IFRS Foundation adds new jurisdiction profiles on the use of IFRS around the world

31 Mar 2017

The IFRS Foundation has added a new jurisdiction profile on the use of IFRS, bringing the total number of profiles completed to 150 jurisdictions.

The new ju­ris­dic­tion profile cover Montenegro which requires all companies to use IFRS.

For more information, see the Montenegro profile page on the IASB's website. In addition, see our popular table on the use of IFRSs around the world which is sup­ple­mented by the more detailed table on the use of IFRSs by the G20 ju­ris­dic­tions.

BCBS has 'not yet reached a conclusion' on IFRS 9

31 Mar 2017

The Basel Committee on Banking Supervision (BCBS) has released a statement on the interim regulatory treatment of accounting provisions and standards in view of the limited time until the effective date of IFRS 9 'Financial Instruments'.

The statement stresses that the BCBS supports the use of expected credit loss (ECL) accounting approaches and encourages their application in a manner that will achieve earlier recognition of credit losses than incurred loss models while also providing incentives for banks to follow sound credit risk management practices. Still, the BCBS notes that the implementation of ECL accounting is likely to have fundamental implications for the regulatory capital and banks’ provisioning practices in qualitative and quantitative ways.

In view of the limited time until the effective date of IFRS 9 (1 January 2018), the BCBS has therefore decided to retain the current regulatory treatment of provisions under the Basel framework for an interim period. In the meantime, the BCBS will thoroughly review the longer-term regulatory treatment of provisions. The statement also notes that jurisdictions may adopt transitional arrangements to smooth any potential significant negative impact on regulatory capital arising from the introduction of ECL accounting.

Please click to access the BCBS statement on the website of the Bank for International Settlements (BIS).

IASB issues podcast on latest Board developments

31 Mar 2017

The IASB has released a podcast featuring its Chair, Hans Hoogervorst and Vice-Chair, Sue Lloyd discussing the deliberations at the March 2017 IASB meeting

The podcast features discussions of the following topics:

  • Wider corporate reporting,
  • Primary financial statements, and
  • Financial instruments with characteristics of equity.

The podcast can be accessed through the press release on the IASB website. More information on the topics discussed is available through our comprehensive notes taken by Deloitte observers of the March 2017 meeting.

SEC appoints new deputy chief accountant

30 Mar 2017

The SEC has appointed Sagar S. Teotia as deputy chief accountant in the Office of the Chief Accountant.

Mr. Teotia joins the SEC from Deloitte & Touche LLP where he was a partner in the National Office Accounting Consultation Group. In addition, he served as an SEC accounting fellow in the Office of the Chief Accountant from 2009 to 2011.

For more information, see the press release on the SEC’s Web site.

The Bruce Column — The struggles to make disclosure principled

30 Mar 2017

The IASB has published its long-awaited discussion paper on Principles of Disclosure and now everyone has six months to grapple with the important questions it raises. Robert Bruce, our regular, resident commentator looks at where the answers may lie.

It is the traditional Catch-22 of financial disclosure. Create a mass of requirements and all you will see is checklist and boilerplate information. Remove some of the requirements in an attempt to encourage judgement and what you get is complaints from investors that they are being denied information. Furthermore if you want a degree of consistency preparers need disclosure objectives to exercise their judgement.

There is also the question of whether you need to write out principles about good communication, or whether it should be down to common sense.

Although the debate has been with us for many years this is the IASB’s first attempt to step back, rethink and try to steer an effective way through these issues. The IASB has produced a discussion paper on Principles of Disclosure.

It all comes down to a deceptively simple question: deciding what to disclose and how to disclose it. But as soon as anyone gets into the detail they realise that the IASB’s current Standards are full of uncertainties. For example it is not clear whether IFRS information should be allowed to be disclosed outside the financial statements and whether non-IFRS information is allowed to be disclosed within the financial statements.

The complexities are rife. During the discussions the IASB realised that it would not be operational to prohibit the disclosure of non-IFRS information within the financial statements because there are differing views of what constitutes non-IFRS information. One example: the IASB requires entities to report (unspecified) subtotals where relevant and to report management determined segment information. Are these numbers IFRS measures or non-IFRS information?

Another issue that the IASB has struggled with in the past is that it knows that users need information that helps them analyse performance and it also knows that it would be helpful to separate out items which mask underlying performance. We are back to the old arguments over a decade ago about ‘extraordinary’ items. The IASB is thinking about developing requirements for the presentation of unusual or infrequently occurring items in the statement of financial performance. And it is thinking of clarifying the presentation of EBITDA and EBIT and creating a bit more structure around these frequently used KPIs. For example it suggests that EBITDA could be presented only if expenses are classified by nature, while EBIT could be presented regardless of whether expenses are classified by nature or by function.

Another area that the discussion paper is trying to tackle is the disclosure of accounting policies, and the problems of laborious and lengthy generic wording copied verbatim from IFRS in an unspecific way cluttering up and obscuring disclosures. The idea is to create several categories of accounting policies. The first category would be for policies that are essential to understanding information in the financial statements because the amounts involved are material and they involve choice or significant judgments or assumptions. The second category would be of items which do not fall into the first but relate to items that are material to the financial statements. The rest falls into the third category. For this tier disclosure is deemed not be necessary, but it would not be prohibited as long as they don’t clutter up or obscure material information or the financial statements generally. In other words accounting policies relating to items in categories one and two have to be explained.

