Details of the changes are:

• Financial instruments — impairment - target date for issue of an exposure draft is the first quarter of 2013 (previously last quarter of 2012)
• Annual improvements 2011-2013 - introduction of target date for finalisation of the amendments in the third quarter of 2013, following the finalisation of the 2010-2012 cycle amendments in the second quarter
• IAS 28 — equity method - introduction of a target date for the proposed amendments in the third quarter of 2013
• IAS 41 — Bearer biological assets- reclassification of the project from 'research projects' to 'other projects', but no change in the expected timing of an exposure draft in the first half of 2013.

Due process documents expected before the end of 2012

The following due process documents are expected to be issued by the end of 2012 (this includes those items already noted above in some cases):

• Finalised standards, amendments or other pronouncements
  • Financial instruments - General hedge accounting
• Exposure drafts
  • Financial instruments - Limited reconsideration of IFRS 9
  • IAS 16/IAS 38 - Revenue-based methods of depreciation
  • IFRS 10/IAS 28 - Sales or contributions of assets between an investor and its associate/joint venture
  • IFRS 11 - Acquisition of an interest in a joint operation
• Other documents
  • Agenda consultation feedback statement.

Click for IASB work plan as of 23 November 2012 (link to IASB website). We have updated our project pages to reflect the updated work plan and other known developments.

The move toward a new differential reporting regime has been a long and controversial process in the United Kingdom, with a consultation process on the future of financial reporting in the UK and Republic of Ireland taking place between 2002 and 2012.

The effect of the changes is that more financial reporting will be based on IFRSs. In announcing the publication of the standards, the FRC commented:

By using an international-based framework all entities, and users, will be using the same accounting language regardless of size, but a proportionate approach to disclosure aims to meet users’ information needs, without imposing undue reporting burdens.

The two new standards are as follows:

• FRS 100 Application of Financial Reporting Requirements - sets out the overall financial reporting requirements, giving many entities a choice of detailed accounting requirements depending on factors such as size, and whether or not they are part of a listed group
• FRS 101 Reduced Disclosure Framework - applies to the individual financial statements of subsidiaries and ultimate parents, allowing them to apply the same accounting as in their listed group accounts, but with fewer disclosures.

These standards will be followed by a third standard, FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, which is expected to be issued in 2013.

The Financial Reporting Standard for Smaller Entities (FFSSE) is also amended by the standards and will remain in force under the new regime.

The new requirements will be effective from 1 January 2015, but may be adopted early.

Click for press release (link to FRC website).

Deloitte (United Kingdom) has also published an edition of its iGAAP Alert discussing the changes in more detail.

Click through for direct access to the notes:

Wednesday, 21 November 2012

• Financial instruments — Impairment (IASB only)
  • Criteria for recognition of lifetime expected losses
  • Methods and information to assess expected losses and transfer criteria
  • Disclosures applicable to entities applying the simplified approach for trade and lease receivables.

Remaining notes on the joint IASB-FASB and IASB-only discussions on insurance contracts will be posted soon.

You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

We agree that the triennial review of the IFRS for SMEs should be comprehensive in its scope, but believe that some underlying principles for making changes to the Standard would be beneficial in ensuring that a consistent approach is followed and that the IFRS for SMEs remains coherent in its approach and its relationship to full IFRSs.

The letter outlines that we believe that the following principles should be followed:

• The IFRS for SMEs should not be amended to reflect changes in full IFRSs as complex and significant as the revised requirements on consolidation, accounting for joint arrangements and measurement of fair value included in IFRS 10 , IFRS 11 and IFRS 13 respectively before those changes are effective. Rather, the suitability of a significant new standard should be assessed for its suitability for incorporation into the IFRS for SMEs once a track record of its application under full IFRSs emerges. The post-implementation review of the new standard may provide an opportunity to make this assessment
• Any incorporation of a full IFRS standard into the IFRS for SMEs should retain the integrity of the conceptual model applied in that standard
• In assessing the suitability of a full IFRS standard for incorporation into the IFRS for SMEs, the Board should (as noted in the October 2010 Guide to the IFRS for SMEs) take into account the costs to, and the capabilities of SMEs to prepare financial information before moving to any more complex model
• Reversal of the IASB’s decisions to include simpler requirements in the IFRS for SMEs than are included in full IFRSs should only be considered where there is clear evidence that this is necessary.

The letter also comments on other issues, such as local public authorities being best placed to judge how the financial reporting framework for entities using the IFRS for SMEs is applied in their jurisdictions, the need to articulate clearly the type of entity for which the IFRS for SMEs is designed, and the drafting process for any amendments to the standard.

