FASB announces outreach plan to assess effective date of new revenue guidance

31 Oct 2014

At today’s meeting of the FASB/IASB joint transition resource group for revenue recognition, James Kroeker, the FASB vice chairman, announced that the FASB and its staff plan to conduct further outreach with both public and private companies over the next several months to gauge their progress in preparing to implement the guidance in ASU 2014-09 (equivalent to the IASB's IFRS 15 revenue standard).

Mr. Kroeker emphasized that the Board is considering whether to defer the effective date of the new revenue guidance and noted that a decision will be made no later than the second quarter of 2015.

Additional information on the TRG is available in Deloitte’s TRG Snapshot newsletter.

New EFRAG governance structure becomes effective, EFRAG Board members announced

31 Oct 2014

The EFRAG General Assembly convened today, first in its old composition, then in its new composition thus rendering the new EFRAG structure effective. Part of the meeting of the new General Assembly was devoted to the appointment of EFRAG Board members (including an acting President).

In June 2014, the EFRAG General Assembly approved the new EFRAG Statutes and EFRAG Internal Rules with an effective date of 31 October and established a temporary Nominating Committee to select and recommend candidates for the new EFRAG Board.

According to the revised EFRAG Internal Rules, the EFRAG Board would be responsible for all technical positions of EFRAG, after having considered the technical advice provided by EFRAG TEG and reflecting the results of EFRAG's due process and must ensure that EFRAG follows open and transparent processes. The EFRAG Board is composed of members belonging to two pillars - eight members each from European Stakeholder Organisations and National Standard Setters.

The Nominating Committee submitted a report to the General Assembly with a proposed composition of the Board. The General Assembly accepted the proposed composition and appointed the following Board members:

  • European Stakeholder Organisations:
    • Patrice Marteau, Industrial and trading companies
    • Claes Norberg, Industrial and trading companies
    • Jorge Gil Lozano, Banks
    • Gerard Gil, Banks
    • Benoît Jaspar, Insurance companies
    • Laurence Rivat, Accountancy profession
    • Mark Vaessen, Accountancy profession
    • Hans Buysse, User
  • National Standards Setters:
    • Chairman ANC (until the appointment: Michel Barbet-Massin) (France)
    • Liesel Knorr, Chairman ASCG (Germany)
    • Angelo Caso, Chairman OIC (Italy)
    • Roger Marshall, Chairman FRC AC (UK)
    • Stig Enevoldsen, Member DASC (Denmark)
    • Peter Sampers, Incoming Chairman DASB (Netherlands)
    • Erlend Kvaal, Chairman NASB (Norway)
    • Anders Ullberg, Chairman SFRB (Sweden)

The Maystadt report had also recommended including the European Supervisory Authorities and the ECB as members, however, these have declined full membership and will be observers on the new Board.

The General Assembly also appointed Roger Marshall as acting President of the Board until a President is a elected.

Deloitte is pleased that Laurence Rivat has been appointed to the Board. Laurence is Head of the Paris IFRS Centre of Excellence of Deloitte and member of Deloitte's Global IFRS Leadership Team (GILT). She is also a member of the IFRS Interpretations Committee. Deloitte also notes with pleasure, that Stig Enevoldsen, former Deloitte partner, will represent the Danish standard-setter on the new EFRAG Board.

Please click for the press release announcing the appointments on the EFRAG website. The IASB has issued a press release welcoming the appointments.

KASB and FASB hold joint meeting

31 Oct 2014

Representatives of the Financial Accounting Standards Board (FASB) and the Korea Accounting Standards Board (KASB) held a meeting on 16 October 2014 in Seoul, Korea. The participants of the meeting discussed issues relating to the recent activities and key projects of the two Boards.

In particular, the KASB presented issues relating to the equity method, linked presentation, and rate regulated activities - on two of these matters the KASB has recently published research reports.

