2015

IASB (International Accounting Standards Board) (blue) Image

IASB member discusses pensions accounting

13 Feb 2015

In a report issued by the ‘Financial Director’, IASB member Stephen Cooper provided an explanation on the current state of pensions accounting as well as the reason why potential changes are being considered.

Mr Cooper began by stating that IAS 19 focused on more on pension expense presentation rather than measurement and that the guidance caused confusion in practice due to the ‘corridor approach’. To address this issue, he commented that a change was made to the presentation requirements when reporting remeasurements of the net pension asset or liability in other comprehensive income, which essentially removed the ‘corridor approach’. In addition, he noted the positive response from the field on another change related to the removal of the expected return on assets from the income statement.

However, Mr Cooper emphasized that additional changes may be needed due to constant changes in the market. An example of a change currently being researched by the IASB are the challenges with hybrid pension schemes and whether they fall into the defined contribution category or a defined benefit. He mentioned that a more reasonable approach of handling issues with hybrid pension schemes may be to develop a more general model that encompassed all pension schemes.

For more information, see the report on the IASB’s website.

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Death of Harvey Goldschmid, Vice-Chairman of the IFRS Foundation Trustees

13 Feb 2015

The Trustees and Monitoring Board of the IFRS Foundation have released condolences on the sudden death of Harvey Goldschmid, Vice-Chair of the Trustees of the IFRS Foundation.

The death of the former Commissioner of the US Securities and Exchange Commission (SEC) was announced by Columbia Law School where he was Dwight Professor of Law. Harvey Goldschmid was initially appointed Trustee of the IFRS Foundation in January 2010 and was subsequently reappointed for a second term. Since Janaury 2015 he had been Vice-Chairman of the Trustees and Chairman of the Trustees' Due Process Oversight Committee (DPOC). Prior to contributing to the success of the IFRS Foundation as a Trustee, Mr Goldschmid chaired the joint IASB and FASB Financial Crisis Advisory Group (FCAG) together with the present IASB Chairman Hans Hoogervorst.

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IPSASB (International Public Sector Accounting Standards Board) (mid gray) Image

IPSASB presentation with an overview of the finalised public sector conceptual framework

13 Feb 2015

The International Public Sector Accounting Standards Board (IPSASB) has made available a presentation providing an overview of the key aspects of the 'Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities'.

The finalised framework was published on 31 October last year after the IPSASB completed its multi-phase project initiated in 2006. The framework aims at enabling the IPSASB to further improve the consistency of its standard-setting by strengthening the linkage between IPSASs and enhance the IPSASB's accountability through improved transparency of the concepts underpinning the development of IPSASs and RPGs.

The presentation (36 mins) is available on the IPSASB website.

EFRAG (European Financial Reporting Advisory Group) (dk green) Image

Feedback statement on outreach activities on rate regulation

12 Feb 2015

The European Financial Reporting Advisory Group (EFRAG) has published a feedback statement on input received during outreach activities conducted with European users on the IASB's Discussion Paper 'Reporting the Financial Effects of Rate Regulation'.

The IASB issued its Discussion Paper in September 2014. To respond to the Discussion Paper, EFRAG has conducted interviews with investors and analysts to understand users' information needs in respect of an entity's rate-regulated activities.

Of the 19 users that were interviewed, most broadly favoured the inclusion of the financial effects of rate-regulated activities in the primary financial statements as this would enhance the usefulness of the information provided. They believed that recognising the economic effects of rate regulation in the primary statements would:

  • result in a measure of performance that reflects what an entity is entitled to earn;
  • result in useful financial information to assess prospects of future cash flows; and
  • portray the economic reality of entities operating rate-regulated activities.

These users supported separate presentation of the effects of rate regulation on rate-regulated activities as they assess different risks profiles when entities also operate in areas that are not rate-regulated. They also supported note disclosure that includes a qualitative description of the rate-regulated regimes in which the entity operates, information regarding the regulatory asset base and the factors affecting the rate-regulated revenue requirement agreed by the rate regulator.

