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IASB re-exposes liability measurement proposals

05 Jan 2010

The IASB has published for comment a revised exposure draft (ED/2010/1) of one section of a replacement for IAS 37 'Provisions, Contingent Liabilities and Contingent Assets'.

That section deals with measurement of liabilities that are within the scope of IAS 37. IAS 37 applies to liabilities not covered by other accounting standards, including liabilities to decommission assets, environmental liabilities, obligations under onerous contracts, and liabilities arising from legal disputes. In June 2005, the IASB had published Proposals to amend IAS 37, including revised measurement requirements. In the light of the comments received, the IASB has decided to issue revised proposals that include more guidance on measurement. Comment deadline is 12 April 2010. The IASB intends to replace IAS 37 in the third quarter of 2010. Click for IASB Press Release (PDF 100k).

Main provisions of the revised liability measurement ED:

  • IAS 37 currently requires an entity to record an obligation as a liability only if it is probable (likelihood greater than 50%) that the obligation will result in an outflow of cash or other resources from the entity. The revised ED does not include the 'probability of outflows' criterion. Instead, an entity would account for uncertainty about the amount and timing of outflows by using a measurement that reflects their expected value, namely the probability-weighted average of the outflows for the range of possible outcomes.
  • Liabilities within the scope of IAS 37 would be measured at the amount that the entity would rationally pay at the measurement date to be relieved of the liability. Normally, this amount would be an estimate of the present value of the resources required to fulfil the liability, which would take into account the expected outflows of resources, the time value of money, and the risk that the actual outflows might ultimately differ from the expected outflows.
  • If the liability is to pay cash to a counterparty (for example to settle a legal dispute), the outflows would be the expected cash payments plus any associated costs, such as legal fees.
  • If the liability is to undertake a service (for example, to decommission plant) at a future date, the outflows would be the amounts that the entity estimates it would pay a contractor at the future date to undertake the service on its behalf.



FCAG progress report to G-20

05 Jan 2010

The Financial Crisis Advisory Group (FCAG), an independent advisory body to the IASB and FASB, has sent a Letter to G-20 Participants updating them on the progress of the IASB and the FASB toward a single set of global financial reporting standards.

An excerpt:

Although conditions may have improved somewhat in various markets around the globe, the FCAG believes it remains critically important to achieve a single set of high quality, globally converged financial reporting standards that provide consistent, unbiased, transparent and relevant information across geographical boundaries. We are encouraged by the Boards' progress to date in developing such standards....

The next several months are likely to see a number of key developments, including:

  • the US Securities and Exchange Commission's response to the comments it has received regarding its proposed roadmap for the potential use of International Financial Reporting Standards (IFRS) by domestic US reporting companies;
  • the European Union's endorsement decision regarding the completed first part of the IASB's financial instruments project, IFRS 9 Financial Instruments: Classification and Measurement;
  • the constituent feedback on the IASB's proposed standard from the second part of its financial instruments project, Financial Instruments: Amortized Cost and Impairment, and the issuance of its proposal on hedge accounting, the third and final part of its financial instruments project; and
  • the issuance by the FASB of its comprehensive financial instruments proposals on classification and measurement, impairment, and hedge accounting.

In light of all of this, the FCAG expects to meet again in the fourth quarter of 2010 to review the Boards' further progress and any relevant external developments.

Click for: Letter to G-20 Participants (PDF 26k)


Concerns about implementation of IFRS 8

05 Jan 2010

The United Kingdom Financial Reporting Review Panel (FRRP) has issued a Statement FRRP Highlights the Challenge of Implementing New Segmental Reporting Requirements expressing concern about how companies are reporting the performance of key parts of their business in the light of the introduction of IFRS 8 Operating Segments.

IFRS 8 requires companies to provide an analysis of profit, assets, and liabilities so that investors can see the performance of the principal operations or 'segments'. The FRRP reviewed a sample of 2009 interim accounts and 2008 annual accounts and has asked a number of questions about the implementation of IFRS 8, in particular, where:
  • only one operating segment is reported, but the group appears to be diverse with different businesses or with significant operations in different countries;
  • the operating analysis set out in the narrative report differs from the operating segments in the financial statements;
  • the titles and responsibilities of the directors or executive management team imply an organisational structure which is not reflected in the operating segments; or
  • the commentary in the narrative report focuses on non-IFRS measures whereas the segmental disclosures are based on IFRS amounts.
In its statement, the Panel encourages Boards of Directors to test their initial conclusions about their segmental reporting by considering the following questions:
  1. What are the key operating decisions made in running the business?
  2. Who makes these key operating decisions?
  3. Who are the segment managers (as defined in the standard) and who do they report to?
  4. How are the group's activities reported in the information used by management to review performance and make resource allocation decisions between segments?
  5. Is any proposed aggregation of operating segments into one reportable segment supported by the aggregation criteria in the standard, including consistency with the core principle?
  6. Is the information about reportable segments based on IFRS measures or on an alternative basis?
  7. Have the reported segment amounts been reconciled to the IFRS aggregate amounts?
  8. Do the accounts describe the factors used to identify the reportable segments including the basis on which the company is organised?
Click for Statement FRRP Highlights the Challenge of Implementing New Segmental Reporting Requirements (PDF 36k).


