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 draft endorsement advice letter seeks comments on the assessment of the amendments against the technical criteria for endorsement in the EU and on the initial costs and benefits of implementing and applying the amendments in the EU. Comments are requested by 5 September 2014.

The endorsement status report, dated 23 July 2014, is available here.

To guide the process along, the SMEIG has issued three agenda papers, which will cover (1) background information, (2) issues addressed by specific questions in the ED, and (3) other issues raised by respondents.

The SMEIG plans to collect all responses from its members by 8 September. The responses will be combined into a single report and, when finalised, it will be sent to the IASB for consideration when redeliberations on the ED begin.

For more information, see the press release, including the agenda papers, on the IASB’s website.

Topics discussed included:

• Governance and procedural matters. A report was received in relation to the IFRS Foundation Monitoring Board meeting held on 13 June 2014, and the Trustees approved an updated Charter and Memorandum of Understanding (MoU) with the Foundation. It also approved the text of a Statement of Protocols with the European Securities and Markets Authority (ESMA), considered preliminary themes for the next review of the structure and effectiveness of the IFRS Foundation to be conducted over the course of 2015, started the process of a self-evaluation exercise of the Trustees, and approved a change in the terms of reference of the IFRS Advisory Council moving its secondary focus from promotion and adoption of IFRS to encouraging broad participation in the development of IFRS. Other topics discussed included Trustee appointments and reports from a number of committees
• International IFRS developments. Discussion included a number of significant events in Europe (including the European Commission's review of the IAS Regulation and the restructuring of the European Financial Reporting Advisory Group), a current assessment of the United States environment and the Foundation's approach, the importance of Mexico and improving relationships with the Group of Latin-American Standard-Setters (GLASS), engagement challenges in the Asia-Oceania region, and the particular challenges of stakeholder engagement in Africa and the Middle East
• IASB Chairman report. Hans Hoogervorst provided an update on the IASB's activities, noting adoption updates in Singapore, India and Japan, initiatives to improve the consistent application, and technical updates focusing on the conceptual framework project, insurance contracts and leases.
• Due Process Oversight Committee (DPOC) Chairman report. Scott Evans provided a report on the July 2014 meeting of the DPOC, focusing on the IASB's technical activities, Effects Analysis Consultative Group, IFRS taxonomy, the annual review of consultative groups, and general due process matters. More information on this meeting is available here
• Other matters. The Trustees received a presentations from the Chairman of the UK Financial Reporting Council (FRC) on the FRC's perspective of financial reporting issues, from Kumar Dasgupta (Technical Director) on the revised IFRS 9 Financial Instruments, and held the first Tommaso Padoa-Schioppa Memorial Lecture.

The full report from the meeting available on the IASB website.

The report noted discussion on the following topics:

• Major IASB projects. The DPOC discussed the finalised version of IFRS 9 Financial Instruments (incorporating requirements for impairment and modifications to classification and measurement), macro hedge accounting, insurance contracts, leases, revenue recognition, conceptual framework and the disclosure initiative. The DPOC raised questions on possible diverse views of constituents in the insurance project, and the impact of the divergent views of the IASB and FASB in the leases project.
• Implementation and maintenance projects. The DPOC received an update on a number of projects, including bearer plants, equity accounting and the post-implementation review of IFRS 3 Business Combinations
• Effects Analysis Consultative Group (EACG). The DPOC considered a near final draft of the EACG report advising the IASB on developing an agreed methodology for field testing and effects analysis, including a revised section on financial stability responding to the IASB's obligations from being a member of the Financial Stability Board (FSB). The finalised report will be submitted to the IFRS Foundation Trustees and may result in some amendments to the Due Process Handbook
• IFRS taxonomy (XBRL). The DPOC received a progress report on the IASB's proposals to revise the due process for updating the IFRS taxonomy, noting concerns raised by some IASB board members and disappointment at the delay in the publication of an Invitation to Comment on the proposed new due process, which was originally intended to be considered at this meeting. However, the DPOC accepted proposals for trial runs of the new process for both a new Standard and an update
• Review of consultative groups and DPOC engagement. The DPOC considered an annual review of consultative groups, considering standing advisory groups (Accounting Standards Advisory Forum, Capital Markets Advisory Committee and Global Preparers Forum, Emerging Economies Group, SME Implementation Group, Education and Advisory Group, Advisory Group on Sharia-compliant instruments and transactions) and those groups recommended for disbandment, or already disbanded (XBRL Advisory Council, XBRL Quality Review Team, Effects Analysis Consultative Group, Financial Instruments Working Group and the Expert Advisory Panel on Impairment. No changes were proposed to the Insurance Working Group and Leases Working Group, Rate-Regulated Activities Consultative Group and Valuation Expert Group, and the DPOC also noted the new IFRS Taxonomy Consultative Group and Joint Transition Resource Group for Revenue Recognition
• Due process reports. The DPOC considered a report dealing with the availability of comment letters and meeting papers and interactions with securities and prudential regulators and noted consistent adherence to the due process requirements.

