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November

IFRS Foundation Trustees hold October 2016 meeting

14 Nov 2016

The IFRS Foundation Trustees met in New Delhi on 12–14 October 2016.

Meeting ac­tiv­i­ties included the following:

  • Executive session — The Trustees discussed a number of important strategic issues:
    • Feedback on the Constitutional review — The Trustees review feedback on the Exposure Draft IFRS Foundation Review of Structure and Effectiveness: Amendments to the Constitution and made conclusions on 10 proposals.  
    • Agenda con­sul­ta­tion — The Trustees were updated on the progress on the Board’s Agenda Con­sul­ta­tion and the near-final draft of the 2015 agenda consultation feedback statement.
    • Pre­sen­ta­tion on IFRS in India — The Trustees received a pre­sen­ta­tion on the status of IFRSs in India and the development of Indian Accounting Standards.
    • Other issues — The Trustees discussed progress on the Foundation’s new website, the UK referendum on leaving the EU, intellectual property, fundraising activities in the USA, developments in Asia-Oceania, and the preparations for the Trustees’ next meeting in January 2017.
    • Committee reports — The Trustees discussed reports from the Due Process Oversight Committee, Audit and Finance Committee, the Human Capital Committee, and the Nom­i­nat­ing Committee.
  • IASB Chairman’s report — The Chair of the IASB provided the Trustees with an update on a number of the IASB’s technical ac­tiv­i­ties, agenda consultation, IFRS 9 endorsement, and other issues.
  • Events in Delhi — The Institute of Chartered Accountants of India (ICAI) hosted a stakeholder event with the Trustees.

The full report on the IFRS Foun­da­tion trustees’ meeting is available on the IASB’s website.

 

Due Process Oversight Committee holds October 2016 meeting

14 Nov 2016

The Due Process Oversight Committee (DPOC) met in New Delhi on 13 October 2016.

Meeting ac­tiv­i­ties included the following:

  • Updates on technical ac­tiv­i­ties — The DPOC was presented with a report that outlined the due process ac­tiv­i­ties for all projects on the IASB’s current agenda. Specif­i­cally, the DPOC discussed (1) outreach conducted on performance reporting and debt/equity presentation for the conceptual framework project and (2) the decision on an issue regarding the interaction of IAS 28 and IFRS 9.
  • 2015 Agenda Consultation: summary of the consultation process — The DPOC confirmed that the requirements of the Due Process Handbook have been meet.
  • Effect Analysis — The DPOC discussed the challenges of assessing insurance products and macroeconomic consequences of applying the expected loss model under IFRS 9.
  • Strategic Work Plan 2016 — The DPOC discuss benchmarking of its due process procedure against other organisations.
  • Consultative groups — The DPOC agreed that the annual review of consultative groups was in accordance with the Due Process Handbook.
  • Reporting protocol — The DPOC discussed the annual review and the handling of comment letters.
  • IFRS education initiative due process report — The DPOC agreed that the development and level of review for the IFRS education initiative was consistent with the Due Process Handbook.
  • Cor­re­spon­dence — No new cor­re­spon­dence has been received since the DPOC’s previous meeting.

The full report on the DPOC meeting is available on the IASB’s website.

Agenda for IASB meeting changed

14 Nov 2016

The IASB has changed the agenda for its meeting this week. The insurance contracts and Conceptual Framework sessions have been swapped. The Conceptual Framework will now be discussed on Tuesday morning, insurance contracts on Wednesday afternoon.

The Conceptual Framework session will focus on:

  • Summary of tentative decisions
  • Liability definition and supporting concepts
  • Testing the proposed asset and liability definitions — illustrative examples
  • Effects of the proposed changes to the Conceptual Framework on preparers

The insurance contracts session will discuss:

  • Methodology - external testing of draft IFRS 17
  • Results - external testing of draft IFRS 17
  • Level of aggregation
  • Experience adjustments
  • Transition issues
  • Mitigating financial risks reflected in insurance contracts
  • Other sweep issues
  • Mandatory effective date of IFRS 17

Please click for the updated agenda.

Summary of the September 2016 ASAF meeting now available

11 Nov 2016

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 29 September 2016.

