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2013

IASB appoints Executive Technical Director

12 Dec 2013

The International Accounting Standards Board (IASB) has appointed Hugh Shields as Executive Technical Director. Mr Shields will lead the IASB's technical staff and be responsible for the efficient delivery of all technical activities.

Mr Shields follows Sue Lloyd who is currently Senior Director of Technical Activities for the IASB and has been appointed as IASB member beginning 1 January 2014. The change in title to 'Executive Technical Director' suggests that Mr Shields' portfolio of tasks will differ slightly from Ms Lloyd's.

Mr Shields currently serves as a Managing Director for Credit Suisse in the Europe, Middle East and Africa region and is responsible for both financial and regulatory reporting across the bank. He will begin his work at the IASB in March 2014.

Please click for more information in the press release on the IASB website.

Following the appointment of Hugh Shields, IASB Chairman Hans Hoogervorst provided an overview of recent changes to the leadership of the IASB's technical staff which recognises the changing landscape within accounting standard-setting.

IASB concludes the 2011-2013 Annual Improvements cycle

12 Dec 2013

The IASB issued 'Annual Improvements to IFRSs 2011–2013 Cycle', a collection of amendments to IFRSs, in response to issues addressed during the 2011–2013 cycle. Four standards are affected by the amendments.

Annual Improvements 2011–2013 Cycle makes amendments to the following standards:

Standard Amendments
IFRS 1 First-time Adoption of International Financial Reporting Standards (changes to the Basis for Conclusions only) Meaning of effective IFRSs
Clarifies that an entity, in its first IFRS financial statements, has the choice between applying an existing and currently effective IFRS or applying early a new or revised IFRS that is not yet mandatorily effective, provided that the new or revised IFRS permits early application. An entity is required to apply the same version of the IFRS throughout the periods covered by those first IFRS financial statements.
IFRS 3 Business Combinations Scope of exception for joint ventures
Clarifies that IFRS 3 excludes from its scope the accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself.
IFRS 13 Fair Value Measurement Scope of paragraph 52 (portfolio exception)
Clarifies that the scope of the portfolio exception defined in paragraph 52 of IFRS 13 includes all contracts accounted for within the scope of IAS 39 Financial Instruments: Recognition and Measurement or IFRS 9 Financial Instruments, regardless of whether they meet the definition of financial assets or financial liabilities as defined in IAS 32 Financial Instruments: Presentation.
IAS 40 Investment Property Clarifying the interrelationship of IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property
Clarifies that determining whether a specific transaction meets the definition of both a business combination as defined in IFRS 3 Business Combinations and investment property as defined in IAS 40 Investment Property requires the separate application of both standards independently of each other.

The amendments are effective for annual periods beginning on or after 1 July 2014, but can be applied earlier. For more information, please see the press release on the IASB's website or our Annual improvements page.

Deloitte's IFRS Global Office has prepared an IFRS in Focus Newsletter explaining the amendments.

IASB concludes the 2010-2012 Annual Improvements cycle

12 Dec 2013

The IASB issued 'Annual Improvements to IFRSs 2010–2012 Cycle', a collection of amendments to IFRSs, in response to issues addressed during the 2010–2012 cycle. Seven standards are affected by the amendments.

Annual Improvements 2010–2012 Cycle makes amendments to the following standards:

IFRS Amendments
IFRS 2 Share-based Payment Definition of 'vesting condition'
Amends the definitions of 'vesting condition' and 'market condition' and adds definitions for 'performance condition' and 'service condition' (which were previously part of the definition of 'vesting condition').
IFRS 3 Business Combinations
(with consequential amendments to other standards)
Accounting for contingent consideration in a business combination
Clarifies that contingent consideration that is classified as an asset or a liability shall be measured at fair value at each reporting date.

IFRS 8 Operating Segments

Aggregation of operating segments
Requires an entity to disclose the judgements made by management in applying the aggregation criteria to operating segments.

Reconciliation of the total of the reportable segments' assets to the entity's assets
Clarifies that an entity shall only provide reconciliations of the total of the reportable segments' assets to the entity's assets if the segment assets are reported regularly.

IFRS 13 Fair Value Measurement
(amendments to the basis of conclusions only, with consequential amendments to the bases of conclusions of other standards)
Short-term receivables and payables
Clarifies that issuing IFRS 13 and amending IFRS 9 and IAS 39 did not remove the ability to measure short-term receivables and payables with no stated interest rate at their invoice amounts without discounting if the effect of not discounting is immaterial.
IAS 16 Property, Plant and Equipment Revaluation method - proportionate restatement of accumulated depreciation
Clarifies that when an item of property, plant and equipment is revalued the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount.
IAS 24 Related Party Disclosures Key management personnel
Clarifies that an entity providing key management personnel services to the reporting entity or to the parent of the reporting entity is a related party of the reporting entity.
IAS 38 Intangible Assets Revaluation method - proportionate restatement of accumulated amortisation
Clarifies that when an intangible asset is revalued the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount.

