2014

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.

Summary of the September ASAF meeting now available

30 Oct 2014

The staff of the International Accounting Standards Board (IASB) have made available a summary of the discussions of the Accounting Standards Advisory Forum (ASAF) meeting held in London on 25-26 September 2014. The meeting saw discussion on leases, discount rates, post-implementation review of IFRS 3 'Business Combinations', conceptual framework, disclosure initiative, insurance contracts, financial instruments with the characteristics of equity, IFRS taxonomy, and the IASB's agenda.

The topics covered during the meeting included:

  • Leases. The meeting considered an update on the IASB's leases project, an overview of the feedback received from an additional consultation undertaken by the European Financial Reporting Advisory Group (EFRAG). ASAF members had mixed views on the EFRAG paper and the definition of a lease (including defining a lease as a financing arrangement) and noted the importance of achieving convergence between the IASB and FASB
  • Discount rates. The ASAF members generally supported the IASB's intended scope and research approach in this project, made a number of suggestions on topics to be considered, and emphasised the importance of the interaction of this project with the IASB's projects on the conceptual framework and insurance contracts
  • Post-implementation review of IFRS 3. The meeting received a number of updates and reports and highlighted the critical issues of the subsequent accounting for goodwill (where mixed views were expressed) and the definition of a business
  • Conceptual framework. The meeting received an update on the IASB's progress in this project and expressed support for the direction being taken, whilst noting a number of concerns. The meeting also considered the tentative decisions made by the IASB on measurement and the implications of long-term investment for the conceptual framework
  • Disclosure initiative. The meeting discussed the purpose of notes to the financial statements, the ordering of notes to the financial statements, the role of materiality in addressing the disclosure problem, and the nature of significant accounting policies and improving accounting policy disclosures
  • Insurance contracts. The IASB sought feedback from the ASAF members on accounting for contracts with participating features and transition (most preferring retrospective application at the date of transition)
  • Financial instruments with characteristics of equity. The meeting discussed whether the project could proceed as a fundamental review of IAS 32 Financial Instruments: Presentation, or whether IAS 32 should be maintained with improvements to presentation and disclosure requirements. Many ASAF members noted the necessity of a fundamental review to provide a better foundation focused on identifying the objectives of the distinction between liabilities and equity, but considered that the IASB "should not necessarily start from an entirely blank sheet of paper".

A full report of the meeting is available on the IASB's website.

Summary of the October 2014 DPOC meeting

29 Oct 2014

The IFRS Foundation has published a summary of the 8 October 2014 Due Process Oversight Committee (DPOC) meeting that was held in Mexico City during the Trustees' meeting.

Topics discussed during the DPOC meeting were:

 

Update on technical activities

Updates were given on the progress of the major projects as well as research, implementation and maintenance projects on the IASB's work plan.

  • The DPOC noted the issuance of IFRS 9 as the most significant development since its last meeting in July 2014.
  • On insurance contracts the DPOC was updated on progress following the responses, outreach and fieldwork that had been undertaken on the proposals in the IASB's revised Exposure Draft. The DPOC noted that, while there was broad support for the proposals, there remained some significant areas of concern, in particular around complexity and accounting mismatches. The DPOC questioned the IASB representatives on the diverse views of constituents on the proposals and how the concerns were being considered and reported on by the Board.
  • The DPOC noted that the comprehensive review of the IFRS for SMEs was continuing, and that the IASB at its October 2014 meeting was scheduled to start discussing the issues raised in the responses to the ED.
  • A brief discussion on convergence and what had been achieved led to noting that the most notable success had been the issue in May 2015 of IFRS 15.
  • On the conceptual framework project, the DPOC was informed that there had been some slight slippage in the timetable and that an ED was now scheduled to be published in early 2015 rather than by the end of 2014. The DPOC noted some preliminary decisions the IASB has made and advised that the rationale for the IASB's view should be set out clearly in the Basis of Conclusions in the forthcoming ED.

The DPOC was also updated on the progress of the projects on macro hedge accounting, the disclosure initiative, and on rate-regulated activities. Further, the DPOC was updated on the progress of a number of the research projects on the IASB's work plan. The DPOC questioned whether the IASB was undertaking all the work itself on the programme, given the resource constraints, and the IASB stated that it has recognised that it needed to consider more the prioritisation and resource allocation. Other updates provided concerned various implementation and maintenance projects and the XBRL Taxonomy.

 

Leases

At this meeting, the DPOC paid particular attention to the progress on the leases project, in particular considering the concerns raised by some stakeholders and comments that stakeholder views were not always given due weight.The technical staff's view was that the due process requirements had been fully adhered to and had been applied in an appropriate manner for such an important and controversial project. The DPOC acknowledged that the IASB could not respond to each individual comment letter or submission received, especially on projects such as leases that generated a very high level of response, but noted it was important that there was communication from the IASB summarising the major issues raised with the Board and the rationale for the Board's tentative decisions. Following the discussions with the DPOC, the IASB committed to review its public disclosure of the rationale used to reach tentative decisions and conclusions, with special attention to issues that received substantial debate in the exposure process.

 

Effects Analysis Consultative Group

The DPOC received a progress report on the work of the Effects Analysis Consultative Group (EACG), which had been set up to advise the IASB in developing an agreed methodology for field testing and effects analyses. The DPOC was content with the near final draft report. The DPOC also agreed that it was important that the report was finalised and published as soon as possible, so that the proposals could be embedded into the IASB's process as quickly as possible, to the extent that they were not already reflected in the due process.

 

Update on consultative groups

The DPOC noted an update on the meetings of a number of the IASB's consultative groups since July 2014 and a forward schedule of group meetings. The Chairman reminded the DPOC that it had a responsibility to monitor the effectiveness of the bodies and consultative groups that supported the IASB and encouraged that a representative of the DPOC should observe at least part of the meetings of each of the major groups once a year and report back to the Committee to validate the breadth of attendance and an appreciation of the quality of dialogue.

