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IASB amends offsetting rules in IAS 32 and amends disclosure requirements

16 Dec 2011

The IASB has issued amendments to IAS 32 'Financial Instruments: Presentation' that provide clarifications on the application of the offsetting rules.

The joint offsetting project between the IASB and FASB was intended to address the differences in their respective accounting standards regarding offsetting of financial instruments.

However, the FASB decided to retain the current US GAAP guidance. Therefore, the Boards decided to jointly focus on developing converged disclosure requirements to allow financial statement users the ability to more easily compare financial instruments exposures under IFRS and US GAAP.

Additionally, the IASB decided to amend IAS 32 to clarify certain aspects because of diversity in application that was identified during the IASB constituent outreach.

The project to amend IAS 32 focused on four main areas:

  • the meaning of 'currently has a legally enforceable right of set-off'
  • the application of simultaneous realisation and settlement
  • the offsetting of collateral amounts
  • the unit of account for applying the offsetting requirements.

The amendments to the disclosure requirements in IFRS 7 Financial Instruments: Disclosure require information about all recognised financial instruments that are set off in accordance with paragraph 42 of IAS 32. The amendments also require disclosure of information about recognised financial instruments subject to enforceable master netting arrangements and similar agreements even if they are not set off under IAS 32. The IASB believes that these disclosures will allow financial statement users to evaluate the effect or potential effect of netting arrangements, including rights of set-off associated with an entity's recognised financial assets and recognised financial liabilities, on the entity's financial position.

The amendments to IAS 32 are not effective until annual periods beginning on or after 1 January 2014. However, the new offsetting disclosure requirements are effective sooner - for annual periods beginning on or after 1 January 2013 and interim periods within those annual periods. The amendments need to be provided retrospectively to all comparative periods.

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Deloitte IFRS Podcast on the deferral of the effective date of IFRS 9

16 Dec 2011

A new Deloitte IFRS Podcast has been released, discussing the IASB's deferral of the effective date of IFRS 9 'Financial Instruments'.

Randall Sogoloff, Leader for Communications in the Deloitte IFRS Global Office, and Andrew Spooner, leader of Deloitte's Global IFRS financial instruments team, discuss the IFRS 9 Deferral. The podcast is available for download here (12 mins 5.5 mbs) or via iTunes; it is one of a series that will be posted to IAS Plus.

IASB defers effective date of IFRS 9 and publishes modified transition disclosures

16 Dec 2011

The IASB has published amendments that defer the mandatory effective date of both the 2009 and 2010 versions of IFRS 9 'Financial Instruments' to annual periods beginning on or after 1 January 2015.

Prior to the amendments, IFRS 9 was mandatorily effective for annual periods beginning on or after 1 January 2013. Early application is still permitted.

Instead of requiring restatement of comparative financial statements, entities are either permitted or required to provide modified disclosures on transition from IAS 39 to IFRS 9 on the basis of the entity's date of adoption and if the entity chooses to restate prior periods. An entity that adopts IFRS 9 for reporting periods:

  • beginning before 1 January 2012 is not required to restate prior periods or provide the modified disclosures
  • beginning from 1 January 2012 until 31 December 2012 may elect to either restate its prior periods or provide the modified disclosures
  • beginning on 1 January 2013 or thereafter is not required to restate prior periods but is required to provide the modified disclosures.

Much of the information required in the modified disclosures is consistent with existing disclosures in IAS 8 and IFRS 7. However, the amendments also require reclassification disclosures in IFRS 7 (as amended by IFRS 9 (2009)) on transition from IAS 39 to IFRS 9 regardless as to whether they would normally be required due to a change in business model. Reclassification disclosures and other disclosures required when initially applying IFRS 9 are expected to allow reconciliations between the measurement categories in accordance with IAS 39 and IFRS 9 and individual line items in the financial statements or classes of financial instruments.