In connection with the equity method, the KASB discussed the problems of the current IFRS on the equity method and the possible alternatives proposed by the KASB. Regarding rate regulated activities, the KASB explained the current status of the rate regulated industry and related issues as explained in the research report published yesterday.

The two Boards agreed to continue their bilateral cooperation into the future. Please click for the press release published on the KASB website.

Case study - based teaching material for the IFRS for SMEs

31 Oct 2014

The IFRS Foundation Education Initiative is developing a series of comprehensive Framework-based IFRS teaching materials to assist IFRS teachers to educate IFRS learners more effectively. The material is designed to develop in students the ability to make the judgements that are necessary to apply IFRSs. Now the first two case studies adapted for the IFRS for SMEs have been made available.

The two case studies are available on the IASB website:

Second and final draft of the CDSB's environmental reporting framework

31 Oct 2014

The final draft builds on the feedback received during the first consultation held in spring 2014. The completed CDSB Framework will be available in March 2015.

The Climate Disclosure Standards Board (CDSB) is updating the existing CDSB Climate Change Reporting Framework, originally released in September 2010, to take account of recent developments in corporate non-financial reporting. As the first consultation draft already demonstrated, the scope of the updated CDSB Framework now encompasses environmental information, in particular natural capital. The updated Framework provides specific guidance on the characterisation, measurement and reporting for GHG emissions, forest risk commodities and water.

The new consultation draft is open for comment until 14 December 2014. Click for more information (link to CDSB website).

The CDSB has also recording a briefing video providing an introduction to the updated CDSB Framework and outlining how to respond to the consultation

ESMA publishes report on the equivalence of the Indian Accounting Standards

30 Oct 2014

The report fulfils the mandate received by the European Securities and Markets Authority (ESMA) from the European Commission (EC) in February 2014 to provide it with an update on the level of convergence of the Indian Accounting Standards (Ind AS) towards International Financial Reporting Standards (IFRSs) and the quality of application and enforcement of the Ind AS.

In drawing up the report, ESMA relied on information provided by representatives of the Institute of Chartered Accountants of India (ICAI) and the Securities and Exchange Board of India (SEBI) as well as other information publicly available.

ESMA notes that the originally phased approach of convergence with IFRSs has been postponed and Ind AS are not yet applicable in India. A transition date has not been formally announced by the Ministry of Corporate Affairs (MCA). This leads ESMA to identify three major areas of concern with respect to the progress made towards convergence:

  • The initial roadmap for implementation of the converged standards by companies has been spread over several years and experienced significant delays. Adoption was finally postponed. A new roadmap issued in 2014 proposes that listed and large entities mandatorily use Ind AS for the preparation of consolidated financial statements from 1 April 2016. However, the roadmap is under the consideration of the MCA and will only be effective after a formal decision of the Indian government. ESMA notes that the adoption timeframe of Ind AS and their exact content remains uncertain.
  • The strategy followed by the Indian authorities regarding the convergence process has been to adopt IFRSs as issued by the IASB and modify them for the specific Indian legal and economic context. Consequently, the converged Ind AS have removed a number of options available within IFRS and introduced several compulsory carve-outs, some of which may constitute significant departures from IFRS according to ESMA. (ESMA also notes that he ICAI expressed its commitment to remove these carve outs, when possible.)
  • ESMA states that the expertise in India regarding IFRS application and enforcement remains limited. Even though ESMA acknowledges that the ICAI has made a significant effort to prepare auditors and preparers for the implementation of Ind AS, ESMA believes this expertise to be rather of a theoretical nature and of unproven practical value.

Three of the annexes to ESMAs report provide deeper insight and offer an overview of the main differences between the converged Indian standards and IFRS (Annex II), an impact analysis of adopting Ind AS (Annex III), and an overview of the proposed new roadmap (Annex IV).

Please click for access to the report including all annexes on the ESMA website.

KASB publishes research report on rate regulation

30 Oct 2014

The Korean Accounting Standards Board (KASB) has published a research report looking at possible solutions for recognising regulatory assets and liabilities from different angles.