 

Correspondence

The DPOC considered an EFRAG letter proposing that a public 'fatal flaw' review prior to finalising a new Standard or major amendment should be included as a formal step in the IASB's due process. The staff and the IASB will review the suggestion and to revert to the DPOC with the results.


Please click for the full summary of the meeting on the IASB's website.

October 2014 IASB meeting notes — Part 2

28 Oct 2014

The International Accounting Standards Board (IASB) met at its offices in London on 22–24 October 2014. We have posted the Deloitte observer notes from Thursday's sessions on the IFRS for SMEs and insurance contracts.

Click through for direct access to the notes:

Thursday, 23 October 2014

You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

IASB issues work plan update for October 2014

28 Oct 2014

Following its October meeting, the International Accounting Standards Board (IASB) has updated its work plan. The revised plan adds an expect dates for final IFRSs on leases (H2 2015) and investment entities (Q4 2014); narrows the target range for the discussion paper on principles of disclosure to the second quarter of 2015; and moves the target date for an exposure draft on the classification of liabilities to the first quarter of 2015. Further, the revised plan provides an updated date for the feedback statement on the post-implementation review of IFRS 3 (now Q1 2015). Lastly, it includes updates to the expected timing of board discussions for the research project on inflation (Q1 2015) and adds a new research topic on performance reporting to be discussed during the first quarter of 2015.

 

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

Public consultation

Q4 2014

Insurance contracts

Re-exposure

Redeliberations

Q4 2014

Leases

Re-exposure

Target IFRS

H2 2015*

Disclosure initiative — Principles of disclosure

Board discussion

Targeted Discussion Paper

Q2 2015*

Disclosure initiative — Amendments to IAS 1

Exposure draft

Target IFRS

Q4 2014

Disclosure initiative — Reconciliation of liabilities from financing activities

Redeliberations

Exposure draft

Q4 2014

IFRS for SMEs — Comprehensive review

Exposure draft

Redeliberations

Q4 2014

Rate-regulated activities

Discussion paper

Public consultation

Q4 2014 and Q1 2015

* Indicates a change since the previous work plan update on 26 September 2014.

Click for the IASB work plan dated 28 October 2014 (link to IASB website). We have updated our project pages to reflect the updated work plan and other known developments.

Report from October 2014 IFRS Foundation Trustees meeting

28 Oct 2014

A report has been made available from the meeting of the Trustees of the IFRS Foundation, which was held in Mexico City on 7-9 October 2014.

The summary of the meeting includes the following reports:

 

Report of the Trustees’ Executive session

  • Funding arrangements. Discussion included the need for jurisdictions who benefit from the use of IFRS to contribute towards the cost.
  • Self-evaluation exercise. Discussions revolved around the feedback received from the self-assessment exercise perform during the summer of 2014.
  • Structure and effectiveness review. The Trustees continued discussions on the upcoming review of the organisation, which included discussions on the theme of the review. Also, the Trustees considered a timetable for the review and chose to use the Executive Committee as the review’s Review Committee.
  • ASAF review. Discussion included the terms of reference and what process should be taken for the upcoming review of the ASAF. Further, the Trustees agreed that an extension of current members’ terms is necessary to allow for enough time to complete the review.
  • International IFRS developments. Discussion included a number of significant events in Europe (including the European Commission's review of the use of IFRS), a current assessment of the United States environment and the Foundation's approach, and the positive developments in the Asia-Oceania region.
  • Advisory Council update. Discussion included the role of the Council and its relevance.
  • IASB Chairman report. Hans Hoogervorst provided an update on the IASB's activities, noting issues arising from the insurance contracts and leases projects
  • Group of Latin-American Standard-Setters (GLASS). The Trustees were shown the development GLASS has made since the support for IFRS.
  • Appointments. The Trustees made appointments to account for retiring members.
  • Establishment of an Alumni Network.
  • Presentations. The Trustees received presentations from:
    • The Education and Content Services Committee
    • The Audit and Finance Committee

 

Report of the Vice-Chair of the IASB

Ian Mackintosh, Vice-Chair of the IASB, provided the Trustees with an update on the IASB’s activities including the issuance of IFRS 9, the consultation on Sharia-compliant instruments and transaction and its projects on leases, insurance contracts, conceptual framework, macro-hedging, the review of IFRS for SMEs, and disclosure initiative.

Other developments discussed included the review of the investor engagement strategy and the global use / consistent application of IFRS.

 

Report of the Chairman of the Due Process Oversight Committee

Scott Evans, Chairman of the Due Process Oversight Committee (DPOC) reported on the recent activities of the DPOC.

 

Regional outreach activity

As part of the Trustees’ meeting, the IFRS Foundation hosted a joint event with the Consejo Mexicano de Normas de Información Financiera and the Comisión Nacional Bancaria y de Valores to exchange views with Mexican stakeholders.

 

The full summary of conclusions of the IFRS Foundation Trustees' meeting is available on the IASB website.

SMEIG provides recommendations on IASB's IFRS for SMEs ED

28 Oct 2014

The SME Implementation Group (SMEIG) has issued a final report that outlines its recommendations to the IASB on questions concerning Exposure Draft (ED) ‘Proposed amendments to the IFRS for SMEs’.

In July 2014, three agenda papers were issued to guide the SMEIG in its development of this final report. The agenda papers covered (1) background information, (2) issues addressed by specific questions in the ED, and (3) other issues raised by respondents. The final report contains a summary of all substantive comments made by SMEIG members concerning the questions raised in the agenda papers.

The full report is available on the IASB’s website.

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