This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.


EFRAG endorsement status report

21 Dec 2012

The European Financial Reporting Advisory Group (EFRAG) has updated its report showing the status of endorsement, under the EU Accounting Regulation, of each IFRS, including standards, interpretations, and amendments. The latest report follows the issue of EFRAG's draft endorsement advice on the IASB's investment entities amendments, in which EFRAG’s initial assessment is that the amendments satisfy the technical criteria for EU endorsement and EFRAG should therefore recommend their endorsement.

In its draft endorsement advice on the investment entities amendments, EFRAG notes the following on the question of the exemption from consolidation:

EFRAG generally believes that a reporting entity should not differentiate between types of entities when applying the control model of consolidation in IFRS 10 Consolidated Financial Statements. However, EFRAG notes that the Amendments respond to the concerns of users of financial statements, who expressed support for a consolidation exception for subsidiaries of investment entities, and argued that their interests are best served by having a single line measurement basis based on fair value, instead of consolidation of subsidiaries of investment entities.... Although EFRAG acknowledges... concerns, we believe that limiting the use of the exception to investment entities as defined under the Amendments, does not affect the relevance of information produced by those entities, and therefore should not preclude the information provided under the Amendments from meeting the relevance criterion.

In accordance with its usual technical analysis, the draft endorsement advice also considers the investment entity amendments in terms of reliability, compatibility, and understandability before noting "EFRAG’s overall initial assessment is that the information resulting from the application of the Amendments would not be contrary to the true and fair view principle".

Comments on the Invitation to Comment on EFRAG's draft endorsement advice are requested by 28 January 2013.

Click for:

Australian standard setter reveals split views on investment entities

21 Dec 2012

The Australian Accounting Standards Board (AASB) has released an exposure draft outlining its proposals of how to implement the IASB's investment entities amendments in the Australian context. The exposure draft proposes the use of additional disclosure, but notes "AASB members were split between the... options when considering how best to proceed". The exposure draft outlines two alternate views, including one which could lead to the investment entities amendments not being adopted in Australia.

Consistent with the AASB's prior deliberations, the proposals in the body of Exposure Draft ED 233 Australian Additional Disclosures - Investment Entities would see the issue of the investment entities amendments, together with additional Australian-specific disclosure requirements.

The additional disclosures would require:

  • a consolidated statement of profit or loss and other comprehensive income
  • a consolidated statement of financial position
  • a consolidated statement of changes in equity
  • a consolidated statement of cash flows
  • a summary of the significant accounting policies used in preparing the above consolidated financial statements.

The consolidated financial statements would include controlled investees despite the investment entities exception to consolidation requirements provided in AASB 10 Consolidated Financial Statements (equivalent to IFRS 10).  No exemption from the disclosure requirement would be provided under the AASB's 'reduced disclosure requirements'.

Consistent with the deliberations at the AASB's December meeting, ED 233 also includes two 'alternative views':

  • Alternative View 1 - effectively arguing against adoption of the investment entities amendments, as the AASB members holding this view consider them "a violation of the basic principle that an entity should account for all of its assets, liabilities, income and expenses".  Other concerns expressed include a lack of a rigorous definition of an 'investment entity' and complication of accounting requirements by adding exceptions
  • Alternative View 2 - immediately issue in Australia the IASB’s investment entity requirements as made by the IASB, without imposing additional disclosure requirements that "imposes significant additional costs on Australian investment entities relative to their international counterparts".  AASB members supporting this view nevertheless would accept the disclosure proposals in the exposure draft in order to retain Australia's compliance with IFRS.

The proposals are open for comment until 29 March 2013.  Click for (links to AASB website):

IASB launches disclosure survey

20 Dec 2012

In preparation for the upcoming discussion forum on disclosure, the staff of the International Accounting Standards Board (IASB) have launched a survey aimed at assisting the IASB to gain a clearer picture on the perceived "disclosure problem". The survey is open until 15 January 2013.

The IASB has announced that responses to the survey will be confidential and no information published will be attributable to any individual or organisation. The survey is expected to take around 10 minutes to complete, although the survey does provide for many 'free form' sections where respondents can provide detailed information if they desire.

Click for:

IFRS Foundation issues educational material on fair value measurement

20 Dec 2012

As part of the IASB’s Education Initiative, the IFRS Foundation staff — with the assistance of the valuation expert group — has issued the first chapter of educational material to accompany IFRS 13, titled 'Measuring the fair value of unquoted equity instruments within the scope of IFRS 9 Financial Instruments'.

