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January

IASB seeks members for new IFRS Taxonomy Consultative Group

31 Jan 2014

The IASB is seeking candidates for membership and Chair/Vice-Chair for its IFRS Taxonomy Consultative Group. The newly-created group will provide an advisory and review forum for members to actively assist the IASB in the maintenance and development of the IFRS Taxonomy and related activities.

Due to the integration of XBRL into the IASB standard-setting process and the creation of a new IASB staff group for the Disclosure Initiative, the IASB conducted a review of the IFRS Taxonomy Due Process. As a result, IFRS Taxonomy Consultative Group was created. The group replaces the XBRL Advisory Council (XAC) and the XBRL Quality Review Team (XQRT). The XAC is no longer operational, while the XQRT will only remain in existence until the new IFRS Taxonomy Consultative Group is up and running. In addition, the IFRS Advisory Council has taken on some of the general strategic responsibility of the XAC that specifically relate to how technology may impact standard setting and future corporate reporting. 

The IFRS Taxonomy Consultative Group will consist of 16-20 members, including a Chair and Vice-Chair. Candidates should have an expertise in at least one of the following areas:

  • XBRL
  • General taxonomy design
  • Financial reporting ontology
  • Consumption and preparation of electronically marked-up IFRS financial statements.

Application will be accepted until 28 February 2014.

For more information, see the press release on the IASB website.

EFRAG updates endorsement status report for draft endorsement advice on annual improvement cycles

31 Jan 2014

EFRAG has updated its Endorsement Status Report to reflect the fact that draft endorsement advice has been published on 'Annual Improvements to IFRSs 2010–2012 Cycle' and 'Annual Improvements to IFRSs 2011–2013 Cycle'.

Annual Improvements to IFRSs 2010–2012 Cycle affects seven standards (IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38), Annual Improvements to IFRSs 2011–2013 Cycle affects four standards (IFRS 1, IFRS 3, IFRS 13, IAS 40). EFRAG's initial assessment is that all of the amendments satisfy the technical criteria for EU endorsement and EFRAG should therefore recommend their endorsement.

The endorsement status report, dated 31 January 2014, is available here.

IFAC and ICAS issue paper on the IASB’s conceptual framework

31 Jan 2014

The International Federation of Accountants (IFAC), along with the Institute of Chartered Accountants of Scotland (ICAS), has issued a paper which highlights some of the main themes and concerns that should be considered as the IASB updates its conceptual framework.

The IFAC / ICAS paper, Do We Need a Roadmap for Financial Reporting: Developing the IASB’s Conceptual Framework, discusses the role conceptual framework serves in (1) the standard-setting process and (2) practical use in financial reporting. It also explores whether the scope of the IASB’s conceptual framework covers today’s evolving financial reporting landscape and whether a single framework is globally feasible.

In addition, the paper examines the potential core building blocks and characteristics of the conceptual framework. These core building blocks include:

  • Scope of financial reporting.
  • Stewardship.
  • Business model.
  • Entity versus proprietary perspectives.
  • Prudence.
  • Unit of account.
  • Concept of capital.

The IFAC and ICAS have prepared this paper to encourage discussion between stakeholders as they provide feedback to the IASB’s Discussion Paper, A Review of the Conceptual Framework for Financial Reporting.

For more information, see:

EFRAG updates endorsement status report

31 Jan 2014

EFRAG has updated its Endorsement Status Report to reflect the fact that final endorsement advice has been published on 'Defined Benefit Plans: Employee Contributions' (Amendments to IAS 19 'Employee Benefits') and that the IASB has issued IFRS 14 'Regulatory Deferral Accounts'.

The IASB issued the amendments to IAS 19 in November 2013 to clarify the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service. EFRAG's assessment is that the amendments satisfy the technical criteria for EU endorsement and EFRAG therefore recommends their endorsement.

The IASB published IFRS 14 Regulatory Deferral Accounts on 30 January 2014. The Standard is intended to allow entities that are first-time adopters of IFRS, and that currently recognise regulatory deferral accounts in accordance with their previous GAAP, to continue to do so upon transition to IFRS. EFRAG currently expects endorsement of IFRS 14 in the first quarter of 2015.

The endorsement status report, dated 30 January 2014, is available here.

EFRAG issues final endorsement advice and effects study report on the amendments to IAS 19

31 Jan 2014

The European Financial Reporting Advisory Group (EFRAG) has submitted to the European Commission its endorsement advice letter and effects study report on the amendments to IAS 19 regarding employee contributions to defined benefit plans.

EFRAG supports the amendments to IAS 19, which clarify the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service and permit a practical expedient if the amount of the contributions is independent of the number of years of service. The EFRAG’s assessment is that benefits for preparers and users implementing the amendments to IAS 19 outweigh the costs and therefore EFRAG recommends that the European Commission (EC) endorses the amendments.

