IASB issues an ‘Investor Perspectives’ article on hedge accounting

30 Jun 2014

The International Accounting Standards Board (IASB) has released another edition in its 'Investor Perspectives' series. In this edition, Patricia McConnell (IASB Board member) discusses the benefits of the new hedge accounting model will have on the investor community.

The article provides information on (1) when to apply the new hedge accounting model, (2) the reasoning behind the amendments, and (3) the enhanced disclosure requirements.                    

Click to view:


EFRAG and the European National Standard Setters invite companies to share their views on lessee accounting

30 Jun 2014

The European Financial Reporting Advisory Group (EFRAG) and the European standard setters (ANC, ASCG, FRC and OIC) are performing an additional public consultation on the two different approaches for lessees proposed by the IASB and FASB.

The objective of the consultation is to obtain examples where contracts or transactions could qualify as leases under a single-model approach (IASB) or a dual-model approach (FASB), but are viewed by constituents as in-substance services. In addition, the EFRAG and European standard setters are seeking input on which of the two alternative approaches is preferred.

During the March 2014 joint meeting, the IASB and FASB did not reach a consensus regarding lessee accounting. The IASB supported a single-model approach under which lessees would account for all leases as Type A (or finance-type) leases, while the FASB supported a dual-model approach; however, lessees would classify a lease by using criteria similar to the lease classification criteria in IAS 17. The FASB also indicated that they expect most current capital leases to be treated as “Type A” leases and most operating leases to be treated as “Type B” leases.

The public consultation will begin on 30 June 2014 and will last until 22 August 2014. The feedback received will be shared among the EFRAG and the National Standard Setters.

For more information, see:

Updated EFRAG endorsement status report includes newly issued amendments to IAS 16 and IAS 41

30 Jun 2014

The European Financial Reporting Advisory Group (EFRAG) has updated its Endorsement Status Report to include 'Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41)' bringing bearer plants into the scope of IAS 16.

The IASB issued the amendments to IAS 16 Property, Plant and Equipment and IAS 41 Agriculture on 30 June 2014. They are effective for annual periods beginning on or after 1 January 2016, with earlier application being permitted. The updated status report indicates that final endorsement of the amendments for use in the European Union is currently expected in the first quarter of 2015.

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

IASB brings bearer plants into the scope of IAS 16

30 Jun 2014

The International Accounting Standards Board (IASB) has published 'Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41)'. The amendments bring bearer plants, which are used solely to grow produce, into the scope of IAS 16 so that they are accounted for in the same way as property, plant and equipment. The amendments are effective for annual periods beginning on or after 1 January 2016, with earlier application being permitted.



The IASB received feedback from stakeholders expressing concerns about the relevance and usefulness of information provided to users for certain biological assets accounted for at fair value. Especially mature bearer biological assets, which no longer undergo significant biological transformation and are used solely to grow produce, were perceived to be more akin to property, plant and equipment and their operation similar to that of manufacturing. Therefore, the IASB published Exposure ED/2013/8 Agriculture: Bearer Plants proposing to bring biological assets that meet the definition of a 'bearer plant' within the scope of IAS 16 Property, Plant and Equipment rather than using the fair value measurement approach prescribed by IAS 41 Agriculture. The amendments published today update and finalise proposals in the ED.



For the purpose of bringing bearer plants from the scope of IAS 41 into the scope of IAS 16 and therefore enabling entities to measure them at cost subsequent to initial recognition or at revaluation, a definition of a 'bearer plant' is introduced into both standards. A bearer plant is defined as "a living plant that:

  1. is used in the production or supply of agricultural produce;
  2. is expected to bear produce for more than one period; and
  3. has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales."

The scope sections of both standards are then amended to clarify that biological assets except for bearer plants are accounted for under IAS 41 while bearer plants are accounted for under IAS 16.

The amendments also clarify that produce growing on bearer plants continues to be accounted for under IAS 41 and that government grants related to bearer plants no longer fall into the scope of IAS 41 but need to be accounted for under IAS 20 Accounting for Government Grants and Disclosure of Government Assistance.


