Topics discussed at the meeting included:

• Significant increases in credit risk.
• Use of changes in the risk of a default occurring over the next 12 months when assessing for significant increases in credit risk.
• Measurement of expected credit losses for revolving credit facilities
• Forward-looking information.
• Status of Basel guidance on accounting for expected credit losses.

The next ITG meeting is planned for 11 December 2015.

For more in­for­ma­tion, and a summary of the dis­cus­sions at the meeting, see Deloitte’s IFRS in Focus as well as the meeting summary on the IASB's website.

Since the issuance of 'Japan’s Modified International Standards (JMIS)' in June this year, there are four sets of accounting standards for consolidated financial statements in Japan: JMIS, designated IFRSs, Japanese GAAP, and US GAAP. On 30 June 2015, the Cabinet in Japan adopted a revised 'Japan Revitalisation Plan' that includes encouragement of further IFRSs adoption by Japanese companies to promote the nation's growth. The data released today takes stock and shows the number and market capitalisation of companies that have adopted IFRSs or plan to do so, IFRS adoption by industrial sector, scheduled adoption dates, and the stage of progress by companies considering IFRS adoption.

Please click to access the analysis on the TSE website.

In April 2014, the IPSASB released a consultation document on its long term strategy and work plan for public sector standards. The final strategy now published reveals that the proposed single strategic objective for the IPSASB was supported by constituents and has been adopted for the IPSASB activities from 2015 forward:

In addition, that IPSASB has approved eight projects to be added to the work plan starting in 2015 and 2016:

• Public Sector Measurement;
• Heritage Assets;
• Infrastructure Assets;
• Revenue;
• Non-Exchange Expenses;
• Limited scope review of the Cash Basis IPSAS
• Limited scope review of IPSAS 25 Employee Benefits; and
• Consequential amendments arising from Chapters 1-4 of the IPSASB Conceptual Framework.

The objective of the revenue project is to develop IPSAS dealing with revenue that are consistent with the IPSASB Conceptual Framework, and to the extent appropriate, IFRS 15 Revenue from Contracts with Customers. It will consider the extent to which the performance obligation approach in IFRS 15 is appropriate for transactions in the public sector.

Please click to access the final strategy document Leading through Change on the IPSASB website.

Mr Schnurr began his speech by discussing the IASB and FASB's converged standards on revenue recognition and the similar yet not converged requirements on credit impairment. In both cases he stressed the benefits of cooperation and of learning from each other and from the implementation of the new standards. He then turned to the topic of IFRSs and convergence itself. He reiterated his assessment of the situation and reminded the audience of the findings he had presented at a financial reporting conference at Baruch College in New York City in May this year. He also stated that he was still discussing the "fourth option" (allow, but not require, domestic issuers to provide supplementary IFRS based information), which he had first introduced in December 2014, with the SEC Commissioners. For the time being, however, he believed that continued collaboration was the only realistic path to further the objective of a single set of high-quality, global accounting standards:

In my opinion, in the near term, the FASB and IASB should continue to focus on converging the standards. The boards should renew their commitment to cooperate and develop standards that eliminate differences between IFRS and U.S. GAAP whenever it meets the needs of its constituents and improves the quality of financial reporting. I recognize the boards will not always be able to eliminate differences during the standard-setting process, primarily because they serve different constituents that have different needs. However, when differences in standards arise, the boards should monitor the implementation of those standards with the objective of learning from the implementation and re-engaging with each other with the goal of converging to the standard with the highest quality financial reporting outcome.

Please click to access the full text of Mr Schnurr's speech on the SEC website.

In July 2015, the IASB tentatively decided to amend IFRS 4 Insurance Contracts to address the consequences of different effective dates of IFRS 9 and the new insurance contracts standard. The approach developed has become known as the "overlay approach" and involves excluding from profit or loss and recognising in other comprehensive income the difference between the amounts that would be recognised in profit or loss in accordance with IFRS 9 Financial Instruments and the amounts recognised in profit or loss in accordance with IAS 39 Financial Instruments: Recognition and Measurement.

AOSSG members are not fully convinced that this approach is the best to take. They believe this solution would not cater well for insurers that are a part of a larger finance entity, and would not cater for insurance activities that are a part of a group that has already applied IFRS 9. They also fear that it could complicate the insurers’ presentation of performance reporting and may escalate the view that the amounts flowing through OCI would not be a source of useful information.

