Russell Golden outlines priorities for the FASB

31 May 2013

In a speech delivered at the 32th Annual SEC and Financial Reporting Institute Conference in Pasadena, California on 30 May, upcoming Financial Accounting Standards Board (FASB) Chairman Russell Golden presented his views on the FASB’s current and future tasks.

Mr Golden commented on the FASB’s and IASB’s convergence projects, noting that they are “critically important” and a top priority. The FASB’s current plan is to issue (1) a standard on revenue recognition in the coming months, (2) two financial instruments standards in early 2014 (on classification and measurement and on impairment), and (3) standards on leasing and insurance sometime in 2014. Mr Golden also explained that shortly after issuing each standard, the FASB will create a "transition resource group" to facilitate implementation of the standards. The groups will focus on issues related to education, amendments, and interpretation and will include FASB and IASB members as well as representatives from preparer, auditor, and investor communities.

In addition, Mr Golden discussed the new Accounting Standards Advisory Forum (ASAF) and how the FASB’s membership in the ASAF will help advance the convergence process.

Regarding the FASB’s future agenda items, Mr Golden noted that the Financial Accounting Standards Advisory Council has published a survey seeking information from stakeholders on what projects they believe the FASB should prioritise. Possible projects include disclosure framework, hedging, pension accounting, and liabilities and equity. Further, the FASB will continue to work with the Private Company Council to address the needs of users of private company financial statements.

Lastly, Mr Golden stated that in response to feedback from stakeholders about the FASB Accounting Standards Codification, the FASB plans to “conduct an analysis of areas where the codification may be improved.” The focus of the analysis will be to improve on how changes to the codification are written and communicated and “to rewrite some of the more confusing sections” (the FASB is presently rewriting the Liabilities and Equity sections).

The full text of the speech is available on the FASB website.

FASB responds to post-implementation review of business combinations accounting

31 May 2013

The Financial Accounting Standards Board (FASB) has issued a response that evaluates the outcome of the Financial Accounting Foundation’s (FAF) Post-Implementation Review (PIR) of FASB Statement No 141(R), ‘Business Combinations’ (codified in FASB Accounting Standards Codification, Topic 805).

The report notes the following challenges faced by companies in adopting the new standard: “(1) applying the definition of a business, (2) accounting for purchased loans, and (3) separately reporting some intangibles and goodwill.” The FASB has noted that it will consider these findings while working on other ongoing projects.

The PIR findings also note that companies experienced issues implementing FASB Statement No. 157, Fair Value Measurements, to certain types of assets and liabilities acquired in a business combination. The FASB also noted that it will decide on starting any additional standard-setting activities after the upcoming PIR on Statement 157 is available and it has an opportunity to work with the IASB once the review of IFRS 3 is complete. The FASB will continue to keep the FAF’s Oversight Committee and the Board of Trustees updated of any progress that is made.

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ICAA report calls for public sector accounting standard reform

31 May 2013

The Institute of Chartered Accountants in Australia (ICAA) has released a report calling for reform of global public sector reporting, including the 'transformation' of the International Public Sector Accounting Standards Board (IPSASB) and the integration of the private and public sector financial reporting models under the auspices of the IFRS Foundation, possibly eventually leading in the longer term to a potential merger of the IPSASB and International Accounting Standards Board (IASB).

The report, It’s time...for global, high quality public sector financial reporting, notes an "emerging consensus of the need for improvements in the quality of financial reporting by governments and their agencies around the world" (such as the February 2013 meeting of the G20 financial ministers and central bank governors), and points out that the IPSASB has a key role to play.

The report sets out a vision of "high-quality, transaction-neutral, global financial reporting standards that are applied by reporting entities in the private and public sectors around the world". It argues that the IASB is a role model for the possible approach to reform of the public sector reporting focused on a 'transformed' IPSASB.

The report recommends the IPSASB should be restructured and adequately resourced, and that it operate in an environment where it can act, and be perceived to act, independently. It notes:

  • the possibility of placing the IPSASB within the scope of the Public Interest Oversight Board (PIOB) of the International Federation of Accountants (IFAC) may not be sufficient to ensure the perception of independence exists
  • the majority of members of the IPSASB should be appointed on a full-time basis, mirroring the process that occurred when the International Accounting Standards Committee (IASC) was reconstituted as the IASB
  • a new resourcing model is necessary, as the current level of funding is inadequate to maintain a full-time professional staff, follow an adequate due process, and ensure liaison with constituents.