However, some users interviewed noted that there are drawbacks to the recognition of the effects of rate regulation because most rate-regulated regimes are very complex and continually changing. In the view of theses users, recognition of the effects of rate regulation at the expense of reliability and relevance would increase complexity and therefore reduce the understandability of financial statements.

Please click to access the full feedback statement on the EFRAG website.

Note: On 24 February, EFRAG complemented this feedback with a summary of a joint outreach event on rate-regulated activities held in Brussels on 18 December 2014.

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EFRAG draft comment letter on the IASB's exposure draft of amendments to IAS 7

11 Feb 2015

The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment letter on the IASB exposure draft (ED) proposing amendments that would improve disclosure in financial statements on an entity’s financing activities and liquidity.

On 18 December 2014, the IASB issued ED/2014/6 Disclosure Initiative (Proposed amendments to IAS 7). The main objectives of the proposal are to (1) improved information about an entity's financing activities, excluding equity items and (2) Improved disclosures about the liquidity of an entity.

In its draft comment letter, EFRAG stated that consensus on the amendments has not been reached; however, the draft comment letter does provide different views from constituents on the reconciliation of cash flows from financing activities and disclosures about restrictions on cash and cash equivalents.

In addition, the EFRAG stressed that the IFRS Taxonomy should not be integrated into the IASB’s standard setting process because it believes that it will alter the IASB’s principle-based approach to standard setting.

Comments on the draft comment letter are due by 16 April 2015.

For more information, see the press release and draft comment letter on the EFRAG’s website.

IFRS Trustees meeting (blue) Image

Report from February 2015 IFRS Foundation Trustees meeting

11 Feb 2015

The Trustees of the IFRS Foundation have released a report summarising its meeting held in Zurich, Switzerland on 2-3 February 2015.

Topics discussed at the meeting included the following:

Report of the Trustees’ Ex­ec­u­tive session

  • Monitoring board meeting — The Trustees and the Monitoring Board updated each other on (1) progress made in implementing the 2012 IFRS Foundation governance report, (2) strategic planning, (3) governance developments, (4) use of IFRS, and (5) IFRS Foundation financial situation and funding.
  • Executive session — The Trustees agreed to four goals in the context of a Strategic Plan 2015-17 and reviewed a ‘mission statement’ draft. In addition, an update was given on the review of the ASAF and the IFRS Foundation’s structure and effectiveness, as well as steps taken following its self-evaluation exercise and jurisdictional funding contributions. Further, SEC Chief Accountant Jim Schnurr provided an update on the consideration of the use of IFRS in the United States.

Report of the Chair of the IASB

Chairman Hans Hoogervorst pro­vided the Trustees with an update on the IASB’s ac­tiv­i­ties concerning the revenue standard, IFRS 9, the technical agenda for 2015, insurance contracts, and the conceptual framework project.

Report of the Chair­man of the Due Process Over­sight Com­mit­tee

The Due Process Over­sight Com­mit­tee re­ported on its recent ac­tiv­i­ties. See our related news item on this report.

Re­gional out­reach ac­tiv­ity

As part of the Trustees’ meeting, the IFRS Foun­da­tion hosted a joint event with the Treuhand-Kammer, the Swiss Institute of Certified Accountants and Tax Experts, to ex­change views on IFRS in Europe.

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

DPOC meeting (mid blue) Image

Report from February 2015 DPOC meeting

11 Feb 2015

The IFRS Foundation has released a report summarising the Due Process Oversight Committee (DPOC) meeting held in Zurich, Switzerland on 3 February 2015.

Topics discussed at the meeting included the following:

Updates on technical activities

Comprehensive review of the IFRS for SMEs: due process ‘lifecycle’ review

The DPOC analysed the due process steps completed in the IASB’s review of the IFRS for SMEs and confirmed that all steps have been completed.

