2012

FASB issues ASU to simplify testing of indefinite-lived intangible assets for impairment

27 Jul 2012

The US Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) 2012-02 'Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment'. The ASU simplifies the guidance for testing the decline in the realisable value (impairment) of indefinite-lived intangible assets other than goodwill.

The FASB issued ASU 2012-02 based on feedback received from stakeholders concerning the recurring costs of performing impairment tests for indefinite-lived intangible assets other than goodwill where there was a low likelihood of impairment. The amendments in the ASU allows an entity the option of first performing a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. The FASB believes that the amendments made by ASU 2012-02 will reduce the cost of accounting for indefinite-lived intangible assets.

In addition, the FASB realises that the guidance in this ASU will not result in the convergence of impairments between US GAAP (Topic 350) and IFRS (IAS 36).

The ASU applies to all public, private, and not-for-profit organisations. The amendments are effective for annual and interim impairment tests performed in fiscal years beginning after 15 September 2012. Early adoption is permitted.

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New IASB work plan issued

27 Jul 2012

The International Accounting Standards Board (IASB) has publicly released a revised work plan updating the expecting timing of various due process steps in its projects. There are a number of projects for which deliverables have been deferred, and a target date for the publishing of an IFRS from the revenue recognition project has been formally included (being the first-half of 2013). We've prepared a summary of the changes, together with a listing of the projects where a due process document is expected in the near future.


Summary of changes

The following is a summary of the changes in the revised work plan, which is dated 26 July 2012:

  • Agenda consultation - the timing for the issuance of the feedback statement from the consultation has been pushed back to the third quarter of 2012 (previously second quarter) and development of a strategy previously indicated for the second half of 2012 has been removed. This may be considered to be consistent with comments made by Hans Hoogervorst in earlier speeches acknowledging that the future agenda is not really contentious
  • Financial instruments - general hedge accounting - a review draft of the finalised general hedge accounting chapter of IFRS 9 is expected in the third quarter of 2012 (previously second quarter), with the target date for completion of the chapter expected in the fourth quarter of 2012 (previously second half 2012)
  • Revenue recognition - the work plan confirms deliberations will continue to the end of 2012, but introduces a formal target date of a new IFRS in the first half of 2013
  • Post-implementation reviews:
    • IFRS 8 Operating Segments - the work plan adds that the IASB expects to consider comments received from the Request for Information in the first quarter of 2013
    • IFRS 3 Business Combinations - the post-implementation review on IFRS 3 is now not expected to commence before the fourth quarter of 2012 (previously not earlier than the third quarter 2012).


Projects where a due process document is expected in the near future

The work plan confirms the following milestones are expected to be reached by the end of September:

In addition, the following milestones are expected to be reached by the end of calendar 2012 (in some cases, this may also mean they are issued in the third quarter):

Click for IASB work plan as of 26 July 2012 (link to IASB website). We have updated our project pages to reflect the updated work plan and other known developments.

IASB staff to develop guidance for micro-sized entities applying the IFRS for SMEs

26 Jul 2012

The International Accounting Standards Board (IASB) staff, along with the SME Implementation Group, will be working together to develop guidance suitable for micro-sized entities that are applying the IFRS for SMEs.

The IASB staff will use the IFRS for SMEs to identify requirements that are necessary for most micro-sized entities. Guidance will then be developed based on those requirements and without changing the principles for recognising and measuring assets, liabilities, income, and expenses.

In addition, the guidance will cross-references the "IFRS for SMEs for matters not dealt with in the guidance booklet. Subsequently, having applied the guidance, an entity’s notes to financial statements and auditor’s report could refer to conformity with the IFRS for SMEs because there is no modification."

Click to view the IASB press release.

ESMA publishes review of accounting for Greek sovereign debt

26 Jul 2012

The European Securities and Markets Authority (ESMA) has published a review of the accounting for Greek Government Bonds (GGB) in Europe. The review focuses on IFRS Financial Statements for the year ended 31 December 2011 and considered a sample of 42 European financial institutions with significant exposures to GGB.

The review found a good level of consistency regarding the level of impairment losses. However, the review also found that issuers fell short of meeting IFRS disclosure requirements in particular in relation to transparency of gross exposure, maturities, valuation methodologies and fair value levels used, as well as the impact of impairment on profit or loss. The main findings were:

  • The impairment amount and in most cases the net exposure were reported. However, only a few issuers disclosed gross exposures, maturities or explanations of yearly variations, which made it difficult for investors to assess the real effect of GGB on the financial performance over the period. ESMA also found that some information presented through other channels (e.g. press releases) did not make it into the finanical statements.
  • The valuation methodology used for GGB was disclosed by most issuers but lacked in quality. Especially, adjustments made to market prices in order to determine level 2 values were not explained. Also, reasons leading to the choice of a fair value level were not always explained.
  • Impacts of shadow accounting in connection with insurance activities were generally not disclosed.
  • Disclosures on credit default swaps (CDS) related to GGB lacked transparency and did not provide sufficient information to allow users to understand the impact of these holdings on exposures at the reporting date.
  • Reclassifications of GGB from one category to another were not always mentioned explicitly and informatione was only provided in an aggregated manner. More reasons for reclassifications and disaggregated amounts showing which country’s sovereign debt had been reclassified should have been disclosed.

As a result of these findings, ESMA will pay attention to the quality of country-by-country disclosures and more generally to the granularity of information provided on significant sovereign exposures. ESMA will continue to monitor further developments related to financial instruments accounting and in particular for sovereign debt in the 2012 IFRS financial statements.

