2014

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European Union formally adopts Annual Improvements to IFRS - Cycle 2011-2013

19 Dec 2014

The European Union has published a Commission Regulation endorsing 'Annual Improvements to IFRSs 2011–2013 Cycle'.

Commission Regulation (EC) No 1361/2014 of 18 December 2014 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council published in the Official Journal on 19 December 2014 adopts Annual Improvements to IFRSs 2011–2013 Cycle issued by the IASB in December 2013.

The amendments impacted four standards:

  • IFRS 1 First-time Adoption of International Financial Reporting Standards (changes to the Basis for Conclusions only, so not part of the EU endorsement),
  • IFRS 3 Business Combinations,
  • IFRS 13 Fair Value Measurement, and
  • IAS 40 Investment Property.

The IASB's annual improvements process is intended to enhance the quality of standards, by amending existing IFRSs to clarify guidance and wording, or to correct for relatively minor unintended consequences, conflicts or oversights when such amendments are considered non-urgent but necessary.

The amendments are effective in the EU for annual periods beginning on or after 1 January 2015, however, earlier application is permitted so EU companies can adopt in accordance with the IASB effective date (1 July 2014).

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Latest IASB ‘Investor Update’ issued

19 Dec 2014

The IASB has issued the latest edition of its newsletter, "IASB Investor Update," to provide investors with quick access to information on current accounting and financial reporting issues. The newsletter aims to keep investors informed on new and changing guidance.

This issue features:

The IASB Investor Update newsletter is available on the IASB's website.

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IASB issues work plan update for December 2014

18 Dec 2014

Following its December meeting and today's issuance of two final amendments and one exposure draft resulting from implementation projects, the International Accounting Standards Board (IASB) has updated its work plan. Changes are slight.

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

Redeliberations

Exposure draft

Q1 2015

Financial instruments — Macro hedge accounting

Discussion paper

Comment letter analysis

Q1 2015

Insurance contracts

Re-exposure

Redeliberations

Q1 2015*

Leases

Re-exposure

Target IFRS

H2 2015

Disclosure initiative — Principles of disclosure

Board discussion

Target Discussion Paper

Q2 2015

Disclosure initiative — Reconciliation of liabilities from financing activities

Exposure draft

Public consultation

Q1 2015*

IFRS for SMEs — Comprehensive review

Redeliberations

Target IFRS

Q1 or Q2 2015*

Rate-regulated activities

Discussion paper

Public consultation

Q1 2015

* Indicates a change since the previous work plan update on 24 November 2014.

In addition, comment letter analysis in the unit of account project has been postponed to the first quarter of 2015, first Board discussions in the disclosure initiative project on disclosure review will begin in the first quarter of 2015, and the disclosure initiative project on materiality is expected to see a draft practice statement in the second quarter of 2015.

Click for the IASB work plan dated 18 December 2014 (link to IASB website). We have updated our project pages to reflect the updated work plan and other known developments.

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IASB finalises amendments regarding the application of the investment entities exception

18 Dec 2014

The International Accounting Standards Board (IASB) has published 'Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)'. The amendments address issues that have arisen in the context of applying the consolidation exception for investment entities. They are effective for annual periods beginning on or after 1 January 2016, with earlier application being permitted.

 

Background

In October 2012, the IASB issued Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) providing an exemption from consolidation of subsidiaries under IFRS 10 Consolidated Financial Statements for entities that meet the definition of an 'investment entity'. Subsequently, the IFRS Interpretations Committee received several submissions regarding the implementation of the exemption. The Committee recommended to the IASB to address the issues in a narrow-scope project, and in March 2014 the IASB formally added a project on IFRS 10/IAS 28 — Investment entity amendments to its work programme. An exposure draft of proposed amendments was published in June 2014 with comments requested by 15 September 2014.

