IASB publishes proposed improvements to IFRS 8

29 Mar 2017

The International Accounting Standards Board (IASB) has published an exposure draft 'Improvements to IFRS 8 'Operating Segments' (Proposed amendments to IFRS 8 and IAS 34)'. It contains proposed amendments in five areas. Comments are requested by 31 July 2017.



In July 2013, the IASB completed the post-implementation review of IFRS 8 Operating Segments. The final report concluded that the benefits of applying the standard were largely as expected and that overall the standard achieved its objectives and has improved financial reporting. However, the IASB identified a number of issues that could be considered for improvement and that warranted further investigation. The IASB's subsequent discussions have now led to proposed clarifications and amendments around five issues one of which also regards IAS 34 Interim Financial Reporting.


Suggested changes

The amendments proposed in ED/2017/2 Improvements to IFRS 8 'Operating Segments' (Proposed amendments to IFRS 8 and IAS 34) are:

  • Description of the chief operating decision maker. The IASB proposes to clarify IFRS 8 by:
    • stressing that the chief operating decision maker is the function that makes operating decisions and decisions about allocating resources to operating segments and assesses their performance;
    • noting that the chief operating decision maker can be an individual or a group;
    • stating that a group identified as a chief operating decision maker can have non-executive members; and
    • requiring that an entity discloses the title and description of the role of the individual or the group identified as the chief operating decision maker.
  • Identification of reportable segments. Proposed amendments to IFRS 8 regarding this issue include:
    • requiring that an explanation of the reasons is disclosed if segments identified in the financial statements differ from segments identified in other parts of the entity's reporting; and
    • adding further examples to the aggregation criteria for operating segments with similar economic characteristics.
  • Additional segment information. The IASB believes that IFRS 8 should be clarified by:
    • noting that under certain circumstances an entity may disclose segment information that goes beyond the information regularly provided to and reviewed by the chief operating decision maker.
  • Description of reconciling items. Regarding this issue IFRS 8 would be amended by:
    • clarifying that sufficiently detailed explanations are required for the reconciling items so that users can understand their nature.
  • Change in the composition of an entity’s reportable segments. This proposed amendment regards IAS 34 where the IASB suggests:
    • requiring that the first interim report after a change in the composition of an entity’s reportable segments must contain restated segment information for all interim periods presented.


Effective date and transition requirements

The exposure draft does not contain a proposed effective date which the IASB intends to decide on after the exposure. Nevertheless, has already concluded that earlier application would be permitted, however, the amendments to IFRS 8 and the amendments to IAS 34 must be applied at the same time.


Additional information

Please click for:

IFRS adoption in Australia was relatively smooth

28 Mar 2017

The Australian Accounting Standards Board (AASB) has published its Research Report No. 4 'Review of Adoption of International Financial Standards in Australia' that finds that Australia’s adoption of IFRSs has been relatively smooth for most Australian business entities. However, it also states that extra support is warranted for not-for-profit entities.

Australia adopted IFRSs effective 1 January 2005, and in 2015 the AASB commenced a review of the adoption to assess the ongoing relevance of IFRSs to Australian for-profit and not-for-profit (NFP) reporting entities.

The key messages identified as part of the review are:

  • The transition process has been reasonably smooth for most sectors.
  • IFRSs are an appropriate basis for NFP standards developed by the AASB, however, further modifications are needed to as regards the quality and the cost-efficiency of reporting.
  • Adopting IFRSs across all sectors has enabled users and preparers to move between sectors, and between countries, with transferable knowledge and skills.
  • Internationally active entities have experienced cost savings in preparing financial reports.
  • Small and medium-sized entities and NFP entities have concerns regarding the costs of fully complying with the new standards, especially as regards disclosure requirements.

The press release on the AASB website notes projects, the AASB is currently undertaking and considering to specifically meet the needs of the NFP sector. The research report is available here.

The Bruce Column — The challenge of embedding integrated reporting in North American business

27 Mar 2017

Bob Laux has been a stalwart of the US financial reporting scene for a long time, most recently leading the treasury controller group at Microsoft. Now he has taken up a new role, as North American Lead at the International Integrated Reporting Council. As he prepares for his task and the challenges ‘to ensure integrated reporting is at the heart of the business agenda in North America’ he has been talking about his plans to Robert Bruce, our regular, resident, columnist.

Bob Laux has long been a fixture at financial reporting conferences. He is a financial reporting guru. And then, a couple of years ago, at a panel event in Los Angeles he surprised everyone by saying he was ‘disgusted’ at the state of the accounting profession. He was saying it for effect. But he needed to shout loudly to draw his audience’s attention to his view that financial reporting in the US had become a rolling mass of infrastructure which didn’t really serve its users very well.

Earlier this year he joined the International Integrated Reporting Council as its North American Lead, with, as he puts it, a ‘goal of trying to make integrated reporting mainstream in North America’.

