We support the amendments to IAS 36 proposed in the exposure draft. However, we offer some recommendations for drafting changes to add clarity.

Click to access the comment letter.

Philippe Maystadt, a former President of the European Investment Bank, will be responsible "to reinforce the EU's contribution to [IFRSs], and to improve the governance of the institutions developing these standards".

In particular, he will "focus on a review of the governance of EU bodies in the field of financial reporting and accounting (the European Financial Reporting Advisory Group (EFRAG) and the Accounting Regulatory Committee)." Further, his role as Special Advisor will include (1) advising the commission when it endorses new IFRSs and (2) recommending improvements to the current system, in particular, bringing together different viewpoints from the EU to develop a “single EU voice”.

Mr Maystadt’s report on his review will be presented to Commissioner Barnier and Finance Ministers during the November 2013 ECOFIN Council meeting.

More information is available on the EU website.

The ASAF is comprised of 12 members and a non-voting chair. The following members have been appointed today (the two 'world at large' seats were given to the Asia/Oceania region and Europe):

The first meeting of the ASAF will be held on 8 and 9 April 2013 in London.

The IASB points out that the ASAF will replace multiple Memoranda of Understanding (MoU) it has previously entered into with national accounting standard-setters in Brazil, China, Japan and the United States. These will be replaced by the single agreement to be signed by all ASAF members, and accommodating regional standard-setting bodies (AOSSG, EFRAG, GLASS and PAFA) within that arrangement. Nevertheless, the IFRS Foundation will continue to facilitate through various mechanisms a dialogue with the broader international accounting standard-setting community.

Please click for IFRS Foundation press release (link to IASB website) and more information about the ASAF on IAS Plus.

Indonesia's approach to IFRS adoption is to maintain its national GAAP (Indonesian Financial Accounting Standards, IFAS) and converge it gradually with IFRSs as much as possible. Since 2012, the standards applied in Indonesia are based on those IFRSs that were effective at 1 January 2009. However, there is currently no plan (and consequently no timetable) for a full adoption of IFRSs.

In his speech, Mr. Hoogervorst outlined the benefits he sees for Indonesia if IFRSs are fully adopted. He described how Europe profited from adopting IFRSs and invited Indonesia to imagine the benefits that emerging economies could draw from the use of IFRS, especially economies that are so forcefully on the rise as Indonesia. He added: "For many emerging economies, adoption of IFRS has become an important statement of ambition – an international commitment to adhere to the highest possible standards of financial reporting."

However, Mr. Hoogervorst also warned that jurisdictions should embrace IFRSs fully and not stop half-way:

It is important to understand that the full benefits of using the IFRS-brand can only be enjoyed if you adopt it fully. For foreign investors it is very difficult to discern small differences from big ones. If a jurisdiction cannot state that it has fully adopted IFRS, investors are likely to think that the differences are much bigger than they really are. If you have gone through all the trouble to adopt 95% of IFRSs, please make sure you also do the last 5%. Otherwise, you have all the pain of transition without the full gain of international recognition of that achievement.

Regarding fears of difficulties or problems with transition, Mr. Hoogervorst offered the IASB's assistance and pointed at the IASB's Asia-Oceania office in Tokyo and the Emerging Economies Group. He also mentioned the IASB's close cooperation with the Asian-Oceanian Standard-Setters Group, which he described to be likely represented in the Accounting Standards Advisory Forum the IFRS Foundation has set up to deepen the IASB's cooperation with standard-setters across the world. Mr. Hoogervorst indicated that all of these initiatives offered excellent opportunities for a strong Indonesian participation in financial reporting and he concluded: "You have a wonderful opportunity to help shape the future of global financial reporting".

Please click for access to the full text of the speech on the IASB's website.

The IIRC's intention to publish the papers was signalled earlier in the year, and have the objective of providing additional background information for stakeholders to assist them in responding to the forthcoming consultation draft.  The papers have been prepared by the IIRC's Technical Collaboration Groups (TCGs) and do not necessarily reflect the views of the IIRC or the member organisations from which the participants of the TCGs were sourced.

Both background papers also are not designed as authoritative documents, but as guides and information.  Accordingly, they outline a number of matters where debate is continuing, and also outline issues and areas for further development.

