IASB Update October 2006

IASB Update for October 2006 reported the Board's discussion of the intangible assets research project and noted that 'The project will not encompass the requirements for the initial accounting for intangible assets acquired separately or in a business combination, or the initial and subsequent accounting for goodwill' (page 5).

The Board clarified that the intangible assets project should address intangible assets purchased separately; all others mentioned would be addressed in the business combinations project.

IFRS for SMEs: Reporting-level within the SME GAAP hierarchy of the 'mandatory fall-back' to IFRS

In response to an issue that had arisen as a result of the Board's consideration of a pre-ballot draft of the Exposure Draft of an IFRS for SMEs, the Board agreed that the GAAP hierarchy for an SME (in paragraph 10.3 of the draft ED) should not include a 'mandatory fallback' to full IFRSs. The hierarchy should be:

• (a) the requirements and guidance in this IFRS dealing with similar and related issues; and
• (b) the definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses and the pervasive principles in Section 2 Concepts and Pervasive Principles; and

The Board's reasons included the following:

• SMEs are likely, in most cases, to conclude that they can find answers using (a) and (b), so a 'mandatory fallback' will not normally be invoked;
• requiring SMEs to look to full IFRSs imposes two sets of standards with some recognition and measurement differences on a single entity; and
• leaving the mandatory fallback in 10.3 creates a potential conflict between auditors - who are likely to be aware of the provisions of full IFRSs - and SME managers - who are responsible for preparing the financial statements and may have done so based solely on the IFRS for SMEs.

In making the judgement described in paragraph 10.2, management may also consider the requirements and guidance in full IFRSs and Interpretations of full IFRSs dealing with similar and related issues. If additional guidance is needed to make the judgment described in paragraph 10.2, management may also consider the most recent pronouncements of other standard-setting bodies that use a similar conceptual framework to develop accounting standards, other accounting literature and accepted industry practices, to the extent that these do not conflict with the sources in paragraph 10.3. The Board concurred that paragraph 10.4 as revised reflects the decision reached in October 2006.