We comment on a number of tentative agenda decisions of the IFRS Interpretations Committee

31 Jul 2013

We have published our comment letters on IFRS Interpretations Committee agenda decisions on IFRS 5, IFRS 10 and IAS 32, as published in the May IFRIC Update. In each case, we agree with the Committee's decision not to add the issue to their agenda, but in some cases have suggestions for improvement on how the agenda decision could be worded.

More information about the issues is set out below:

IssueMore information
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations — Classification in conjunction with a planned IPO, but where the prospectus has not been approved by the securities regulator
IFRS 10 Consolidated Financial Statements — Effect of protective rights on an assessment of control
IAS 32 Financial Instruments: Presentation — Classification of financial instruments that give the issuer the contractual right to choose the form of settlement

You can access all our comment letters to the International Accounting Standards Board, IFRS Foundation, and IFRS Interpretations Committee here.

Summary of the July 2013 DPOC meeting

30 Jul 2013

The IASB has posted a summary of the 10 July 2013 Due Process Oversight Committee (DPOC) meeting that was held in Johannesburg during the Trustees’ meeting.

Topics discussed during the DPOC meeting were:


Update on technical activities

Updates were given on the progress of the major projects on the IASB’s work plan. Regarding classification and measurement, the DPOC noted additional discussions will be held between the FASB and IASB in their July 2013 meeting and with the Accounting Standards Advisory Forum (ASAF) in September 2013. The next step will be to perform a ‘lifecycle’ review sometime in October 2013.

For the impairment project, the DPOC discussed the preliminary views on the exposure draft on expected credit losses, which overall supported the proposals and believed the IASB should complete the project in a timely basis. The IASB representatives also believed that convergence with the FASB was not likely to be achieved. Additional discussions will be held between the FASB and IASB in their July 2013 meeting and with the ASAF in September 2013.

Other major projects discussed were hedge accounting (EU adoption of IFRS 9/effective date), macro hedging (upcoming discussion paper/timetable), leases (ED comment period), insurance contracts, and conceptual framework (discussion paper/ASAF involvement).

In addition, the DPOC received updates on implementation and maintenance projects on the IASB’s work plan, in particular, separate financial statements, disclosure requirements about the assessment of going concern, IFRIC 21 Levies, the start of the post-implementation review of IFRS 3, educational material, and XBRL.


Production and timing of Consultative and Final Documents

The DPOC was updated by the IASB on the steps to manage the workload and burden on constituents due to the large amount of publications scheduled to be issued in the second half of 2013.


Due process ‘lifecycle’ review of revenue recognition 

The DPOC received a report on the due process steps taken to date on revenue recognition. The DPOC was satisfied with the due process steps performed for the IASB to begin the final balloting of a new Standard.


Review on consultative groups

The DPOC reviewed and were satisfied that the following consultative groups were operating effectively and should be retained:

  • ASAF;
  • Emerging Economies Group (EEG);
  • Capital Markets Advisory Committee (CMAC) and Global Preparer Forum (GPF);
  • Education and Advisory Group (EAG);
  • SME Implementation Group (SMEIG);
  • XAC and XQRT;
  • Effects Analysis Consultative Group (EACG);
  • Rate-regulated Activities Consultative Group (RRACG);
  • Financial Instruments Working Group (FIWG), Insurance Working Group (IWG) and Leases Working Group (LWG);
  • Expert Advisory Panel (EAP); and
  • Valuation Expert Group (VEG).

In addition, the DPOC was informed of another group in the formative stage representing Islamic countries (Advisory Group on Sharia-compliant instruments and transactions).


Due Process Protocol

The DPOC addressed three issues: (1) the availability of comment letters, (2) the availability of meeting papers to observers, and (3) interactions with securities and prudential regulators.


DPOC web pages

The DPOC welcomed the redesign performed on the DPOC website.


Review of correspondence

No new correspondence cases were submitted since the Committee’s previous meeting in April 2013.


The DPOC is responsible for approving due process and overseeing the IASB’s compliance with due process, and reviewing the Trustees’ fulfillment of their oversight function in accordance with the Constitution of the IFRS Foundation.

A summary of the meeting is available on the IASB website.

