June

Updated EFRAG endorsement status report reflects EU adoption of IFRIC 21 and draft endorsement advice letter on IFRS 11 amendments

16 Jun 2014

The European Financial Reporting Advisory Group (EFRAG) has updated its Endorsement Status Report to reflect that the European Union has published a Commission Regulation endorsing IFRIC 21 'Levies'. In addition, the report has been updated for the issuance of a draft endorsement advice letter on the amendments to IFRS 11.

IFRIC 21 is effective in the EU for annual periods beginning on or after 17 June 2014, however, earlier application is permitted so EU companies can adopt in accordance with the IASB effective date (1 January 2014).

The endorsement status report, dated 16 June 2014, is available here.

European Union formally adopts IFRIC 21

16 Jun 2014

The European Union has published a Commission Regulation endorsing IFRIC 21 'Levies'.

Commission Regulation (EC) No 634/2014 of 13 June 2014 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council published in the Official Journal on 14 June 2014 adopts IFRIC 21 Levies issued by the IASB in May 2013.

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.

IFRIC 21 is effective in the EU for annual periods beginning on or after 17 June 2014, however, earlier application is permitted so EU companies can adopt in accordance with the IASB effective date (1 January 2014).

Feedback from the joint outreach event on the accounting for business combination under IFRS

14 Jun 2014

The first joint outreach event of the European Financial Reporting Advisory Group (EFRAG), the European Federation of Financial Analysts Societies (EFFAS), the Association Belge des Analystes Financiers (ABAF), and the International Accounting Standards Board (IASB) was held on 1 April 2014. The event was part of the Post-implementation Review of IFRS 3 'Business Combinations' with the purpose of gathering views from users on the decision usefulness of the information resulting from the current accounting and disclosure requirements for business combinations, as well as what improvements, if any, are needed, and why.

During the event, selected case studies on business combination transactions taken from published IFRS financial statements were presented and discussed. The key messages provided by participants included the following:

  • Timeliness of information received through the annual accounts is a concern given that markets react on the day an acquisition is announced;
  • it would be relevant to understand the reasons for a business combination from the perspective of both the seller and the buyer;
  • there is a need for more transparency regarding expected synergies;
  • adjustments to contingent consideration are not considered part of performance and result in counter-intuitive accounting;
  • there is a need for improved transparency on fair value measurement of acquired intangible assets with no active market; and
  • book values of assets acquired and liabilities assumed would be useful to better understand the "step-ups" to fair value.

Please click for access to the full feedback statement on the EFRAG website.

IASB provides disclosure initiative update

13 Jun 2014

The IASB has issued an update highlighting recent discussions of disclosure initiative projects. The objective of the disclosure initiative is to discover areas where disclosures can be improve and simplify within existing disclosure requirements.

The disclosure projects covered in this update include:

  • Principles of disclosure — held discussions during the April 2014 IASB meeting on the scope of the project and will research areas where improvements to disclosures requirements can be issued more quickly.
  • Targeted improvements to disclosure requirements:
    • Amendments to IAS 1 — issued exposure draft in March 2014 and will deliberate the feedback received in the third quarter of 2014.
    • Reconciliation of liabilities arising from financing activities — held discussions during March 2014 IASB meeting on results of a survey and will be performing outreach activities and deliberate the outcomes from those activities in the third quarter of 2014.
    • Accounting policies — anticipate the issuance of a paper in September 2014, which will detail how entities can determine which accounting policies are important.
    • Other — a review of all Standards is being conduct to see if there are ways to simplify the disclosure requirements without reducing the usefulness.
  • Materiality — held discussions during March 2014 IASB meeting on the application of materiality to assess whether it should be disclosed in financial statements and a study of how to define, interpret, and apply materiality in different jurisdictions and for different purposes is underway. Results of this study will be discussed in September 2014 with a paper soon to follow.

For more information, see the IASB's press release and our disclosure initiative project pages:

IASB proposes amendments regarding the application of the investment entities exemption

11 Jun 2014

The International Accounting Standards Board (IASB) has published an Exposure Draft (ED) of proposed amendments to IFRS 10 'Consolidated Financial Statements' and IAS 28 'Investments in Associates and Joint Ventures'. The proposed amendments aim at addressing issues that have arisen in relation to the exemption from consolidation for investment entities. Comments are requested by 15 September 2014.

 

Background

In October 2012, the IASB issued Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) providing an exemption from consolidation of subsidiaries under IFRS 10 Consolidated Financial Statements for entities which meet the definition of an 'investment entity'. Subsequently, the IFRS Interpretations Committee received several submissions regarding the implementation of the exemption. The Committee recommended to the IASB to address the issues in a narrow-scope project, and in March 2014 the IASB formally added a project on IFRS 10/IAS 28 — Investment entity amendments to its work programme.

 

Suggested changes

The IASB proposes in ED/2014/2 Investment Entities: Applying the Consolidation Exception (Proposed amendments to IFRS 10 and IAS 28) amendments aimed at clarifying the following aspects:

  • Exemption from preparing consolidated financial statements. The suggested amendments confirm that an entity can apply the consolidation exemption even if its parent entity measures its subsidiaries at fair value in accordance with IFRS 10.
  • A subsidiary providing services that relate to the parent's investment activities. A subsidiary that provides services related to the parent's investment activities should not be consolidated if the subsidiary itself is an investment entity.
  • Application of the equity method by a non-investment entity investor to an investment entity investee. When applying the equity method, a non-investment entity investor in an investment entity retains the fair value measurement applied by the associate to its interests in subsidiaries, unless the non-investment entity investor is a joint venturer where the joint venture is an investment entity.

