Our views on the Annual Improvements ED

  • Deloitte Comment Letter Image

09 Nov 2008

Deloitte has submitted to the IASB a comment letter on the IASB's Exposure Draft of Proposed Improvements to IFRSs 2008.

We welcome and support the IASB's continuing improvements process as a way of dealing with certain amendments to IFRSs in an efficient and effective manner. And we are supportive of most of the proposals in the ED. Our letter takes issue with three of the proposals, as noted in the box below.

The three improvements with which we have some concerns are the following:

  • We do not agree with the proposal in IAS 7 Statement of Cash Flows for basing the classification of expenditures as cash flows from investing activities on recognition of an asset in the statement of financial position and believe this has significant impact for certain entities and industries. We believe that the question of classification of cash flows in the statement of cash flows would be better addressed in the IASB's project on financial statement presentation.
  • In addition, we believe the proposed guidance in IAS 18 Revenue on determining whether an entity is acting as a principal or as an agent does not establish a principle underlying the list of indicators provided and hence, will not resolve many of the issues that arise in practice.
  • Finally, we believe the proposed change of guidance in IAS 39 Financial Instruments: Recognition and Measurement for determining whether a non-financial contract contains a separable embedded foreign currency derivative could be improved. We acknowledge that determining whether such embedded derivatives require separation has proved problematic in practice and therefore the requirement does need improvement. However, we do not believe the current proposed wording will establish the necessary clarity. We have provided an alternative wording that uses the indicators provided in the proposed Basis for Conclusions which we believe would make the amendment clear and operational.

Click to view Deloitte's Comment Letter on the IASB's Exposure Draft of Proposed Improvements to IFRSs 2008 (PDF 175k).

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