February

Feedback statement on the Discussion Paper on the accounting treatment for goodwill

04 Feb 2015

In July 2014, a research group of the Accounting Standards Board of Japan (ASBJ), the European Financial Reporting Advisory Group (EFRAG) and the Italian standard setter Organismo Italiano di Contabilità (OIC) published a Discussion Paper (DP) 'Should Goodwill still not be Amortised? - Accounting and Disclosure for Goodwill' that argued that the reintroduction of amortisation of goodwill would be appropriate. A feedback statement summarising the comments received on the DP is now available.

In response to the paper, the research group received twenty nine comment letters.

The majority of respondents supported reintroducing the amortisation of goodwill. Nonetheless, these respondents provided mixed views on whether the IASB should indicate a maximum amortisation period. Some respondents also acknowledged the subjectivity and high level of judgement in determining the useful life of goodwill, but they believed the level of subjectivity and judgement to be not higher than that in the impairment test. In general, respondents who supported the amortisation of goodwill believed that the IASB should develop guidance to help preparers to determine the useful life of the acquired goodwill.

A minority of respondents, mostly users, were supportive of the current impairment-only approach. These respondents explained that the amortisation model was fairly meaningless and it would not be beneficial to users of financial statements.

The full feedback statement is available on the EFRAG website.

Summary of the discussions at the IFRS Foundation's stakeholder event in Zurich

04 Feb 2015

The 'IFRS in Continental Europe' stakeholder event jointly organised by the IFRS Foundation and TREUHAND-KAMMER, the Swiss Institute of Certified Accountants and Tax Experts, on 2 February in Zurich not only saw a speech by IASB Chairman Hans Hoogervorst but also a lively debate on the motivation of Swiss listed companies moving away from IFRS and turning towards Swiss GAAP FER.

As Mr Hoogervorst had pointed out in his keynote address preceding the panel discussion, the high complexity IFRSs in comparison to Swiss GAAP FER, particularly regarding goodwill, pension accounting and disclosures, is one reason often cited for turning away from IFRSs. Panelists discussed (a) whether companies leaving IFRSs were exceptional cases or whether more were to be expected in the future (especially in connection with the upcoming Leases standard), (b) the reaction of capital markets to companies moving from IFRSs to Swiss GAAP FER, and (c) the topic of 'one size does not fit all' and the appropriate cost-benefit ratio for smaller listed entities.

In conclusion, all panelists agreed that rivaling accounting standards would lead to an ideas competition. However, they all also agreed that IFRS ensure a good international comparability, which is important to investors.

The complete summary of the discussion (including a list of panelists) and the event in general is available on the TREUHAND-KAMMER website.

Chair of the Monitoring Board reappointed

03 Feb 2015

The Monitoring Board of the IFRS Foundation has announced that it has agreed to reappoint Masamichi Kono, incumbent Chair of the Monitoring Board, as the next Chair.

In March 2013, the Monitoring Board had announced its final membership criteria and the appointment of Mr Kono, then Acting Chair of the Monitoring Board, to serve as its Chairman. Mr Kono's first first term as Chair will therefore expire in February 2015. He will now serve a second term with effect from 1 March 2015, expiring in February 2017.

Please click for the Monitoring Board's press release availabe on the Financial Services Agency of Japan's website.

Basel Committee issues draft guidance on accounting for expected credit losses

03 Feb 2015

The Basel Committee on Banking Supervision has issued draft guidance on accounting for expected credit losses. Comprising 11 fundamental principles, the guidance sets out supervisory expectations for banks relating to sound credit risk practices associated with implementing and applying an expected credit loss (ECL) accounting framework.

The scope of the guidance is accounting for expected credit losses broadly, so it is intended to cover IFRS 9 Financial Instruments as well as all other accounting frameworks (including impending changes to US GAAP).

The guidance is structured around 11 principles:

  • A bank's board of directors and senior management are responsible for ensuring appropriate credit risk practices.
  • A bank should adopt, document and adhere to methodologies that allow for appropriately assessing and measuring the level of credit risk on all lending exposures.
  • A bank should have a process in place to appropriately group lending exposures on the basis of shared credit risk characteristics.
  • A bank's aggregate amount of allowances should be adequate and consistent with the objectives of the relevant accounting requirements.
  • A bank should have policies and procedures in place to appropriately validate its internal credit risk assessment models.
  • A bank's use of experienced credit judgment is essential to the assessment and measurement of expected credit losses.
  • A bank should have a sound credit risk assessment and measurement process that provides it with a strong basis for assessing and pricing credit risk, and accounting for expected credit losses.
  • A bank's public reporting should promote transparency and comparability by providing timely, relevant and decision-useful information.
  • Banking supervisors should periodically evaluate the effectiveness of a bank's credit risk practices.
  • Banking supervisors should be satisfied that the methods employed by a bank to determine allowances produce a robust measurement of expected credit losses under the applicable accounting framework.
  • Banking supervisors should consider a bank's credit risk practices when assessing a bank's capital adequacy.

The guidance also includes an appendix specifically dealing with IFRS 9. The appendix provides guidance on certain aspects of the ECL requirements in the impairment sections of IFRS 9 that are not common to other ECL accounting frameworks and covers (i) the loss allowance at an amount equal to 12-month ECL, (ii) the assessment of significant increases in credit risk, and (iii) the use of practical expedients.

The Basel Committee stresses that the guidance is intended to set forth supervisory requirements on accounting for expected credit losses that do not contradict applicable accounting standards established by standard-setters. The IASB had prior access to the guidance and has not identified any aspects of it that would prevent a bank from meeting the impairment requirements of IFRS 9.

Please click for access to the draft guidance and a corresponding press release on the website of the Bank for International Settlements (BIS). Comments on the draft guidance close on 30 April 2015.

Hans Hoogervorst speaks about IFRSs at stakeholder event

02 Feb 2015

At the IFRS Foundation trustees’ stakeholder event in Zurich, Switzerland, IASB Chairman Hans Hoogervorst provided an update on IFRS progress, use of IFRSs in Switzerland, and steps taken to address complexity and volatility.

Chairman Hoogervorst began by noting that 114 out of 138 jurisdictions surveyed have adopted IFRSs and another 12 have allowed the use of IFRSs. In Europe, a consultation is underway to evaluate companies’ experiences with IFRSs. Most of the feedback received has indicated that IFRSs have resulted in improvements to financial reporting. Chairman Hoogervorst also provided an update on the increasing use of IFRSs in Japan and China as well as the recent convergence efforts with India.

In addition, he touched on the reasons why some Swiss companies have changed their reporting methods from IFRSs or U.S. GAAP to Swiss GAAP. He stated that the main reason this change is occurring is to reduce complexity and disclosure requirements. Further, he indicated that the IASB is “constantly confronted with trade-offs between [its] desire to give as much information as possible on the one hand, and [its] wish to keep costs for preparers manageable on the other hand.” However, he mentioned that one of the objectives of the IASB’s disclosure initiative project is to make complexity more manageable.

The full transcript and a video recording of Chairman Hoogervorst’s speech are available on the IASB’s website.

January 2015 IFRS Interpretations Committee meeting notes — Part 3 (concluded)

02 Feb 2015

The IFRS Interpretations Committee met in London on 27 January 2015. We've posted the remaining Deloitte observer notes for the sessions on IAS 16 and IAS 39.

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

TUESDAY, 27 JANUARY 2015

Items for con­tin­u­ing con­sid­er­a­tion

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

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.