In terms of the possibility moving toward 'transaction neutral' standards, the report states:

Some have interpreted transaction-neutral accounting standards as meaning that identical standards would apply to entities in both sectors or that private sector standards should apply to public sector entities. This is a misunderstanding of the notion of transaction-neutral standards.

Transaction-neutral standards should reflect the nature of the transactions and other events affecting the entity in question. For example, a for-profit entity (whether in the private or public sector) acquires and uses assets to generate profits for stakeholders... [whereas] a not-for-profit entity (whether in the private or public sector) acquires and uses assets to provide needed goods and services in accordance with its service delivery objective, not to directly generate future cash flows. ... The impairment standards should be the same for for-profit entities in either sector but different from the impairment standards for not-for-profit entities in either sector

To achieve such an outcome, it is acknowledged that a transaction-neutral conceptual framework would be a necessary base for standard setting.

The report considers possible approaches to developing the vision, including creating a completely new body, adopting the standards of a countries as the base for new standards, and a global standard setter established and funded by governments. It concludes:

... we believe the IFRS Foundation course of action, which would involve bringing the IPSASB into the IFRS Foundation, would be a more efficient strategy and would be more likely to be successful in achieving the vision.

The report recommends the following steps to implement this preferred course of action:

  • Amending the IFRS Foundation Constitution to include development of standards for the public sector, and the transaction neutral standard concept
  • Adding members from the public sector to the IFRS Monitoring Board and IFRS Foundation Trustees (ideally equal public and private representation)
  • Reconstituting the IPSASB with a smaller number of full-time members, with consideration in the longer term of merging the IASB and IPSASB, "after the transition to the modified IFRS Foundation has occurred and the two boards have been successfully pursuing their mandates"
  • Enlarging the IFRS Foundation's funding model to include contributions from public sector constituents.

Click for access to the report (link to the ICAA website).

Latest IASB work plan tweaks delivery timeframes for a number of projects

31 May 2013

The International Accounting Standards Board (IASB) has updated its work plan, following its recent meeting and the issue of a number of pronouncements. The timing of expected milestones have been deferred or clarified in relation to general hedge accounting, annual improvements and other narrow scope projects. Following the issue of the re-exposed leases proposals, the work plan formally schedules the expected commencement of redeliberations in the fourth quarter of 2013.

Summary of changes

Details of the changes are:

Updates to major projects

Updates to narrow-scope projects

  • Annual improvements 2010-2012 — target date for the final amendments arising from this cycle has been moved to the fourth quarter of 2013 (previously third quarter of 2013).  This now means that all outstanding annual improvements cycles will have their next due process document issued in the fourth quarter (i.e. finalised amendments for the 2010-2012 cycle and 2011-2013 cycle, and an exposure draft on the 2012-2014 cycle)
  • IAS 1 – Going concern disclosures — exposure draft is now expected in the fourth quarter of 2013 (previously third or fourth quarter of 2013)
  • IFRS 13 – Unit of account — target date for the exposure draft is now the third quarter of 2013 (previously second quarter of 2013)

Projects where due process documents are expected in the second quarter include an exposure draft on insurance contracts, a discussion paper on the conceptual framework project, a published report on the post-implementation review of IFRS 8 and finalised amendments on the novation of derivatives.  In addition, an exposure draft of proposed amendments to IAS 41 Agriculture on bearer plants is expected to be issued in the second or third quarter of 2013.

Click for IASB work plan dated 30 May 2013 (link to IASB website). We have updated our project pages to reflect the updated work plan and other known developments.

Updated EFRAG endorsement status report

30 May 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 publication of 'Recoverable Amount Disclosures for Non-Financial Assets' (Amendments to IAS 36) by the IASB.

On 29 May 2013, the IASB published amendments to IAS 36 which provided guidance to address disclosure about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal. The EFRAG has therefore updated its endorsement status report. Endorsement of these of the amendments for application in Europe might be expected in the first quarter of 2014.

Please click for the EFRAG Endorsement Status Report as of 30 May 2013.