In its letter, the AOSSG therefore suggests that aligning the effective date of IFRS 9 and the forthcoming standards on insurance contracts might be a better solution. Views on how this might best be implemented differ between AOSSG members. Some suggest an option for insurers to continue to apply IAS 39, some believe local regulators should determine the scope of such an option, some believe the option to apply IFRS 9 twice would be the best way forward.

The AOSSG letter is well timed. At its upcoming meeting next week, the IASB will discuss a "deferral approach" in addition to the "overlay approach" that could lead to a potential IFRS 9 deferral.

Please click to access the full letter on the AOSSG website.

The first paper in this series focuses on materiality. Those responsible for preparing, or approving for release, a general purpose financial report need to make judgements about what information to include in the report and how to present it. This publication is designed to help those with this responsibility think about matters such as:

• how to identify who the primary users of your report are;
• how to identify what information those users want, or expect to be, included in the report;
• what factors should be considered in deciding whether information material, including what qualitative factors can make small amounts material;
• how to reduce the amount of immaterial information in your report, ensuring that material information is not obscured.

This publication is particularly relevant to directors, CEOs and CFOs. Please click to download the first issue of Thinking Allowed.

Robert Bruce, our resident, regular columnist, reports on the new publication series in his column Materiality and judgement are the route to financial reporting clarity.

As it has become obvious that the effective date of the forthcoming IFRS on insurance contracts can no longer be aligned with the effective date of IFRS 9 there have been calls for the IASB to delay application of IFRS 9 for insurance activities and align the effective date of IFRS 9 for those activities with the effective date of the new insurance contracts standard. In July 2015, the IASB tentatively decided to amend IFRS 4 to address the consequences of different effective dates of IFRS 9 and the new insurance contracts standard.

At the meeting next week the IASB staff will introduce the possibility of a possible deferral in addition to the "overlay" tentatively decided on in July and transition reliefs on initial application of the new insurance contracts standard. The deferral could either be at reporting entity level or below reporting entity level. It could also be optional or mandatory.

If the IASB decides to propose a deferral approach in addition to the overlay approach, the staff recommends that

• deferral of the effective date of IFRS 9 would be permitted for an entity that issues contracts in the scope of IFRS 4 if that activity is predominant for the reporting entity, and would apply to all financial assets held by that reporting entity;
• an entity that has applied IFRS 9 is not permitted to stop applying IFRS 9 and revert to applying IAS 39;
• an entity that applies the deferral should be required to disclose the fact and make additional disclosures about the effect of this decision; and
• an entity that applies the deferral would be permitted to stop applying the deferral and apply IFRS 9 at the beginning of any annual reporting period before the new insurance contracts standard is applied.

The papers for the meeting are available on the IASB website. Of special relevance are:

• Paper 14B on the overlay approach
• Paper 14C on the deferral approach
• Paper 14D offering a comparison of both approaches

In his speech, Mr Hoogervorst stated that said the forward-looking expected loss model in IFRS 9 Financial Instruments should provide investors with better insight on loan loss risks. He defended the standard against claims that it was not tough enough and that banks should be required to recognise full expected lifetime losses on all loans as soon as the loan has been made. Mr Hoogervorst explained that such a requirement would seriously distort the actual performance of a bank and would probably have highly undesirable side-effects as it would not reflect economic reality, would probabaly prove to be pro-cyclical, and would lead to earnings management. He concluded:

The expected loss model in IFRS 9 will lead to much more timely recognition of inevitable losses, but it avoids the pitfalls of recognising highly uncertain lifetime losses prematurely.

Mr Hoogervorst also commented on the interaction of IFRS 9 and the forthcoming standards on insurance contracts. He indicated that the IASB is working hard to find a pragmatic solution to the problem so that the benefits from the new financial instruments standard can be reaped as soon as possible. Mr Hoogervorst admitted, that a possible deferral of IFRS 9 for certain companies is among the solutions currently considered.

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

EFRAG points out that the IASB is working currently working on one or more solutions for the insurance industry. In fact, the IASB's meeting next week will see four hours of discussion around 'Insurance Contracts: IFRS 9 and IFRS 4' and first agenda papers have been made available indicating that two approaches (the "overlay approach" and the "deferral approach") are will be considered. EFRAG states that it will advise the European Commission of its views as the IASB’s work develops and on that basis will provide further advice relevant for the insurance industry.

Over all, EFRAG recommends that all businesses in the European Union other than those carrying out insurance activities should be required to account for their financial instruments in compliance with IFRS 9 as off 2018. And even businesses carrying out insurance activities should be permitted to aplly IFRS 9 from the same date.

Please click to access the press release and the 97 page endorsement advice on the EFRAG website as well as the updated EFRAG endorsement status report.