 

Transition requirements and effective date

The ED does not contain a proposed effective date. Also, no specific transition provisions are included in the ED.

 

Additional information

Please click for:

IASB Chairman continues to believe that investors need globally comparable financial information

11 Jun 2014

IASB Chairman Hans Hoogervorst has reacted to statements that the opportunity for the adoption of IFRSs in the United States has been lost.

During a speech at an SEC conference in California last week, former SEC chairman Christopher Cox opined that IFRSs wouldn't be adopted in the United States anymore as the enthusiasm for IFRSs had noticeably receded. As part of the reason he made out that the IASB had been neglecting U.S. views by appearing at U.S. roundtables and meetings but rarely and, if doing so, being demonstrably aloof. Mr Cox claimed the IASB did not fully understand the way the FASB interacted with its stakeholders.

In a statement reacting to the speech, Mr Hoogervorst commented:

Former Chairman Cox has shifted his focus from a single set of high quality global standards to maintaining a national standard setter that is 'supple' when responding to domestic priorities and concerns. We continue to believe that investors are best served by high quality globally comparable information, and that includes US investors. As former Chairman Cox noted, US investors have trillions of dollars invested in entities reporting under IFRS. We never forget the importance of these stakeholders and are expanding our efforts to reach out and consult with them on all of our projects.

I believe that we are on the right track with leases, and have disagreed before with former Chairman Cox about this. Both the IASB and the FASB have reaffirmed the heart of our proposals – that lessees need to put this missing obligation on their balance sheet. This is what the SEC staff itself suggested in a 2005 report under Sarbanes-Oxley. At the same time, they cautioned that these reforms would be highly controversial and meet strong resistance. I’m sorry to say that they were right.

We are grateful to the IASB for allowing us to make Mr Hoogervorst's full statement available on IAS Plus. Mr Cox full speech is available on the conference website.

Philippe Danjou remarks on long-term investment

10 Jun 2014

On 4 June 2014, at a roundtable event hosted by the OECD and the Ministry of Finance of Singapore, IASB member Philippe Danjou provided his views on the importance of long-term investing, the misconception of fair value, and the IASB’s goals for its accounting standards financial instruments and insurance contracts.

In his remarks, Mr Danjou focused on four points:

  1. Long-term investment provides a key source of funding for companies; therefore, it is important the IASB “develop financial reporting standards that help investors make sound capital allocation decisions.”
  2. There is little evidence that measurement tools, such as fair value, have contributed to short-termism in financial markets.
  3. There is limited use of fair value outside of the financial services sector and that “[f]air value accounting, where it is a relevant measure, enables transparent and timely reporting of the ‘bad news’, which is essential for sound investment decisions.”
  4. The upcoming Standards on financial instruments and insurance contracts are aimed to be more closely aligned with business models of the banking industry and improve transparency. The IASB does not expect an increased use of fair value accounting.

For more information, see the press release and the full transcript on the IASB’s website.

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

10 Jun 2014

We have published our comment letters on IFRS Interpretations Committee agenda decisions on IAS 1, IAS 12, IAS 34, and IAS 39, as published in the March IFRIC Update.

More information about the issues is set out below:

IssueMore information
IAS 1 Presentation of Financial Statements — Disclosure requirements relating to assessment of going concern
IAS 12 Income Taxes — Recognition of deferred tax for a single asset in a corporate wrapper
IAS 34 Condensed Financial Statements — Condensed statement of cash flows
IAS 39 Financial Instruments: Recognition and Measurement — Classification of a hybrid financial instrument by the holder

You can access all our comment letters to the IASB, IFRS Foundation, and IFRS Interpretations Committee here.

Agenda for June 2014 IASB meeting

06 Jun 2014

The International Accounting Standards Board (IASB) will meet at its offices in London on 17–19 June 2014. Part of the meeting will be held jointly with the Financial Accounting Standards Board (FASB) to discuss the leases project. Additionally, the IASB will discuss insurance contracts, annual improvements (2012-2014 cycle), issues from the IFRS Interpretations Committee, the conceptual framework, business combinations under common control, and its research project on discount rates.

The full agenda for the meeting, dated 6 June 2014, can be found here.  We will post any updates to the agenda, and our Deloitte observer notes from the meeting, on this page as they are available.

IASB holds meetings with AOSSG and ASBJ

06 Jun 2014

The International Accounting Standards Board (IASB) held a series of meetings in Tokyo with the Asian-Oceanian Standard-Setters Group (AOSSG), the Accounting Standards Board of Japan (ASBJ), and others to discuss recent activities by the IASB.

Specifically, the series of meetings included:

  • A public seminar hosted by the ASBJ and attended by over 280 Japanese stakeholders to discuss the new revenue recognition standard and the IASB’s financial instruments project.
  • Discussions with AOSSG that focused on technical developments and feedback received on the Post-Implementation Review of IFRS 3 by the Asian-Oceania region.
  • A jointly hosted-meeting with the ASBJ which included over 50 Japanese entities using IFRS, to discuss the new revenue recognition standard, the role of the IFRS Interpretations Committee and how the IFRS makes changes.
  • Meeting with entities interested in adopting IFRS and those that are currently using IFRS in practice.

For more information, see the press release on the IASB’s 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.