The amendments are effective for annual periods beginning on or after 1 July 2014, but can be applied earlier. For more information, please see the press release on the IASB's website or our Annual improvements page.

Deloitte's IFRS Global Office has prepared an IFRS in Focus Newsletter explaining the amendments.

Translations of GRI sustainability reporting guidance

12 Dec 2013

The Global Reporting Initiative (GRI) has announced the availability of four translations of its Sustainability Reporting Guidelines, dubbed 'G4'. Translation of the G4 Guidelines into various different languages is aimed at making them accessible to a global audience and thus mainstreaming sustainability reporting.

In its translation process of the G4 Guidelines published in English in May 2013, GRI prioritised five core languages - French, Spanish, Portuguese, German and Chinese (forthcoming) – as it estimated that with these the needs of approximately 75 per cent of current reporters and report users could be met. In a second step, GRI intended to cover Arabic, Japanese, Korean, Russian, and Bahasa-Indonesian. These will be available between January and April 2014 together with additional translations into Vietnamese, Croatian and Turkish.

The translations available so far can be accessed through the press release on the GRI website.

IASB publishes proposals for amendments under its annual improvements project (cycle 2012-2014)

11 Dec 2013

The International Accounting Standards Board (IASB) has published to its website an exposure draft (ED) of proposed amendments to four International Financial Reporting Standards (IFRSs) under its annual improvements project.

The IASB uses the annual improvements project to make necessary, but non-urgent, amendments to IFRSs that will not be included as part of another major project.

The ED proposes the following amendments:

IFRS Subject of amendment

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

To add specific guidance in IFRS 5 for cases in which an entity reclassifies an asset from held for sale to held for distribution or vice versa and cases in which held-for-distribution accounting is discontinued

IFRS 7 Financial Instruments: Disclosures

To add additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset for the purpose of determining the disclosures required

To clarify the applicability of the amendments to IFRS 7 on offsetting disclosures to condensed interim financial statements

IAS 19 Employee Benefits

To clarify that the high quality corporate bonds used in estimating the discount rate for post-employment benefits should be denominated in the same currency as the benefits to be paid (thus, the depth of the market for high quality corporate bonds should be assessed at currency level)

IAS 34 Interim Financial Reporting

To clarify the meaning of 'elsewhere in the interim report' and to require a cross-reference

The ED proposes that all of the amendments will be effective for annual periods beginning on or after 1 January 2016. Entities are permitted to early adopt all the proposed amendments. Click for IASB Press Release (link to IASB website).

You can access ED/2013/11 Annual Improvements to IFRSs 2012–2014 Cycle on the IASB's website. The IASB requests comments on the ED by 13 March 2014.

Deloitte's IFRS Global Office has prepared an IFRS in Focus Newsletter explaining the proposed amendments.

Danish regulator suggests disclosure overload can be dealt with within existing IFRSs

11 Dec 2013

The Danish regulator overseeing non-financial entities (Erhvervsstyrelsen or Danish Business Authority (DBA)) has sent out its traditional communication covering relevant topics for consideration at year-end - the so-called 'Christmas letter'. This year, the DBA urges companies to actively look for any immaterial information/disclosure in the financial statements that could be omitted from them.

The DBA states:

We believe that it will be of great advantage if companies not only focus on fulfilling the law's formal and specific rules but also focus on the presentation of the accounts. The financial statements will have to live up to the demands of the law of course. And yet practice has shown that it often will be possible - within the legal framework - to improve the presentation of the accounts considerably.

To achieve this, the DBA suggests certain areas of focus including avoidance of repetitive information and of generic information as well as more marketing related presentation. The recommendations are:

  • Avoid repetitions - not only do they increase the length of the financial statements, there is also the significant risk that the descriptions are not the same in the different places.
  • Avoid generic statements - although model financial statements are available and offer excellent inspiration, they should not be used uncritically, as they are aimed at an average company which individual companies never are.
  • Leave out immaterial information - IFRSs contain many detailed disclosure requirements but a company should assess which information is immaterial and can (and should) therefore be left out.
  • Limit more marketing related presentation - leave out information that is more akin to marketing for the company (information that is not required by law and not strictly necessary for users); a good place for this kind of information would be the company's home page or other communications, not the financial statements.