 

Amendments

Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) makes changes aimed at clarifying the following aspects:

  • Exemption from preparing consolidated financial statements. The amendments confirm that the exemption from preparing consolidated financial statements for an intermediate parent entity is available to a parent entity that is a subsidiary of an investment entity, even if the investment entity measures all of its subsidiaries at fair value.
  • A subsidiary providing services that relate to the parent's investment activities. A subsidiary that provides services related to the parent's investment activities should not be consolidated if the subsidiary itself is an investment entity.
  • Application of the equity method by a non-investment entity investor to an investment entity investee. When applying the equity method to an associate or a joint venture, a non-investment entity investor in an investment entity may retain the fair value measurement applied by the associate or joint venture to its interests in subsidiaries.
  • Disclosures required. An investment entity measuring all of its subsidiaries at fair value provides the disclosures relating to investment entities required by IFRS 12.

 

Changes from the proposals in the Exposure draft

ED/2014/2 Investment Entities: Applying the Consolidation Exception (Proposed amendments to IFRS 10 and IAS 28) proposed to provide relief to non-investment entity investors for their interests in investment entity associates, but not for their interests in investment entity joint ventures. To retain consistency in treatment in applying the equity method to both associates and joint ventures, the final amendments provide relief to non-investment entity investors in both investment entity associates and joint ventures.

The IASB has added amendments to IFRS 12 Disclosure of Interests in Other Entities as the comments received in response to the ED highlighted a lack of clarity of the applicability of IFRS 12 to the financial statements of an investment entity. The additional amendments clarify that the scope exclusion in paragraph 6(b) of IFRS 12 does not apply to the financial statements of a parent that is an investment entity and measures all of its subsidiaries at fair value.

 

Effective date and transition requirements

The amendments are effective for annual periods beginning on or after 1 January 2016 and must be applied retrospectively. Earlier application is permitted.

 

Additional information

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IASB finalises amendments to IAS 1 under the Disclosure initiative

18 Dec 2014

The International Accounting Standards Board (IASB) has published 'Disclosure Initiative (Amendments to IAS 1)'. The amendments aim at clarifying IAS 1 to address perceived impediments to preparers exercising their judgement in presenting their financial reports. They are effective for annual periods beginning on or after 1 January 2016, with earlier application being permitted.

 

Background

The IASB added an initiative on disclosure to its work programme in 2013 to complement the work being done in the Conceptual Framework project. The initiative is made up of a number of smaller projects that aim at exploring opportunities to see how presentation and disclosure principles and requirements in existing Standards can be improved. Among them is a narrow scope project on IAS 1 Presentation of Financial Statements to ensure that entities are able to use judgement when presenting their financial reports as the wording of some of the requirements in IAS 1 had in some cases been read to prevent the use of judgement. An exposure draft of proposed amendments was published in March 2014 with comments requested by 23 July 2014.

 

Amendments

Disclosure Initiative (Amendments to IAS 1) makes the following changes:

  • Materiality. The amendments clarify that (1) information should not be obscured by aggregating or by providing immaterial information, (2) materiality considerations apply to the all parts of the financial statements, and (3) even when a standard requires a specific disclosure, materiality considerations do apply.
  • Statement of financial position and statement of profit or loss and other comprehensive income. The amendments (1) introduce a clarification that the list of line items to be presented in these statements can be disaggregated and aggregated as relevant and additional guidance on subtotals in these statements and (2) clarify that an entity's share of OCI of equity-accounted associates and joint ventures should be presented in aggregate as single line items based on whether or not it will subsequently be reclassified to profit or loss.
  • Notes. The amendments add additional examples of possible ways of ordering the notes to clarify that understandability and comparability should be considered when determining the order of the notes and to demonstrate that the notes need not be presented in the order so far listed in paragraph 114 of IAS 1. The IASB also removed guidance and examples with regard to the identification of significant accounting policies that were perceived as being potentially unhelpful.

 

Changes from the proposals in the Exposure draft

ED/2014/1 Disclosure Initiative (Proposed amendments to IAS 1) had included a proposal that an entity should 'not aggregate or disaggregate information in a manner that obscures useful information'. As disaggregation often means expanding totals and subtotals and thus providing added transparency, the IASB decided to rephrase the clarification to say that 'an entity shall not reduce the understandability of its financial statements by obscuring material information with immaterial information'.

