactions are subject to the disclosure requirements under ASU 2011-11, "Disclosures About Offsetting Assets and Liabilities," for financial assets and liabilities that are offset in the statement of financial position or subject to master netting arrangements or similar agreements.

The proposed ASU is intended to address preparer concerns that the scope of the disclosure requirements under ASU 2011-11 is overly broad and that the related compliance costs would exceed any benefits ultimately realized by financial statement users. Like the requirements under ASU 2011-11, the proposed requirements would be effective for fiscal years beginning on or after January 1, 2013, and interim periods therein. Retrospective application would be required for any period presented that begins before the entity’s initial application of the new requirements. Comments on the proposal are due by December 21, 2012.

Impact on convergence with IFRSs

Concurrently with the FASB’s issuance of ASU 2011-11, the IASB issued amendments to IFRS 7 with a comparable effective date and essentially the same disclosure requirements as those under ASU 2011-11. Accordingly, if the FASB’s proposal is finalized, fewer financial instruments would be subject to the offsetting disclosure requirements under U.S. GAAP than under IFRSs.

At their November 2012 meeting, the IASB staff updated the IASB on the FASB’s decisions regarding the scope of the offsetting disclosures and indicated that it did not recommend that the IASB consider changing the scope of the disclosures under IFRSs. The session was informational, and the IASB was not asked to make any decisions. It is uncertain whether the IASB will revisit this issue in the future.

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IFRS Foundation publishes IFRS Taxonomy update for investment entities

Nov 28, 2012

The IFRS Foundation has published IFRS Taxonomy 2012 interim release for investment entities.

On October 31, 2012, the IASB published Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27), which provides an exception to the consolidation requirements in IFRS 10 for investment entities. This IFRS Taxonomy interim release contains additional taxonomy items that reflect the amendments made by Investment Entities, but are not included in the core IFRS Taxonomy.

Click for more details (link to the IASB's Web site). Our dedicated XBRL page is here.

IASB publishes proposals for limited amendments to IFRS 9

Nov 28, 2012

The IASB has released exposure draft (ED) ED/2012/4, "Classification and Measurement: Limited Amendments to IFRS 9 (Proposed Amendments to IFRS 9 (2010))." The proposed changes would introduce a "fair value through other comprehensive income" (FV-OCI) measurement category for particular financial assets.

The proposed limited scope amendments to IFRS 9, Financial Instruments, are designed to:

  • Address specific application questions raised by interested parties.
  • Consider the interaction of the classification and measurement model for financial assets with the IASB’s Insurance Contracts project.
  • Reduce key differences with the FASB's tentative classification and measurement model for financial instruments.

The proposed new FV-OCI measurement category would include certain financial assets when two conditions are met:

  • The contractual cash flows of the assets are solely payments of principal and interest.
  • The assets are used in a business model, which is neither to exclusively hold nor sell.

In addition, a newly introduced paragraph clarifies that gains or losses on a financial asset in the new measurement category would be recognized in other comprehensive income (OCI), with the exception of impairment losses and foreign exchange gains and losses. Upon disposal, any gain or loss previously recognized in OCI would be recycled to profit or loss for the period.

The application guidance for the ED includes several examples of financial assets with contractual cash flows that are solely payments of principal and interest on the principal amount outstanding as of when the entity’s business model may be to manage assets both to collect contractual cash flows and to sell.

The amendments proposed are a step back toward current requirements in IAS 39, Financial Instruments: Recognition and Measurement, even though important differences remain.

Use of the new FV-OCI category would be mandatory.

The ED also proposes that only the completed version of IFRS 9 (including classification and measurement, impairment, and general hedge accounting chapters) can be newly applied before the mandatory effective date with the exception that entities would be permitted to choose to early apply only the "own credit" provisions in IFRS 9 once the completed version of IFRS 9 is issued. This means that the current choice regarding which version of the standard can be early applied would be dropped.

The comments on the exposure draft close on March 28, 2013.

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IIRC publishes "prototype" framework, reaffirms timeline for finalization

Nov 27, 2012

The International Integrated Reporting Council (IIRC) has released a finalized prototype of its integrated reporting framework (stylized as "<IR>") and reaffirmed the expected timing of the issue of a consultative document as it moves toward finalization of the framework by the end of 2013.

The prototype document has been drafted through the parallel efforts of a number of topic-specific collaboration groups, the IIRC’s Technical Task Force, and the IIRC Secretariat, and takes into consideration constituent feedback received on the IIRC's 2011 Discussion Paper.

The finalized prototype framework follows the announcement of the prototype at a September 2012 IIRC conference, which itself followed a draft framework document that was released in July 2012. Compared to the draft document, the prototype framework is substantially broader in its content, with significant fleshing out of the core principles, concepts, and guidance.

In conjunction with the release of the final prototype document, the IIRC has confirmed that it expects to publish a formal "consultation draft" of the framework in April 2013, to be followed by the final framework, dubbed “version 1.0,″ in December 2013.

Click for the IIRC press release (link to the IIRC's Web site).

SEC Chairman Mary Schapiro to step down

Nov 26, 2012

After nearly four years in office, SEC Chairman Mary Schapiro will step down on December 14, 2012. Her named successor, Elisse B. Walter, is currently one of the SEC commissioners.