Agenda for upcoming IFRS Advisory Council meeting

30 May 2013

The IFRS Advisory Council is meeting in London on 10-11 June 2013. The agenda for the meeting has recently been made available. Topics to be discussed include the costs and benefits of IFRS adoption, project updates and discussion on various IASB projects, an evaluation of the post-implementation review process, the Accounting Standards Advisory Forum (ASAF), and the role and composition of the IFRS Advisory Council.

The full agenda for the meeting (as of 28 May 2013) is summarised below:


Monday, 10 June 2013

Public sessions (09:15-17:30)

  • Welcome and Chairman's preview
  • Overview of the last four months
  • IASB activities - work plan update, project update, implementation, other activities
  • Update on Trustee activities
  • Costs and benefits of IFRS adoption:
    • IFRS country profiles
    • Korean research
    • CERF/AcSB survey
  • Conceptual framework - project update
  • Review of IFRS for SMEs:
    • Project update
    • 'Proportionality' for small/mid-cap public companies
    • Breakout discussions
  • Post implementation reviews
    • Usefulness in IASB/IFRS Foundation meeting its strategic objectives
    • Coordination with FAF on converged standards


Tuesday, 11 June 2013

Public sessions (09:00-15:00)

  • Accounting Standards Advisory Forum (ASAF)
  • Role and composition of the IFRS Advisory Council
    • Workgroup update
    • XBRL overview
    • Should XBRL Advisory Council and IFRS Advisory Council be merged?
    • Other trends and developments that may have a significant impact
  • Financial instruments - classification and measurement
  • Insurance contracts
  • Sum up of discussion


Agenda papers from this meeting have not yet been released, but will be made available on the IASB's website prior to the meeting.  Deloitte observer notes from the meeting will be made available on our agenda page for this meeting.

Agenda for upcoming joint CMAC-GPF meeting

30 May 2013

Representatives from the International Accounting Standards Board (IASB) will meet with both the Capital Markets Advisory Council (CMAC) and Global Preparers Forum (GPF) in London on Thursday, 13 June 2013. The agenda for the joint meeting has been released. The meeting will consist of a series of discussions and breakout sessions on disclosure, financial performance and leases.

The full agenda for the meeting (as of 28 May 2013) is summarised below:


Thursday, 13 June 2013 (9:30-17:00)

  • Welcome and general IASB/IFRIC Update
  • Disclosures - introduction and breakout session
    • GAAP vs NON-GAAP (totals, subtotals and potential disclosures)
    • Significant accounting policies
    • Detailed disclosure requirements vs. objectives
  • Financial performance - introduction and breakout session
    • The attributes of financial performance
    • What is profit/loss and other comprehensive income (OCI), and is recycling appropriate?
  • Leases - introduction and breakout session
    • Lease accounting: two types of leases
    • Disclosure of lease transactions


Agenda papers from this meeting have not yet been released, but  will be made available on the IASB's website prior to the meeting.

Japan's Business Accounting Council discusses specifics of initiatives to promote use of IFRSs in Japan

29 May 2013

Japan’s Business Accounting Council (BAC) met on 28 May 2013 to continue its deliberations about the use of International Financial Reporting Standards (IFRSs) in Japan. No decisions were made during the meeting while the BAC took another step toward concluding the debate.

Following on from the previous BAC meeting in April, the BAC focused on details of three specific initiatives to further promoting use of IFRSs in Japan.

The first initiative is easing eligibility to use of IFRSs voluntarily. The Financial Services Agency (FSA) official suggested permitting use of IFRSs by companies newly going to public as well as companies that do not own a foreign subsidiary with 20 billion yen or more of the stated capital, while retaining some other criteria such as one on entity’s readiness to use IFRSs. BAC members asked questions and made comments on this initiative but no critical new concern was expressed.