The topics covered during the meeting were the following (numbers in brackets are ref­er­ences to the cor­re­spond­ing para­graphs of the summary):

  • Research report Information Needs of Users of New Zealand Capital Markets Entity Reports (1-20): This was a research report from New Zealand. In addition to the research results the ASAF members also discussed the research methodology (small sample, limitations regarding the questions asked), which does not necessarily make the research results applicable in other jurisdictions. ASAF members supplemented the results with insights from their own jurisdictions.
  • Rate-regulated activities (20-36): ASAF members discussed to agenda papers on this topic: (i) Research on the economic value of financial information on rate-regulated activities (prepared by Canada) and (ii) Accounting for rate-regulated activities from a conceptual perspective (prepared by Korea). During the discussion of the Canadian paper, ASAF members explained the situation in their respective jurisdictions. ASAF members agreed that it is important for users of financial statements to receive information about the entity’s rights and obligations created by the rate regulation. Where that information should be made availabe (primary financial statements or notes) remained contentious. The Korean paper explored how the Conceptual Framework and IFRS 15 could be used as a starting point for developing a new accounting model to report the financial effects of rate regulation. ASAF members agreed that developing a new accounting model might be useful and thought the Korean approach promising. However, concerns and comments were also voiced.
  • Conceptual Framework (37-62): ASAF members discussed the Conceptual Framework project comprehensively. Several papers had been submitted for discussion: (i) a paper on measurement prepared and presented by EFRAG (different ASAF memebrs supported different points raised in this paper), (ii) an IASB staff draft of proposed revisions to the discussion of factors to be considered in selecting a measurement basis (the new wording rather met with resistance from ASAF members), (iiI) an update on the Board’s tentative decisions on presenting info rmation about financial performance, and (iv) a paper on financial performance and measurement prepared by the ASBJ.
  • Definition of a business (63-71): ASAF members were informed about the corresponding FASB project and compared it with the IASB exposure draft. They encouraged IASB and FASB to align the wording of their amendments as much as possible and suggested that IASB clarify in the basis for conclusions that even though the IASB wording is different from the FASB wording, it is intended to have the same outcome. Regarding the IASB exposure draft, some inconsistencies and unintended consequences were pointed out.
  • Project updates and agenda planning (72-73): ASAF members were updated on current IASB projects. Topics suggested for the agenda of the next meeting were cryptocurrencies, an update on the forthcoming insurance contracts standard, and a general discussion on their research activities.
  • Working with National standard-setters (74-78): Discussion of this topic was short and onesided as ASAF members were only asked to identify entities in their jurisdictions that have improved how they communicate in their financial statements and would be willing to be included as examples in a report of the IASB staff. ASAF members asked clarifying questions and pointed out other reports that have been published in this area.
  • Feasibility Studies (79-80): This point merely clarified what the IASB staff calls feasibility studies: An informal label to reflect that the staff is looking into whether limited amendments can be achieved with a given approach where implementing the approach is not expected to require extensive drafting.

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

Pre-meeting summaries posted for the IASB's November meeting

10 Nov 2016

The International Accounting Standards Board (IASB) will meet at its offices in London on 14–16 November 2016. We have posted our pre-meeting summaries for the meeting that allow you to follow the IASB’s decision making more closely. For each topic to be discussed we summarise the agenda papers made available by the IASB staff and point out the main issues to be discussed by the IASB and the staff recommendations.

On Monday 14 November, the IASB will discuss topics raised by respondents and to consider what changes, if any, should be made to the final Practice Statement (‘PS’) related to its project on disclosure initiative: materiality.

On Tuesday 15 November, the IASB will discuss elements of the draft IFRS 17, Insurance Contracts, which include level of aggregation, experience adjustments, transition issues, mitigating financial risks reflected in insurance contracts, sweep issues, and effective date. In addition, the IASB will be provided with a summary of research work on primary financial statements and discuss IFRS implementation issues.

On Wednesday 16 November, the IASB will discuss its financial instruments with characteristics of equity project. Specifically, the IASB will receive a summary of discussions to date and discuss the exception of paragraphs 16A–16D of IAS 32. In addition, the IASB will discuss topics related its conceptual framework project, which include liability definition and support concepts as well as the effects of the proposed changes to the conceptual framework on preparers.

Our pre-meet­ing summaries are available on our meeting note page and will sup­ple­ment them with our popular meeting notes after the meeting.

ESMA calls for consistent application of IFRS 9

10 Nov 2016

The European Securities and Markets Authority (ESMA) has published a Public Statement aimed at promoting the consistent application of IFRS 9 'Financial Instruments' by European issuers listed on regulated markets.

In light of the expected impact and importance of the implementation of IFRS 9, ESMA highlights the need for consistent and high-quality implementation of IFRS 9 and the need for transparency on its impact to users of financial statements. The statements addresses the following topics:

  • Transparency on implementation and effects of IFRS 9;
  • Specific considerations for financial institutions/credit institutions;
  • Illustrative timeline and good practices of disclosures for financial institutions; and
  • Next steps.

Please click to download the IFRS 9 public statement from the ESMA website.

In July 2016, ESMA published a similar statement on the application of IFRS 15. ESMA expects that the statements will be taken into account and reflected in the 2016 and 2017 annual and 2017 interim financial statements.

