'Better communication' to be the theme of the second term of the IASB Chairman

30 Jun 2016

At the IFRS Foundation's annual European Conference currently held in Zurich, IASB Chairman Hans Hoogervorst outlined plans to prioritise improvements to the communications effectiveness of financial statements.

After the usual remarks on IFRS adoption around the world, Mr Hoogervorst turned to the main message of his speech. He explained that "preparers sometimes experience financial reporting as too much of a compliance exercise and investors sometimes believe that the financial statements depict performance in an insufficiently clear manner". As he noted, valuable information gets drowned out by ‘tick the box’ disclosures and voluminous, but poorly organised and presented financial data. Mr Hoogervorst also commented on preparers presenting alternative performance measures that are not based on IFRSs to paint a rosier picture than reality. Finally, he mentioned non-financial information on, for example, sustainability issues.

To help investors see what preparers are actually saying, the IASB therefore needs to do more work to increase the communication effectiveness of financial statements, as Mr Hoogervorst said. To this end, and to make sure that financial statements communicate as clearly as possible what preparers are doing, the IASB will take a fresh look at how financial information is presented, how it is grouped together, and in what form it is made available.

The main projects Mr Hoogervorst mentioned that will contribute to this mission are the the project on primary financial statements, the disclosure initiative, and the project on financial instruments with characteristics of equity. He also promised that the IASB would have a closer look at digital reporting and non-financial reporting.

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

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

30 Jun 2016

The IFRS Interpretations Committee will hold its next meeting as video conference on 12 July 2016. The agenda for the meeting is now available. We have also summarised the agenda papers for the meeting for you.

The IFRS Interpretations Committee will continue its discussions on an IAS 12 issue, deliberate comment letters received on the draft interpretations on IAS 21 and IAS 12 as well as on an issue relating to IAS 19/IFRIC 14, and finalise agenda decisions on IFRS 11 and IFRIC 12.

The full agenda and our detailed pre-meeting summaries for the meeting 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.

IASB posts webcast on IFRS 16 lessee measurement

30 Jun 2016

As part of the IASB's webcast series on IFRS 16 implementation, the IASB staff has made available a webcast discussing the measurement requirements for lessees in IFRS 16 'Leases'.

The webcast discusses the measurement of lease liabilities (lease term, variable lease payments, in-substance fixed lease payments, discount rate) and the measurement of right-of-use assets.

The new webcast and all previous webcasts of the series available on the IFRS 16 implementation page on the IASB’s website.

Recent sustainability and integrated reporting developments

29 Jun 2016

A summary of recent developments at the IIRC and the Singapore and Hong Kong stock exchanges.

The International Integrated Reporting Council (IIRC) has made available another publication in its <IR> Creating Value series that focusses on human capital within a business. It highlights the value of reporting on human capital, sharing some of the developments and experimentation taking place in this area. It also identifies the benefits of human capital management and reporting, including the particular benefits to be gained from applying Integrated Reporting. Please click to access The value of human capital reporting on the IIRC website.

Singapore’s local bourse, the Singapore Exchange (SGX), officially launched its guidelines on sustainability reporting which mandates that all listed companies report on a ‘comply or explain’ basis from financial year 2017. More information is available on the SGX website.

The Hong Kong Exchanges and Clearing Limited (HKEX) recently updated its own ESG Reporting Guide and adopted "comply or explain" provisions for certain disclosure obligations in order to assist companies in their goals of being more transparent and accountable to their stakeholders. A linkage and gap analysis document connecting the HKEX ESG Reporting Guide and the GRI G4 Guidelines has also been developed. More information is available on the GRI website.

IASB addresses definition of a business and accounting for previously held interests

28 Jun 2016

In a combination of two of its current implementation projects, the IASB has today published 'Definition of a Business and Accounting for Previously Held Interests (Proposed amendments to IFRS 3 and IFRS 11)'. Comments on the exposure draft are requested by 31 October 2016.



The post-implementation review of IFRS 3 Business Combinations revealed that entities have difficulties when determining whether they have acquired a business or a group of assets. As the accounting requirements for goodwill, acquisition costs and deferred tax differ on the acquisition of a business and on the acquisition of a group of assets, the IASB decided to issue narrow scope amendments aimed at resolving the difficulties that arise when an entity is determining whether it has acquired a business or a group of assets.

At the same time, the IFRS Interpretations Committee received and discussed several issues around transactions involving previously held interests in order to determine whether or not previously held interests should be remeasured. The Interpretations Committee recommended to the IASB to make certain amendments and the IASB agreed to follow the Committee's recommendation, provided the amendments were grouped with and conditional on other amendments relating to the definition of a business.

As a consequence, the IASB now issues one exposure draft addressing the definition of a business as well as the accounting for previously held interests in the assets and liabilities of a joint operation in transactions in which an investor obtains control or joint control of a joint operation that meets the definition of a business.