Capitals

The preparation of the background paper on capitals was lead by the Association of Chartered Certified Accountants (ACCA) and the Netherlands Institute of Chartered Accountants (NBA).

The paper explores the concept of multiple capitals being incorporated into the consultation draft of the <IR> framework by the IIRC.  Largely consistent with the IIRC's September 2011 discussion paper, the background paper discusses various 'capitals' that "represent stores of value that are the basis of an organization’s value creation", namely: financial capital, manufactured capital, intellectual capital, human capital, social and relationship capital, and natural capital.  Some of these were described using different terminology in the discussion paper.

The paper identifies a number of extracts from academic and professional literature that define and discuss each of the capitals considered by the IIRC, and also summarises responses to the discussion paper.  It also outlines examples of the interrelationships between the capitals, e.g. an investment in better training for employees will decrease financial capital but increase human capital.

Some of the observations made in the background paper include:

• The TCG considered whether the term "resources and relationships" should be used instead of "capitals" but supported the continued use of "capitals"
• The concepts of multiple capitals is new and will evolve progressively over time, including through the IIRC's pilot programme
• It is not the objective of <IR> to require the measurement of all capitals, and in some cases "uses of and effects on the capitals are best (and in some cases can only be) reported on in the form of narrative rather than through metrics"
• Capitals an organisation uses or affects may be owned by the organisation (e.g. intellectual property), owned by others, or may not be owned at all in a legal sense (e.g. access to unpolluted air)
• There is debate about the relationship between intellectual capital, human capital, and social and relationship capital.  The TCG concluded that bringing together three capitals into one would not help understanding of the capitals model, but did recommend some modification to the description of 'intellectual capital'
• A comparison and analysis of the differences between the <IR> framework and other notions of capital is also provided, including of the IASB's Conceptual Framework and practices in sustainability reporting under the Global Reporting Initiative (GRI) guidelines.

The background paper contains a useful summary of the matters discussed, including recommended categorisation and changes to the descriptions of the capitals.

Materiality

The preparation of the background paper on Materiality was lead by the American Institute of Certified Public Accountants (AICPA).

The background paper explores the concepts of materiality for purposes of developing an integrated reporting framework, covering the following:

• Defining materiality for < IR > and distinguishing it from materiality as it relates to financial reporting and sustainability reporting
• Discussing the importance of materiality
• Discussing the application of the materiality determination process in <IR>
• Discussing disclosure considerations in an integrated report
• Discussing potential constraints in the current environment.

The paper contains the following definition:

For the purposes of < IR >, a matter is material if it is of such relevance and importance that it could substantively influence the assessments of providers of financial capital with regard to the organization’s ability to create value over the short, medium and long term. In determining whether or not a matter is material, senior management and those charged with governance should consider whether the matter substantively affects, or has the potential to substantively affect, the organization’s strategy, its business model, or one or more of the capitals it uses or affects.

The definition has been derived in the context of integrated reports being "principally aimed at providers of financial capital in order to support their financial capital allocation assessment", particularly those who take a longer term view of an organisation's performance.

The paper outlines three steps in the process of determining whether a matter is material: (1) identify relevant matters for inclusion in the integrated report (2) assess the importance of the matter and (3) prioritise material matters.

A further paper on the 'business model' concept is also expected in due course.

Click for access to the background papers (link to the IIRC website).

EMIR implements a central clearing for certain classes of OTC derivatives and requires the novation of the derivatives in question to these central counterparties (CCP). The IASB's project on the novation of derivatives is dedicated to the question whether the novation of OTC derivatives in these circumstances would result in the discontinuing of hedge accounting.

On 28 February 2013, the IASB issued ED/2013/2 Novation of Derivatives and Continuation of Hedge Accounting. The exposure draft proposes changes to IAS 39 and the forthcoming hedge accounting chapter of IFRS 9 to permit the continuation of hedge accounting where hedging instruments are novated to a central counterparty as a result of laws or regulations around OTC derivatives. ED/2013/2 proposes that the novation of a hedging instrument should not be considered an expiration or termination giving rise to the prospective discontinuation of hedge accounting if all of the following (summarised) criteria are met:

• the novation is required by laws or regulations
• the novation results in a central counterparty becoming the new counterparty to each of the parties to the novated derivative
• the changes in terms of the novated derivative are limited to those necessary to effect the terms of the novated derivative.