In the current debate around the disclosure overload this is an interesting move of the DBA. In the past, enforcement decisions had shown that the DBA (like other regulators in Europe) focused quite extensively on every disclosure requirement in IFRS being included; now it seems the DBA is among the first regulators to act on the main message that came out of the IASB's disclosure discussion forum in January: 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 DBA communication is only available in the Danish language and can be downloaded from the DBA website. The disclosure overload is only one of the topics touched on. The communication also reminds Danish companies of new requirements of the Danish Financial Statements Act, ESMA enforcement priorities for 2012 and 2013 and selected topics and experiences from the DBA's review of financial statements as part of the enforcement in Denmark.

IASB chairman calls 2013 'a very productive year for the IASB'

10 Dec 2013

At the 2013 AICPA National Conference on Current SEC and PCAOB Developments, IASB Chairman Hans Hoogervorst measured the IASB's achievements against the SEC Staff Report published in July 2012.

In his speech, Mr Hoogervorst looked over 2013 and concluded that it had been very productive and noted the many steps towards accomplishing the IASB's mission of bringing transparency to accounting around the world. To support his personal assessment, Mr Hoogervorst used the conclusions of the SEC’s 2012 Staff Report on IFRS as measure.

He discussed the SEC's staff conclusion that the IASB needed to deepen its cooperation with national standard-setters. Mr Hoogervorst pointed at the formation of the Accounting Standards Advisory Forum (ASAF) in February 2013 (with the Financial Accounting Standards Board (FASB) being a member).

Next, Mr Hoogervorst turned to what he called "some scary estimates about the cost of transition to IFRS for US issuers" that were included in the SEC report. He pointed at the results of a survey on the costs of IFRS Transition in Canada that were published in July 2013. That survey showed that the costs of adoption of IFRS in Canada were planned for and expected — with most costs turning out to be the same or less than budgeted — the costs were significant but manageable.

As the SEC Report also touched upon a lack of clarity on the extent to which jurisdictions had actually adopted IFRSs, Mr Hoogervorst pointed at the jurisdiction profiles the IFRS Foundation is compiling — with the last 41 profiles published just yesterday. The profiles offer detailed information about the use of IFRSs in individual jurisdictions and have also revealed that more than 100 of the 122 countries surveyed have already adopted IFRS for most or all domestic listed companies.

As the last major development of 2013 that responds to a conclusion of the SEC report, Mr Hoogervorst mentioned the joint Statement of Cooperation of the International Organization of Securities Commissions (IOSCO) and the IFRS Foundation. This cooperation is aimed at ensuring that international standards are applied and enforced on a globally consistent basis.

The full text of Mr Hoogervorst's speech is available on the IASB's website.

FASB Chairman Russ Golden also spoke at the conference — his speech explored the FASB's potential post-convergence project agenda. See our 11 December 2013 story for more on his remarks.

IIRC finalises its Framework for integrated reporting

09 Dec 2013

The International Integrated Reporting Council (IIRC) has released its ‘International Integrated Reporting <IR> Framework’ (<IR> Framework). The <IR> Framework seeks to explain the fundamental concepts, principles and content requirements underlying an 'integrated report', which is considered the next step in the evolution of corporate reporting.

 

Background

The International Integrated Reporting Council (IIRC) was formed in August 2010 with the objective of creating a globally accepted framework for a process that results in communication by an organisation above value creation over time.  The initial formation of the IIRC involved HRH The Prince of Wales bringing together The Prince’s Accounting for Sustainability Project (A4S), the Global Reporting Initiative (GRI), and a cross section of representatives from civil society, corporate entities, accounting firms and organisations, regulators, non-government organisations and standard-setters.

Since its initial formation, the IIRC has rapidly pursued its objectives, including:

  • Publishing a Discussion Paper Towards Integrated Reporting in September 2011
  • Formation of a IIRC Pilot Programme in October 2011 for organisations to pilot <IR>
  • Releasing a prototype <IR> Framework in November 2012
  • Publishing a Consultation Draft of the <IR> Framework in April 2013, together with number of background papers on key <IR> concepts that led into the development of the Consultation Draft.

The release of the finalised <IR> Framework follows additional consultation and consideration by the IIRC and its working groups of feedback obtained through these due process steps.

 

Overview of <IR>

Integrated reporting (stylised by the IIRC as '<IR>') is seen by the IIRC as the basis for a fundamental change in the way in which organisations are managed and report to stakeholders. A stated aim of <IR> is to support integrated thinking and decision-making. Integrated thinking is described in the <IR> Framework as "the active consideration by an organization of the relationships between its various operating and functional units and the capitals that the organization uses or affects".