The IASB is deferring the mandatory effective date of IFRS 9 because of the delay in the expected timing of completion of the remaining phases of the financial instruments project. The Board intends to allow entities to apply all phases of the financial instruments project concurrently. Also, the Board considered the effective date of the standard on insurance contracts which is currently being developed. Furthermore, at its November 2011 meeting, the IASB tentatively decided to re-open IFRS 9 to address potential application issues in IFRS 9 and consider the interaction between IFRS 9 and the tentative decisions made on the insurance project. Additionally, the IASB will consider the FASB's model on the classification and measurement of financial instruments.


Click for IASB press release (link to IASB website).  An IFRS in Focus newsletter has also been published on the changes.

Accounting rules for European micro entities eased

16 Dec 2011

The European Parliament has voted to considerably simplify life for more than 5 million of the smallest companies in Europe.

In February 2009, the European Commission tabled proposals to reduce burdensome accounting rules for Europe's smallest companies – so-called "micro entities". From next year, it will be possible for Member States to radically simplify the way in which micro-entities prepare their accounts. When it comes to publishing accounts, governments will be able to create a "one-stop-shop" which would see micro-entities only having to send their accounts to the tax administration, which would in turn be responsible for passing the accounts onto the Company Registry. Today, in many countries micro-entities have to file a full set of financial statements, including the balance sheet and profit and loss account, and are required to disclose this through publication in a national gazette.

This simplification ties in with the European proposals for revising the Accounting Directives and the Transparency Directive published in October 2011.

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Additional notes from the December IASB meeting

16 Dec 2011

The IASB's regular monthly meeting is being held on 13-16 December 2011 in London, part of it a joint meeting with the FASB. We have posted additional Deloitte observer notes from the sessions on financial instrument impairment and insurance contracts

Click through for direct access to the notes:

Wednesday, 14 December 2011 (earlier sessions)

Thursday, 15 December 2011

  • Insurance contracts (IASB-FASB)
    • Policyholder participation
    • Measurement of options and guarantees embedded in insurance contracts
    • Cash flows that existing contracts require to be paid to future policyholders
    • Discounting of insurance liabilities for incurred claims

Notes from the further sessions will be posted as they become available.

Click here to go to the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

New IFRS for SMEs training module

15 Dec 2011

The IFRS Foundation Education Initiative has developed a training module for Section 33 of the IFRS for SMEs 'Related Party Disclosures'.

Ultimately, the IFRS for SMEs training material will include 35 stand-alone modules – one for each section of the IFRS for SMEs. Currently, 27 modules are available. Most are also available in Arabic, Russian, Spanish, and Turkish.

Please click for more information on the Section 33 training module or access all training modules on the IASB website.

Further notes from the December IASB meeting

14 Dec 2011

The IASB's regular monthly meeting is being held on 13-16 December 2011 in London, part of it a joint meeting with the FASB. We have posted Deloitte observer notes from the sessions on leases held on the Tuesday and Wednesday of the meeting.

Click through for direct access to the notes:

Tuesday, 13 December 2011 (earlier sessions)

Wednesday, 14 December 2011

  • Leases (IASB-FASB)
    • Cancellable leases
    • Rental income recognition for investment properties
    • Disclosures for leases excluded from the receivable and residual approach

Notes from the Wednesday session on financial instrument impairment will be posted soon.

Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers for the entire meeting.

Notes from the December IASB meeting

14 Dec 2011

The IASB's regular monthly meeting is being held on 13-16 December 2011 in London, part of it a joint meeting with the FASB. We have posted Deloitte observer notes from most of the sessions held on the first day of the meeting.

Click through for direct access to the notes:

Tuesday, 13 December 2011

Notes from the session on Leases will be posted soon.

Click here to go to the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

New Australian resource tax raises accounting issues, prompts AASB to issue agenda decisions

14 Dec 2011

The Australian Accounting Standards Board (AASB) has issued tentative agenda decisions dealing with accounting for proposed new resources taxes. These may potentially have wider implications due to the generic nature of some of the matters discussed and the widespread involvement of global resources companies in the Australian resources industry, many of whom report under IFRSs or US GAAP.