Reporting on projects

The DPOC agreed with the proposals set by the IASB to improve its public disclosure of the rationale used to reach its tentative decisions and conclusions.

Consultative group and DPOC engagement

The DPOC was provided with a schedule of future consultative group meetings and ask which group meetings should be prioritised for observation.

Correspondence

The DPOC considered suggestions to improve the due process steps when completing a final standard or amendment. However, it agreed to retain the current model provided in the Due Process Handbook.

The full summary of con­clu­sions of the DPOC meeting is avail­able on the IASB's Web site.

IFRS Foundation (blue) Image

IFRS Foundation conference in Paris announced

11 Feb 2015

The IFRS Foundation announced the dates for its conference in Europe, which will be held in Paris on Monday 29 June 2015 and Tuesday 30 June 2015. The conference will feature presentations by Hans Hoogervorst, Chairman of the IASB, and Michel Prada, Chairman of the Trustees of the IFRS Foundation.

Substantial break-out sessions will focus on implementing major new IFRSs - IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers.

The conference will also feature:

Plenum meeting: Interactive break-out sessions led by IASB members and senior staff:
  • Welcome address: Hans Hoogervorst, Chairman, IASB
  • Keynote address: Michel Prada, Chairman of the Trustees, IFRS Foundation
  • Keynote address: Gérard Rameix, Chairman, Autorité des Marchés Financiers (AMF)
  • IASB update
  • Principles of disclosure
  • Panel discussion - IFRS disclosure innovations
  • Financial instruments: accounting for macro hedging
  • Leases
  • Rate-regulated activities and emissions trading schemes
  • Conceptual Framework (two sessions)
  • Insurance contracts
  • Financial instruments with characteristics of equity
  • Business combinations under common control

Additional conference details, including registration, are available on the IASB website.

IASB document (blue) Image

IASB proposes amendments to IAS 1 to clarify the classification of liabilities

10 Feb 2015

The International Accounting Standards Board (IASB) has published an Exposure Draft (ED) of proposed amendments to IAS 1 'Presentation of Financial Statements'. The amendments aim at a more general approach to the classification of liabilities under IAS 1 based on the contractual arrangements in place at the reporting date. Comments are requested by 10 June 2015.

 

Background

The issue was originally adressed as part of the annual improvements project 2010 -2012 cycle. Exposure Draft ED/2012/1 Annual Improvements to IFRSs (2010—2012 Cycle), published in May 2012, proposed amendments to IAS 1.73 to clarify that a liability is classified as non-current if an entity expects, and has the discretion, to refinance or roll over an obligation for at least twelve months after the reporting period under an existing loan facility with the same lender, on the same or similar terms. During 2013, however, the IASB decided not to finalise the amendment, but instead pursue a narrow-scope project to refine the existing guidance in IAS 1 on when liabilities should be classified as current.

 

Suggested changes

The amendments proposed in ED/2015/1 Classification of Liabilities (Proposed amendments to IAS 1) aim at:

  • clarifying that the classification of liabilities as current or non-current should be based on rights that are in existence at the end of the reporting period by amending IAS 1.69(d) and IAS 1.73 so that both paragraphs refer to the "right" to defer settlement and both make explicit that only rights in place "at the end of the reporting period" should affect the classification of a liability;
  • making the link clear between the settlement of a liability and the outflow of resources from an entity by adding to IAS 1.69 that settlement refers to the "transfer to the counterparty of cash, equity instruments, other assets or services"; and
  • reorganising the guidance in IAS 1 with respect to classification of liabilities as current or non-current by deleting IAS 1.74–76 and moving their content to the expanded and renumbered paragraphs IAS 1.72R and IAS 1.73R so that similar examples are grouped together.

 

Effective date and transition requirements

The ED does not contain a proposed effective date. However, the ED proposes that the amendments would be applied retrospectively and that early application should be permitted.