The <IR> Framework expresses the IIRC's vision in the following way:

The IIRC's long term vision is a world in which integrated thinking is embedded within mainstream business practice in the public and private sectors, facilitated by Integrated Reporting (<IR>) as the corporate reporting norm. The cycle of integrated thinking and reporting, resulting in efficient and productive capital allocation, will act as a force for financial stability and sustainability.

There are three fundamental concepts underpinning <IR>:

  1. Value creation for the organisation and for others.  An organisation’s activities, its interactions and relationships, its outputs and the outcomes for the various capitals it uses and affects influence its ability to continue to draw on these capitals in a continuous cycle. 
  2. The capitals.  The capitals are the resources and the relationships used and affected by the organisation, which are identified in the <IR> Framework as financial, manufactured, intellectual, human, social and relationship, and natural capital.  However, these categories of capital are not required to be adopted in preparing an entity’s integrated report , and an integrated report may not cover all capitals – the focus is on capitals that are relevant to the entity
  3. The value creation process.  At the core of the value creation process is an entity’s business model, which draws on various capitals and inputs, and by using the entity’s business activities, creates outputs (products, services, by-products, waste) and outcomes (internal and external consequences for the capitals).

The <IR> Framework sets out the purpose of an integrated report as follows:

The primary purpose of an integrated report is to explain to providers of financial capital how an organization creates value over time. An integrated report benefits all stakeholders interested in an organization’s ability to create value over time, including employees, customers, suppliers, business partners, local communities, legislators, regulators, and policy-makers.

The ‘building blocks’ of an integrated report are:

  • Guiding principles – these underpin the preparation of an integrated report, informing the content of the report and how information is presented
  • Content elements – the key categories of information required to be included in an integrated report under the Framework, presented as a series of questions rather than a prescriptive list of disclosures.

The table below summarises each of these building blocks, together with the other key requirements for an integrated report:

 

High-level summary of the requirements for an integrated report

KEY REQUIREMENTS

  • An integrated report should be a designated, identifiable communication
  • A communication claiming to be an integrated report and referencing the Framework should apply all the key requirements (identified using bold italic type), unless the unavailability of reliable data, specific legal prohibitions or competitive harm results in an inability to disclose information that is material (in the case of unavailability of reliable data or specific legal prohibitions, other information is provided)
  • The integrated report should include a statement from those charged with governance that meets particular requirements (e.g., acknowledgement of responsibility, opinion on whether the integrated report is presented in accordance with the Framework) – and if one is not included, disclosures about their role and steps taken to include a statement in future reports (a statement should be included no later than an entity’s third integrated report referencing the Framework)

GUIDING PRINCIPLES

  • Strategic focus and future orientation – insight into the organisation's strategy
  • Connectivity of information – showing a holistic picture of the combination, inter-relatedness and dependencies between the factors that affect the organisation's ability to create value over time
  • Stakeholder relationships – insight into the nature and quality of the organisation's relationships with its key stakeholders
  • Materiality – disclosing information about matters that substantively affect the organisation's ability to create value over the short, medium and long term
  • Conciseness – sufficient context to understand the organisation's strategy, governance and prospects without being burdened by less relevant information
  • Reliability and completeness – including all material matters, both positive and negative, in a balanced way and without material error
  • Consistency and comparability – ensuring consistency over time and enabling comparisons with other organisations to the extent material to the organisation's own ability to create value.

CONTENT ELEMENTS

  • Organisational overview and external environment – What does the organisation do and what are the circumstances under which it operates?
  • Governance – How does an organisation’s governance structure support its ability to create value in the short, medium and long term?
  • Business model – What is the organisation’s business model?
  • Risks and opportunities – What are the specific risk and opportunities that affect the organisation’s ability to create value over the short, medium and long term, and how is the organisation dealing with them?
  • Strategy and resource allocation – Where does the organisation want to go and how does it intend to get there?
  • Performance – To what extent has the organisation achieved its strategic objectives for the period and what are its outcomes in terms of effects on the capitals?
  • Outlook – What challenges and uncertainties is the organisation likely to encounter in pursuing its strategy, and what are the potential implications for its business model and future performance?
  • Basis of preparation and presentation – How does the organisation determine what matters to include in the integrated report and how are such matters quantified or evaluated?