The tentative agenda decisions deal with the following accounting issues arising from a proposed 'Mineral Resource Rent Tax' (MRRT) and extension of 'Petroleum Resource Rent Tax' (PRRT) that are currently being considered by the Australian Parliament:

  • Whether MRRT is an income tax. The agenda decision stops short of concluding MRRT is an income tax, but notes existing guidance is sufficient to address the issue, referencing the possible direct or analogous application of AASB Interpretation 1003 Australian Petroleum Resource Rent Tax (a domestic Interpretation)
  • Accounting for an uplift in allowances on the commencement of a new tax. Entities becoming subject to the MRRT/PRRT for the first time are given the option of adopting an 'starting base allowance' which increases future deductions available based on the market value of the operation, rather than the actual cost of establishing the operation. The agenda decision states such increases in deductions available are to be treated "as a deductible temporary difference giving rise to a deferred tax asset"
  • Substantive enactment. The Bills required to enact the tax have been passed by the Lower House of the Australian Parliament, but will not be considered by the Australian Senate until 2012. The tentative agenda decision concludes existing guidance (including a further Australian domestic Interpretation) "is sufficient to address the issue of when substantive enactment has occurred".

The tentative agenda decisions arose from the AASB's discussions at its December 2011 meeting, where the AASB also debated the question of accounting for payments to Australian State Governments for royalties that can be credited against MRRT/PRRT payable. There is currently debate about whether such royalties should be considered production costs or a form of 'prepaid' MRRT/PRRT and the AASB has indicated it will raise this additional issue with the IFRS Interpretations Committee.

Comments on the AASB's tentative agenda decisions close on 17 January 2012. Click for:

Deloitte comment letters on the IIRC's integrated reporting discussion paper and IASB's amendments to IFRS 1 exposure draft

14 Dec 2011

Deloitte's IFRS Global Office has submitted letters of comment to the International Integrated Reporting Council (IIRC) on its Discussion Paper, Towards Integrated Reporting — Communicating Value in the 21st Century, and to the International Accounting Standards Board (IASB) on its Exposure Draft ED 2011/5, Government Loans — Proposed amendments to IFRS 1.

In regards to the IIRC discussion paper, we acknowledge the purpose of the discussion paper is to create dialogue on the direction and framework for corporate reporting. We agree on improving the current corporate reporting model and that the principle of stewardship should encompass value creation and the costs incurred to create that value. We also provided what we feel are necessary steps in the process of developing a new (integrated) business reporting model. The following is an excerpt from the letter:

We think the following steps are necessary to further the IIRC’s goal: research into and development of a ‘conceptual framework’ for integrated reporting which not only identifies but defines the building blocks of integrated reporting with accompanying rationales. Relevant building blocks would include amongst others:

  • the objective of integrated reporting
  • the primary user group
  • the principle of stewardship of the capitals and resources used by the entity in the context of integrated reporting (which should be a Guiding Principle)
  • the elements of integrated reporting including an assessment of performance or relevant performance metrics in respect of those elements
  • the reporting entity
  • the defining characteristics or attributes of information for inclusion in an integrated report, which would consider relevance, materiality and quality, amongst others, and
  • the standards for disclosing the integrated report in a digital format (e.g., XBRL).

For the integrated reporting model to be successful and capable of practical and consistent application we believe a clear definition of and consensus on these fundamental concepts will be necessary.

In regards to the IASB exposure draft, we agree that first-time adopters should have the same transitional relief as existing preparers in applying the 2008 IAS 20 amendments. However, we suggest that draft paragraph B10 should be amended to make it clear that the proposed exemption applies only to the requirements of IFRS 9 and IAS 20 insofar as they relate to the grant element of government loans at below market rate.

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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.