FASB proposes clarifications to its new revenue standard

30 Sep 2015

The US Financial Accounting Standards Board (FASB) has issued a proposed ASU, 'Narrow-Scope Improvements and Practical Expedients', that would amend certain aspects of the Board’s May 2014 revenue standard, ASU 2014-09, 'Revenue From Contracts With Customers'.

The amendments, which are being proposed in response to feedback received by the FASB–IASB joint revenue recognition transition resource group (TRG), include the following:

  • Collectibility and contract termination.
  • Presentation of sales tax collected from customers.
  • Noncash consideration.
  • Contract modifications at transition.
  • Completed contracts at transition.
  • Transition technical correction.

The proposed ASU’s effective date and transition provisions would be aligned with the requirements of ASU 2014-09, which, once finalised, will be deferred by one year.

Comments on the proposed ASU are due by 16 November 2015.

In July 2015, the IASB also issued an ED proposing clarifications to its new revenue standard, IFRS 15 Revenue from Contracts with Customers. The FASB’s proposed ASU states:

The amendments in this proposed Update are not identical to those proposed by the IASB, and some are incremental to the amendments proposed by the IASB. The FASB expects that the amendments in this proposed Update would not result in financial reporting outcomes that are significantly different from those reported under IFRS for similar transactions.

For more information, see Deloitte's Heads Up newsletter and the press release and proposed ASU on the FASB’s website.

EC's Capital Markets Union action plan includes consultation with the IASB on a tailor-made accounting solution for European SMEs

30 Sep 2015

The European Commission (EC) has adopted an action plan setting out 20 key measures to achieve a true single market for capital in Europe. The project aims to boost growth in the EU with the creation of a single market for capital and break down the barriers that are blocking cross-border investments in the EU and preventing businesses from getting access to finance.

As part of the overall project, the EC launched a public consultation in February 2015. One of the questions in the consultation paper had been whether there is value in developing a common EU level accounting standard for small and medium-sized entities (SMEs). The feedback statement on the consultation released together with the action plan reveals that while some respondents considered that the current situation is appropriate and should not be changed, most respondents considered that some kind of initiative or incentive, legislative or other, is needed to render EU SMEs more attractive to European and international investors through enhanced transparency and comparability of relevant financial information. Rather than a full application of the IFRS or use of the IFRS for SMEs, many respondents suggested that a pragmatic IFRS-based solution be found in order to deliver for SMEs the advantages of a high-quality, comparable, international set of accounting rules, whilst avoiding excessive administrative burden and costs, particularly in relation to disclosure.

Accordingly, the action plan states:

The Commission will also explore with the International Accounting Standards Board (IASB) the possibility of developing a voluntary tailor-made accounting solution, which could be used for companies admitted to trading on SME Growth Markets.

The action plan was published together with a wealth of additional information on the EC's website. Please click to access:

Michel Prada opens the autumn 2015 IFASS meeting

29 Sep 2015

Directly after the 2015 Word Standard-setters (WSS) meeting, the national standard-setters convened at the autumn 2015 International Forum of Accounting Standard Setters (IFASS) meeting, also held in London. Michel Prada, Chairman of the Trustees of the IFRS Foundation, delivered the opening remarks.

Mr Prada first briefly spoke on the main strategic challenges, including the status of global progress towards IFRS. He stressed that the increasing adoption of IFRSs around the world also showed that IFRS raise the quality and consistency of financial reporting and bring benefits to companies and investors and that jurisdictions are aware of that. Mr Prada also mentioned that the fact that IFRS has been adopted by so many jurisdictions around the world means that the IFRS Foundation can shift the focus from getting jurisdictions to adopt to allocating more time to supporting the needs of existing IFRS jurisdictions, as well as supporting those jurisdictions who have already made substantial progress towards the use of IFRS for domestic purposes, such as Japan, India and China. He added that this does not mean that the IFRS Foundation will ignore other jurisdictions, such as the United States, that have not yet adopted IFRSs. He expressed hopes that convergence will continue.

Secondly, Mr Prada spoke on the current consultation on the structure and effectiveness of the IFRS Foundation. He reminded the standard-setters in the room that this review provides a platform for them to tell the IFRS Foundation what it does well and where there is room for improvement. He encouraged feedback on how the IFRS Foundation can ensure that the relevance of IFRS is maintained, what more can be done to encourage consistency in the application of IFRS, and what more can the IFRS Foundation do to further strengthen the governance, accountability and financing of the IFRS Foundation.