Introducing the topic, the research paper looks at different types of rate regulation in Korea (energy companies), the United Kingdom (electricity and gas), Germany (air traffic service), Canada (electricity companies), the United States (gas and electricity) and Brazil (utility companies).

The paper then analyses possible bases for recognition of assets and liabilities from three different angles each: For assets, the Conceptual Framework, revenue recognition, and intangible assets are explored; for liabilities, the paper looks at the Conceptual Framework, provisions under IAS 37, and financial liabilities. However, the paper concludes that no perfect accounting model is available yet and it notes that although the accounting for rate-regulated activities has some similarities with intangible assets, IFRIC 12, provisions, deferred income taxes, and revenue recognition, these are not sufficient enough to support recognition and measurement of rate-regulated assets or liabilities.

Therefore, the KASB concludes in his paper:

We propose to establish a holistic approach to the accounting for rate-regulated activities. Like IFRS 14 Regulatory Deferral Accounts, we need to create brand new items of regulatory assets and liabilities that do not belong to any categories of assets and liabilities beforehand. Further, the requirement of more disclosures in the footnotes to the financial statements may help the readers better understand the accounting for rate-regulated activities.

Generally, the KASB concludes that although the perfect accounting model is not available yet, regulatory assets and liabilities can be recognised the accounting for rate-regulated activities will bring more meaningful information to the stakeholders of the related entities.

The research report is available on the KASB website.

IFRS Foundation and Monitoring Board update their Memorandum of Understanding

30 Oct 2014

The IFRS Foundation and the Monitoring Board have agreed an update to their Memorandum of Understanding (MoU) to reflect the increase in membership of the Monitoring Board.

The first two new permanent members (the Comissão de Valores Mobiliários (CVM) of Brazil and the Financial Services Commission (FSC) of Korea) were announced in January 2014 and the Monitoring Board may in the future include representatives of other capital markets authorities as long as they fulfil the membership criteria.

Please click for additional information on the IASB website:

IFRS Foundation appoints Trustee

30 Oct 2014

The IFRS Foundation has announced the appointment of Takafumi Sato as Trustee of the IFRS Foundation. The appointment will begin on 1 November 2014 and will expire on 31 December 2017. Dr Sato's appointment follows the retirement of Tsuguoki (Aki) Fujinuma, Vice-Chairman of the Trustees.

Dr Sato is currently President of Japan Exchange Regulation. He served as Commissioner of the Financial Services Agency (FSA) from 2007 to 2009 and during his tenure directed the agency in drawing its roadmap towards the application of IFRS in Japan, which included allowing domestic corporations to voluntarily apply IFRS. Dr Sato also served as a founding member of the IFRS Foundation Monitoring Board.

For more information, see the press release on the IASB's website.

EFRAG draft comment letter on the IASB's Exposure Draft regarding the unit of account

30 Oct 2014

The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment letter on the IASB Exposure Draft (ED) proposing amendments to six standards regarding the unit of account for investments in subsidiaries, joint ventures and associates.

The amendments would confirm that the unit of account for investments in subsidiaries, joint ventures and associates is the investment as a whole, but that the fair value measurement of quoted investments in subsidiaries, joint ventures and associates should be the product of the quoted price multiplied by the quantity of financial instruments held, without adjustments.

EFRAG is concerned that these proposals will not always result in relevant information because where the unit of account is the investment in a subsidiary, joint venture or associate, the price paid may include control premiums or discounts and consequently differ from the mathematical product price × quantity. EFRAG believes that the resulting financial information would lack relevance, impair the assessment of management stewardship and would not faithfully represent the substance of the transaction. EFRAG states that it would only  - reluctantly - accept the IASB's proposals should further research by the IASB would demonstrate that there is no better way than price × quantity to measure the fair value of an investment in a subsidiary, joint venture or associate quoted in an active market.

Comments on the draft comment letter are due by 31 December 2014. It is available on the EFRAG website.

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