Click for the following information on the EFRAG website:

FASB abandons converged approach to business model assessment

30 Jan 2014

At its meeting yesterday to discuss the classification and measurement of financial instruments, the US Financial Accounting Standards Board (FASB) tentatively decided not to pursue the converged approach jointly developed by the FASB and IASB (the 'boards') for assessing the business model in which a financial asset is managed.

Under the boards’ converged approach, the classification and measurement of financial assets would have been determined on the basis of an asset’s contractual cash flow characteristics (the so-called “solely payments of principal and interest” test) and the business model under which the asset is managed. At its December 2013 meeting, the FASB had already decided against the development of a converged approach for assessing an asset’s contractual cash flow characteristics, thus both aspects of the converged approach developed at the IASB/FASB joint meeting in November 2013 have now been abandoned.

The FASB discussed and directed the staff to further research the following two alternatives:

  • Retain existing guidance in US GAAP on classifying and measuring investments in debt securities and loans. Under this alternative, the FASB would consider potential refinements to the tainting guidance in ASC 320 Investments — Debt and Equity Securities on investments in held-to-maturity securities.
  • Develop a single classification and measurement model for both loans (including trade receivables) and investments in debt securities. That model would be based on the existing classification and measurement guidance in ASC 320 on investments in securities, except for potential refinements to the tainting guidance.

Under ASC 320 in current US GAAP, entities use one of three categories to classify and measure investments in securities: trading (fair value through net income), available for sale (fair value through other comprehensive income), and held to maturity (amortised cost). Under ASC 310 Receivables, entities use one of two categories to classify and measure loans: held for investment (amortised cost) and held for sale (lower of cost or fair value). Some Board members expressed the view that loans and debt securities are economically similar instruments and should not be subject to different accounting models because of their legal form.

The FASB will consider the results of the staff’s analysis at a future meeting.

For more information, see Deloitte's Accounting Journal Entry and the meeting minutes on the FASB's website.

IASB issues interim standard on rate regulation

30 Jan 2014

The International Accounting Standards Board (IASB) has published IFRS 14 'Regulatory Deferral Accounts'. This Standard is intended to allow entities that are first-time adopters of IFRS, and that currently recognise regulatory deferral accounts in accordance with their previous GAAP, to continue to do so upon transition to IFRS. The Standard is intended to be a short-term, interim solution while the longer term rate-regulated activities project is undertaken by the IASB. The IASB has stated that by publishing this Standard, they are not anticipating the outcome of the comprehensive rate-regulated activities project which is in its early stages.

 

Background

In September 2012, the IASB started a comprehensive rate-regulated activities project, starting with a research phase to develop a Discussion Paper.  In December 2012, the IASB decided to add an additional phase to the rate-regulated activities project to develop this limited-scope Standard.

In April 2013, the IASB published the Exposure Draft ED/2013/5 Regulatory Deferral Accounts (the ‘ED’), with comments due by 4 September 2013. 

The IASB received comments on the ED which lead to some clarifications and edits, including additional disclosure requirements; however, the main proposals in the ED were not changed substantially in the final Standard.

 

Scope

Initial application of IFRS 14 must coincide with the application of IFRS 1 First-time Adoption of International Financial Reporting Standards. This means, IFRS 14 cannot be applied by entities that have previously adopted IFRSs. Entities applying this interim standard must also meet specified eligibility criteria. Specifically, the entity has to conduct 'rate-regulated activities' (as defined by IFRS 14), and it must have recognised amounts that qualify as regulatory deferral account balances in its financial statements in accordance with its previous GAAP.

 

Overview of the key requirements

  • IFRS 14 requires the balances reflecting the effects of rate regulation to be described as “regulatory deferral account debit balances” and “regulatory deferral account credit balances” (collectively they are referred to as “regulatory deferral account balances”) and these balances cannot be referred to as, or presented with, assets and/or liabilities because  the determination of whether these balances meet the definition of assets or liabilities in the Conceptual Framework must be addressed as part of the IASB's comprehensive conceptual framework project
  • The effects of rate regulation must be separately presented in the statement of financial position and statement(s) of profit or loss and other comprehensive income, and the Standard provides illustrative examples of these presentation requirements
  • All assets and liabilities, balances and transactions have to comply with all other IFRS standards so the regulatory deferral account balances represent the effects of rate regulation only after the requirements of other IFRS standards have been met
  • IFRS 14 includes some specific guidance on how other Standards such as IAS 10 Events After the Reporting Period, IAS 12 Income Taxes, IAS 33 Earnings Per Share, IAS 36 Impairment of Assets, IFRS 3 Business Combinations and IFRS 5 Non-current Assets Held for Sale and Discontinued Operations should be applied to regulatory deferral balances and/or movements in such balances
  • There are specific disclosure requirements to (a) enable users to evaluate the nature of, and the risks associated with, the specific rate regulation regime and (b) enable users to understand how the regulatory deferral account balances are recognised and measured both initially and subsequently.