This 71-page chapter addresses the fair value measurement of unquoted equity instruments. It presents a range of commonly used valuation techniques for measuring the fair value of unquoted equity instruments within the market and income approaches, as well as the adjusted net asset method. This chapter does not prescribe the use of a specific valuation technique, but instead encourages the use of professional judgement and the consideration of all facts and circumstances surrounding the measurement.

It is the first of a series of chapters of educational material provided to support IFRS 13. These chapters are being developed to describe, at a high level, the thought process for measuring assets, liabilities and an entity’s own equity instruments at fair value, ensuring consistency with the objective of a fair value measurement set out in IFRS 13. Additional chapters will be published as they are finalised.

Click to view (links to IASB website):

Final notes from the December 2012 IASB meeting

20 Dec 2012

The IASB's December meeting was held in London on 13-17 December 2012, some of it a joint meeting with the FASB. We have posted the remaining Deloitte observer notes from Monday's session on agriculture.

The IASB discussed three fundamental issues related to the limited scope project on bearer biological assets (BBAs): (1) what definition of BBAs should be used, (2) how BBAs should be measured, and (3) how produce growing on the BBAs should be accounted for.

Click through for direct access to the notes on agriculture (IASB-only session). You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

FASB proposes an impairment model for all financial assets

20 Dec 2012

On 20 December 2012, the US Financial Accounting Standards Board (FASB) issued Proposed Accounting Standards Update, 'Financial Instruments — Credit Losses'. The proposed ASU introduces the current expected credit loss (CECL) model for accounting for the impairment of financial assets. The proposed CECL model is intended to require more timely recognition of credit losses, while also providing additional transparency about credit risk. It replaces the multiple existing impairment models in US GAAP which generally require that a loss be incurred before it is recognised.

The proposed ASU introduces the sole impairment test for financial assets measured at amortised cost or fair value through other comprehensive income (FV-OCI) — irrespective of the form of the asset (i.e., loan versus debt security). Under the proposed model, a reporting entity would recognise an impairment allowance equal to the current estimate of expected credit losses (i.e., all contractual cash flows that the entity does not expect to collect) for such assets as of the end of the reporting period.

The FASB’s proposed impairment model would apply to all financial assets measured at amortised cost or FV-OCI, though it does permit a practical expedient in limited circumstances. Thus, the proposed model would apply to trade and lease receivables and loan commitments not measured at fair value through net income (FV-NI).

Comments on the proposed ASU are due by 30 April 2013.

Comparison with IFRS

The approach in the proposed ASU represents the third model that was exposed by the FASB for comment. This model and the first model were included in FASB-only documents; the second model was a supplementary document published jointly with the IASB in January 2011. Through June 2012, the FASB and the IASB continued to jointly deliberate a ”three bucket” impairment model for financial assets. However, after constituents expressed significant concerns that the joint model could be difficult to understand, operationalise, and audit, the FASB decided to develop an alternative impairment model. Because the IASB did not receive similar feedback from its constituents they have tentatively decided to continue deliberations of the jointly developed model. The two Boards, however, are committed to joint redeliberations after receiving comments on their respective proposals. The IASB plans to issue its exposure draft on impairment in the first quarter of 2013.

The following table highlights some of the key similarities and differences between the FASB’s proposed model and the IASB’s current thinking:

SubjectFASB’s Proposed ASUIASB’s Tentative Decisions
Scope The proposed ASU applies to:
  • Financial assets measured at either amortised cost or FV-OCI.
  • Trade and lease receivables.
  • Loan commitments not measured at FV-NI.
Same as the FASB.
Recognition threshold

None. Impairment is based on expected (rather than incurred) credit losses.

However, the FASB does not require entities to record an impairment allowance for a FV-OCI financial asset if:

  • its fair value exceeds its carrying amount, and
  • the expected credit losses are deemed insignificant.

None. Impairment is based on expected (rather than incurred) credit losses.

The IASB does not provide an exception for FV-OCI financial assets.
Measurement Current expected credit losses (i.e., all contractual cash flows that the entity does not expect to collect).

For assets in the first category, 12-month expected losses.

For assets in the second category, lifetime expected credit losses.
Transfer criteria between categories Not applicable in CECL model. Only one measurement objective.

Transfer to lifetime expected credit losses when there has been significant deterioration in credit quality since initial recognition, taking into consideration the term and the original credit quality of the asset. For higher credit quality assets, lifetime expected losses would be recognised when the credit quality of those assets deteriorates to below "investment grade".

Transfer back to 12-month expected credit losses when transfer criteria no longer satisfied.

