March

Agenda for March 2013 IFRS Interpretations Committee meeting

06 Mar 2013

The IFRS Interpretations Committee will meet at the IASB's offices in London on Tuesday and Wednesday 12-13 March 2013. The meeting is open to the public and will be webcast.

The tentative agenda is available on our meeting page for the meeting.

The Bruce Column — Effective disclosure: More or less

06 Mar 2013

Everyone agrees that something should be done about the levels of disclosure in financial reporting. It is just, as our resident columnist Robert Bruce reports, that no one agrees on what that something might be.

The issue of disclosure unites everyone. And it divides everyone. Everyone agrees that useful and effective disclosure is at the heart of financial reporting. Everyone agrees that we need less boilerplate and more clarity and a story better and more clearly told. But at the same time everyone has different ideas of what precisely constitutes useful and effective.

So it was helpful, a few weeks ago, to have a forum where all strands of opinion could be heard; ideas mooted and objections raised. And it helped to have it pulled together by the International Accounting Standards Board, (IASB), which itself is no stranger to piling up the complexity of what is disclosed.

Perhaps not surprisingly the main conclusion that the IASB drew after the event was that there ‘was no clear agreement on what the disclosure problem is’. In the IASB’s view, ‘the objectives of the IASB, the auditors and regulators, are appropriate and beneficial’. But the perceptions remained that the standards were seen to compel more than to guide and auditors and regulators were seen as emphasising compliance more than communication. Perceptions are that the problem is behavioural. And that takes a long time to change, and, as was noted at the forum, the incentives for such change were not right.

So it was felt that there are two ways forward. A long-term strategy needs to be put into place. And some quick fixes need to be sorted out which can act as a catalyst to bring people into a mode of thinking which encourages the focus on disclosures that matter, that are key to telling a clear story.

A short-term route to help disclosure become clearer would be for the IASB to make some changes to IAS 1. That says specifically that you don’t have to disclose something if it is not material. But people still do. The IASB needs to highlight that as much as it can. It should try to nudge the mindset into change. Stick a line in saying specifically that you should not disclose something if not material. Another paragraph says that the notes ‘should be produced in the following order’. This stands in the way of thoughtful preparers trying to put the less important stuff in the back of the book and allow the really important stuff to stand out. The wording needs to change. The IASB has to lighten it all up and emphasise that not only it is perfectly all right to use judgement but it is something that they encourage.

The IASB also needs to pull back on taking the easy way out when there have been huge arguments over two differing treatments in the creation of a standard. Too often they suggest that the results under the losing treatment can be disclosed in the notes. It may cheer up the protagonists but it simply creates more disclosure.

But the IASB cannot force a preparer to be brave and less compliance driven. It can only nudge and encourage.  And that goes for everyone else in this dance of the data. Recognising that it is everyone’s problem and getting everyone to act accordingly would be a start.

The really long-term changes are going to be those in the work the IASB is doing on the conceptual framework and the work on a disclosure framework. That would create more clarity.

Another process which is on the horizon is integrated reporting, the reorganising of all information, non-financial as well as financial, which impacts on corporate strategy. The IASB has just signed a memorandum of understanding with the International Integrated Reporting Council, (IIRC), which: ‘demonstrates the common interest of both organisations in improving the quality and consistency of global corporate reporting to deliver value to investors and the wider economy’. An ebullient Paul Druckman, CEO of the IIRC, said: ‘creating a new corporate reporting language that better serves business and investors, and contributes to a more sustainable global economy will be the ultimate prize’.

EFRAG Update - February 2013 issue

06 Mar 2013

The European Financial Reporting Advisory Group (EFRAG) has released the February 2013 issue of its EFRAG Update newsletter summarising the discussions held at the EFRAG TEG meeting of 28 February to 1 March 2013 and EFRAG TEG conference calls held on 29 January and 12 February 2013.

EFRAG endorsement status report

05 Mar 2013

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 reflects the endorsement by the European Commission of the amendments to IFRS 1 for government loans.

On 4 March 2013, the European Union issued a commission regulation which resulted in the endorsement of Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards — Government Loans. The amendments to IFRS 1 are now incorporated into European law. The EFRAG has updated its endorsement status report to reflect the EU's decision.

