April

Updated EFRAG endorsement status report

05 Apr 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 amended IFRS 10 transition guidance.

On 4 April 2013, the European Commission endorsed the amendments made by the IASB in June 2012 that were intended help to alleviate concerns that the transitional requirements of IFRS 10 Consolidated Financial Statements were more burdensome than had been intended. The amendments are now incorporated into European law. The EFRAG has updated its endorsement status report to reflect the EC's decision.

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

European Union formally adopts amended IFRS 10 transition guidance

05 Apr 2013

The European Union has published a Commission Regulation endorsing ‘Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance’ (Amendments to IFRS 10, IFRS 11 and IFRS 12).

The European Union has published the Commission Regulation (EC) No 313/2013 of 4 April 2013 amending Regulation (EC) No 1126/2008 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 April 2013. This regulation adopts the amendments made by the IASB in June 2012 that were intended help to alleviate concerns that the transitional requirements of IFRS 10 Consolidated Financial Statements were more burdensome than had been intended.

The amendments have been given a European effective date of 1 January 2014 but can be applied earlier, so companies can decide to apply at the IASB effective date (1 January 2013). This is in line with the strategy chosen when adopting the standards themselves in December 2012.

Apart from IFRS 9 (endorsement postponed), there is currently only one IASB pronouncement awaiting endorsement in the European Union: Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27). Endorsement of that pronouncement is currently expected in the third quarter of 2013.

Deloitte comment letters on recent tentative agenda decisions of the IFRS Interpretations Committee

05 Apr 2013

Deloitte’s IFRS Global Office has submitted comment letters to the IFRS Interpretations Committee (Committee) on three tentative agenda decisions published in the January 2013 edition of 'IFRIC Update', in relation to IAS 7, IAS 28 and IFRS 3, and IFRS 2.

In each case, we agree with the IFRS Interpretations Committee’s decision not to add the items onto its agenda for the reasons set out in the tentative agenda decision.   However, we offer some minor suggestions on two of the tentative agenda decisions.

The three issues are as follows:

TopicIssueMore information
IAS 7 — Identification of cash equivalents The basis of classification of financial assets as cash equivalents in accordance with IAS 7 Statement of Cash Flows, specifically whether this should be based on remaining period to maturity as at the balance sheet date rather than the current focus on the investment’s maturity from its acquisition date

Deloitte comment letter

January Committee meeting discussions

IAS 28 & IFRS 3 — Associates and common control Whether it is appropriate to analogise the scope exemption for business combinations under common control included in IFRS 3 to the acquisition of an interest in an associate or joint venture under common control

Deloitte comment letter

January Committee meeting discussions

IFRS 2 — Timing of recognition of intercompany recharges Clarification on the timing of recognition of a liability in relation to intragroup recharges made in respect of share-based payments, particularly in the specific fact pattern in which the parent company of an international group grants share-based awards to the employees of its subsidiaries.

Deloitte comment letter

January Committee meeting discussions

ESMA publishes more enforcement decisions

04 Apr 2013

The European Securities and Markets Authority (ESMA) has published another batch of extracts from its confidential database of enforcement decisions taken by European national enforcers. This batch deals with decisions in relation to IAS 16, IAS 36, IAS 38, IAS 39, IAS 8/IAS 40, IAS 24/IAS 34, IFRS 7/IAS 39, IFRS 3, and IFRIC 12.

The European national enforcers of financial information monitor and review financial statements published by issuers with securities traded on a regulated European market and who prepare their financial statements in accordance with International Financial Reporting Standards (IFRS) and consider whether they comply with IFRS and other applicable reporting requirements, including relevant national law.

ESMA has developed a confidential database of enforcement decisions taken by individual European enforcers as a source of information to foster appropriate application of IFRS.

The publication of enforcement decisions is designed to inform market participants about which accounting treatments European national enforcers may consider as complying with IFRS, i.e. whether the treatments are considered as being within the accepted range of those permitted by IFRS. ESMA considers the publication of the decisions, together with the rationale behind them, will contribute to a consistent application of IFRS in the European Union.

Topics covered in the latest batch of extracts, thirteenth in the series, include:

StandardTopic
IAS 39 Financial Instruments: Recognition and Measurement Recognition of financial expense on financial liabilities measured at amortised cost
IAS 38 Intangible Assets Intangible assets with indefinite useful life
IFRIC 12 Service Concession Arrangements Presentation of revenue and expenses related to service concession arrangements
IAS 36 Impairment of Assets Value in use calculation
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and IAS 40 Investment Property Assessment of materiality of an error
IAS 24 Related Party Disclosures and IAS 34 Interim Financial Reporting Related party disclosures in interim financial statements
IFRS 3 Business Combinations Definition of a business
IFRS 7 Financial Instruments: Disclosures and IAS 39 Financial Instruments: Recognition and Measurement Disclosures related to fair value of financial instruments
IAS 36 Impairment of Assets Discount rate in value in use calculation
IAS 16 Property, Plant and Equipment Residual value of property

Click for access to the full report.