And when we talked recently, he talked about how ‘discouraged’ he was by his profession, the accounting profession. ‘We are a great profession but we can do better’, he said. ‘In the US we have periodic reporting, the 10Qs and 10Ks, and a tremendous amount of effort is put into those documents. There is a lot of infrastructure and controls on top of them. And day after day I would be saying to myself, is this it? Is this my contribution to this great profession we are in? And a lot of us think we can do better. It is a huge infrastructure. It is rules. It is a lot of disclosure, documents which run to well over a hundred pages that I don’t think too many people are reading and may be not their first source for investing’.

For him this giant infrastructure is ‘the big elephant in the room’. So how could he combat this massive obstacle? His answer is that ‘we are just going to have to be smart about it’. And that, for Laux, means integrated reporting, reporting based on the different capitals which underpin value creation of a company. ‘There are a lot of challenges’, he says, ‘but I am confident that now is the right time. We have been talking about this type of reporting for over two decades now. We have come a long way. But now is the time for action’.

In particular he feels that many others share this view. ‘Many people in business, investors and society generally feel that companies need to have a long-term view. We need to get out of our short-term mentality and in business the short-term mentality is the quarterly earnings game, and it’s just not productive. I think we all know that and we all need to come together and find a solution’.

And for him that solution is integrated reporting and the integrated thinking, of all the elements which make up corporate performance and value creation, which can open up a long-term, sustainable, view. It is a growing trend.

Last year the largest and most influential pension fund in the US, CalPERS, called on company boards to ‘provide an integrated report that puts historical performance into context and portrays the risks, opportunities and prospects for the company in the future’. He appreciates that companies can find the process of putting integrated reporting into place difficult. But he provides encouragement. ‘The good thing is that when you go through the exercise you start learning: this is what I need to do differently; this is how I need to think about a multi-capital view of the world; this is how I need to cut down on my silos; this is who I need to have in the room; this is how I can be clearer about my company’s strategy; this is how I can be clearer about execution on strategy’.

But he is also clear that it will be a mighty task. ‘I love being an accountant’, he said, ‘but we are difficult people to change. But we all want to do the right thing. That is why a lot of us became accountants’. Bringing about the cultural and attitudinal changes which will lead to integrated reporting being mainstream to North American business is a tough call. Laux understands that. But he sees it as being possible. ‘I’m excited’, he said. ‘I’m hopeful’.

EFRAG issues positive endorsement advice on IFRS 16

27 Mar 2017

The European Financial Reporting Advisory Group (EFRAG) has issued final endorsement advice for IFRS 16 ‘Leases’.

EFRAG assesses that the standard meets all technical en­dorse­ment criteria of the IAS Reg­u­la­tion. While some limitations with regard to relevance, reliability and comparability were identified, the EFRAG determined that they constitute “acceptable trade-off between the objective of achieving a complete and faithful representation of information on the one hand and reducing complexity of applying IFRS 16 on the other hand.” In addition, the EFRAG assesses that adopting the standard would be conducive to the European public good.

Please click to access the press release that offers access to the en­dorse­ment advice on the EFRAG website. EFRAG has also updated its en­dorse­ment status report, which can be down­loaded here.

IASB posts webcast on IFRS 16 lease modifications

27 Mar 2017

As part of the IASB webcast series on IFRS 16 implementation, the IASB staff has made available a webcast related to IFRS 16 lease modification requirements for lessees.

This webcast discusses modification requirements in IFRS 16 and implementation issues that have occurred.

The webcast is available on the IFRS 16 im­ple­men­ta­tion page on the IASB’s website.

While direct IPSAS and IFRS adoption remains low, most OECD country governments have adopted accrual accounting

27 Mar 2017

A new study by the International Federation of Accountants (IFAC) and the Organisation for Economic Co-operation and Development (OECD) has found that nearly three-quarters of OECD countries have adopted accrual accounting for their year-end financial reports. In 2003, only a quarter of the governments used accrual accounting.

The study was conducted from November 2015 to June 2016 among all of the (then) 34 OECD countries. Of those 34 countries, 25 countries (73%) base their annual financial reports on accrual accounting, and another three countries (9%) are currently transitioning to accrual accounting. Only six countries still use cash accounting.

The study also points out that while the direct adoption of international accounting standards, such as International Public Sector Accounting Standards (IPSAS) or International Financial Reporting Standards (IFRS), by national governments remains very low, almost 40% of the standard-setters use IPSAS (28%) or IFRS (9%) as primary or explicit references for developing their national standards.

The study 130 page study offers a short executive summary, a 15 page analysis of practices across all countries, and afterwards a detailed analysis of each country's accounting practice.

Please click to access Accrual Practices and Reform Experiences in OECD Countries on the IFAC website.