Finally, given the audience he was addressing, Mr Prada discussed the role and responsibilities of accounting standard-setters in an IFRS world. He pointed at the IASB's WSS meeting just held before the IFASS meeting and the ASAF meeting that will directly follow. He asked whether having these bodies in place was sufficient. Mr Prada also asked whether the IASB should get more involved in bodies such as IFASS, which is a body instituted by the national standard-setters where the IASB is just one guest among many, or whether it is good that national-standard-setters have a body to themselves. Mr Prada also mentioned that expectations with all bodies and the IFRS Foundation and the IASB always go two ways and that in a world where all involved parties agree that the goal is having one set of high quality global accounting standards they have to leverage resources and networks, particularly in the area of policy-level outreach and stakeholder engagement.

After his remarks Mr Prada took questions from the audience on all aspects of his speech. One of them concerned the perceived fact that the IASB favours coopoeration with the FASB over working with other standard-setters, which would be giving undue influence to the FASB. In his reply, Mr Prada again spoke out fervently for supporting the goal of global accounting standards. He stated that if a standard-setter has knowledge the IASB can draw on, the IASB should not turn it down - and the FASB was a very experienced standard-setter. Yet he also pointed at the fact that the IASB works with many other standard-setters on individual projects. Mr Prada also denied that this cooperation means that the IASB is unduly influenced by these standard-setters. For, as he pointed out, if the FASB really influenced the IASB unduly, IFRSs would be much more rule based while in fact there are now FASB standards (for example on revenue recognition) that are in fact principles based.

Please click to access the full text of the speech on the IASB website.

ESMA works on implementing EU-Transparency Directive requirements

29 Sep 2015

The European Securities and Markets Authority (ESMA) has taken steps to implement requirements that were included in the amended European Transparency Directive. The requirements aim at making submission easier for issuers and facilitating accessibility, analysis and comparability for investors and regulators.

One of the requirements of the amended Directive is that issuers listed on regulated markets in the EU must prepare their annual financial reports in a European Single Electronic Format (ESEF) from 1 January 2020. ESMA has now launched a public consultation on regulatory technical standards on the ESEF. The consultation documents are available through the press release on the ESMA website. Comments are requested by 24 December 2015.

The other requirement ESMA is currently working on is a European Electronic Access Point (EEAP). The objective of the EEAP is to provide an easy search and access tool for end-users looking for regulated information, such as annual reports, major shareholdings etc., on issuers admitted to trading on regulated markets in Europe. ESMA has now submitted corresponding regulatory technical standards to the European Commission for endorsement. It is expected that the EEAP will be made available to end-users after 1 January 2018. Please see the final report on the ESMA website for more information.

EFRAG extends comment period for its publication documents on the Conceptual Framework ED

29 Sep 2015

Following the IASB's decision to extend the comment period for the Conceptual Framework ED, the European Financial Reporting Advisory Group (EFRAG) has followed suit and has extended the comment period for the three related documents it currently has out for public consultation.

On 22 September 2015, the IASB followed an earlier staff recommendation and extended the comment period on the May 2015 exposure drafts to 25 November 2015. EFRAG had been among the voices calling for an extension of the comment period. EFRAG has now extended the comment period on its own related consultation documents to 18 November 2015:

Please click to access the press release announcing the extension on the EFRAG website.

ESMA opinion on accounting for cash contributions to a DGS

29 Sep 2015

The European Securities and Markets Authority (ESMA) has published its opinion on the application of the IFRS requirements in relation to the recognition of cash contributions to the Deposit Guarantee Scheme (DGSs) in IFRS accounts.

ESMA’s responsibilities include promoting effective and consistent application of International Financial Reporting Standards (IFRS). Therefore, the ESMA Regulation gives ESMA competence to deliver accounting opinions.

The opinion now published is limited to the accounting treatment of ex-ante non-refundable cash contributions to the DGS for which the obligating event is identified at a single point in time. Based on the analysis of the existing IFRS requirements, ESMA concluded that as soon as the obligating event of a non-refundable cash contribution to a DGS is identified, the contribution must be recognised as an expense in full.