ESMA fears scope restriction might dis-incentivise the novation of certain derivatives

04 Apr 2013

The European Securities and Markets Authority (ESMA) has submitted a letter of comment responding to the IASB exposure draft 'Novation of Derivatives and Continuation of Hedge Accounting' (ED/2013/2).

In the comment letter ESMA supports the proposal in ED/2013/2 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 certain criteria are met. However, ESMA believes that the criterion "required by laws or regulations" is unnecessary restrictive and might dis-incentivise voluntary novation. This would run counter to the aim of the European Market Infrastructure Regulation (EMIR) and similar regulations in other jurisdictions that are intended to implement the G20's agreed reforms around over the counter (OTC) derivatives designed to reduce counter-party risks in general.

The comment letter states:

Nevertheless, ESMA is concerned that the scope of the proposed amendment could be unnecessarily restrictive by limiting the exception only to those novations that result from legislation explicitly mandating the use of central counterparties for existing derivative contracts. [...] Given the benefits by the system of clearing derivatives through central counterparties from a counterparty risk point of view voluntary clearing of some other existing derivatives through a central counterparty should not be dis-incentivesed, even if not mandatorily required. [...] Accordingly, ESMA is of the view that existence of an explicit clearing obligation required by law and regulation should not be a pre-condition for the continuation of the hedging relationship, provided all other proposed conditions are met.

Please click for access to the full comment letter on the ESMA website.

Deloitte comment letters on acceptable methods of depreciation and novation of derivatives EDs

02 Apr 2013

Deloitte's IFRS Global Office has submitted letters of comment responding to the IASB exposure drafts 'Novation of Derivatives and Continuation of Hedge Accounting' (ED/2013/2) and 'Clarification of Acceptable Methods of Depreciation and Amortisation' (ED/2012/5).

In the comment letter for ED/2013/2,  we agree that an amendment to IAS 39 and to IFRS 9 is necessary to address the effects on hedge accounting relationships of regulations in major capital markets including the U.S. and the European Union and, potentially, future regulations elsewhere leading to novation of derivatives to a central clearing function. We do not, however, agree that the scope of the amendment should be limited to novations required by such regulations as that would not capture the many novations that are likely to be heavily encouraged or incentivised by governments or regulators without being formally required. We do not believe that entities that novate contracts in anticipation of such legislation becoming effective should be disadvantaged.

More information and the full Deloitte comment letter can be found here.

The comment letter for ED/2012/5, we agree with the general prohibition of a revenue-based method of depreciation or amortisation for the reasons expressed in the exposure draft. However, we recommend that the Board provide additional clarity on circumstances in which a revenue figure might form part of the calculation of depreciation or amortisation under the diminishing balance or units of production method.

More information and the full Deloitte comment letter can be found here.

FASB proposes amendments to discontinued operations

02 Apr 2013

The US Financial Accounting Standards Board (FASB) has issued Proposed Accounting Standards Update (ASU) 'Presentation of Financial Statements (Topic 205): Reporting Discontinued Operations'. The proposal intends to improve financial reporting concerning discontinued operations and significantly converge the definition of discontinued operation with IFRS 5.

The proposed guidance is intended to address the FASB’s concerns that (1) “too many asset disposals that are recurring in nature qualify for being presented as discontinued operations, resulting in financial statements that are not decision-useful” and (2) “the current rules are difficult to apply and unnecessarily costly.”

In addition, the amendments will require entities to include "additional disclosures about discontinued operations and other disposals of individually material components . . . that do not qualify for discontinued operations presentations in the financial statements."

Comments are due by 30 August 2013.

Click for (links to FASB website):

Conclusions on governance and strategy review of IFAC member bodies

02 Apr 2013

The Monitoring Group and Public Interest Oversight Board (PIOB) have published documents in response to their March 2012 consultation documents on the governance of various organisations operating under the auspices of the International Federation of Accountants (IFAC). The reports outline a number of recommendations in relation to the governance and strategy of the various IFAC bodies, but does not make any recommendations on the governance of the International Public Sector Accounting Standards Board (IPSASB). The Monitoring Group has formally taken the question of IPSASB oversight onto its agenda, noting "its [own] composition and that of the PIOB currently are not appropriate to the needs of stakeholders in public sector accounting standards".