Click for access the comment letter.

The issue of how an investor should account for other net asset changes arose from consequential amendments to IAS 28 Investments in Associates made in 2007, which removed explicit guidance previously in that standard.  The issue was initially considered by the IFRS Interpretations Committee, who recommended the IASB make a limited scope amendment to IAS 28 Investments in Associates and Joint Ventures (2011).  IAS 28 (2011) carries over the core equity method requirements from the earlier version of IAS 28 and is effective from 1 January 2013, meaning the previous version could not be amended prior to it being superseded.

The proposals in ED/2012/3 would require an investor to recognise in its own equity its share of the changes in the net assets of the investee that are not recognised in profit or loss or other comprehensive income of the investee, or that are not distributions received.

Examples of transactions of an associate or joint venture which may result in other net assets changes include:

• issues of additional share capital to parties other than the investor
• buy-backs of equity instruments from shareholders other than the investor
• writing of a put option over the investee's own equity instruments to other shareholders
• purchase or sale of non-controlling interests in the investee's subsidiaries
• equity-settled share-based payments.

The calculation of the amount recognised in equity may also reflect the change (if any) in the investor's ownership interest caused by the transaction giving rise to the other net asset change, e.g. a reduction in ownership interest because of the issue of shares by an associate to other shareholders.

The proposed approach would effectively reinstate the requirements of IAS 28 prior to the 2007 amendment and as such is a short-term solution to address diversity in practice until such time as the IASB gives broader consideration to the equity method of accounting.

An effective date for the amendments will be announced after exposure.

The ED contains an alternative view by on of the board members who believes  that the amendment is inconsistent with concepts of other IFRSs (IAS 1, IFRS 10), and would cause serious conceptual confusion. This board member is of the opinion that this short-term solution would not improve financial reporting but would instead undermine a basic concept of consolidated financial statements.

The exposure draft is open for a comment period of 120 days, and closes on 22 March 2013.

Click for:

• IASB press release (link to IASB website).
• IFRS in Focus — Proposals for limited amendments to the equity method.

The term of all members of the EFRAG Supervisory Board expired late September 2012. Following the recommendations of the EFRAG Governance and Nominating Committee, the EFRAG General Assembly appointed and reappointed in its meetings of 25 October and 20 November the 14 private sector members of the EFRAG Supervisory Board. All members are appointed for a 3-year mandate. The public policy members of the EFRAG Supervisory Board, including the Chairman, will be announced in December following the conclusion of the EC nomination process.

Please click for a list of all private sector members of the EFRAG Supervisory Board on the EFRAG website.

The IASB discussed the possibility of a 'collectibility threshold' at its September 2012 meeting in the context of possible refinements to the revenue model to clarify the proposals on the presentation of the impairment loss line item.

In the unsolicited letter, the AASB notes that it "considers that the re-introduction of a collectibility threshold for revenue would be inconsistent with the core principle of the proposed model that an entity should recognise revenue to depict the transfer of promised goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services".

The letter goes on to note that a collectibility threshold introducing credit risk into the measurement of revenue is a valuation, rather than transaction, driven approach.  It also outlines that the credit risk of the customer is not related to the goods and services provided and netting bad debts against revenue may obscure useful information.

The letter also outlines that the AASB is also concerned about the introduction of 'rules-based' requirements relating to proxies for measuring an entity’s performance.  In particular, the letter provides feedback on the IASB's consideration of the suitability of ‘units of delivery’ or ‘units produced’ as output methods to measure progress that was discussed at the IASB's October meeting.

The aim of the AASB is to bring the issues raised in the letter to the attention of the IASB "before the IASB finalises this important project".  The IASB and FASB are discussing revenue recognition at the IASB meeting being held this week.

The issue of the letter follows on from discussions about various IASB projects at the AASB's meeting on 31 October - 1 November 2012.  At the meeting, the AASB also noted concerns about the leases project (which will be included in its response to the forthcoming exposure draft), and expressed concern about the IASB's recent investment entities amendments, which we previously reported on.

Click for a copy of the AASB's letter (link to AASB website).

In this edition, IASB board member Paul Pacter discusses the amendments to investment entities. The newsletter reviews the four main issues the IASB had to consider while developing the amendments. The four main issues were:

• How should investment entities account for their investments?
• Which entities should qualify as investment entities?
• Should a non-investment entity parent consolidate an investment entity subsidiary?
• What disclosures should investment entities make?

Click to view 20 November 2012 — Paul Pacter: Investors, preparers and the IASB agree on consolidation exception for investment entities (link to IASB website). All Investor Perspectives are archived on the IASB's website.