ED/2014/1 had also proposed to use the term 'disclose' to mean information in the notes and the term 'present' otherwise. As respondents to the ED noted that a change in terminology should be part of a comprehensive review of IAS 1 and would be outside the scope of a narrow-scope amendment, the IASB did not finalise the proposals regarding use of the terms 'present' and 'disclose'.

Finally, the ED had proposed that an entity should disclose the fact that it applies the amendments when it does so for the first time. The transition provisions now state that an entity need not disclose the fact that it has applied these amendments (regardless of early application or application on the effective date), as the IASB considers the amendments to be clarifying and not directly affecting an entity's accounting policies or accounting estimates.

 

Effective date and transition requirements

The amendments are effective for annual periods beginning on or after 1 January 2016. Earlier application is permitted. Application of the amendments need not be disclosed.

 

Additional information

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IASB proposes amendments to IAS 7 as result of the Disclosure initiative

18 Dec 2014

The International Accounting Standards Board (IASB) has published an Exposure Draft (ED) of proposed amendments to IAS 7 'Statement of Cash Flows'. The amendments aim at clarifying IAS 7 to improve information provided to users of financial statements about an entity's financing activities and liquidity. Comments are requested by 17 April 2015.

 

Background

The IASB added an initiative on disclosure to its work programme in 2013 to complement the work being done in the Conceptual Framework project. The initiative is made up of a number of smaller projects that aim at exploring opportunities to see how presentation and disclosure principles and requirements in existing Standards can be improved. Among them is a narrow scope project on IAS 7 Statement of Cash Flows to improve information provided to users of financial statements about an entity's financing activities and liquidity.

 

Suggested changes

The IASB proposes in ED/2014/6 Disclosure Initiative (Proposed amendments to IAS 7) amendments with two objectives:

  • Improved information about an entity's financing activities, excluding equity items. The IASB proposes that an entity should disclose a reconciliation of the amounts in the opening and closing statements of financial position for each item for which cash flows have been, or would be, classified as financing activities in the statement of cash flows, excluding equity items. The reconciliation should include (i) opening balances in the statement of financial position, (ii) movements in the period, and (iii) closing balances in the statement of financial position. The proposed amendments also include an illustrative example.
  • Improved disclosures about the liquidity of an entity. The IASB proposes to extend the disclosures by adding required disclosures about restrictions that affect the decisions of an entity to use cash and cash equivalent balances, including tax liabilities that would arise on the repatriation of foreign cash and cash equivalent balances.

This is also the first time an IASB Exposure Draft includes proposed changes to the IFRS Taxonomy to reflect the effect of the proposed amendments.

 

Dissenting opinion

One Board member voted against the publication of the ED as this Board member believes that (i) it would be more appropriate to address the suggested amendments from a broader point of view as part of the principles of disclosure research project, (ii) the proposed amendments do not meet the needs of users of financial statements, and (iii) the costs of preparing the proposed reconciliation could be larger than expected.

 

Effective date and transition requirements

The ED does not contain a proposed effective date. However, the ED proposes that the amendments would be applied prospectively without further transition requirements.

 

Additional information

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Short survey on principles of disclosure

18 Dec 2014

The Italian standard-setter Organismo Italiano di Contabilità (OIC) is helping the IASB to understand preparers' views on the IASB's project on priciples of disclosure, which is undertaken with the view of bringing IAS 1, IAS 7 and IAS 8 into one standard. To this end the OIC is conducting a short survey.

The objective of the survey is to determine whether there are aspects of IAS 8 Accounting policies, Changes in Accounting Estimates and Errors that should be changed when they will be brought into this new standard. It has two sections:

  • Practical experience with application of IAS 8
  • A possible alternative approach

More information about the online survey is available on the OIC website. It should take approximately 30 minutes to complete and can be completed until 20 February 2015.