Monitoring Group Statement on Governance

The members of the Monitoring Group are the Basel Committee on Banking Supervision, European Commission, Financial Stability Board (FSB), International Association of Insurance Supervisors (IAIS), International Forum of Independent Audit Regulators (IFIAR), International Organization of Securities Commissions (IOSCO), and the World Bank. One of the objectives of the Monitoring Group is to ensure appropriate public accountability of IFAC's standard-setting bodies, namely the International Auditing and Assurance Board (IAASB), the International Ethics Standards Board for Accountants (IESBA), the International Accounting Education Standards Board (IAESB) and the Compliance Advisory Panel (CAP).

The Statement on Governance outlines the following recommendations:

  • Standard-setting board meeting materials should clearly note the public interest concerns and needs identified by public constituents
  • The standard-setting boards should establish (i) procedures to ensure that all standard-setter board members are aware of and understand concerns conveyed by Monitoring Group members over the course of a standard-setting project and (ii) a mechanism for feedback to Monitoring Group members on resolution of the Monitoring Group member concern.
  • The PIOB should establish procedures to ensure that it is aware of any issues conveyed by a Monitoring Group member and other stakeholders that rely on the work of an auditor
  • The PIOB shall improve transparency of its oversight activities, to both the Monitoring Group and the public
  • The Monitoring Group is to expand its efforts to improve the quality of its discourse with the PIOB and public transparency of its activities

In relation to the question of IPSASB oversight, the Monitoring Group's consultation paper asked for constituent views on whether the IPSASB should be included within the ambit of the existing Monitoring Group/PIOB governance framework, which would see PIOB oversight of the IPSASB. However, there were divergent views on whether this approach was appropriate. In particular, concerns were expressed that in order for the Monitoring Group and PIOB to take on this role, they would need to review their own composition and size to ensure both the old and new responsibilities could be appropriately carried out, given to the current oversight focus on audit-related standards. Further comments were made around the overall structure and funding of the IPSASB.

Responding to constituent feedback, the Monitoring Group convened a roundtable in February 2013 to further discuss governance with stakeholders in public sector accounting standards. The Monitoring Group has released a summary of the roundtable in conjunction with the Statement of Governance. The summary discusses various issues surrounding the IPSASB governance, including the need for legitimacy, the nature the stakeholders to be involved in public sector standard-setting and oversight, and a lack of progress on addressing the issue. The summary also notes the IFRS Foundation has "concluded that, at this time, it will not add public sector accounting standards to its organizational remit" and the recent G20 actions in this area involving the International Monetary Fund (IMF) and World Bank.

Click for:

PIOB recommendations

The Public Interest Oversight Board (PIOB) report, PIOB recommendations in response to its consultation on the PIOB work program 2012 and beyond, provides a summary of each question asked in the PIOB's consultation, along with a summary of comments received and the PIOB's conclusions. Some of the recommendations include (reproduced from the report):

  • The PIOB will endeavour to engage stakeholders more actively with a view to enhancing its awareness of their concerns regarding standard setting in the fields under its mandate
  • The PIOB will work with IFAC and the chairs of the standard-setting boards to expand the content and use of feedback reports to enhance the transparency of due process
  • The PIOB will work with IFAC and the chair of the nominating committee to explain better the workings of the nomination process
  • The PIOB in developing its opinion on the public interest will increase its consultations with the MG as well as with a broad range of stakeholders
  • The PIOB will improve the transparency of its oversight functions: it will disclose its meeting agendas, will continue to provide summaries of its meetings in a timely manner with a better description of the decisions adopted and an indication of the discussions held, and will disseminate this information more effectively by electronically circulating a quarterly update.

Click for PIOB recommendations in response to its consultation on the PIOB work program 2012 and beyond.

Agendas for upcoming IFRS Foundation meetings

02 Apr 2013

Agendas have been released for the upcoming meeting of the IFRS Foundation Trustees and the meeting of the Monitoring Board with the IFRS Foundation Trustees, both of which are scheduled to be held in London on Thursday 11 April 2013.

The agendas for the meeting are reproduced below:

 

Thursday, 11 April 2013

Meeting of the Monitoring Board with the IFRS Foundation Trustees (09:30-11:00)

  • Update from the Monitoring Board - Monitoring Board governance review
  • Update from the IASB - Update on IASB developments, including IASB-FASB convergence projects
  • Update from the IFRS Foundation
    • Accounting Standards Advisory Forum (ASAF)
    • Update on financials
    • Funding
    • Recent Due Process Oversight Committee activities
    • Profiles project

Meeting of the IFRS Foundation Trustees (11:15-13:30)

  • Report of the IFRS Foundation Chair
  • Report of the IASB Chair and Senior Technical Directors
  • Report of the Due Process Oversight Committee

 

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