Chairman Schapiro is one of the longest-serving SEC chairmen; she was appointed by President Barack Obama on January 20, 2009. In the wake of the financial crisis in January 2009, Chairman Schapiro strove to strengthen, reform, and revitalize the agency. She oversaw a more rigorous enforcement and examination program, and she shaped the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The SEC final staff report Work Plan for the Consideration of Incorporating IFRSs into the Financial Reporting System for U.S. Issuers in July 2012 did not contain any recommendations about the adoption of IFRSs in the United States, but its publication is viewed as a positive signal. As designated SEC Chairman Walter noted in a recent speech, although the time frame was uncertain, she believed the United States "will get there eventually" with IFRS adoption.

Click to view the SEC press release (link to the SEC's Web site).

IASB work plan updated

Nov 25, 2012

The IASB has publicly released a revised work plan following a number recently published pronouncements. The expected finalization of amendments resulting from the proposed equity method amendments to IAS 28 and the 2011–2013 annual improvements cycle has been announced, and the release of an exposure draft on financial instrument impairment has been deferred.

Details of the changes include:


Due process documents expected before the end of 2012

The following due process documents are expected to be issued by the end of 2012 (this includes those items already noted above):

Click for the IASB work plan as of November 23, 2012 (link to the IASB's Web site). We have updated our project pages to reflect the updated work plan and other known developments.

Further notes from November IASB meeting

Nov 23, 2012

The IASB's November meeting was held in London on November 19–21, 2012. Deloitte observer notes are posted from the additional IASB-only session on financial instrument impairment held on Wednesday.

Click for direct access to the notes:

Wednesday, November 21, 2012

  • Financial instruments — Impairment (IASB only)
    • Criteria for recognition of lifetime expected losses.
    • Methods and information to assess expected losses and transfer criteria.
    • Disclosures applicable to entities applying the simplified approach for trade and lease receivables.

The remaining notes on the joint IASB-FASB and IASB-only discussions on insurance contracts will be posted soon.

You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

IASB publishes proposals for limited amendments to equity accounting

Nov 22, 2012

The IASB has released exposure draft (ED) ED/2012/3, "Equity Method: Share of Other Net Asset Changes," which proposes limited scope amendments to IAS 28 to include guidance on how an investor accounts for its share of the changes in net assets of an associate or joint venture that are not recognized in profit or loss or other comprehensive income of the investee ("other net asset changes").

The issue of how an investor should account for other net asset changes arose from consequential amendments to IAS 28, Investments in Associates, made in 2007, which removed explicit guidance previously in that standard. The issue was initially considered by the IFRS Interpretations Committee, who recommended the IASB make a limited scope amendment to IAS 28, Investments in Associates and Joint Ventures (2011). IAS 28 (2011) carries over the core equity method requirements from the earlier version of IAS 28 and is effective from January 1, 2013, meaning the previous version could not be amended before it is superseded.

The proposals in ED/2012/3 would require an investor to recognize in its own equity its share of the changes in the net assets of the investee that are not recognized in profit or loss or other comprehensive income of the investee or that are not distributions received.

Examples of transactions of an associate or joint venture that may result in other net assets changes include:

  • Issues of additional share capital to parties other than the investor.
  • Buy-backs of equity instruments from shareholders other than the investor.
  • Writing of a put option over the investee's own equity instruments to other shareholders.
  • Purchase or sale of noncontrolling interests in the investee's subsidiaries.
  • Equity-settled share-based payments.

The calculation of the amount recognized in equity may also reflect the change (if any) in the investor's ownership interest caused by the transaction giving rise to the other net asset change, e.g., a reduction in ownership interest because of the issue of shares by an associate to other shareholders.

    The proposed approach would effectively reinstate the requirements of IAS 28 before the 2007 amendments and, as such, is a short-term solution to address diversity in practice until such time as the IASB gives broader consideration to the equity method of accounting.

    An effective date for the amendments will be announced after exposure.

    The ED contains an alternative view by board members who believe that the amendment is inconsistent with concepts of other IFRSs (IAS 1, IFRS 10) and would cause serious conceptual confusion. This board member is of the opinion that this short-term solution would not improve financial reporting but would instead undermine a basic concept of consolidated financial statements.

    The ED is open for a comment period of 120 days and closes on March 22, 2013.

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    Additional notes from the November 2012 IASB meeting

    Nov 21, 2012

    The IASB's November meeting was held in London on November 19–21, 2012; some of it was a joint meeting with the FASB. Deloitte observer notes are posted from Monday's education session on impairment and the joint session on revenue recognition, Tuesday's education session on conceptual framework and the joint education session on impairment, and Wednesday's education session on FSB Enhanced Disclosure Forum (update).

    Click for direct access to the notes:

    Monday, November 19, 2012

    Tuesday, November 20, 2012

    Wednesday, November 21, 2012

    You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

    Notes from the November 2012 IASB meeting

    Nov 20, 2012

    The IASB's November meeting was held in London on November 19–21, 2012; some of it was a joint meeting with the FASB. Deloitte observer notes are posted from Monday's education session on levies and Tuesday's sessions on offsetting and due process documents.

    Click for direct access to the notes:

    Monday, November 19, 2012

    Tuesday, November 20, 2012

    You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

    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.