The OIC is currently also conducting a survey on accounting changes.

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Panel discussion on the accounting for the financial crisis

17 Dec 2014

At the 8 December 2014, joint ICAEW and IFRS Foundation conference, leaders from the financial and accounting community held a panel discussion to discuss the role accounting played during the financial crisis.

The panel discussion was moderated by Simon Nixon (Chief European Commentator of the Wall Street Journal) and featured views from:

  • Sir Winfried Bischoff (Chairman, Financial Reporting Council).
  • Mike Ashley (Chairman of the Audit Committee, Barclays).
  • Vincent Papa (Director, Financial Reporting Policy, CFA Institute).
  • Sue Lloyd (IASB member).
  • Hugh Shields (IASB staff).

The video is available on the IASB website.

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Summary of the CMAC October 2014 meeting

17 Dec 2014

The IASB has released a summary of the Capital Markets Advisory Committee (CMAC) meeting which was held in London on 16 October 2014.

The topics discussed at the meeting included:

  • Rate-regulated activities.
    CMAC members provided feedback on the IASB’s discussion paper on reporting the financial effects of rate regulation. The members noted that it is important to provide information regarding rate regulation to investors and lenders. One of the main concerns from the discussions was how to measure regulatory assets and the level of judgement involved.
  • Measuring quoted investments at fair value.
    CMAC members discussed the IASB’s Exposure Draft Measuring Quoted Investments in Subsidiaries, Joint Ventures and Associates at Fair Value. In particular, they were asked which measurement method they believed will provide the most useful information to investors. All members believed measurement based on unadjusted Level 1 inputs is the most useful.
  • Post-implementation Review of IFRS 8 Operating Segments.
    CMAC members were asked for their views concerning potential amendments to address issues specified in the post-implementation review. Topics discussed included (1) identification and aggregation of operating segments, (2) preservation of trend data on reorganization, (3) allocation of reconciling items and central charges to operating segments, and (4) reported line items.
  • Research projects and investor involvement.
    CMAC members generally supported the IASB’s Research Programme, however, some believed that IASB should monitor the range of views it receives to make sure it is receiving input from the investor community at large.
  • Business combinations under common control (BCUCC).
    The IASB staff provided the CMAC members with an update of the BCUCC research project and the IASB’s tentative decisions on the scope of the project. In addition, the members were presented with two general BCUCC scenarios and provided feedback.
  • Disclosure Initiative.
    CMAC members provided feedback on sections of the Principles of Disclosure project on (1) cash flow statements and (2) non-IFRS information in financial statements.
  • Appointments.
    The CMAC announced the appointment of Paul Lee, Glen Suarez, and Marietta Miemietz.

The next CMAC meeting will take place on Friday 27 February 2015.

The full meeting summary is available on the IASB website.

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Agenda for February 2015 IFRS Advisory Council meeting

17 Dec 2014

An agenda has been released for the upcoming meeting of the IFRS Advisory Council, which is being held in London on 23-24 February 2015. In addition to a number of reports and updates, the meeting will focus on the ASAF review, the Education Initiative strategy, the 2015 Agenda Consultation, and the IFRS Foundation structure and effectiveness review and MOU’s strategy.

A summary of the agenda (as at 17 December 2014) is set out below:

Monday 23 February 2015 (09:45-16:30)

  • Welcome and Chairman's introduction
  • Key strategic issues the Council has dealt with and has identified going forward
  • IASB ac­tiv­i­ties over the last four months
  • ASAF two-year review
  • Trustee ac­tiv­i­ties — seeking input on key issues and IFRS Foundation structure and effectiveness review
  • Education Initiative strategy

Tuesday 24 February 2015 (09:00-14:45)

  • 2015 Agenda Consultation
  • Future of corporate reporting — Global reporting initiative
  • Strategy for IFRS Foundation MOU
  • Sum up discussions

Agenda papers for the meeting will be available in due course on the IASB website.

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