 

Changes made in finalising the Framework

The <IR> Framework incorporates the IIRC’s responses to feedback received in the consultation process, and input from participants in the IIRC’s Pilot Programme.  Some of the changes made in finalising the Framework include:

  • Better explaining the relationship between an integrated report and other reports and communications, such as financial reports and sustainability reports – the Framework notes an integrated report is “intended to be more than a summary of information in other communications… rather, it makes explicit the connectivity of information to communicate how value is created over time”
  • Changing the primary objective of an integrated report from a focus on the audience (providers of financial capital) to a purpose (explaining how an organisation creates value over time), so as to reflect the broader constituent interest in <IR>
  • Further elucidating the concept of ‘value’ and ‘value creation’, explaining that value arises from increases, decreases or transformations of capitals, and has two linked aspects: value for the organisation (which enables financial returns to providers of financial capital) and for others (stakeholders and society at large).  The Framework also explains that value and value creation need not be quantified in an integrated report
  • Clarifying terminology used, including the relationship between ‘integrated thinking’ and <IR>
  • Including an additional Content Element in the <IR> Framework on ‘Basis of preparation and presentation’, requiring an entity to describe its basis of preparation and presentation of the integrated report, including the significant frameworks and methods used to quantity or evaluate material matters.  Greater emphasis has also been given to using existing measurement guidance, including accounting standards, to ensure consistency in measurements across various reports and communications
  • Addressing concerns around the involvement of those charged with governance in an integrated report – whilst the requirement for a statement acknowledging responsibility for the integrated report has been retained, a two-report grace period has been included to allow organisations  to take responsibility for an integrated report, at least on a comply or explain basis.
The question of whether those charged with governance should provide a statement acknowledging their responsibility for the integrated report was the single most contentious issue arising from the IIRC’s consultation process with only just over 50% of respondents in support. Investor representatives in general felt such a statement is necessary to add credibility to the integrated report and prevent it being seen as a marketing document. The principal argument against such a statement came from respondents in countries like Japan where there is currently no requirement for such a statement in relation to financial statements and there is no evidence that this has caused investors to look less favourably on Japanese stocks. By holding integrating reporting to a higher standard, the IIRC risks discouraging take up in such markets. Time will tell whether this proves to be the case.

The <IR> Framework is accompanied by a Basis for Conclusions and another document identifying at a more detailed level how various issues raised by respondents to the April 2013 Consultation Draft were treated, as well as mapping significant changes in structure and movements of text from the Consultation Draft to the <IR> Framework.

 

More information

Click for:

2014 IFRS 'Blue Book' now available

09 Dec 2013

Further to our story on 15 November 2013, the IFRS Foundation has published the "2014 IFRS Consolidated without early application".

This volume (nicknamed the 'Blue Book') contains all official pronouncements that are mandatory on 1 January 2014. It does not include IFRSs with an effective date after 1 January 2014.

Changes since the 2013 edition include:

  • Amendments to the following Standards: IFRSs 1, 3, 5, 7, 9, 10, 12, 13 and IASs 7, 12, 24, 27, 28, 32, 34, 36 and 39
  • One new Interpretation, IFRIC 21
  • IFRS Foundation Constitution and Due Process Handbook

The Blue Book sells for £68 plus shipping (academic, developing country, and volume discounts apply). The publication can be purchased through the IASB web shop.

41 additional jurisdiction profiles added on the use of IFRS

09 Dec 2013

The IFRS Foundation (IFRSF) has added 41 new jurisdiction profiles on the use of IFRS to bring the total of profiles completed to 122 jurisdictions. With the addition of the new profiles, the IFRSF completes the third phase of its initiative to assess the progress of jurisdictions using IFRSs.

In its press release on the IASB website the IFRSF has also included an analysis of key findings from all 122 jurisdiction profiles:

  • Application of IFRSs is already required for all or most domestic listed companies in 101 of the 122 jurisdictions;
  • in most of the remaining countries application of IFRSs is permitted for at least some listed companies;
  • of the 101 jurisdictions that have adopted IFRS for listed companies 60% also require the application of IFRSs for unlisted financial institutions and/or large unlisted companies; and
  • modifications to IFRS are rare, mostly temporary and limited in applicability.

Newly available is also an IFRS Foundation Adoption Guide outlining steps, approaches and pitfalls for countries planning to adopt IFRSs.

The IFRSF has been using information from various sources to develop the profiles about the use of IFRSs in individual jurisdictions. We are proud that IAS Plus with the assistance of our Deloitte member firms has been able to help the IFRS Foundation with this ambitious project, which is led by Paul Pacter, former IASB member and former webmaster of IAS Plus who originally set up our popular table on the use of IFRSs around the world which is supplemented recently by the more detailed table on the use of IFRSs by the G20 jurisdictions.

The profiles and analyses are available on the IASB 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.