September 2014 IASB meeting notes — Part 2

30 Sep 2014

The IASB's meeting was held on 22–24 September 2014. We have posted Deloitte observer notes from Wednesday's sessions on the post-implementation review of IFRS 3 and IFRS Interpretations Committee issues.

Click through for direct access to the notes:

Wednesday, 24 September 2014

You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting. Notes from the remaining sessions will be posted in due course.

KASB publishes research report on the equity method

30 Sep 2014

The Korean Accounting Standards Board (KASB) has published a a research report with issues that the KASB believes should be addressed in connection with the IASB's equity method research project.

The KASB believes that the most fundamental application issue regarding the equity method is the vagueness of its underlying concept, whether it serves as one-line consolidation or measurement basis, which seem to be two unrelated concepts. Therefore, the KASB introduces a new dimension called 'scope of equity-accounted 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 report explains how the equity method accounting standard may vary under each of the three alternative concepts.

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 the KASB believes this will provide valuable insights when amending IAS 28 Investments in Associates and Joint Ventures.

Lastly, this paper reports the results of the empirical research regarding the value relevance of the equity method. It shows the importance of the equity method, not on a conceptual level but on an empirical and practical level. The report also points at the amendments to IAS 27 Separate Financial Statements the IASB published in August 2014 to again allow application of the equity method in separate financial statements, which will extend usage of the equity method.

The research report builds on a discussion paper on the same topic published in June 2014. It includes the comment letters the KASB received and a summary of the views expressed. The KASB stresses that the purpose of its research paper is not to provide a final version of a new standard on the equity method but to provide a starting point of discussions for developing a better standard for the equity method.

The research report is available on the KASB website.

EFRAG recommends public fatal flaw review of IASB pronouncements

30 Sep 2014

The European Financial Reporting Advisory Group (EFRAG) has written a letter to the International Accounting Standards Board (IASB) recommending that prior to finalisation of a standard or a major amendment to a standard a public fatal flaw review should take place. EFRAG believes that this would enhance the IASB's quality control procedures.

The IASB at times uses the tool of fatal flaw reviews, however, membership of the review teams is restricted. EFRAG believes that a public fatal flaw review should be included as a formal step in the IASB's due process including discussion of the fatal flaw results in a public meeting of the IASB based on a public summary report of these results before the final text of a standard or major amendment is approved by the IASB. EFRAG had made a similar suggestion in its comment letter on the proposed IFRS Foundation Due Process Handbook, which was published in its final version in February 2013 without the change EFRAG suggested.

Please click for access to the letter to the IASB on the EFRAG website.

Update: Subsequently, the EFRAG published on its website a feedback statement summarising comments in response to the EFRAG Draft Letter and showing how those comments were considered. The feedback statement is available on the EFRAG website.

Council of the European Union adopts ESG disclosure Directive for large companies and groups

30 Sep 2014

The Council of the European Union has adopted the Directive on disclosure of non-financial and diversity information by large companies and groups addressing environmental, social, and governance (ESG) issues.

The new Directive, which amends the Accounting Directive, applies to large public-interest entities with more than 500 employees.  Public-interest entities include listed companies as well as some unlisted companies, such as banks, insurance companies and other companies that are so designated by Member States because of their activities, size or number of employees.  

Such companies will be required to disclose information in their annual reports on environmental, social and employee matters, respect for human rights, anti-corruption and bribery matters.  The disclosure will need to include a description of the policy pursued by the company related to these matters, the results of these policies and the risks related to these matters and how the company manages those risks. The Directive does not require companies to comply with integrated reporting.

Welcoming the adoption of the Directive, the European Commission highlighted:

Companies in the scope of the Directive will disclose relevant, useful information necessary for an understanding of their development, performance, position and impact of their activity, rather than detailed reports. Furthermore, the Directive provides companies with significant flexibility to disclose relevant information in the way that they consider most useful, or in a separate report. Companies may use international, European or national guidelines which they consider appropriate.

As the European Parliament already adopted the Directive in April 2014, the Directive will now be published in the EU Official Journal and enter into force 20 days later. Member States will have two years to transpose the Directive into national legislation. Therefore, companies concerned will start reporting under the new Directive as of their financial year 2017.

Please click for:

  • Press release on the website of the Council of the European Union
  • Statement on the European Commission's website

ACCA roundtable on 'Evaluating the impact of IFRS in the EU'

28 Sep 2014

On 25 September, the Association of Chartered Certified Accountants (ACCA) organised a high level conference in order to both present and discuss the recently published consultation on the evaluation of the IAS Regulation and the potential ways forward. The event was hosted by Theodor Dumitru Stolojan, MEP, at the European Parliament.

MEP Stolojan opened the event. He noted that the Commission's report following the consultation should send signals regarding the Conceptual Framework project and that the progress with respect to IFRSs to date was encouraging.

