IASB activities update
IASB Chairman’s comments
Financial Instruments — IFRS 9: All technical decisions have been taken, and the staff is now working on drafting the chapters of IFRS 9 on Impairment. The General Hedging guidance has been issued and amendments to Classification and Measurement have completed the redeliberation process.
Mr Hoogervorst noted that the IASB and FASB have reached different conclusions on Impairment, but he suggested that under either Standard, losses would be recognised earlier. The amendments to Classification and Measurement and offsetting are not too different between IAS 39 and IFRS 9, but IFRS 9 has clearer principles.
Effective date has been set as financial years beginning on or after 1 January 2018.
Leases — Eagerly awaiting a joint meeting with the FASB to discuss leases. This is likely to be a political as much as a technical debate. There is a strong desire for significant long-term leases to be on balance sheet; the role of the ‘dual model’ will be assessed (possible solutions are simplification or going to a single (financial lease) model); and whether to make any changes to lessor accounting. Hans reiterated his concern about undisclosed leverage in lessees’ balance sheets and his belief that the right of use approach will lead to better accounting, better management decisions, and stronger balance sheets.
Insurance — This project makes all other look simple. There is no consensus in Europe on how insurance companies should present their financial statements: there are at least four models in operation. There are many business models for insurance companies. The key concern in the IFRS zone is that insurers do not want the effects of guarantees and options to flow through the income statement. Within the last week, the FASB decided to make more modest adjustments to existing US GAAP and will no longer seek convergence with the IASB.
Council Members raised certain issues, in particular in relation to Insurance. It was noted that many insurers are endeavouring to improve their transparency and disclosure: their principal concern is around issues of measurement.
There was also a short discussion of the post-implementation review of IFRS 8 Operating Segments.
On the topic of Impairment, there were several interventions trying to clarify some of the implications of having two major standards in use. Mr Hoogervorst noted that the Financial Stability Board was aware of the challenges facing the two Boards – indeed, many of the FSB members had direct influence on the Boards’ respective decisions.
Charles Macek noted that the B20 Australia is attempting to influence the G20 to limit its ambition and to focus on removing boundaries to cross-border activity as a foundation to global growth. Financial reporting can help to remove barriers; divergence in financial reporting standards makes this harder.
Mr Prada offered his view that it was important to maintain the momentum on financial reporting, but as part of the solution to breaking down the barriers to global growth, while not pinning success to specific deliverables. It was important to maintain a sense of direction, lest financial reporting slip from the political consciousness.
Technical Directors’ report
Henry Rees noted that a discussion on portfolio (macro-) hedging is in the final stages of preparation and will be issued later in Q2. The joint Revenue standard is in the final stages of editing and production and is expected to be issued early in Q2 2014.
Alan Teixeira noted the Conceptual Framework project: the staff is still analysing the comment letters received and expects to present a high-level summary to the IASB in March 2014. The Council will discuss this at their June 2014 meeting.
On disclosure, Dr Teixeira noted current progress, in particular a forthcoming exposure draft of amendments to IAS 1, intended to ‘unshackle’ preparers. The ED will address how materiality is intended to be implemented in IFRSs. On Materiality, there is a working group—including representatives of IOSCO, the IAASB and others—looking at materiality more broadly. He mentioned that the IASB staff was aware of court decisions in the US, the UK, New Zealand, the Netherlands and other jurisdictions that provided conflicting views on this issue.
Dr Teixiera also noted that the project on bearer plants (amendments to IAS 41) would be kept narrow and not expanded to ‘bearer’ animals, but that a post-implementation review of IAS 41 would be added to the list for the next IASB Agenda Review.
Dr Teixeira also mentioned progress being made in the area of effects analysis.
Finally, the IFRSF’s Tokyo Office will be undertaking a survey of how XBRL is used in electronic filings. This study has a similar purpose as the IFRS Implementation survey: to gather high quality data on those jurisdictions that require electronic filings, whether those requirements include mandatory use of the IFRS XBRL Taxonomy or some other electronic format, etc.
Council Members sought clarification on several issues.
- Insurance contracts — Comprehensive project
- Conceptual Framework — Comprehensive IASB project
- Financial instruments — Comprehensive project
- Financial instruments — General hedge accounting
- Financial instruments — Impairment
- Financial instruments — Limited reconsideration of IFRS 9
- Financial instruments — Macro hedge accounting
- Disclosure initiative — IAS 1 amendments