Presentation of impairment allowance Valuation allowance (i.e., contra asset). Same as the FASB.
PCI financial assets Follows CECL model. Impairment allowance represents current expected credit losses. Interest income recognition is based on purchase price plus the initial allowance accreting to contractual cash flows. The impairment allowance for PCI financial assets is always based on the change (from the original expectation at acquisition) in lifetime expected credit losses. Interest income recognition is based on initially expected (rather than contractual) cash flows.
Nonaccrual accounting An entity would be required to place a financial asset on nonaccrual status “when it is not probable that the entity will receive substantially all of the principal or substantially all of the interest.”
IFRSs do not currently contain a nonaccrual principle nor would the IASB’s proposed approach introduce one.   However, for assets that have deteriorated to being credit-impaired, interest income is based on the net carrying amount of the asset.
Write offs An entity would write off the carrying amount of a financial asset “if the entity [ultimately] has no reasonable expectation of future recovery.” 
Same as the FASB.

Click to view the news release (linking to the proposed ASU) on the FASB's website. Also see the related Deloitte (United States) Heads Up newsletter for more detailed information on the proposed ASU.

IASB-EFRAG joint meeting

20 Dec 2012

Following the regular IASB meeting in December 2012, the International Accounting Standards Board (IASB) and a European Financial Reporting Advisory Group (EFRAG) delegation met on 18 December 2012 to discuss a number of topics.

The topics discussed were:

Please click for:

EFRAG Update with a summary of the November and December 2012 EFRAG conference calls and meetings

20 Dec 2012

The European Financial Reporting Advisory Group (EFRAG) has released the December 2012 issue of its EFRAG Update newsletter.

The newsletter contains a summary from the EFRAG TEG conference call held in November 2012 and the EFRAG CFSS and EFRAG TEG meeting held in December 2012. Highlights were the approval of a draft endorsement advice on the IASB's investment entities amendments, of EFRAG’s final response to the IASB’s post-implementation review of IFRS 8 Operating Segments and of two draft comment letters (on annual improvements and on depreciation and amortisation).

Click for the EFRAG Update (link to EFRAG website).

IASB work plan revised

20 Dec 2012

The International Accounting Standards Board (IASB) has released a revised work plan, reflecting the outcomes from the IASB's Agenda Consultation 2011 and other IASB decisions. A number of new projects have been added to the agenda, and new target dates introduced or clarified for many other projects.

Details of the changes from the previous work plan dated 4 December 2012 are as follows:

New projects

  • Rate-regulated activities - inclusion of this project in the active agenda, to be completed in two phases: an interim IFRS (exposure draft expected in first or second quarter 2013) and a comprehensive project (discussion paper expected in the second half of 2013).
    This dual approach is the result of much debate on this contentious topic. Over the past few years, several jurisdictions adopting IFRS for the first time or considering the adoption of IFRS, including Canada, have come out very vocal in support of an interim standard (and possibly final standard) that would allow grandfathering of existing accounting practice upon adoption of IFRS. These views have often been in conflict with the views of other jurisdictions that already adopted IFRSs and having already changed their accounting for regulatory asset and liabilities, they are generally not supportive of exceptions or changes being made for new adopters. The IASB is balancing the desire to have Canada (where companies with rate regulated activities still have not adopted IFRSs) and other jurisdictions fully adopt IFRSs without amendment with the views of those jurisdictions already using IFRSs. Thus the IASB decided (after much debate) to proceed with the issuance of an exposure draft for an interim standard that will allow some sort of grandfathering in addition to their prior decision arising from the Agenda Consultation process to proceed with a comprehensive project on rate regulated activities.  There is no certainty at this early stage about what the ultimate outcome will be for either project.
  • IAS 12 — Deferred tax assets for unrealised losses - a new project split out separately from the annual improvements process, as was decided at the December IASB meeting, with an exposure draft expected in the fourth quarter of 2013
  • IAS 36 — Recoverable amount disclosures for non-financial assets - a narrow scope amendment designed to clarify relevant disclosure requirements, which the IASB agreed at its December meeting would be fast tracked as an amendment outside the annual improvements process in an attempt to finalise the amendment as timely as possible. An exposure draft is expected in the first quarter of 2013.

Clarification of target dates on other projects

Click for IASB work plan dated 19 December 2012 (link to IASB website). We have updated our project pages to reflect the updated work plan and other known developments.

Further notes from the December 2012 IASB meeting

19 Dec 2012

The IASB's December meeting was held in London on 13-17 December 2012, some of it a joint meeting with the FASB. We have posted Deloitte observer notes from Friday's session on insurance contracts and Monday's sessions on IAS 36 and rate-regulated activities.

Click through for direct access to the notes:

Friday, 14 December 2012
Monday, 17 December 2012

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

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.