Didier Millerot, Head of the Financial Reporting and Accounting Unit in the Internal Market and Services Directorate General, gave an overview of the Commission's consultation. He noted the need to ensure regulation delivers and is meeting objectives, pointed out that the report will not necessarily lead to legislative proposals and mentioned that certain MEPs are 'passionate' about IFRSs, which makes discussion difficult.

The speakers at the conference discussed various topics in the EC's questionnaire:


  • Speakers noted that IFRSs meet investors' expectations but that there are areas for improvement. However, they stressed that this is not unique to IFRSs and for example also the case with US GAAP.
  • They pointed at some 'avoidable complexity' for example regarding hedge accounting and suggested that the presentation of some matters could be improved.
  • Some speakers noted limited comparability, but stressed that this might also be a question of enforcement.
  • One speaker noted a lot of 'noise' in financial statements which would make for challenges.
  • It was also suggested that the business model could be used as a 'filter'.
  • Speakers underlined the benefits of a 'common vocabulary'.


  • It was pointed out that any system has costs and they have to be balanced with the efficiencies gained. It was noted that it is difficult to really identify the costs, which the EC should be mindful of. It was also pointed out that it is hard to compare local GAAPs with IFRSs as the former would have evolved in last decade too - it is not sure that the maintenance costs would have differed much. The same would hold true for implementation costs from changes ahead.
  • It was noted that IFRSs are very helpful from a competitiveness point of view for Europe.


  • Speakers stressed that tremendous improvements have been made in national enforcement and that the 'different accents' in the 'single language' are slowly fading.
  • ESMA's common enforcement priorities were considered helpful. However, speakers also stated that they were wary of 'standard setting via the back door'. It was suggested that ESMA should focus on disclosures.
  • It was also pointed out that there is a need for a level playing field but also for some flexibility in member states.
  • Concerns voiced mainly regarded the question of how to interpret IFRSs with respect to materiality.


  • Some speakers saw a possible benefit in group and subsidiaries' accounts alignment and also suggested that the use of IFRSs by small listed companies would help attract investment.
  • Other speakers confessed they were 'nervous' and mentioned that there was a need to draw boundaries based on the simplicity of the business model.

Endorsement mechanism

  • Speakers showed themselves pleased with the conclusion that more flexibility was not endorsed - they didn't want to lose the benefits of global standards. They questioned whether it was necessary to more criteria for endorsement when considering the primary purpose of IFRSs.
  • Others mentioned that the process must be 'European' while making sure at the same time that the Commission's advice is stemming from technical expertise.
  • Speakers placed hope in the new EFRAG structure and stressed that lengthy legislative processes should be avoided.
  • It was also pointed out that standards should be endorsed before the IASB's effective date.

After some questions from the audience, Olivier Boutellis-Taft of the Federation of European Accountants (Fédération des Experts-comptables Européens, FEE) closed with a spirited summary statement.  He noted:

Today our panel of experts struggled a bit to clearly identify the costs – but they were very clear in saying that the benefits outweigh the costs. It was also outlined that some of these costs are not related to IFRS but indeed to other sources such as local regulation. However it seems that this does not prevent a few people to blame IFRS. [...] I fail to understand why the IFRS debate often becomes so emotional. It should be dispassionate, objective and factual; it should not be hijacked to pursue objectives that are not related to improving transparency and quality of companies' financial information. It is good to consult on this matter but feedback will have to be interpreted with caution. Although the panel today was very consensual, there is a risk of over-representation of "unhappy customers" which should not lead to frustrating the silent majority – silent majority that expressed itself loudly today.

He also warned against flexible endorsement: "Some are calling for a "more specific version of IFRS (EFRS)": the result will be sub-global standards i.e. sub-optimal standards. It means less consistency, less comparability, less transparency and more cost e.g. reconciliation cost."

Please click for a transcript of Mr Boutellis-Taft's concluding remarks on the FEE website.

IASB issues work plan update for September

26 Sep 2014

Following its September meeting, the International Accounting Standards Board (IASB) has updated its work plan. The revised plan updates the expected redeliberation periods in the amendments to IAS 1 and recognition of deferred tax assets for unrealised losses projects, as well as noting the extension for the expected timing of the exposure draft in the conceptual framework and liabilities projects. The rate-regulated activities project now appears as a major project, while the principles of disclosure remained as a research project. Both the rate-regulated activities and unit of account project have their public consultation periods noted in the revised work plan. Further, the revised plan provides an expected date for a final IFRS on amendments to IAS 1 (Q4 2014) as well as a discussion paper on principles of disclosure (Q1 2015). Lastly, it includes updates to the expected timing of board discussions for various research projects.