In connection with the publication ot the report  Steven Maijoor, ESMA Chair, said:

 

While the report only focused on the accounting treatment of Greek sovereign debt and related instruments, I would emphasise that the principles we have highlighted in relation to disclosure and transparency are applicable more generally, and should be applied to any material exposures to financial instruments that become subject to enhanced risk.

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IASB seeks candidates for the methodology for fieldwork and effects analyses consultative group

25 Jul 2012

The International Accounting Standards Board (IASB) is seeking candidates for membership to the consultative group that will assist the IASB in developing an agreed methodology for fieldwork and effect analyses.

Consistent with the recommendations from the 2011 Trustees' Strategy Review, the group will provide information on, and an assessment of, fieldwork and effect analyses methodologies that are used currently and whether and, if so, how they might be applied to the IASB’s standard-setting activities, together with advice on the most appropriate methodology (or methodologies) that might be used.

The establishment of the consultative group will also assist the IASB in identifying the 'extent to which it can, and should, meet the needs of bodies responsible for the endorsement of IFRSs in their jurisdictions with respect to effect analysis' so that endorsement bodies might rely on the IASB effects analyses instead of conducting their own analysis.

The IASB expects the consultative group to have 12 to 20 members and will be taking applications until 14 September 2012.

More information on the terms and candidacy for membership are available on the IASB website.

SMEIG members reappointed by IFRS Foundation

25 Jul 2012

Members of the SME Implementation Group (SMEIG) have been reappointed by the Trustees of the IFRS Foundation for an additional two-year term ending 30 June 2014.

The SMEIG first task as part of their second term will be to analyse the feedback from the Request for Information (part of the IASB's initial comprehensive review of the IFRS for SMEs) and to make recommendations to the IASB for possible enhancements to IFRS for SMEs.

Click to view IASB press release (link to IASB website).

IASB webcast on financial instruments projects

25 Jul 2012

On 30 and 31 July 2012 IASB staff will give a web update on the Financial Instruments Projects including a question and answer session.

Details of the web updates are provided below:

Topic: Update on the Financial Instruments Projects
Date and time: Monday, 30 July 2012 15:00 GMT+1 and
Tuesday, 31 July 2012 09:00 GMT+1
More information: Click here

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Separation of the role of Chairman of the IASB and Chief Executive Officer of the IFRS Foundation reflected in new Constitution

25 Jul 2012

The Trustees of the IFRS Foundation have published a drafting review of the IFRS Foundation Constitution. The document reflects changes to the Constitution regarding the separation of the role of Chairman of the IASB and Chief Executive Officer of the IFRS Foundation.

The changes are one of the results of the Monitoring Boards governance review 2010-2011. They have already been implemented by appointing Yael Almog as Executive Director of the IFRS Foundation earlier this year.

The Trustees have announced that further changes to the IFRS Foundation Constitution may be considered in the future, however, they felt that the reality of this change should be reflected in the Constitution as soon as possible.

Comments on the drafting review are requested by 23 October 2012.

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New report calls for integrated reporting in light of global financial crisis

24 Jul 2012

A joint report by the United Nations Environment Programme Finance Initiative (UNEP-FI), the International Institute for Sustainable Development (IISD), and the Blended Capital Group explores lessons learned from the global financial crises, and outlines a number of recommendations, including a global integrated reporting standard.

The report, entitled Lenses and Clocks: Financial stability and systemic risks, provides an overview of the developments during the financial and economic crisis of 2007–2012 and the ongoing response to that crisis, and then highlights a number of areas related to the "re-engineering" of the global financial system, relating sustainable finance and investment thinking to these areas.

The report laments the focus on 'short-term' outcomes and analyses some of the initiatives and policy responses to issues identified from the global financial crisis.  In critiquing the global convergence of accounting standards, the report notes:

It appears... that international efforts to bring about convergence around one standard, the International Financial Reporting Standards, have faltered and the accounting community has to a large degree accepted that, at this stage, an integrated global accounting system is beyond its reach, with many of the key unresolved issues still on the table in 2012. Agreement over the valuation and pricing of banking assets, notably the complex financial products such as derivatives that sat at the heart of the initial sub-prime crisis in the United States, as well as loans and loan-like instruments, appear to be, once again, at the epicentre of the schism across the accounting world.

The recommendations of the report are outlined as a series of four 'propositions':

  • Proposition 1: Build a deeper understanding of how policy-makers, market regulators and international financing institutions can support the growth and main-streaming of responsible investment and inclusive finance approaches.
  • Proposition 2: Establish a monitoring body, which ensures that  global financial architecture is managed on sustainable fiduciary principles.
  • Proposition 3: Investigate why long-term pension investment has not resulted in a financial system that more obviously serves the interests of savers and supports global sustainability.
  • Proposition 4: Build on the work of the Integrated Reporting Committee and others to promote transparency in the operations of financial and commercial organisations.

The recommendations on proposition 4 include a call for a new protocol on integrated reporting which would cover at least all listed entities on the 50-plus major stock exchanges of the world:

The international community should agree to the adoption by stock exchange authorities and market regulators worldwide of a United Nations protocol that requires listed entities to abide by an integrated reporting standard covering sustainability issues promoting transparency in the operations of financial and commercial organizations. Such a protocol would build on the work of the International Integrated Reporting Committee and would embed a requirement to include a vote on the quality of the integrated report at the annual general meetings of listed corporations.

 

Click for access to the full report (link to the UNEP-FI website)

Final notes from the July IASB meeting

23 Jul 2012

The IASB's July meeting was held in London on 16-20 July 2012, some of it a joint meeting with the FASB. We have posted Deloitte observer notes from the sessions on financial instruments: impairment and financial instruments: classification and measurement.

Click through for direct access to the notes:

Friday, 20 July 2012

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

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