The second initiative is introduction of the 4th framework of accounting standards (in addition to Japanese GAAP, designated IFRSs, and USGAAP) that are to be developed through a new “endorsement” process. Handouts for the meeting suggests following three endorsement criteria and related specific subjects that may lead to modification from IFRSs in the process, as well as an idea to use ASBJ, the national accounting standard setter in Japan, as the endorser:

  • Conceptual disagreement eg. non-recycling of OCI & non-amortisation of goodwill
  • Practical burden eg. fair valuation of non-listed shares
  • Coordination with related institutions etc. (application is difficult or too costly in light of industry regulations) eg. unification of fiscal year-ends among group companies and affiliates

Similar to the previous BAC meeting, members are not necessarily supportive of introducing the 4th framework in near future as the additional set of accounting standards that an entity can voluntarily use. There were more questions and concerns expressed by members than voices supportive of suggested initiative. Even among those supportive (mostly limited to preparers), there were comments such that a) modifications to IFRS, if any, should be further limited than proposed in the handout, for example, only to non-recycling, and b) discussions around problems in IFRSs should be more internationally-oriented, rather than being discussed in local/domestic endorsement process. On the endorser, no member fundamentally disagreed with involving the ASBJ and some noted that the FSA should also be responsible.

On the third initiative of streamlining local disclosure requirements of separate financial statements in accordance with Japanese GAAP, the FSA official suggested to replace certain disclosures required under the Financial Instruments and Exchange Act with similar ones under the Companies Act where consolidated financial statements already provide information on a group basis, except for regulated industries for which other industry regulators are to be consulted. Again, similar to the previous BAC meeting, members were sharply divided. Generally, members representing users expressed concern about losing information while prepares showed a strong support of the initiative.

In closing the meeting, the chairman of the BAC noted that, at the next meeting, the BAC would conduct deliberations to finalise this round of debates, based on a summary paper to be provided by the FSA.

Handouts for the meeting are available on the FSA’s website (Japanese only). The next meeting date has not yet been announced.

IASB amends IAS 36 regarding recoverable amount disclosures for non-financial assets

29 May 2013

The International Accounting Standards Board, as a consequential amendment to IFRS 13 'Fair Value Measurement', modified some of the disclosure requirements in IAS 36 'Impairment of Assets' regarding measurement of the recoverable amount of impaired assets. However, one of the amendments potentially resulted in the disclosure requirements being broader than originally intended. The IASB has rectified this through the issue of 'Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36)'.

Exposure Draft ED/2013/1 Recoverable Amount Disclosures for Non-Financial Assets (Proposed amendments to IAS 36) was published on 18 January 2013. The amendments published today result from the proposals of the ED and the feedback received on it.

The amendments to IAS 36:

  • remove the requirement to disclose the recoverable amount of each cash-generating unit (group of units) for which the carrying amount of goodwill or intangible assets with indefinite useful lives allocated to that unit (group of units) is significant when compared to the entity’s total carrying amount of goodwill or intangible assets with indefinite useful lives
  • require an entity to disclose the recoverable amount of an individual asset (including goodwill) or a cash-generating unit for which the entity has recognised or reversed an impairment loss during the reporting period
  • require an entity to disclose additional information about the fair value less costs of disposal of an individual asset, including goodwill, or a cash-generating unit for which the entity has recognised or reversed an impairment loss during the reporting period, including:
    • the level of the fair value hierarchy (from IFRS 13) within which the fair value measurement is categorised
    • the valuation techniques used to measure fair value less costs of disposal
    • key assumptions used in the measurement of fair value measurements categorised within 'Level 2' and 'Level 3' of the fair value hierarchy
  • require an entity to disclose the discount rate used, where an entity has recognised or reversed an impairment loss during the reporting period and recoverable amount is based on fair value less costs of disposal determined using a present value technique (this amendment originated in the 2010-2012 cycle of annual improvements in the exposure draft published in May 2012).

The overall effect of the amendments is to reduce the circumstances in which the recoverable amount of assets or cash-generating units is required to be disclosed, clarify the disclosures required, and to introduce an explicit requirement to disclose the discount rate used in determining impairment (or reversals) where recoverable amount (based on fair value less costs of disposal) is determined using a present value technique.

Constituent comment on the original proposals was overall supportive of the amendments. One notable change from the exposure draft is the removal of the proposed illustrative example, responding to constituent concern about its usefulness and the potential for confusion, and in light of existing examples in IFRS 13. Other constituent comments around inconsistencies in the use 'costs to sell' and 'costs of disposal' have been referred to the IFRS Interpretations Committee for possible consideration as an annual improvement.

The amendments apply on a retrospective basis for annual periods beginning on or after 1 January 2014. An entity may apply the amendments earlier to any period in which it also applies IFRS 13.

