Issued in July, the Discussion Paper is intended to contribute to the global discussion on how goodwill should be accounted for and disclosed.

Whilst we recognise the conceptual merits of the current model of non-amortisation coupled with a full annual impairment test, its application imposes significant costs on the preparers of financial statements. Specifically, we continue to see a significant proportion of the resources for preparing and auditing financial statements of many entities devoted to the annual impairment review of both goodwill and indefinite-life intangible assets. Similarly, we are aware of concerns over the costs of identifying and valuing separate intangible assets. We are not convinced that this level of cost is justified by the resulting information provided to users of financial statements.

We encourage the IASB to re-open its deliberations (with global convergence in mind) on these areas of business combination accounting and to re-examine the value of information provided by an annual impairment review of unamortised goodwill and indefinite-life intangible assets.

Click for the full comment letter.

The topics discussed were as follows (click through to access detailed Deloitte observer notes for each topic):

TUESDAY, 16 SEPTEMBER 2014 (13:00-17:05)

Items for continuing consideration

• IFRS 11 – Classification of joint arrangements
• IFRS 5 – Non-Current Assets Held for Sale and Discontinued Operations
  
  • Cover note
  • Summary of the issues
  • Other IFRS 5 issues that the IASB had previously considered but not addressed
  • Feedback from former IASB staff and members
  • Further analysis using complex fact patterns
  • Considerations of next steps
• IAS 12 – Measurement of income tax on uncertain tax positions
• IFRIC 14 – Availability of refunds from a defined benefit plan managed by an independent trustee
• Conceptual Framework – Transition requirements for the revised Conceptual Frameworks

Administrative session

• Interpretations Committee work in progress
• Review of Interpretations Committee activities

WEDNESDAY, 17 SEPTEMBER 2014 (9:00-11:45)

New items

• IFRIC 21 – Levy on PPE of service provider
• IAS 28 – Assessment of fund manager's significant influence over funds
• IFRS 12 – Disclosures for a subsidiary with a material non-controlling interest and for a material joint venture or associate
• IAS 39 – Accounting for embedded foreign currency derivatives in host contracts
• IFRS 13 – The Fair Value Hierarchy – Using quoted prices provided by third parties

The guide that was published in a draft version in February 2014 builds on the qualitative characteristics of useful financial reporting and recommends that supplementary financial measures should be relevant, complete, neutral, transparent, understandable and verifiable, comparable, and timely. The guide also offers recommendations on the disclosure of such measures:

• The definition and purpose of the measure should be explained.
• Changes in composition of a supplementary financial measure should be disclosed including the reasons for the changes.
• A quantitative reconciliation to the most directly comparable GAAP measure should be provided.
• The measure should be given context.
• Supplementary financial information should complement but not overshadow GAAP measures.

Additionally, the guide recommends that companies should consider obtaining internal or external assurance on their supplementary financial information voluntarily where obtaining assurance on these is not mandated.

The disclosure of non-GAAP information is currently widely discussed and there are several initiatives under way. In February 2014, the European Securities and Markets Authority (ESMA) launched a consultation on Guidelines on Alternative Performance Measures and earlier this month the International Organization of Securities Commissions (IOSCO) issued a proposed Statement on Non-GAAP Financial Measures.

Please click for more information on the finalised International Good Practice Guidance, Developing and Reporting Supplementary Financial Measures on the IFAC website:

• Press release
• Access to an executive summary
• Access to the full length guidance

The new requirements since 1 July 2013 include:

• IFRS 14 and IFRS 15;
• the new hedge accounting chapter in IFRS 9;
• amendments to IFRS 1, IFRS 2, IFRS 3, IFRS 8, IFRS 11, IFRS 13, IAS 16, IAS 19, IAS 24, IAS 38, IAS 40 and IAS 41; and
• consequential amendments to other Standards and Interpretations.

The Green Book can be purchased for £94 plus shipping for the two book set (academic, developing country, and volume discounts apply). Click for more information and ordering details.

In recent discussions, one of the factors often mentioned in connection with long-term finance has been accounting and especially fair value accounting. A Green Paper consultation on the long-term financing of the European economy published by the European Commission (EC) in March 2013 had suggested that the fair value might lead to short-termism in investor behaviour. This had solicited, among others reactions, a statement by the IASB that "the IASB does not believe that fair value accounting principles have of themselves led to short-termism in investment behaviour". In an earlier speech the IASB Chairman had noted that even long-term investors require shorter-term, reliable and unbiased performance measures to keep track of their investments and to hold management to account. Nevertheless, the EC later adopted a package of measures on long-term financing that included considering whether the use of fair value in especially in IFRS 9 Financial instruments "is appropriate, in particular regarding long term investing business models".

The FSB report reflects some of the concerns regarding fair value accounting that were voiced in the member survey (the EC is a member of the FSB). The two main concerns voiced were that:

• the use of fair value accounting for financial instruments increases volatility in measures of income and capital and so could provoke adverse reactions from investors and
• fair value does not reflect the business model of long-term investors, as it can mean that short term changes in value of instruments are given undue weight.

The second concern was especially raised for insurers, whose business model involves matching assets and liabilities, and for holders of strategic equity investments. Nevertheless, the members also noted that the insurance contract project is still under development, and that the introduction of expected loss accounting for loan provisions through the impairment project will greatly enhance transparency.

All in all, the FSB finds that it is too early to fully assess whether the concerns are justified and what the impact of the changes on the provision of long-term finance or changes in market behaviour in response to these changes might be, but promises that the regulatory community "will remain vigilant to avoid material unintended consequences and to analyse potential impacts as implementation proceeds". For the time being, however, the FSB concludes:

The FSB's monitoring continues to find little tangible evidence or data to suggest that global financial regulatory reforms have had adverse consequences on the provision of long-term finance. The reforms are intended to be proportionate to risks and to support financial stability. They are not designed to encourage or discourage particular types of finance.

Please click for access to the full report on the FSB's website.

After the report was released, the FSB held a plenary meeting in Cairns, Australia, that looked at vulnerabilities affecting the global financial system and reviewed work plans for completing core financial reforms. Among other topics, the plenary discussed work by the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) on new standards for the financial sector that take account of the lessons of the financial crisis and introduce forward-looking expected loss provisions for loan losses. Members welcomed this work and reaffirmed the continuing relevance of the objective of achieving a single set of high-quality global accounting standards. The FSB also encouraged the IASB and FASB to monitor the consistent implementation of their respective standards and to continue to seek opportunities for further convergence.

Please click for the press release on the FSB's website.