Updated IASB work plan

29 Jul 2013

Following its recent meeting, the International Accounting Standards Board (IASB) has updated its work plan. The expected timing in the general hedge accounting standard has been extended to include the fourth quarter of 2013. Also, additional adjustments have been made to narrow scope projects, post-implementation reviews, and the conceptual framework project.

Details of the changes are:

Updates to major projects

Updates to narrow-scope projects

Updates to post-implementation reviews

  • IFRS 3 — Request for information is expected in the fourth quarter of 2013.

A Standard on revenue recognition is expected to be issued in the third quarter of 2013.

Click for IASB work plan dated 29 July 2013 (link to IASB website). We have updated our project pages to reflect the updated work plan and other known developments.

July 2013 IASB meeting notes — Part 4 (concluded)

29 Jul 2013

The IASB's meeting was held in London on 23-25 July 2013, some of it a joint meeting with the FASB. We have posted Deloitte observer notes from Thursday’s sessions on macro hedge accounting and the 2010–2012 Cycle of Annual Improvements to IFRSs.

Click through for direct access to the notes: 

Thursday, 25 July 2013

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

IPSASB publishes guidance on public sector financial statement discussion and analysis

29 Jul 2013

The International Public Sector Accounting Standards Board (IPSASB) has published a new 'Recommended Practice Guideline' (RPG) providing guidance on preparing and presenting financial statement discussion and analysis of the financial statements of public sector entities.

The release of the Recommended Practice Guideline 2 Financial Statement Discussion and Analysis (RPG 2) represents the second RPG issued by the IPSASB, and follows the recent earlier release of RPG 1 on long-term fiscal sustainability. Both RPGs are considered 'good practice', are not mandatory, and do not need to be applied in order for a public sector entity to comply with International Public Sector Accounting Standards (IPSAS).

RPG 2 is designed to encourage more public sector entities to provide financial discussion and analysis. It requires the reporting boundary and reporting period for the discussion and analysis to be the same as the financial statements themselves, be presented at least annually, and issued with the financial statements. The discussion and analysis should reflect the nature of the entity and the regulatory environment in which it operates, and be clearly identified and distinguished from the financial statements (prepared and presented in accordance with IPSAS) and other information presented in a public sector entity's annual report.

The RPG outlines that a financial discussion and analysis should include:

  • An overview of the entity’s operations and the environment in which it operates
  • Information about the entity’s objectives and strategies
  • An analysis of the entity’s financial statements including significant changes and trends in an entity’s financial position, financial performance and cash flows
  • A description of the entity’s principal risks and uncertainties that affect its financial position, financial performance and cash flows, an explanation of changes in those risks and uncertainties since the last reporting date and its strategies for bearing or mitigating those risks and uncertainties.

In some respects, RPG 2 is similar to the IASB's IFRS Practice Statement Management Commentary, but is not based upon it. The Basis for Conclusions on the RPG explains the reasons for this as follows:

In undertaking this project, the IPSASB considered, under its Process for Reviewing and Modifying IASB Documents, whether to develop guidance that was converged with Management Commentary, an IFRS Practice Statement. The IPSASB did not consider this approach to be appropriate because the users identified in the Practice Statement are investors whereas Chapter 2 of the [IPSASB] Conceptual Framework identifies different users, which results in different information needs related to the financial statements. On this basis the IPSASB decided it was important to develop guidance on financial statement discussion and analysis specific to the public sector. Financial statement discussion and analysis assists users of public sector entities’ financial statements by complementing and supplementing the financial statement explanations with insights and perspectives.

In addition, the original IPSASB proposals in ED 47 Financial Statement Discussion and Analysis, which was issued in April 2012, would have seen the issue of an IPSAS rather than an RPG.   However, in considering constituent feedback on ED 47, the IPSASB decided that on balance the ED should be developed into an RPG, and that it would consider the authority of RPG 2 in the future.

As a non-mandatory guide, RPG 2 does not have a stated effective date, but financial statement discussion and analysis should not be described as complying with the RPG unless it complies with all of its requirements. Click for IPSASB press release (link to IFAC website).

July 2013 IASB meeting notes — Part 3 (continued)

26 Jul 2013

The IASB's meeting was held in London on 23-25 July 2013, some of it a joint meeting with the FASB. We have posted Deloitte observer notes from Thursday’s sessions on contingent pricing of property, plant and equipment and intangible assets (IAS 16/IAS 38) and elimination of intercompany profits between an issuer and its joint venture (IAS 28).