Please click to access the opinion on the ESMA website.

IASB issues 'Investor Perspectives' on measurement

28 Sep 2015

The IASB has released a new edition in its 'Investor Perspectives' series. In this edition, IASB member Steve Cooper discusses the proposals on measurement in the Conceptual Framework project.

On 28 May 2015, the IASB issued an exposure draft on the conceptual framework, which includes a more extensive measurement section, describing the different measurement methods and considerations for applying these methods. In this edition, Mr Cooper discusses five "key questions" related to selecting a measurement method.

For more information, see the September 2015 edition of the Investor Perspectives newsletter on the IASB’s website.

'IASB is not an Anglo-Saxon, self-regulatory body'

28 Sep 2015

In his opening remarks at the 2015 Word Standard-setters (WSS) meeting that is currently taking place in London, IASB Chairman Hans Hoogervorst spoke about standard-setting in the public interest.

His remarks mostly built on the IASB and the IFRS Foundation joint publication Working in the public interest: the IFRS Foundation and the IASB and Mr Hoogervorst elaborated on the four main themes:

  • Working in the public interest;
  • The audience of IFRS;
  • The characteristics of IFRS; and
  • Institutional aspects of the IFRS Foundation and the IASB.

During his discussion of the last point, Mr Hoogervorst admitted that there is a perception that personally angers him:

Some see us as an Anglo-Saxon, self-regulatory body, which somehow privileges commercial interests. The reality is quite different.

Mr Hoogervorst explained that while it was true that the IASB's governance is very similar to that of the FASB, similar governance models can also be found in many non Anglo-Saxon countries. He also stressed that the IASB has no power to impose IFRS. As the standards need to be voluntarily adopted, the IASB knows that it needs to listen carefully to its constituents, which means that it simply cannot afford to be self-regulatory. And lastly he stressed that the notion furthest from the truth was that the IASB would somehow privilege commercial interests. Mr Hoogervorst pointed to the fact that the members of the IASB are shielded from undue influence by special interests by not being allowed to hold positions in for-profit organisations. He also stressed the transparency of the IASB's decision-making, which allows the public to watch very closely whether the IASB is unduly influenced in any way.

Please click to access the full text of the speech on the IASB's website.

FASB proposes changes to materiality references

28 Sep 2015

The FASB has issued a proposed Accounting Standards Update (ASU) 'Assessing Whether Disclosures Are Material' as part of its disclosure framework project.

The U.S. Accounting Standards Codification uses the term "material" but does not contain a definition or guidance on applying the term. The proposed ASU would insert a statement that "materiality" is a legal concept (i.e., the concept defined by the U.S. legal system). The proposal would also add a statement that materiality applies to quantitative and qualitative disclosures in the notes to the financial statements “individually and in the aggregate in the context of the financial statements as a whole” and that “some, all, or none of the requirements in a disclosure Section may be material.” It would also add a statement that omitting “disclosures about immaterial information is not an accounting error.”

The discussion of materiality in the IASB and FASB conceptual frameworks was aligned in 2010 as part of a joint effort by the two boards. The IASB and the FASB have now both taken unilateral steps to amend the converged definition of materiality in their frameworks. In May this year the IASB proposed a minor wording change to the description of materiality in the Conceptual Framework, by narrowing the focus to the 'primary' users of general purpose financial reports. The IASB is also considering amending the definition of materiality in IAS 1 Presentation of Financial Statements as part of its Disclosure Initiative. Those proposals would, as a first step, be included in the Principles of Disclosure Discussion Paper which the IASB says will be published in 2016. In addition, the IASB plans to issue an exposure draft of a proposed practice statement on the subject of materiality in October 2015.

For more information, see Deloitte's related Heads Up newsletter as well as the press release and FASB in Focus newsletter on the FASB’s website.

FSB calls for continued efforts on convergence, considers the IASB's insurance standard a high priority

28 Sep 2015

The Financial Stability Board (FSB) met in London on 25 September 2015 to discuss progress in its ongoing workplan.

Although overall progress was considered to be good, the plenary reiterated its support for the objective of achieving a single set of high quality global accounting standards and called on the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) to continue efforts to achieve this. On individual accounting projects, the plenary noted the importance of the IASB completing its standard for insurance contracts as a high priority.

Please click to access the report from the meeting on the FSB website.

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