Current status

The revised time table for the major projects is now as follows:

Project Current status Next project step Expected timing

Conceptual Framework — Comprehensive IASB project


Exposure draft

Q1 2015

Financial instruments — Macro hedge accounting

Discussion paper

Public consultation

Q4 2014*

Insurance contracts



Q4 2014




Q4 2014

Disclosure initiative — Principles of disclosure

Board discussion

Targeted Discussion Paper

Q1 2015*

Disclosure initiative — Amendments to IAS 1

Exposure draft

Redeliberations and Target IFRS

Q4 2014*

Disclosure initiative — Reconciliation of liabilities from financing activities


Exposure draft

Q4 2014

IFRS for SMEs — Comprehensive review

Exposure draft


Q4 2014

Rate-regulated activities

Discussion paper

Public consultation

Q4 2014 and Q1 2015*

* Indicates a change since the previous work plan update on 30 July 2014.

In addition, the expected timing of board discussion has been deferred for the following research projects:

Click for the IASB work plan dated 26 September 2014 (link to IASB website). We have updated our project pages to reflect the updated work plan and other known developments.

September 2014 IASB meeting notes — Part 1

25 Sep 2014

The IASB's meeting was held on 22–24 September 2014. We have posted Deloitte observer notes from Monday's discussion on the research programme, and Tuesday's session on insurance contracts.

Click through for direct access to the notes:

Monday, 22 September 2014

  • Research programme
    • Project update
    • Research project on post-employment benefits
    • Business combinations under common control

Tuesday, 23 September 2014

You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting. Notes from the remaining sessions will be posted in due course.

Updated EFRAG endorsement status report includes 2012-2014 annual improvements cycle

25 Sep 2014

The European Financial Reporting Advisory Group (EFRAG) has updated its Endorsement Status Report to include 'Annual Improvements to IFRSs 2012–2014 Cycle', published on 25 September 2014.

The amendments respond to issues addressed during the 2012–2014 cycle and affect IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, IFRS 7 Financial Instruments: Disclosures, IAS 19 Employee Benefits, and IAS 34 Interim Financial Reporting. The amendments are effective for annual periods beginning on or after 1 January 2016, with earlier application being permitted. Endorsement for the use in Europe is currently expected in the third quarter of 2015.

The endorsement status report, dated 25 September 2014, is available here.

IFRS Foundation adds 8 new jurisdiction profiles on the use of IFRS around the world

25 Sep 2014

The IFRS Foundation (IFRSF) has added 8 new jurisdiction profiles on the use of IFRS, bringing the total number of profiles completed to 138 jurisdictions.

The eight new jurisdiction profiles cover Afghanistan, Angola, Armenia, Belize, Guyana, Peru, Philippines, and Vietnam.

The IFRSF has been using information from various sources to develop the profiles about the use of IFRSs in individual jurisdictions. We are proud that IAS Plus with the assistance of our Deloitte member firms has been able to help the IFRS Foundation with this ambitious project, which is led by Paul Pacter, former IASB member and former webmaster of IAS Plus who originally set up our popular table on the use of IFRSs around the world which has been supplemented recently by the more detailed table on the use of IFRSs by the G20 jurisdictions.

The profiles and analyses are available on the IASB's website.

IASB concludes the 2012-2014 Annual Improvements cycle

25 Sep 2014

The IASB has issued 'Annual Improvements to IFRSs 2012–2014 Cycle', a collection of amendments to IFRSs, in response to issues addressed during the 2012–2014 cycle. Four standards are affected by the amendments.

Annual Improvements 2012–2014 Cycle makes amendments to the following standards:

Standard Amendments

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

Changes in methods of disposal.
Adds specific guidance in IFRS 5 for cases in which an entity reclassifies an asset from held for sale to held for distribution or vice versa and cases in which held-for-distribution accounting is discontinued.

IFRS 7 Financial Instruments: Disclosures

(with consequential amendments to IFRS 1)

Servicing contracts.
Adds additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset for the purpose of determining the disclosures required.

Applicability of the amendments to IFRS 7 to condensed interim financial statements.
Clarifies the applicability of the amendments to IFRS 7 on offsetting disclosures to condensed interim financial statements.

IAS 19 Employee Benefits

Discount rate: regional market issue.
Clarifies that the high quality corporate bonds used in estimating the discount rate for post-employment benefits should be denominated in the same currency as the benefits to be paid (thus, the depth of the market for high quality corporate bonds should be assessed at currency level).

IAS 34 Interim Financial Reporting

Disclosure of information 'elsewhere in the interim financial report'.
Clarifies the meaning of 'elsewhere in the interim report' and requires a cross-reference

The amendments are effective for annual periods beginning on or after 1 January 2016, but can be applied earlier. For more information, please see the press release on the IASB's website or our Annual improvements page.

Deloitte's IFRS Global Office has prepared an IFRS in Focus Newsletter explaining the amendments.

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