The full report is available on the IASB website.

The IASB is expected to issue a finalised version of IFRS 9 in the near future, which will incorporate new requirements for financial instrument impairment, and make amendments to classification and measurement arising from the IASB's limited reconsideration of IFRS 9. The new standard is also expected to have an effective date of 1 January 2018.

Two presentations, including question and answer sessions, will be held to cater for different time zones. Details and registration links to the IASB's webcast provider are outlined below:

• Session 1 - 29 July 2014 10:00am-10:40am (British Summer Time) - registration link
• Session 2 - 29 July 2014 2:00pm-2:40pm (British Summer Time) - registration link

The webcasts will be recorded and made available after the completion of the sessions.

The purpose of the TRG is not to issue guidance but instead to seek feedback on potential issues related to implementing ASC 606 and IFRS 15. By analyzing and discussing potential implementation issues, the TRG will help the boards determine whether they need to take additional action, such as providing clarification or issuing other guidance. The TRG comprises financial statement preparers, auditors, and users from “a wide spectrum of industries, geographical locations, and public and private organizations.”

Topics discussed at the meeting included:

• Determining whether an entity offering internet-related intangible goods and service arrangements is a principal or an agent.
• Determining whether certain amounts billed to customers should be presented as revenue or a reduction of costs.
• Sales-based and usage-based royalties in contracts with licenses and goods or services other than licenses.
• Inclusion of renewal periods for impairment testing of capitalized contract costs.

For more information, see Deloitte’s TRG Snapshot.

Highlights included the issuance of two draft comment letters related to (1) IASB’s discussion paper on macro hedging and (2) IASB’s exposure draft on investment entities and approved a final comment letter on the IASB’s proposed amendments to IAS 1. In addition, the EFRAG TEG approved:

• An invitation to comment relating to the endorsement for use in the European Union and European Economic Area of IASB publication on bearer plants.
• An EFRAG/ICAC/OIC/RJ discussion paper on separate financial statements.
• Two short discussion series papers on the presentation of the reversal of acquisition ‘step-ups’ and the question of whether IFRIC 21 unveiled issues in IAS 37.

Additional topics discussed in the newsletter are:

• IFRS 15
• IASB’s annual improvements to IFRS (2012-2014 cycle)
• EFRAG/ANC/FRC research paper The Role of the Business Model in Financial Statements
• EFRAG Short Discussion Series paper on equity method
• Conceptual framework
• Insurance contracts
• Rate-regulated activities

Please click for the new issue of the EFRAG Update (link to EFRAG website).

The Discussion Paper is intended to contribute to the global discussion on how goodwill should be accounted for and disclosed. Under IFRS, goodwill arising from a business combination is not amortised but subject to an annual impairment test. In connection with the post-implementation review of IFRS 3 Business Combinations, the debate on the strengths and weaknesses of an impairment-only model gained renewed momentum.

In the Discussion Paper, the Research Group explores possible approaches to remedy the shortcomings that constituents identified:

• limited usefulness of the information resulting from the impairment-only approach,
• cost and subjectivity of the impairment testing in accordance with IAS 36, and
• lack of timeliness in the recognition of impairment losses.

In its paper, the Research Group considers one or a combination of the following: (a) changing the accounting requirements for goodwill, (b) improving the requirements for impairment testing and (c) improving the disclosure requirements in IAS 36 Impairment of Assets. As a result of its analysis, the Research Group concluded that reintroduction of amortisation of goodwill would be appropriate because it reasonably reflects the consumption of the economic resource acquired in the business combination over time, and can be applied in a way that achieves an adequate level of verifiability and reliability. In addition, the Research Group concluded that further improvement should also be considered in the area of disclosure requirements.

The Discussion Paper also includes a chapter providing the Research Group's observations if the IASB decides to reintroduce the amortisation and impairment approach.

The ASBJ, EFRAG and OIC invite comments on the Discussion Paper by 20 September 2014.

Press releases offering access to the Discussion Paper are available on the ASBJ and EFRAG websites.

Update 3 October 2014: The deadline for commenting on the paper has been extended to 30 November 2014. Please see the press release on the OIC website.

We generally agree that the changes proposed to the application of judgement can result in clearer communication to financial statement users; however, we believe there is a need for additional guidance to assist in that application of judgement. Further, we believe that a review of specific disclosure requirements within new and existing standards should be initiated.

Lastly, the disaggregation of line items in the statement of profit or loss continues to be a topic of much debate (see ESMA consultation paper and IFAC exposure draft). We believe that the IASB is best placed to provide a globally accepted framework for the presentation of additional information in the statement of profit or loss and encourage the Board to press ahead with the consideration of the presentation and disclosure of non-IFRS financial information.

Click for the full comment letter.