July

Report on the June 2014 IFRS Advisory Council meeting

01 Jul 2014

A report on the IFRS Advisory Council meeting held in London on 9-10 June 2014 has been posted to the IASB's website. The meeting included the updates on the activities of the Council, IFRS Foundation, International Accounting Standards Board (IASB) and Effect Analysis Consultative Group, as well as discussions focused on the role of judgement in financial reporting, the preliminary feedback on the post-implementation review of IFRS 3, the Conceptual Framework project, and the proposed approach to implementation support groups. A number of other topics were also discussed.

Highlights from the meeting include:

  • Role of judgement.  There was strong support for principles-based accounting. The most members also felt that the use of judgement should be expected and that the IASB should consider this when developing its principles. Also, many members believed that the IASB should not include anti-abuse precautions in its Standards.  
  • Conceptual framework.  There was support by the members for the decisions made on the scope, purpose and status this project, included its the proposed time line; however, some noted that significant issues should not be rushed for the sake of meeting this time line. The members also noted that the IASB should carefully examine the relationship between the Conceptual Framework and its Standards. In addition, the members expressed concerns with the reintroduction of prudence and warned against it conflicting with neutrality.
  • Implementation support groups. There was support for the use of implementation groups; however, certain provisions should be considered. These provisions included: (1) any future group should be considered on a case by case basis and whether it is necessary at all, and (2) transparency is needed on the group's activities. In addition, the members asked for an evaluation of the implementation groups for revenue and impairments to occur in order to determine their effectiveness.
  • Terms of reference. There were recommendations to revise the Council’s secondary objective in order to clear up any misconceptions regarding its independence and objectivity.

The next meeting of the IFRS Advisory Council is scheduled for 13-14 October 2014 in London.

The full report on the IFRS Advisory Council meeting is available on the IASB website.

KASB publishes discussion paper on the equity method

01 Jul 2014

The Korean Accounting Standards Board (KASB) has published a discussion paper with three alternative concepts regarding the equity method and other issues that the KASB believes should be addressed in connection with the IASB's equity method research project.

The paper discusses problems with the vagueness around the concept of the equity method. These are caused by the fact that the concept is not clearly presented in IAS 28 Investments in Associates and Joint Ventures as the standard remains vague on whether the equity method serves as one-line consolidation or measurement basis, which seem to be two unrelated concepts. In its discussion paper, the KASB introduces a new dimension called 'scope of group' (reflecting the relationship between an investor and its associate) to bring the concepts 'one-line consolidation' and 'measurement basis' onto one continuum. This allows the KASB to establish three concepts of the equity method, including a concept existing in the middle of the continuum. The paper offers a detailed analysis of the three alternative concepts and shows how accounting treatments and results may differ.

In its paper, the KASB also presents additional issues that should be considered in the equity method research project. Under its national GAAP Korea accumulated extensive experience in resolving equity method-related issues and believes this will provide valuable insights when amending IAS 28. Lastly, the paper also reports the results of a market-based empirical study on the value relevance of the equity method.

The discussion paper is available on the KASB website. Comments on the paper are requested by 31 August 2014.

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