 

Additional information

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Summary of the December ASAF meeting now available

10 Feb 2015

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 4-5 December 2014. The meeting saw discussion on the disclosure initiative, emissions trading schemes, rate-regulated activities, leases, post-employment benefits, dynamic risk accounting, the equity method of accounting, foreign currency translation, inflation accounting, insurance contracts, current projects and research, the 2015 agenda consultation, and the IASB's agenda.

The topics covered during the meeting included:

  • Disclosure initiative. The meeting considered the principles of disclosure in connection with the statement of cash flows and related disclosures. Some ASAF members suggested that the objective of the statement of cash flows needs to be identified. In addition, some ASAF members also suggested to also undertake research into the statement of financial position and the statement(s) of profit or loss and other comprehensive income (OCI) at the same time as researching the statement of cash flows.
  • Emissions trading schemes. As the project is still in the preliminary stages of research, the discussion consisted mainly of seeking ASAF members' views on the scope of, and approach to, the project.
  • Rate-regulated activities. ASAF members were invited to share their preliminary views on the Discussion Paper on rate regulation and to seek clarification from the staff of any issues related to the DP. A FASB representative provided a summary of the guidance in US GAAP to provide some background about why regulatory balances are recognised as assets and liabilities. The EFRAG representative provided a summary of targeted outreach EFRAG has undertaken with users of the financial statements.
  • Leases. The IASB staff presented an update on the project on leases and provided a summary of the most important tentative decisions reached to date. Convergence was discussed at length with some members stating that convergence was critical to the project and IASB and FASB should discuss again their tentative decisions on the lessee accounting model. The FASB representative explained that the FASB is not considering changing its tentative decision. Other members stated that achieving a higher quality solution was more important than achieving convergence.
  • Inflation accounting. GLASS presented a paper considering inflation accounting and how IAS 29 Financial Reporting in Hyperinflationary Economies could be improved. It was argued that the current threshold for hyperinflation was late in recognising hyperinflation conditions. ASAF members recommended that the IASB should consider a short-term project in order to review changing the threshold in IAS 29. In addition, the IASB might also consider a longer-term project on the accounting concepts for inflation accounting in general.
  • Foreign currency translation. The IASB staff explained that the IASB has decided to reclassify the research project on foreign currency translation from short-term to longer-term. Depending on feedback during the agenda consultation, the IASB might even consider removing it from the research programme altogether. The staff noted that the IASB would consider specific narrow-scope issues in respect of IAS 21 that are brought to its attention separately from any research project.
  • Post-employment benefits. The IASB staff introduced the research project on post-employment benefits and sought ASAF members’ views on the scope and approach. The IASB staff has the preliminary idea to explore conceptually a single measurement model for pension plans. ASAF members supported scope and approach of the project.
  • Dynamic risk accounting. The IASB staff provided a summary of the feedback received during outreach meetings on the Discussion Paper and CASB and AASB presented their findings from outreach conducted. Views were mixed. While there is support for developing a new model that reflects dynamic risk management activities, there is also a preference for improvements to the existing accounting models. It was also noted that views differ between preparers and users. ASAF members pointed out that non-financial entities tend to think the dynamic risk accounting is not applicable to them as the analysis in the DP is focused on banks. ASAF members also stressed that disclosures would play a significant role regardless of the direction of the project.
  • Equity method of accounting. The KASB presented a research report on the equity method and the ASBJ presented the results from a survey it has undertaken on the topic.
  • 2015 Agenda consultation. The meeting discussed the next agenda consultation, which is due to take place in 2015. ASAF members agreed with the proposal that the consultation should seek input on how and which projects that are part of the research programme should be prioritised. However, there should also be the opportunity to recommend new projects or the removal of projects. The consultation should identify the available resources of the IASB and its staff and it should be explained that ambitions need to be matched to the resources available. ASAF members also warned of too many narrow-scope projects and reminded the IASB of the desired period of calm.
  • Insurance contracts. The meeting discussed recent developments in the insurance contracts project, including the IASB’s tentative decisions on transition as well as the accounting for contracts with participating features and disclosures.

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

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