The summary of the meeting includes the following reports:

Report of the Trustees’ Executive session

• On-going relationship with the International Organisation of Securities Commissions (IOSCO)
  The Trustees stressed the need for consistent application of IFRSs and the need to work with securities regulators. Also, they are seeking to strengthen their relationship with the IOSCO by developing a statement of co-operation with the IOSCO’s Committee on Issuer Accounting, Audit and Disclosure.
• Funding of the IFRS Foundation
  The Trustees discussed stabilising longer-term funding and various funding initiatives.
• Strategy Review
  The Trustees noted that most of the actions resulting from the the 2012 reports of the Trustees’ Strategy Review and the Monitoring Board Governance Reviews have been fully implemented without modifications, except for long-term financing.
• Canada survey on cost of transition to IFRSs
  The Trustees found the survey useful and can be used by other jurisdictions when evaluating their own transitional plans to IFRSs.
• IFRS developments around the world
  • European Union — Updated on developments in EU, particularly on meetings with Philippe Maystadt as part of his review on the governance of European bodies involved with financial reporting and the process for the endorsement of IFRSs in the EU.
  • United States — Updated on developments in the US, particularly on the initial meeting between Michel Prada, Yael Almog, and new US SEC Chair Mary-Jo White.
  • Japan — the Trustees noted the progress of companies adopting IFRSs in Japan, the intention by Japanese authorities to introduce a new index of international companies listed in Japan which required the use IFRSs to be included in the index, and an additional version of Japanese GAAP that was closer inline to IFRSs
  • Emerging economies — the Trustees reviewed steps taken by the IASB to satisfy the G20 recommendation to develop its outreach to emerging economies.
• Nominations
  The Trustees appointed Dr Abdulrahman Al-Humaid (Saudi Arabia) and Joji Okada (Japan) and reappointed Duck-Koo Chung (Korea), Dick Sluimers (Netherlands) and Antonio Zoido (Spain).
• Trustee meetings
  The Trustees discussed meeting locations for 2014.

Report of the Chairman of the IASB

Hans Hoogervorst, Chairman of the IASB, provided the Trustees with an update on the IASB’s activities including the leases and insurance contracts exposure drafts, developments in the impairment project, discussion paper on conceptual framework, and the feedback statement on the Discussion Forum on Financial Statement Disclosure.

Report of the Chairman of the Due Process Oversight Committee

Scott Evans, Chairman of the Due Process Oversight Committee (DPOC) reported on the recent activities of the DPOC. Mr Evans discussed the IASB’s current technical activities, an upcoming report on the revenue recognition project lifecycle, an annual review of consultative groups, and a review of production activities.

Regional outreach activity

As part of the Trustees’ meeting, the IFRS Foundation hosted a joint event with the South African Institute of Chartered Accountants (SAICA) at which the Trustees and the leadership of the IASB met with representatives of key stakeholders to discuss issues under the theme The future of financial reporting in Africa.

The full summary of conclusions of the IFRS Foundation Trustees' meeting is available on the IASB website.

The first phase will develop the scope of the PIR by reviewing how entities have implemented IFRS 3 and identify where issues or unexpected costs were encountered.  It will also analyse research concerning the application of IFRS 3 developed by the academic community. Information gathered during this phase will be included in a Request for Information (RFI) for public consultation, which is targeted to be issued during the fourth quarter of 2013. 

During the second phase of the review, the IASB will schedule outreach events and review the responses to the RFI to gain additional knowledge on how the Standard is being applied in practice. At the end of the PIR, the IASB will publish a Feedback Statement with the main findings and discuss any additional steps if needed as a result of the review.

Click for:

• Press release (link to IASB website)
• IAS Plus project page on the post-implementation review of IFRS 3

RPGs are a new type of pronouncement issued by the IPSASB, and they are designed to provide guidance on the broader aspects of financial reporting that are outside the financial statements. RPGs are considered 'good practice' and entities are encouraged to apply them, but compliance with RPGs is not required in order for an entity's financial statements to comply with International Public Sector Accounting Standards (IPSAS). In this context, Recommended Practice Guideline 1 Reporting on the Long-Term Sustainability of an Entity’s Finances (RPG 1) provides guidance on providing information about a public sector entity's projected flows which underlie its long-term fiscal sustainability, including projected inflows and outflows related to the provision of goods and services and programs providing social benefits using current policy assumptions over a specified time horizon.

RPG 1 is the result of a long project and consultation process, which initially began as a project on accounting for 'social policy obligations' in 2002 and more recently saw an exposure draft issued in October 2011.  The importance of the project has been amplified by the global financial crisis and the sovereign debt crisis.

The IPSASB recognised that financial statements in themselves could not provide sufficient information about a public sector entity's long term fiscal sustainability, as the IPSASB's Conceptual Framework determined that an entity could not recognise an asset for future tax receipts and liabilities for future obligations such as social benefits which had been legislated. Accordingly, RPG 1 focuses on the provision of projections of future inflows and outflows, including future capital expenditure, over a specified time horizon.

Under the RPG, projections are prepared on the basis of current policy assumptions, and assumptions about future economic and other conditions.  The projections may be based on relevant budgets and forecasts already prepared, and may make use of assumptions and projections prepared by others, such as finance ministries. The time period for the projection will depend on balancing verifiability, faithful representation and relevance, reflect the characteristics of the entity and the longevity of its key programs, and will often be presented in a tabular format. Additional guidance is provided on factors such as demographic and economic assumptions, inflation and discount rates and sensitivity analysis. The RPG also sets out the minimum disclosure requirements surrounding the projections and the overall long-term fiscal sustainability information.