IASB and FASB to create a joint revenue recognition transition resource group

26 Jul 2013

The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) have formally announced the plan to create a joint transition resource group for the upcoming revenue recognition standard. The transition group will be in charge of keeping the IASB and FASB informed on interpretive issues occurring during implementation of the standard and assist in determining what action may be needed to resolve diversity in practice.

The transition group will consist of 10 to 15 specialists, which will be announced shortly after the issuance of the revenue standard. Specialists will include financial statement preparers, auditors, regulators, users, and other stakeholders as well as IASB and FASB members.

More information on the revenue recognition transition resource group is available on the IASB website.

IAASB exposure draft proposes significant changes to audit reports

26 Jul 2013

The International Auditing and Assurance Standards Board (IAASB) has released an exposure draft which proposes changes to audit reports, including the provision of more information on how audits are performed. Among other changes, a key development would be the introduction of a 'key audit matters' section in the audit report on audits of listed entity financial statements.

The proposals in the IAASB exposure draft, entitled Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing (ISAs), follow from earlier consultation documents published in May 2011 and June 2012, which were developed after earlier research on user perceptions on auditor reports. It also responds to constituent feedback in light of the global financial crisis and European Commission (EC) proposals on audit reform.

The key proposals in the exposure draft include:

  • Key audit matters. The audit report for audits of listed entity financial statements would include a new section outlining the key audit matters arising during the audit, being "those matters that, in the auditor's professional judgment, were of most significance in the audit of the financial statements of the current period". Such matters would be selected from the matters communicated by the auditor to those charged with governance over the entity being audited
  • Independence. The audit report would include an explicit statement that the auditor is independent of the entity and has fulfilled any other relevant ethical requirements, and disclose the sources of those requirements
  • Engagement partner. For audits of financial statements of listed entities, the audit report would be required to explicitly state the name of the engagement partner
  • Prominence of opinion. The auditors opinion would be placed at the beginning of the audit report
  • Ordering. Whilst not mandating specific requirements, the proposals outline a preferred ordering and placement of the elements of the audit report
  • Going concern. The auditor would be required to report on going concern in the audit report, including a conclusion the appropriateness of management's use of the going concern basis and a statement whether a material uncertainty about going concern has been identified
  • Auditor responsibilities. Improvements are proposed about how the responsibilities of the auditor are described and the key features of the audit. Some elements of the description of responsibilities would be permitted to be moved to an appendix, or referenced from a website of an appropriate authority.

The proposed 'key audit matters' section of the audit report replaces earlier proposals for an 'auditor commentary' which would have required the audit report to highlight matters "likely to be most important to users' understanding of the audited financial statements or the audit". Constituent feedback on the 'auditor commentary' proposal expressed concern about the emphasis on users (in that it would require the auditor to take responsibility for determining what is important a user's understanding of the financial statements) , and the possible inclusion of 'original information' in the audit report (which may blur the roles of management, those charged with governance and the auditor). The revised proposals for the 'key audit matters' section responds to these concerns by linking it with the dialogue with those charged with governance.

The exposure draft is open for comment until 22 November 2013. Click for IAASB press release (link to IFAC website).

July 2013 IASB meeting notes — Part 2 (continued)

25 Jul 2013

The IASB's meeting was held in London on 23-25 July 2013, some of it a joint meeting with the FASB. We have posted Deloitte observer notes from Tuesday's sessions on the comprehensive review of the IFRS for SMEs and Wednesday’s joint session on revenue recognition and IASB only sessions on rate-regulated activities, classification and measurement, and post-implementation review of IFRS 3.

IASB outreach events for insurance contracts

25 Jul 2013

The International Accounting Standards Board (IASB), in conjunction with national standard setters and others, will be hosting a series of public outreach events on the revised insurance contracts proposals. The outreach events will be held between August-October 2013 in various locations within Europe, Asia-Oceania, Americas, and Africa.

The outreach events will provide participants a direct opportunity to discuss the proposals in greater detail with the IASB. In order to cover a wide range of views on the topic, the Boards are seeking participation from preparers, auditors, users of financial statements, and others.

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