EU consultation on ESAs includes section on financial reporting

24 Mar 2017

The European Commission has launched a public consultation on the operation of the European Supervisory Authorities (ESAs) one of which is the European Securities and Markets Authority (ESMA). The consultation suggests that the review of the ESAs' operation might also be used to "streamline" the endorsement process in the EU by giving ESMA an "advisory role".

The section on financial reporting first describes ESMA's role as an enforcer of accounting and auditing standards and outlines the efforts that have been undertaken to harmonise accounting and auditing practices in the EU. It then notes several possibilities for strengthening ESMA's position in this respect as supervisory and enforcement convergence has remained somewhat limited to date.

The last paragraph of the section is used to make an additional suggestion:

Finally, there may also be scope to streamline the adoption process of international accounting standards. One possible avenue, which was already considered in the Maystadt report published in October 2013, would be to give ESMA an advisory role in the endorsement process, subject to appropriate safeguards to ensure that the European public interest is fully considered as part of the endorsement process.

The questions asked at the end of the section then seem to connect the topics of improvements to the operations of the ESAs and changes to the endorsement process by asking (a) what improvements to the current organisation and operation of the various bodies could be made and (b) how the current endorsement process could be made more effective and efficient.

Please click to access the consultation documents on the European Commission's website.

Updated IASB work plan — Analysis

24 Mar 2017

Following its March 2017 meeting, the IASB has updated its work plan. It reveals that the discussion paper on principles of disclosure and proposed amendments to IFRS 8 as consequence of the post-implementation review are expected next week.

Below is an analysis of all changes made to the work plan since the last update in February 2017.

Research projects

Standard-setting and related projects

Nar­row-scope amend­ments


Post-implementation reviews

The revised IASB work plan is available on the IASB's website.

March 2017 IASB meeting notes posted

23 Mar 2017

The IASB met at its offices in London on 21 and 22 March 2017. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

The IASB considered corporate reporting more broadly. Until now the IASB has been monitoring developments in corporate reporting, including integrated reporting, sustainability and the recent work on climate-related disclosures, and cooperating with other bodies. The Board decided to take a more active role in thinking about broader corporate reporting issues. As a first step, the IASB will investigate whether it should review and update its Practice Statement on Management Commentary.

The IASB had a brief session to review its work on goodwill and impairment, primarily for information and planning purposes.

The IASB reviewed its work on discount rates, one of its research projects. The project is now closed, with no further work required other than to ensure that the analysis is properly documented, preserved on the IASB’s website and referred to by staff on other projects. This does not prevent the IASB discussing low and negative interest rates, which it plans to do later in 2017.

The IASB continued its discussions on Primary Financial Statements. The Board supported the staff recommendation that entities be required to have a subtotal in the income statement for EBIT. They know that this will require future discussion of what constitutes finance income and expense from ordinary activities and how earnings from associates fits in. The Board is also considering requiring entities to present in the income statement a management operating performance measure, with each entity using their own definition. The papers also discussed the general aggregation principles.

The IASB concluded its public discussions on the Conceptual Framework. Entities that have relied on the Framework to develop policies for regulatory account balances be required to continue to use the existing Framework until they apply the future Standard on rate-regulated activities.

There was a brief oral update on the Insurance Contracts project. The post-ballot drafts have been circulated internally and the staff expect to publish the new Standard in the second half of May 2017.

On Wednesday, the IASB had an education session on Dynamic Risk Management. The staff plan is to have the IASB identify a preferred model by about October 2017, which would then be developed further.

The financial instruments with the characteristics of equity project wrapped up its current phase. The IASB discussed how the proposed model would apply to derivatives in an entity’s own equity in a group scenario when the functional currency of the parent differs from that of the subsidiary. They will also assess the implications of the model for other Standards, particularly IFRS 2 Share-based Payments and IAS 33 Earnings per Share. The next step is the preparation of the Discussion Paper, which the staff expect to be published towards the end of 2017.

Please click to access the detailed notes taken by Deloitte observers for the entire meeting.

Accountancy Europe follows up on 'CORE & MORE'

23 Mar 2017

Accountency Europe (formerly FEE) has published a follow-up paper to the 2015 FEE paper putting forward the idea of a 'CORE & MORE' model of corporate reporting.

The second paper presents a summary of the responses received to the first paper in writing as well as during several public and private events. From the feedback, Accountancy Europe has identified three main topics for further development and intends to:

  • elaborate the concept as stakeholders requested a clarification of the concept and felt that parts of it could be interpreted incorrectly;
  • support the coordination and development of non-financial information reporting as it believes that it is important that one party (or parties) take(s) firm ownership of a global principles-based non-financial information reporting framework; and
  • further research the impact and opportunities of technology as a driver and enabler of reporting change, including online reporting and social media, both from the perspective of the reporting entity and the users of corporate reporting.

Accountancy Europe’s aim is to provide separate contributions and recommendations in the areas mentioned above and to host an event on these issues in the second half of 2017.

Please click to access the follow-up paper on the Accountency Europe website.

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.