Other considerations

The IASB explains in the Basis for Conclusion that it decided on a 'no-alternative-use model' for bearer plants instead of a 'predominant-use model' (thereby excluding from the amendments biological assets that have both bearer and consumable attributes) as a predominant-use model would be more difficult to apply because it would require judgement to be applied and as reclassifications between IAS 16 and IAS 41 might become necessary if the predominant use changes.

The IASB also excluded livestock from the scope of the amendments as a cost model would be more complex for livestock. Also, the IASB argued that an active market would usually exist for livestock, resulting in fair value information being readily available and easier to apply than cost measurement.


Dissenting opinions

Two IASB members dissented from the publication of the amendments because they believe that the amendments will eliminate information about the fair value changes in bearer plants and the underlying assumptions used to estimate those changes. They believe that the amendments are no improvement to IFRSs and lower the quality of the information available in the financial statements of entities engaged in agricultural activities. Therefore, they conclude that the amendments fail to meet the Board's own criteria for new or amended standards.


Effective date and transition

The amendments are effective for annual periods beginning on or after 1 January 2016. Earlier application is permitted.

On the initial application of the amendments, entities are permitted to use the fair value of items of bearer plant as their deemed cost as at the beginning of the earliest period presented. Also, an entity need not disclose the quantitative information required by paragraph 28(f) of IAS 8 for the current period. However, entities are required to provide these disclosures for each prior period presented.


Additional information

Click for:

Latest IASB 'Investor Perspectives' published

27 Jun 2014

The International Accounting Standards Board (IASB) has released another edition in its 'Investor Perspectives' series. In this edition, Patricia McConnell (member of the IASB) provides her perspectives on the new accounting requirements for revenue recognition.

With revenue as the ‘top line’ metric that is crucial to many investment decisions, the issuance of IFRS 15 Revenue from Contracts with Customers providing a single, principles based five-step model to be applied to all contracts with customers is a significant milestone in financial reporting.

Click to view Investor PerspectivesRevenue recognition: finally, a Standard approach for all (link to IASB website). All Investor Perspectives are archived on the IASB's website.

IASB launches newsletter for investors

26 Jun 2014

The IASB has launched a new newsletter, "IASB Investor Update," to provide investors with quick access to information on current accounting and financial reporting issues. The newsletter aims to keep investors informed on new and changing guidance.

The first issue features:

  • Request for comments on current projects;
  • Spotlight on disclosures;
  • Insights on the changes to revenue recognition;
  • IASB profile on Pat McConnell, a retiring Board member; and
  • An events calendar.

The IASB Investor Update newsletter is available on the IASB's website.

Fourth Global IFRS Banking Survey — Ready to land

26 Jun 2014

Deloitte has issued its 'Fourth Global IFRS Banking Survey — Ready to Land'. The report captures the current views of 54 major banking groups'—including 14 global systemically important financial institutions (G-SIFIs)—on recent accounting and regulatory changes.

It summarises key findings such as:

  • Three years is most frequently cited as the necessary lead time for all phases of IFRS 9 Financial Instruments.
  • There is an increasing expectation that banks' pricing will be affected by the accounting change.
  • More than half of banks surveyed believe that the expected loss approach will result in banks' provisions increasing by up to 50% across all loan asset classes.
  • 70% of banks surveyed anticipate their IFRS 9 expected loss provision to be higher than current regulatory expected loss. Capital planning uncertainty will continue, as regulators' responses to change are not yet known.
  • The key implementation challenges cited were resource constraints and coordinating multi-disciplinary effort including finance, credit, risk and IT.
  • 56% of banks surveyed are concerned about credit data reconciliation and credit data quality.

Please click to download Fourth Global IFRS Banking Survey — Ready to land.

Click for previous surveys:

Summary of the discussions at the first ITCG meeting

25 Jun 2014

The IASB's IFRS Taxonomy Consultative Group (ITCG) held its inaugural meeting on 29 May 2014. The IASB has now published on its website meeting notes from that meeting.

The ITCG discussed current and possible future activities in relation to the IFRS Taxonomy which currently focus mainly on the maintenance and further development of the content of the IFRS Taxonomy. One of the planned projects is to publish jurisdictional profiles on the use of the IFRS Taxonomy around the world.