The ED currently only applies to novations that occurred as a result of laws and regulations. It does not apply to instruments novated voluntarily as a pre-emptive measure in expectation of corresponding laws and regulations.

Please click for:

• The delegated regulations implementing the technical standards on OTC derivatives (link to EU Official Journal)
• European Securities and Markets Authority (ESMA) website with information on main obligations, scope, exemptions and notification requirements (please also check with your local regulator for additional requirements)
• IAS Plus project page IAS 39/IFRS 9 — Novation of OTC derivatives and continuing designation for hedge accounting

EFRAG Insider is written in easy and accessible language and offers a high level overview of financial reporting projects and standards while highlighting the most topical subjects. The newsletter also offers information on activities of the EFRAG Chairman and the TEG members as well as on international exchanges with other organisations involved in developing consistent IFRS.

The first publicly available issue of EFRAG Insider is available through the press release on the EFRAG website.

The topics discussed were as follows (click through to access detailed Deloitte observer notes for each topic):

FRS 102 is derived from the IASB’s IFRS for SMEs, reflecting a simplified version of full IFRSs, but incorporates changes made by the FRC, one of which widens the scope of the standard significantly compared to the IFRS for SMEs. This has the effect that any entity not required to apply full IFRSs will be able to apply FRS 102.

Following on from FRS 100 Application of Financial Reporting Requirements and FRS 101 Reduced Disclosure Framework, which were published in November 2012, FRS 102 completes the main package to replace UK GAAP as it currently exists. In due course a separate standard will follow for insurers and amendments to the financial instruments section are also expected.

Although all UK reporters could elect to follow full IFRSs when current UK GAAP disappears, the relative brevity of FRS 102, at less than 250 pages in length, will appeal to many. Regardless of their choice, the introduction of more detailed requirements around accounting for financial instruments may pose challenges for some reporters.

Key changes that FRS 102 will introduce to UK accounting include the following:

• derivatives can no longer be held off balance sheet and will be measured at fair value through profit or loss. Those reporters who have adopted FRS 26 will already be familiar with such requirements;
• goodwill and intangibles can no longer have indefinite lives and must be amortised. In the absence of a reliable estimate the life is presumed to be a maximum of five years – a significantly shorter period than the existing presumption of 20 years or less; and
• the multi-employer exemption permitting defined benefit plans to be accounted for as defined contribution plans will no longer be available to entities under common control.

The mandatory effective date of FRS 102 is for accounting periods beginning on or after 1 January 2015, although early adoption is permitted for periods ending on or after 31 December 2012.

Please click for

• FRC press release on the FRC website
• Access to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland on the FRC website
• An Impact Assessment for FRS 100, FRS 101, FRS 102 on the FRC website
• Deloitte UK's dedicated website The future of UK GAAP
• Deloitte UK publication Need to know — The long-awaited standard that will replace current UK GAAP

The topics discussed were as follows (click through to access detailed Deloitte observer notes for each topic):

Tuesday, 12 March 2013

Annual improvements

• IFRS 3 — Accounting for contingent consideration in a business combination
• IAS 7 — Interest paid that is capitalised
• IFRS 3 — Mandatory purchase of non-controlling interest in a business combination obtaining control of listed entity

Work in progress

• IAS 19 — Determination of discount rate

Issues related to IFRS 2 Share-based payment

• Share-based payment awards settled net of tax withholdings
• Modification of a share-based payment transaction from cash-settled to equity-settled

Wednesday, 13 March 2013

New items for initial consideration

• IAS 28 — Elimination of intercompany profits between an issuer and its joint venture
• IAS 19 — Post vs pre-tax discount rate
• IFRS 7 — Applicability of the amendments to IFRS 7 on offsetting financial assets and financial liabilities to condensed interim financial statements

Administrative session

• Committee work in progress
• Review of Interpretations Committee work in 2012

Notes from the remaining sessions will be made available soon.

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