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IASB releases Feedback Statement on disclosure

28 May 2013

The International Accounting Standards Board (IASB) has published a Feedback Statement summarising the discussions at a forum hosted by the IASB on financial information disclosure, and outlining its response to the matters raised. The IASB wishes to act as a catalyst for collective action by preparers, regulators, the accounting profession, as well as the IASB, to address ongoing concerns about the quality and quantity of financial reporting disclosure. In its response, the IASB has indicated it will consider a number of initiatives, including narrow scope amendments to IAS 1 'Presentation of Financial Statements', seeking to develop educational material on materiality, and considering a project as part of its research agenda to address broader challenges associated with disclosure.

The disclosure discussion forum was held in London on 28 January 2013 and sought to foster dialogue between preparers, auditors, regulators, users of financial statements and standard-setters. The key objective of the forum was to get a clearer picture of the ‘disclosure problem’ and its causes, and involved around 120 people, mainly from the United Kingdom, but also involving representatives from wider Europe, the United States and Asia-Oceania.

Feedback Statement contains a summary of the discussions, the IASB's response, a summary of work already undertaken on disclosure, and the outcomes of the IASB's survey on disclosure launched in December 2012. The IASB states that the discussion forum makes it clear that users, preparers, standard-setters, auditors and regulators all contribute to the perceived problems about disclosure, and that each of these parties can contribute to improvements.

The Feedback Statement notes some of the steps that the IASB will be asked to consider in the near and medium term to take the lead in improving disclosure, relating to materiality, perceptions existing standards prevent the exercise of judgement, and a more general review of disclosure requirements.

In this regard, the key responses the IASB intends to consider are as follows:

Short term

  • Narrow scope amendments to IAS 1 - this will be considered by the IASB in the second half of 2013, and will look at proposals such as:
    • adding an explanation in IAS 1 similar to more recent standards explaining that too much detail can obscure useful information, i.e. why materiality should "filter out entity-specific information that is not relevant to the users of the financial statements of a particular entity"
    • clarifying that materiality applies to the whole financial statements and that information which is not material need not be presented in the primary financial statements or disclosed in the notes
    • clarifying that some disclosures specified in standards are simply not important enough to justify separate disclosure for a particular entity
    • making it clear that preparers should exercise judgement in presenting their financial reports
    • remove the perception of a 'normal order of presentation' of financial statements, making it easier for entities to provide more contextual and holistic information
    • reducing restrictions on how accounting policies should be presented, allowing important accounting policies to be given greater prominence in financial reports
    • adding additional explanations with examples of how IAS 1 requirements are designed to shape financial statements instead of specifying precise terms that must be used, including whether subtotals of IFRS numbers such as EBIT (earnings before interest
      and tax) and EBITDA (earnings before interest, tax, depreciation
      and amortisation) should be acknowledged in IAS 1)
    • adding a requirement that entities disclose and explain their net debt reconciliation
  • Educational material on materiality - the IASB plans to start a project on materiality with a view to creating either general application guidance or education material. Such a project will look at how materiality is applied in practice and whether more guidance should be added to IAS 1. This project will be started in the second half of 2013
  • Disclosure requirements in new exposure drafts - the IASB intends to draft future exposure drafts using less prescriptive language, and have clear disclosure objectives, whilst avoiding requirements that would affect the auditability of the standards. The IASB also considers that it has already "made considerable progress in this regard in its recent Standards".

Medium term

  • Research project on disclosure - the IASB will be asked to commence a research project reviewing IAS 1, IAS 7 and IAS 8, with the goal of replacing all of those standards and 'in essence' creating a disclosure framework. This work may build on the IASB's previous work on the financial statement presentation project (suspended in 2010), and consider how this project might be developed in parallel with the work on the Conceptual Framework project
  • Review of existing disclosure requirements - a systematic review of all existing standards may be undertaken in light of the revised Conceptual Framework and any work arising from the research project on disclosure. The IASB has signalled that it intends to consider whether there are ways to accelerate this standards-level review of general disclosure requirements, notwithstanding a preference to complete its work on disclosure principles as part of its Conceptual Framework project (although any disclosure related principles developed will not have a direct effect on current disclosure requirements). The review is expected to be undertaken over the next two years.

The Feedback Statement also indicates an intention to develop additional outreach events, and briefly discusses broader issues such as technology, the impact of disclosures on smaller listed entities, country-by-country reporting, and integrated reporting.

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