The group also discussed the proposals for the new IFRS Taxonomy due process including optional steps, resources and the process for common practice additions. The ITCG also considered IASB review and approval of new due process documents.

Regarding the objectives and working practices of the ITCG, the members discussed agenda-setting, taxonomy review and meeting frequency. They found that the main topic for further review is the formalisation of the interaction between the ITCG and the IFRS Advisory Council which is expected to provide strategic guidance on the IFRS Taxonomy.

The main content topics discussed were the 2014 common practice project and amendments to the IFRS Taxonomy resulting from IFRS 15 Revenue from Contracts with Customers. One of the points was convergence with the US GAAP taxonomy, as IFRS 15 is a converged standard.

The meeting concluded with an update on a joint trial project with the FASB, consisting of the development of a data model for IFRS 13 Fair Value Measurement and updates on the use of the IFRS Taxonomy within members' jurisdictions.

Please click for access to the meeting notes on the IASB website.

FASB confirms that improvement of GAAP is its topmost priority

25 Jun 2014

In the first speech of a FASB member after the IASB Vice-Chairman's speech warning against 'turning back the clock', the FASB has confirmed that while it will continue to work with the IASB to make accounting standards as comparable as possible its topmost priority is 'to improve and protect the quality of GAAP'.

In a speech given at the IFRS Conference in London earlier this week, IASB Vice-Chairman Ian Mackintosh had warned against 'turning back the clock' and had directly commented on remarks made recently by members of the FASB that one size (of accounting standards) may not fit all. He had stated: "If all IASB constituents were to insist on the primacy of national preferences, obviously the goal of a single set of global standards would come to naught".

At an accounting conference in California yesterday, FASB member Tom Linsmeier responded by stressing again that the FASB is committed to completing the remaining joint projects with the IASB but afterwards foresees a future of co-existence instead of convergence at all cost:

Once those projects are complete, we envision a new, long-term, decentralized, global standard-setting environment in which the FASB, the IASB, and other major capital market standard setters co-exist and cooperate, as peers, with the goal of issuing more comparable standards, while also addressing the specific needs of the capital markets for which they set standards.

Given that he was speaking at a conference of the American Gas Association, Mr Linsmeier turned to rate-regulation to illustrate his point. He explained that the principles that guide accounting for rate-regulated utilities under US GAAP were well established, understood and supported in the United States. He noted that under IFRSs, there currently was an interim standard on rate regulation (IFRS 14 was issued earlier this year) but the IASB was still working on a final standard where the project was still in research phase.

Illustrating his point about the post-convergence priorities of the FASB, he noted that despite the urging by some in the international community to develop a new, converged standard with the IASB, he did not "foresee the FASB making major changes to [its] model." Mr. Linsmeier stated that while the FASB model was not perfect, "it is not broken" and that it was "very hard to conclude that it would be cost-beneficial to ask our stakeholders to completely overhaul their accounting for rate-regulated activities just to achieve convergence with IFRS."

The full transcript of his speech is available on the FASB’s Web site.

New plank of Japanese growth programme includes promotion of further voluntary use of IFRSs

25 Jun 2014

The Japanese government has finalised another plank of the so-called 'Abenomics' platform intended to boost growth in Japan. It includes steps to promote further voluntary use of IFRSs in Japan.

Chapter 5-2 of the document devoted to the activation of financial and capital markets and investments includes the following three specific policy statements:

  • further promotion of voluntary use of IFRSs in Japan by the Cabinet to increase the number of IFRS adopters, toward the goal of the single set of high quality accounting standards mandated by G20 back in 2008;
  • implementation of additional measures by the Cabinet such as issuing a report summarising early adopters' experience of implementing IFRS for use by followers;
  • encouragement of listed entities at the Tokyo stock exchange to explain their basic thinking as to the choice of accounting standards (e.g. whether IFRSs are to be adopted) to their investors.

The policy may not produce rapid and drastic changes, but demonstrates clearly that the Japanese government supports the goal of a single set of accounting standards.

The policy statement is available on the Japanese government's website, the comments regarding IFRSs are on page 78 (document available in Japanese only).

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.