March

Agenda and pre-meeting summaries for the March 2016 IFRS Interpretations Committee meeting

11 Mar 2016

The IFRS Interpretations Committee will meet at the IASB's offices in London on 22 March 2016. The agenda for the meeting is now available. We have also posted our pre-meeting summaries for the meeting that allow you to follow the decision making more closely.

The Committee will be considering papers related to 13 topics. Eight of the papers recommend finalising decisions that the Interpretations Committee not take the related matter onto its agenda. Three papers are recommending that the committee issue tentative decisions not to add the matters to the agenda. The remaining two papers are recommending that the Committee develop amendments to standards. 

There seems to be a concerted effort to bring some of the issues that the committee has considered over several meetings to a conclusion. These include accounting for proceeds from testing property plant and equipment (paper 2), pre-paid cards (paper 4), variable consideration on PP&E acquisitions paper 8) and the impairment requirements for long-term interests (paper 15). 

The longest allocated time slots are for the discussions on prepaid cards, for which the staff recommendation is to finalise the agenda decision not to take the matter onto the agenda; the classification of deferred tax on payments related to financial instruments classified as equity, for which the recommendation is to amend IAS 12; and the relationship between IFRS 9 and IAS 28 and how impairment is assessed for long-term interests, for which the recommendation is to issue a tentative decision not to add the matter to the agenda.

There is one new issue, relating to the determination of the expected manner of recovery of indefinite life intangible assets for the purposes of measuring deferred taxes. The recommendation is to not take the matter onto the agenda.

The full agenda for the meeting and our detailed pre-meeting summaries can be found here. We will update this page for any changes to the agenda and our Deloitte observer notes from the meeting as they become available.

Research into the impact of IFRS adoption in Australia

11 Mar 2016

The Australian Accounting Standards Board (AASB) is currently conducting a review of the published empirical research that has examined the impact of International Financial Reporting Standards (IFRS) adoption on publicly listed Australian companies and other capital market participants. First findings were discussed during the last AASB meeting.

Preliminary findings from the review, which is conducted jointly with La Trobe University, show mixed results:

(a) In regard to the impact of IFRS adoption on the quality of Australian financial reports, some studies reported positive outcomes through improvements in the value relevance of accounting reports post-IFRS adoption, and reductions in the number of firms engaging in earnings management. Available research evidence has further supported the adoption of the IFRS goodwill impairment regime as improving accounting quality. Other studies, however, suggested that measures of accounting quality have remained stable or consistent with AGAAP and that prior AGAAP treatments for identifiable intangible assets were more appropriate.

(b) Some studies reported positive results in terms of the promotion of the comparability of Australian financial reporting practices with their global peers. Not all studies, however, reported the same results.

(c) In general, IFRS adoption by Australian companies appears to have had a positive outcome for investors and analysts based on research revealing improved analyst forecast accuracy and dispersion.

(d) Survey research around the time of IFRS adoption revealed a degree of pessimism by managers from listed Australian companies towards many of the possible benefits from accounting convergence.

Given that results are mixed and the academic literature has not examined all aspects of the possible impact of IFRS adoption in Australia, the AASB staff believes that further research is warranted and will conduct outreach activities to gather views from preparers and users of financial statements.

The findings of the review will be published as an AASB Research Report. A draft version of the report is available in Agenda paper 18.1 (Appendix) for the AASB's February 2016 meeting.

IFRS conference in Zurich announced

10 Mar 2016

The IFRS Foundation has announced an IFRS conference in Zurich on 30 June and 1 July 2016.

The conference will include discussions on the implementation of IFRS 9 Financial Instruments, IFRS 15 Revenue from Contracts with Customers, and IFRS 16 Leases. In addition, the conference will cover the following:

  • Speech by IASB Chairman Hans Hoogervorst on the future of financial reporting
  • Key note address
  • IASB update
  • Panel discussion on consistent application
  • Panel discussion on the future of financial reporting
  • Workshops on:
    • Goodwill and impairment
    • Disclosure initiative
    • Insurance contracts
    • Conceptual Framework

More details are available on the conference website (you need to be registered user of the website to access all the information, but registration is free of charge)

IASB publishes editorial corrections

10 Mar 2016

The IASB has published a batch of editorial corrections that retract a previous correction and impact stand-alone standards and the IASB's “2015 IFRS (Red Book)”, "A Guide Through IFRS 2015", and "2016 IFRS (Blue Book)".

The editorial corrections affect the following individual pronouncements:

  • IAS 39 Financial Instruments: Recognition and Measurement

Editorial corrections do not change the meaning or application of pronouncements, but instead correct inadvertent errors. The editorial corrections can be viewed on the editorial corrections page of the IASB's website.

Research report on the information needs of users of New Zealand capital markets entity reports

10 Mar 2016

The New Zealand External Reporting Board (XRB) has released a research report examining the usefulness of the financial reports produced by for-profit entities operating in New Zealand domestic capital markets. Significantly, this is the first user-needs research of this type since New Zealand’s adoption of International Financial Reporting Standards (NZ IFRS) in 2007.

The findings of the research show that:

Overall, a significant majority of respondents do use financial reports in making various types of decisions, and most users are satisfied with the quality of current financial reports in meeting their information needs.

All components of financial reports are perceived, on balance, to be useful. In general, respondents rank the statement of profit or loss and the statement of financial position as the two most useful components, while the statement of changes in equity is considered to be least useful. Only a quarter of respondents indicate that the financial statements contain information that is not useful.