When an entity reports on its long-term fiscal sustainability, it discusses three inter-related dimensions, by reference to their capacity and vulnerabilities, which are summarised below:

As a non-mandatory guide, RPG 1 does not have a stated effective date, but long-term fiscal sustainability information 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).

In September 2012, the IASB published a review draft of a hedge accounting chapter of IFRS 9. The review draft was issue to allow constituents an opportunity to provide a fatal flaw review on the proposals. The EFRAG, along with European National Standards Setters, conducted a field test on the review draft to determine if there are any fatal flaws and to test how the proposals will work when performing actual transactions.

As a result of the field test, the EFRAG initiated an additional consultation concerning the impact on macro hedge accounting relationship proposed in the review draft and those currently existing under IAS 39. The outcome of the consultation resulted in two options, which are (1) retain IAS 39 hedge accounting for all of their hedges until either they decide to apply IFRS 9 irreversibly or the project on macro hedging is completed or (2) to adopt irreversibly the requirements of the Review Draft as drafted.

The feedback statement is available on the EFRAG website.

Early in FASB history, the position of vice chairman was created but later retired. Recently, the FAF Trustees decided to reinstate the position of vice chairman due to the increasing time demands on the FASB chairman. The vice chairman’s role is to assist in representing the FASB with external stakeholder and to stand in for current chairman as needed in guiding FASB’s internal operations.

Mr Kroeker formally worked as the US Securities and Exchange Commission’s (SEC) Chief Accountant from 2009 to 2012. During his tenure as SEC Chief Accountant, he expressed his support for convergence and emphasised the need for the Boards to have adequate time to develop fully converged standards.

Prior to his term with the SEC, he was a partner at Deloitte & Touche, LLP, serving in its National Office Accounting Services Group and he was previously a practice fellow at the FASB from 1999 to 2001.

Mr Kroeker’s term will last five years ending on 30 June 2018, at which time he’ll be eligible for re-appointment for an additional five years.

A press release of the announcement is available on the FAF website.

The update consists of removing the example of the special purpose vehicle that issues credit-linked notes, which had proved problematic.

The updated Effects Analysis and the previous version (last updated January 2012, example now deleted on pages 25 and 26) are both available on the IASB website.

In 2012, European enforcers performed full reviews of around 1,050 interim and annual accounts covering around 17 % of listed entities accounts in Europe. In addition, 1,200 accounts were subject to partial review, representing a coverage of 20% of the population of listed entities.

ESMA noted that there is still room for improvement in the quality of financial reporting. Examples of areas requiring additional effort from issuers in order to comply with IFRS include:

• application of the classification criteria for assets held for sale,
• determination of the discount rate for the calculation of defined benefit obligations,
• classification and measurement of financial instruments,
• assessment of goodwill impairment,
• distinction between a change in an accounting policy and an accounting estimate and
• disclosures about the risks and uncertainties or judgments and estimates used in preparation of IFRS financial statements.

A separate targeted review of goodwill impairment, where the results were already published in January 2013, was conducted in 2012 and illustrated "that goodwill impairment losses recognised in 2011 were limited to a handful of issuers and concentrated in a very limited number of industries" and in many cases the related disclosures "were of a boiler-plate nature and not sufficiently entity-specific".

As the enforcers feel that this means that, in many cases, the users of the financial statements are not able to evaluate the reliability of the assumptions used from the disclosures given, ESMA and European enforcers decided to monitor this area in 2013 and included this topic in the common enforcement priorities defined for the 2012 annual financial statements.

In an additional effort to strengthen enforcement, the ESMA has launched a consultation on guidelines on the enforcement of financial information published by listed entities in the European Union. The proposed guidelines are the result of a review of Standards No. 1 and 2 on the enforcement of financial information developed by the Committee of European Securities Regulators (CESR), ESMA's predecessor, in April 2003 and April 2004 respectively.

Please click for the Activity Report of the IFRS Enforcement activities in Europe in 2012 on the ESMA website.

Exposure Draft ED/2013/3 Financial Instruments: Expected Credit Losses proposes a model according to which credit losses are no longer recognised if incurred; rather, entities would recognise expected credit losses on financial assets and on commitments to extend credit based upon current estimates of expected shortfalls in contractual cash flows as at the reporting date.

The field-test, conducted through a questionnaire developed by EFRAG and National Standard Setters, was focused on the practical application of the new requirements and was intended to gather solely facts and objective data, rather than views and opinions.

The main findings of the survey are reproduced below from the press release published on the EFRAG website:

The proposed model would be more responsive to changes in credit quality compared to the incurred loss model in IAS 39.

Many participants were concerned that the proposals in the ED did not allow them to sufficiently rely on their existing credit risk management and regulatory practices; and that not all necessary data are available.

While overall the requirements were found to be clear, they were rated operationally difficult to apply. As a consequence further guidance was considered necessary by participants.

Tracking credit quality, assessing the significance of credit deterioration, having access to sufficient data, discounting expected credit losses and fulfilling the disclosures would be operationally difficult.

Participants were divided as to whether the proposals in the Exposure Draft reflected the manner in which they assessed credit deterioration.

Participants would incur significant implementation costs to apply the requirements in the ED.

Please click for access to the full field-test results on the EFRAG website.

IFRIC 21 provides guidance on when to recognise a liability for a levy imposed by a government, both for levies that are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and those where the timing and amount of the levy is certain.

EFRAG published its draft endorsement advice tentatively recommending to adopt IFRIC 21 for use in Europe on 19 July 2013. Currently, EFRAG believes that final endorsement of IFRIC 21 might be expected in the first quarter of 2014.

Please click for the EFRAG Endorsement Status Report as of 22 July 2013.