Please click for the EFRAG Endorsement Status Report as of 5 March 2013.

Agenda for the March 2013 meeting of IASB representatives with the Global Preparers Forum

05 Mar 2013

The tentative agenda is now available for the meeting of IASB representatives with the Global Preparers Forum, which is being hosted by the IASB in London on 11 March 2013.

The agenda is summarised below.

Monday, 11 March 2013 (09:30-17:00)

Agenda papers from this meeting are available on the IASB's website.

EU formally adopts amendments to IFRS 1

05 Mar 2013

The European Union has published a Commission Regulation endorsing the amendments to IFRS 1 regarding government loans published by the IASB on 13 March 2012.

The European Union has published the Commission Regulation (EC) No 183/2013 of 4 March 2013 amending Regulation (EC) No 1226/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council in the Official Journal on 5 Mach 2013. This means that the amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards published by the IASB on 13 March 2012 have now been incorporated into European law.

This amendment addresses how a first-time adopter would account for a government loan with a below-market rate of interest when transitioning to IFRSs. It also adds an exception to the retrospective application of IFRS, which provides the same relief to first-time adopters granted to existing preparers of IFRS financial statements when the requirement was incorporated into IAS 20 in 2008.

The amendments to IFRS 1 must be applied, at latest, to annual periods beginning on or after 1 January 2013.

IASB publishes further editorial corrections

05 Mar 2013

The International Accounting Standards Board (IASB) has published its first batch of editorial corrections for 2013. The editorial corrections are in respect of the 2013 IFRS 'Blue Book' and remove incorrect references to IFRS 9 'Financial Instruments'. The IASB has issued an 'Blue Book errata' in addition to its usual compilation of editorial corrections which are published three times each year.

The 2013 IFRS 'Blue Book' consolidates all new standards and amendments to International Financial Reporting Standards (IFRS) which are applicable on 1 January 2013, but without early application of other standards and amendments that apply in later periods.

Due to the deferral of the mandatory effective date of IFRS 9 to annual reporting periods beginning on or after 1 January 2015, the 2013 IFRS 'Blue Book' should not contain references to IFRS 9.  The Blue Book 2013 errata removes these references and replace them with equivalent references and other requirements related to IAS 39 Financial Instruments: Recognition and Measurement.

The compilation of editorial corrections includes the following:

  • consequential amendments that should have been included in the stand-alone Standards at the time of publication. These corrections will need to be made to either 2012 IFRS (Red Book), A Guide through IFRS 2012 or 2013 IFRS (Blue Book), or all of them
  • notification that an Error Note was issued in January 2013 to correct the Exposure Draft Recoverable Amount Disclosures for Non-financial Assets (separately available on the IASB website)
  • notification of minor changes made to the content of the Illustrative examples to accompany IFRS 13 Fair Value Measurement Unquoted equity instruments within the scope of IFRS 9 Financial Instruments (separately available on the IASB website)
  • editorial corrections to various individual publications, which may need to be made to 2012 IFRS (Red Book), A Guide through IFRS 2012 (Green Book) and 2013 IFRS (Blue Book)
  • editorial corrections to 2012 IFRS (Red Book), A Guide through IFRS 2012 and 2013 IFRS (Blue Book) as a consequence of errors that were made when compiling those volumes.

Click for the following on the IASB website:

IIRC and GRI agree to cooperate

04 Mar 2013

The International Integrated Reporting Council (IIRC) and the Global Reporting Initiative (GRI) have announced that they have entered into a memorandum of understanding (MoU) which seeks to formalise the principles for ongoing cooperation, coordination and alignment between the two organisations.

The MoU seeks to assist both organisations in reaching their mutual interests, which include the following:

  • Efforts to promote the global harmonisation and clarity of corporate reporting frameworks, standards and requirements
  • The development of their respective reporting frameworks, guidelines and standards
  • Transparency and sharing of relevant and significant information.

The MoU follows similar agreements with the International Federation of Accountants (IFAC) announced in October 2012, and International Accounting Standards Board (IASB) announced in February 2013.

The MoU is effective from the date of signing on 1 February 2013 until 30 September 2014, but may be extended by mutual agreement.