Most respondents do find notes to the financial statements useful when making their decisions. Consistent with prior studies, a number of respondents suggest improvements in the disclosure of expectations about future performance. Some respondents suggest better disclosure (e.g., segment reporting, and/or reporting on sustainability), and others suggest simplification, standardisation, and transparency to current financial reporting.

The authors note that overall, users appear satisfied with the current state of financial reporting, although their study did identify some useful insights as to where future efforts for improvement could focus. Based on the findings in the survey and interviews the authors propose improvements to financial reporting overall and to some specific items. These improvements include simplification, standardisation, comparison with budget and targets, dashboard reporting, supplementary information, segment and financial instruments disclosures.

Please click for more information on the XRB website:

EFRAG and ICAS issue financial reporting research report

09 Mar 2016

The EFRAG and ICAS have issued a research report, “Professional investors and the decision usefulness of financial reporting,” which examines the use of financial reporting by professional investors and how the results of the research may have standard setting implications.

The research report discovered that:

  • “The objective of investors (valuation or stewardship) does matter.
  • Investors are strongly anchored on the income statement.
  • Investors have strong reservations about the representational faithfulness of bottom line figures.
  • Regardless of its shortcomings, financial accounting information is a key input factor for investors' decision making.
  • The quality of corporate governance, including audit, influences investors' assessment of the representational faithfulness.”

In addition, the research report noted that (1) different objectives for financial reporting need to be prioritised by standard setters; (2) income statements were considered more useful than the balance sheet; (3) standardised performance measures for the income statement need to be enhanced; and (4) "investors' perceptions of corporate governance significantly affect their views of representational faithfulness."

For more information, see the press release and report on the EFRAG’s website.

IPSASB continues interview series

09 Mar 2016

The International Public Sector Accounting Standards Board (IPSASB) has released further instalments of its interview series with Ian Carruthers who took office as new IPSASB Chair on 1 January 2016. In the fourth instalment, Mr Carruthers reviews the key priorities for the IPSASB.

Please click to access all interviews published so far on the IPSASB website. They are:

  • What are IPSAS?
  • Why is IPSAS Adoption Important?
  • What are the IPSASB's Key Achievements?
  • What are the IPSASB's Current Areas of Focus?

FEE position paper on the development of consistent high quality non-financial reporting in Europe

09 Mar 2016

In November 2014, the EU Directive on disclosure of non-financial and diversity information by large companies and groups addressing environmental, social, and governance (ESG) issues was published in the Official Journal. Member States have to transpose the Directive into national law by 6 December 2016 and the new provisions have to be applied to all undertakings within the scope of the Directive for the financial year starting on 1 January 2017.

The Federation of European Accountants (Fédération des Experts-comptables Européens, FEE) has issued a position paper highlighting the requirements of the new Directive and setting out what the Directive means in practice by discussing the key issues around implementing the requirements and providing some real-world examples of how the requirements can be met.

Please click to access the position paper and an appendix with additional examples of good practice in sustainability reporting on the FEE website.

IFRS 2016 'Red Book' now available

08 Mar 2016

The International Accounting Standards Board (IASB) has announced that the 2016 edition of the Bound Volume of International Financial Reporting Standards (the 'Red Book') is now available.

eIFRS Professional and Comprehensive subscribers can now access the electronic files of the 2016 IFRS 'Red Book' via eIFRS (you will be required to provide your login details).

The Red Book is also available through the IASB's Web Shop. Copies are priced at £72 each, plus shipping.

IASB Chairman encourages Vietnam to adopt IFRSs

08 Mar 2016

At a workshop on 'Experiences of IFRS Implementation in Developing Countries' in Hanoi, IASB Chairman Hans Hoogervorst discussed a possible IFRS adoption in Vietnam.

Mr Hoogervorst began his speech by stressing that IFRSs bring transparency, improve accountability, and help companies and markets to operate more efficiently. He also noted academic research that shows that most emerging economies adopting IFRSs see a reduction in their cost of capital. He therefore invited Vietnam to adopt IFRSs as a means to unlock the wealth of opportunity Vietnam has to offer and to make it an attractive place for international investors to invest.

Mr Hoogervorst then turned to the question of whether Vietnam should adopt IFRSs as they are or try to modify IFRSs to meet local requirements. He strongly recommended adopting.

The big reason is economics. If a country adopts IFRS Standards to attract foreign capital, then developing a country-specific version of the Standards makes no sense. International investors just don’t have the time to study local variations to IFRS Standards. Even small changes make them nervous about the quality of the standards. Investors have plenty of investment opportunities around the world. The benefits of adjusting IFRS Standards are tiny when compared to the international recognition that comes with full adoption.

Mr Hoogervorst also noted that adopting IFRSs as they are was much easier and quicker than trying to make one's own modifications. He also pointed out that Vietnam had a very young accountancy profession and developing the profession would be a lot easier when tapping in to a wealth of IFRS materials, resources, training courses and people from around the world.

Mr Hoogervorst concluded his speech by briefly touching on two other topics. He commented on the use of IFRSs around the world and particularly pointed out developments in Japan, India and China. And he also explained how the IASB is trying to help overcome the transition challenges for emerging economies. In this context, he pointed at the IASB's Emerging Economies Group (EEG) and the IFRS for SMEs.

Please click to access the full text of the speech on the IASB's website. A supporting slideshow is also available.

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