Suggested changes

The amendments proposed in ED/2016/1 Definition of a Business and Accounting for Previously Held Interests (Proposed amendments to IFRS 3 and IFRS 11) are:

Definition of a business (changes to the implementation guidance of IFRS 3 only)

  • A business consists of inputs and processes applied to those inputs that have the ability to contribute to creating outputs, while a business need not include all of the inputs or processes that the seller used in operating that business and need not have an output. However, if there is no output, the set is a business only if it includes an organised workforce with the necessary skills, knowledge, or experience to perform an acquired substantive process that is critical to the ability to develop or convert another acquired input into output.
  • If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, then the set of activities and assets is not a business.
  • Tangible and intangible assets, different classes of tangible assets, identifiable intangible assets in different intangible asset classes, financial assets and non-financial assets, and different classes of financial assets shall not be combined into a single asset or considered a group of similar assets.

Accounting for previously held interests (changes to IFRS 3 and the implementation guidance of IFRS 11)

  • Acquisition of control over a joint operation that meets the definition of a business is a significant economic event that warrants remeasurement of previously held interests in the assets and liabilities of the joint operation at fair value at the time an investor obtains control of the joint operation.
  • Acquisition of joint control over a joint operation that meets the definition of a business is not an event that warrants remeasurement of previously held interests in the assets and liabilities of the joint operation at the time an investor obtains joint control over the joint operation.


Interaction with the FASB

The exposure draft notes that IFRS 3 is the result of a joint project between the IASB and the FASB and the business combinations requirements under IFRSs and US GAAP are substantially converged. However, even though the FASB (that had received similar feedback) and the IASB have worked together to respond to problems with the definition of a business, the IASB decided to expose amendments to the application guidance of IFRS 3 that are different from the wording exposed by the FASB in November 2015 although the results are expected to be substantially the same.


Effective date and transition requirements

The ED proposes that the amendments would be applied to business combinations for which the acquisition date is on or after the effective date. Earlier application would be permitted.


Additional information

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IASB issues 'Investor Perspectives' on disclosure effectiveness

27 Jun 2016

The IASB has issued the latest issue of "Investor Perspectives." In this edition, IASB board member Pat Finnegan discusses improving disclosure effectiveness.

This issue of Investor Perspective features:

  • An examination of capitalisation tables;
  • A closer look at the IASB's projects on Conceptual Framework and financial instruments with characteristics of equity;
  • A solicitation for ideas on "more efficient and effective way for investors and lenders to obtain a comprehensive picture of the rights and obligations created by a company’s liability and equity claims"; and
  • Recent resources related to disclosure effectiveness.

For more information, see the June 2016 edition of the Investor Perspectives newsletter on the IASB’s website.

IFRS 9 endorsement in the EU takes next hurdle

27 Jun 2016

On 27 June 2016, the Accounting Regulatory Committee (ARC) voted in favour of endorsing IFRS 9 'Financial Instruments' for use in the European Union. Final endorsement is currently expected in the fourth quarter of 2016.

The development is reflected in an updated EFRAG endorsement status report.

6th ANC Symposium on Accounting Research

27 Jun 2016

On 12 December 2016, the Autorité des Normes Comptables (ANC), the French standard setter, will host its 6th Symposium on Accounting Research in Paris. The general theme will be "Accounting and performance".

The symposium on accounting research will gather together academics, international standard-setting representatives, finance and accounting directors, chartered accountants and external auditors around series of round tables on 'Accounting and Performance' and measurement issues. Debates will focus on for whom should performance be designed, which time horizon to take into account, the relevance of the information to publish and its link with the European public good. Participation in the symposium is free of charge, however, prior registration is required.IAS Plus observers will be present at the symposium.

Please click for the formal invitation and registration on the ANC website.

IASB Chairman speaks on the IASB's reactions to the global financial crisis

27 Jun 2016

At an event celebrating the 25th birthday of the Portuguese Securities Market Commission CMVM, IASB Chairman spoke on a variety of topics including developments at the IASB after the onset of the global financial crisis and IFRS 9.

Sketching progress that has been achieved in the regulatory field after the global financial crisis, Mr Hoogervorst first pointed at the increased use of IFRSs around the world. This, he stated, has brought "tremendous benefits to the global economy in terms of transparency, accountability and efficiency". In terms of standard-setting he then mentioned the completion of IFRS 15 and IFRS 16 and the near completion of the new standard on insurance contracts. The completion of IFRS 9 he called the IASB's main response to the financial crisis.

Looking more deeply into IFRS 9 Financial Instruments, Mr Hoogervorst explained the new expected loss model that means that full lifetime losses will have to be recognised as soon as a significant increase in credit risk has taken place. He noted that implementation of the expected loss model will require considerable effort, particularly in jurisdictions where the banking system is suspected of harbouring a lot of problem loans. In these jurisdictions proper implementation of IFRS 9 could be a huge challenge for auditors, market and prudential regulators. He warned and encouraged his audience:

Expect to hear a lot of complaints, but stand resolute in your determination to do the right thing!

After discussing accounting, Mr Hoogervorst strayed beyond the remit of the IASB and offered his thoughts on audit, bank capital, leverage in the global economy, and unchartered waters in general.

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

EU referendum in the UK

24 Jun 2016

In the EU referendum in the UK yesterday, which saw a turnout of 71.8%, 51.9% of the voters made clear that they see the UK’s interests best-served by leaving the European Union.

Deloitte UK offers a website dedicated to the EU referendum and its result offering insight papers, perspectives and access to webinars on what this change can mean.

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