EBA reports on results of the impact assessment of IFRS 9

10 Nov 2016

The European Banking Authority (EBA) has published a first report on the results of its impact assessment of IFRS 9 'Financial Instruments'. For the report, EBA looked at a sample of approximately 50 institutions across the European Union.

The impact assessment looked at qualitative and quantitative aspects and provided the following results:

Qualitative aspects

  • The smaller banks surveyed are lagging behind in their preparation compared to larger banks.
  • The involvement of some key stakeholders in IFRS 9 implementation seems limited at the current stage.
  • Many respondents plan to perform parallel runs to test the implementation of IFRS 9, but it seems that this testing may be more limited than originally envisaged due to there being insufficient time between the completion of the building of the systems and initial application of IFRS 9.
  • Banks are generally looking to leverage off existing definitions, processes, systems, models and data used for regulatory and credit risk management purposes in order to implement IFRS 9 impairment requirements, although new models and/or adjustments to existing models will be necessary.
  • Data quality and availability are the most significant challenges for banks responding to the survey and they expect to use different (internal and external) sources of data.
  • Overall, the impact of the change in classification and measurement requirements does not seem very significant for most banks.
  • The interpretation and application of some key elements of IFRS 9 impairment requirements are challenging and have to be finalised in many cases.
  • Available practical expedients of IFRS 9 will be used by banks.
  • 75% of the banks included in the survey anticipate that IFRS 9 impairment requirements will increase volatility in profit or loss.

Quantitative aspects

  • The total estimated impact of IFRS 9 is mainly driven by the impairment requirements and only to a lesser degree by the classification and measurement requirements of IFRS 9.
  • The estimated change in provisions varies from portfolio to portfolio and different factors could influence the impact of IFRS 9 in percentage terms on own funds.
  • The reclassification of financial instruments between categories may also have an impact on own funds.
  • The estimated increase of provisions compared to the current levels of provisions under IAS 39 is 18% on average and up to 30% for 86% of respondents.
  • In terms of the estimation of the total quantitative impact of IFRS 9, CET1 and total capital ratio are estimated to decrease, on average, by 59 bps and 45 bps respectively.

The full report can be accessed on the EBA website. The EBA also announces that it will be conducting a second exercise to assess the impact at a later point of time, when more reliable and precise information can be provided by respondents as a result of their ongoing efforts to implement IFRS 9.

Agenda for the December 2016 ASAF meeting

10 Nov 2016

The International Accounting Standards Board (IASB) has released an agenda for the meeting of the Accounting Standards Advisory Forum (ASAF), which is to be held at the IASB's offices in London on 8-9 December 2016.

The agenda for the meeting is sum­marised below:

Thursday, 8 December 2016 (10:30-17:30)
  • Conceptual Framework
    • tentative decisions taken by the Board at its November 2016 meeting on the liability definition and supporting concepts
    • staff recommendations for the approach to capital maintenance in the revised Conceptual Framework
  • Country-by-country reporting — Update on AASB approach
  • Post-implementation review of IFRS 13 Fair Value Measurement — Scope
  • Rate-regulated activities
    • Scope
    • Interaction with other IFRSs and the Conceptual Framework
    • Segregating identifiable rate adjustments from the overall changes in value of the regulatory licence
  • Disclosure initiative
    • Working with National standard-setters — Update on the discussion from the September 2016 ASAF meeting
    • Update on the discussion of the disclosure initiative at the annual AOSSG meeting

Friday, 9 December 2016 (9:00-15:45)

  • Cryptocurrencies
  • Financial instruments with characteristics of equity
  • Update on Insurance Contracts
  • Update by ASAF members on activities
  • Project updates and agenda planning

Agenda papers for the meeting are currently being made available on the IASB's website.

IFAC report on how accountancy can contribute to the UN's Sustainable Development Goals

10 Nov 2016

The International Federation of Accountants (IFAC) has published a report 'The 2030 Agenda for Sustainable Development: A Snapshot of the Accountancy Profession’s Contribution' that highlights the importance of the goals to business and the profession and considers how accountancy contributes to eight specific goals.

The report features existing activities and initiatives within the profession that support the goals and poses questions for professional accountancy organisations and professional accountants to consider.

The eight goals identified are:

  • Goal 4: Quality education
  • Goal 5: Gender equality
  • Goal 8: Decent work and economic growth
  • Goal 9: Industry, innovation, infrastructure
  • Goal 12: Responsible consumption and production
  • Goal 13: Climate action
  • Goal 16: Peace and justice and strong institutions
  • Goal 17: Partnership for the goals

The report can be accessed through the press release on the IFAC website.

November 2016 IFRS Interpretations Committee meeting notes posted

09 Nov 2016

The IFRS Interpretations Committee met in London on 8 November 2016. We've posted Deloitte observer notes for the technical issues discussed during this meeting.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.