 

Effective date and transition

The Standard can be applied in an entity's first annual IFRS financial statements for periods beginning on or after 1 January 2016.  Earlier application is permitted. Application of the standard is voluntary. However, an entity that elects to apply the standard in its first IFRS financial statements continues to apply it in all its subsequent financial statements.

 

Click for:

IASB publishes Request for Information on the post-implementation review of IFRS 3

30 Jan 2014

The International Accounting Standards Board (IASB) has issued a Request for Information (RFI) seeking comments from stakeholders to identify whether IFRS 3 'Business Combinations' provides information that is useful to users of financial statements; whether there are areas of IFRS 3 that are difficult to implement and may prevent the consistent implementation of the standard; and whether unexpected costs have arisen in connection with applying or enforcing the standard.

The post-implementation review process for IFRS 3 was originally expected to commence in 2012 but it was only formally announced to begin on 25 July 2013. Since then the IASB has been gathering information to determine the scope of the review and to identify the main questions that need to be answered before the implementation of IFRS 3 can be assessed.

The RFI published today includes those questions and forms part of the formal public consultation. After the comment period ends, the IASB will consider the comments received along with information gathered through other consultation activities and findings from research on the topic. The final conclusions of the IASB will be presented in a report and a feedback statement which will also set out the steps the IASB believes should be taken as a result of the review.

The technical questions in the RFI address the following areas:

  • Definition of a business,
  • Fair value,
  • Separate recognition of intangible assets from goodwill and the accounting for negative goodwill,
  • Non‐amortisation of goodwill and indefinite life intangible assets,
  • Non‐controlling interests,
  • Step acquisitions and loss of control,
  • Disclosures, and
  • Any other matters the stakeholders wish to raise.

Comment deadline is 30 May 2014. The request for information and a corresponding press release are available on the IASB website.

Latest edition of EFRAG Insider

30 Jan 2014

The European Financial Reporting Advisory Group (EFRAG) has published a new edition of the publicly available newsletter 'EFRAG Insider'.

In this edition, the EFRAG discusses their support for the business model to play a role in financial reporting; a view which is contained within their draft comment letter on the International Accounting Standard Board’s (IASB’s) discussion paper ‘A Review of the Conceptual Framework for Financial Reporting’ and their other comment letters on the Insurance and Financial Instrument projects of the IASB.

It also addresses the exposure drafts on leases and insurance contracts, particularly the field tests carried out with the National Standard Setters from UK, France, Germany and Italy which were used by EFRAG to formulate their final comment letters to the IASB. 

Additionally this edition covers initial input gathered from European analysts on the post-implementation review of International Financial Reporting Standard (IFRS) 3 'Business Combinations', the IASB’s Rate-Regulated Activities project and provides a spotlight on the recommendations of the Maystadt Review.

 The December 2013 edition of EFRAG Insider is available on the EFRAG website

US FAF offers to contribute to the funding of the IFRS Foundation to help facilitate the completion of the joint projects

29 Jan 2014

The US Financial Accounting Foundation (FAF), which is responsible for the oversight, administration, and finances of the Financial Accounting Standards Board (FASB), has announced that it will contribute up to $3 million to the IFRS Foundation “to support the completion of international convergence projects”. The FAF stressed that the contribution, to be made in up to three payments of $1 million during 2014, is non-recurring.

The IASB and FASB have still four major convergence projects to complete: revenue recognition, leasing, financial instruments (both classification and measurement and impairment), and insurance. Revenue recognition is nearing completion (finalised pronouncements by IASB and FASB are currently expected in the first quarter of 2014), the financial instruments topics could be completed in the second half of 2014, insurance and leases have not yet been given an expected publication date.

While the aim of the contribution is to complete the convergence projects, collaboration will continue even after the finalised pronouncements have been published. FASB and IASB announced that they would form a joint transition resource group for revenue recognition in July 2013. The FASB is also a member of the IASB's Accounting Standards Advisory Forum (ASAF).

IFRS Foundation officials have long urged the US to provide more funding to the work of the Foundation. In the SEC's final staff report on IFRS published in July 2012, the SEC staff stated: "Currently, the IFRS Foundation Trustees have been unsuccessful in obtaining the funding for the portion of the IASB budget allocated to the United States." In their October 2012 response to the report, the IFRS Foundation reacted by stating: "[T]he U.S. has to date not contributed a proportionate amount to the IFRS Foundation's budget. [...] We note that, while around 20–25 percent of the total seats in the Foundation's different bodies are currently held by the U.S., the U.S. contributions amount to less than 10 percent of the total country contributions to the Foundation's budget." The Trustees also claimed that a proportionate US contribution based on GDP would amount to just over £4 million. As the annual report of the IFRS Foundation shows, US contributions to the IFRS Foundation's funding were roughly £1.2 million in 2012 and the present climate does not suggest that a significant increase is likely for 2013.

The FAF trustees made one previous contribution of $0.5 million to the IFRS Foundation in 2011. In addition, FASB has dedicated technical staff to the convergence projects.

Please click for access to the announcement of the FAF website.

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