Agenda for 7-8 January 2010 IFRIC meeting

05 Jan 2010

The International Financial Reporting Interpretations Committee (IFRIC) will meet at the IASB's offices in London on Thursday and Friday 7 and 8 January 2010 (morning only on 8 January).

The meeting is open to the public and will be webcast. The tentative agenda is shown below.

Agenda for the IFRIC MeetingThursday and Friday, 7 and 8 January 2010

Thursday 7 January 2010 (10:00-18:15h)

  • Introduction
  • IAS 16 Property, Plant and Equipment – Accounting for production phase stripping costs in the mining industry
  • IFRS 2 Share-based Payment – Vesting and non-vesting conditions
  • Review of Tentative Agenda Decisions published in November 2009 IFRIC Update
    • IAS 38 Intangible Assets – Amortisation method
    • IFRS 2 Share-based Payment – Contingent manner of settlement
    • IAS 27 Consolidated and Separate Financial Statements – Presentation of comparatives when applying the 'pooling of interests' method
    • IAS 27 Consolidated and Separate Financial Statements – Combined Financial Statements and Redefined Reporting Entities
    • IAS 18 Revenue – Receipt of a dividend of treasury shares
    • IFRS 4 Insurance Contracts and IAS 32 Financial Instruments Presentation – Scope issue for investments in REITs
    • IAS 32 Financial Instruments: Presentation – 'Fixed for fixed' condition
  • Annual Improvements – Deliberation of Comments Received
    • IFRS 1 First-time Adoption of IFRSs – Revaluation basis as deemed cost
    • IAS 27 – Impairment of investments in subsidiaries, jointly controlled entities and associates in the separate financial statements of the investor
    • IFRS 3 Business Combinations – Measurement of non-controlling interests
    • IFRS 3 – Transition requirements for contingent consideration from a business combination that occurred before the effective date of the revised IFRS
    • IFRS 7 Financial Instruments: Disclosures – Disclosures about the nature and extent of risks arising from financial instruments
    • IAS 28 Investments in Associates – Partial use of fair value for measurement of associates
    • IAS 39 Financial Instruments: Recognition and Measurement – Bifurcation of embedded foreign currency derivative
    • IAS 39 – Application of the fair value option
    • IAS 34 Interim Financial Reporting – Significant events and transactions
Friday 8 January 2010 (09:00-12:30h)
  • Staff Recommendations for Tentative Agenda Decision
    • IFRS 8 Operating Segments and IAS 36 Impairment of Assets – Transition provisions for IFRS 8 amendment
    • IAS 21 The Effects of changes in Foreign Exchange Rates – Determination of functional currency of investment holding company
    • IAS 32 Financial Instruments: Presentation – Debt/equity classification of instruments with obligation to deliver cash at the discretion of shareholders
    • IFRS 1 First-time adoption of International Financial Reporting Standards – Accounting for costs included in self-constructed assets on transition
    • IAS 39 Financial Instruments Recognition and Measurement – Unit of account for forward contracts with volumetric optionality
  • Administrative Session – IFRIC work in progress

Argentina requires IFRSs starting 2012

04 Jan 2010

Argentina's Comisión Nacional de Valores (CNV, the National Securities Commission, an agency of the Argentine Ministry of Economics and Public Finance) has adopted a requirement that all companies that publicly offer equity or debt securities must prepare their financial statements using IFRSs, beginning with financial statements for the year ended 31 December 2012.

Companies may voluntarily file their financial statements in accordance with IFRSs starting in January 2011. Argentine companies that are currently preparing IFRS financial statements on a supplemental basis may adopt IFRSs starting in 2010. The new requirements were adopted by Resolución General No. 562 (Spanish, PDF 509k – also available on CNV's website here).

Another record year for IAS Plus

01 Jan 2010

In 2009 IAS Plus had 2,210,000 visitors. Thank you for making us, once again, the #1 source on the Internet for information about international financial reporting.

We wish you a very happy new year. Here are a few more statistics about IAS Plus in 2009:
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