Click for:

MASB outlines new private entities financial reporting framework

02 Mar 2013

The Malaysian Accounting Standards Board (MASB) has issued a roadmap outlining a new financial reporting framework for private entities. The roadmap proposes a framework that sees private entities transitioning to the MASB’s ‘Financial Reporting Standards for Small and Medium-sized Entities’ (FRS for SMEs). The FRS for SMEs is expected to be issued during the first half of 2013 and be effective for annual periods beginning on or after 1 January 2016. The FRS for SMEs is virtually identical to the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) as issued by the IASB in July 2009.

Currently, private entities are using either the MASB’s Private Entity Reporting Standards (PERS) or the Malaysian Financial Reporting Standards (MFRSs), which are equivalent to IFRSs, for their financial reporting. In the roadmap, the MASB proposes an outline for a differential reporting regime for private entities, which requires medium-sized private entities (annual revenue at or above RM500,000) to use the FRS for SMEs and all other private entities that do not meet the criterion of a medium-sized entity to continue to use the existing PERS framework. Both medium- and micro-sized private entities would still have the option to use full MFRSs.

The IASB is currently developing guidance suitable for micro-sized entities that are applying IFRS for SMEs. When the guidance becomes available, the MASB will evaluate and consider if changes need to be made to its policy decision on micro-sized entities.

Comments for the questions raised in the roadmap are due by 6 May 2013.

The press release and the roadmap are available on the MASB website:

Monitoring Board announces final membership criteria and processes for review of existing members and selection of new ones

01 Mar 2013

The Monitoring Board of the IFRS Foundation today announced the successful conclusion of its assessment approach for the membership criteria of the Monitoring Board. The criteria will be used in the selection of new members and in the periodic review of existing members that will take place every three years. At the same time, the Monitoring Board announced the appointment of Masamichi Kono, current Acting Chair of the Monitoring Board, to serve as its Chairman.

The Monitoring Board's Final Report on the Review of the IFRS Foundation's Governance published in February 2012 identified a number of enhancements to the governance framework including expanding the Monitoring Board’s membership and beginning periodic assessments of the members against membership criteria yet to be developed. The criteria and the assessment processes were finalised at the Monitoring Board’s 6 February 2013 meeting.

The main focus of the membership criteria is the use of IFRSs with some quantitative and qualitative additional aspects:

  • The jurisdiction has made a clear commitment to IFRSs and promotes global acceptance of a single set of high quality international accounting standards. It mandates or permits the application of IFRSs to consolidated financial statements of companies raising capital in its relevant market.
  • The IFRSs to be applied are essentially aligned with IFRSs developed by the IASB.
  • The jurisdiction can be regarded a major market for capital-raising in the global context.
  • The jurisdiction makes financial contributions to the setting of IFRSs on a continuing basis.
  • The jurisdiction has in place and in operation a robust enforcement mechanism.
  • The relevant national or regional standard-setting body actively contributes to the development of IFRSs.

These criteria will be applied in selecting new members. This process will begin in 2013. Candidate not meeting certain criteria, but demonstrating clear commitment to do so can be invited for reapplication.

Additionally, a periodic review of existing members will take place every three years, beginning in 2013. Eligibility of continued Monitoring Board membership will be assessed against the criteria with due consideration of the evolution over time towards full compatibility with all criteria. If an existing member is found not to be fully or materially meeting the criteria, its voting rights could be suspended and at worst its membership could be revoked.

The members of the Monitoring Board currently include the US Securities and Exchange Commission (SEC). Although the application of IFRSs by domestic companies is not permitted in the United States, the SEC does permit application of IFRSs in consolidated financial statements of companies raising capital in its relevant market (foreign private issuers) and the US market is a major market for capital-raising. Behind the EU and Japan is also the third largest contributor to the IFRSF funding, the SEC’s enforcement is robust and the FASB as the national standard-setter continues to be committed to contributing to the development of high-quality IFRSs. The decision whether this means the SEC fully meets the membership criteria rests with the other Monitoring Board members and will have to be taken during the periodic review of the existing members.

Please click for access to the press release on the Monitoring Board website.

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.