One of the more radical suggestions is to have a two-tiered approach to disclosure requirements that would be less prescriptive and put greater emphasis on judgement in deciding how and what to disclose. You first decide how important a particular issue is to the company. The more important it is the more information a reader should expect to see about that activity. 

The discussion paper leaves everyone with a lot to think about. There are complexities and uncertainties. Will it be possible to create more structure? What role should management judgement be allowed to play? The next six months gives everyone an opportunity to put their views across.

IASB publishes discussion paper on disclosure principles

30 Mar 2017

The International Accounting Standards Board (IASB) has published a comprehensive discussion paper (DP) setting out the Board's preliminary views on disclosure principles that should be included in a general disclosure standard or in or in non-mandatory guidance on the topic. Comments are due 2 October 2017.


For the years 2017-2021 the IASB has chosen "Better communication" as its central theme, and in addition to the primary financial statements project and the IFRS Taxonomy this also includes the disclosure initiative. A related project is also the Conceptual Framework project. In fact, some concepts and financial reporting issues have been moved back and forth between different projects of this group.

The disclosure initiative itself is made up of a number of projects:

  • Amendments to IAS 1 to remove barriers to the exercise of judgement and amendments to IAS 7 to improve disclosure of liabilities from financing activities have already been completed.
  • Guidance on the application of materiality has been split into two projects and will see a final practice statement and an exposure draft of proposed amendments to IAS 1 and IAS 8 published in June.
  • Of the two research projects that are included in the disclosure initiative, the principles of disclosure project is the one behind the DP published today and the standards-level review of disclosures is also involved to a degree as Section 8 contains a possible approach that could be explored further as part of the project and the appendix to the DP contains two examples of how existing standards could be re-drafted using the principles described in the DP.


The IASB's project on the principles of disclosure

The objective of the principles of disclosure project is to help preparers to communicate information more effectively, to improve disclosures for users of financial statements, and to help the Board to develop disclosure requirements in standards. Since IAS 1 Presentation of Financial Statements contains general requirements for disclosures in the financial statements, the project uses the IAS 1 requirements as a starting point to see whether parts of IAS 1 can be amended to reach the project's objective or whether a new disclosure standard should be developed to replace parts of IAS 1 (both options a subsumed under the expression "general disclosure standard" throughout the DP).


Summary of main proposals

Contents. The DP contains 110 pages and is divided into eight sections accompanied by an appendix. The paper is preceded by an executive summary describing the reasons behind publishing the DP, its reach, the main content of the document, the preliminary views of the Board, the terminology used, and the next steps. The paper itself is structured as follows:

Section Topic
1 Overview of the ‘disclosure problem’ and the objective of this project
2 Principles of effective communication
3 Roles of the primary financial statements and the notes
4 Location of information
5 Use of performance measures in the financial statements
6 Disclosure of accounting policies
7 Centralised disclosure objectives
8 New Zealand Accounting Standards Board staff’s approach to drafting disclosure requirements in IFRS Standards
Appendix Illustration of applying Method B in Section 7

The key issues dealt with in each section are summarised below.

Section 1 (Overview of the ‘disclosure problem’ and the objective of this project). The first section offers background information on the disclosure initiative and discusses the "disclosure problem" that demonstrates the need for principles of disclosure. The section also outlines the objective of the project and the DP and describes the interactions with the other IASB projects.

Section 2 (Principles of effective communication). The core of this section are the principles the Board believes entities should apply when preparing financial statements. Seven principles are identified ranging from the principle that the information provided should be entity-specific to avoid generic, ‘boilerplate’ language or information to the principle that the information should be provided in a format that is appropriate for that type of information. Except for one, these principles were originally included in the 2013 Conceptual Framework DP. The Board has come to the conclusion that these principles should be provided either in a general disclosure standard or in non-mandatory guidance on the topic, not in the Conceptual Framework. New is the principle on formatting as the Board has received feedback that more effective use of formatting would improve how entities communicate information.

Section 3 (Roles of the primary financial statements and the notes). This section contains a discussion of the roles of the different financial statements as the Board has received feedback that information in the primary financial statements is used more frequently and is subject to more scrutiny from users, auditors, and regulators. Entities also state that they find it difficult to decide what information should be presented in the primary financial statements instead of being disclosed in the notes, not least because of the inconsistent use of the terms ‘present’ and ‘disclose’ in IFRSs. Therefore, this section identifies and describes the role of the primary financial statements based on the objective of financial statements in the 2015 Conceptual Framework ED and sets out the implications of that role. It also describe the role and content of the notes based on the proposals in the Conceptual Framework ED. The Board has also concluded that going forward it will also specify the intended location as being either ‘in the primary financial statements’ or ‘in the notes’ when it uses the terms 'present' or 'disclose' to indicate a location.

Section 4 (Location of information). This section discusses providing information that is necessary to comply with IFRSs outside the financial statements and providing non-IFRS information within the financial statements. The Board’s preliminary view is that a general disclosure standard should include a principle that an entity can provide information that is necessary to comply with IFRSs outside of the financial statements if the information it is provided within the entity’s annual report and this location makes the annual report as a whole more understandable and if is clearly cross-referenced. Similarly, the Board has concluded that a general disclosure standard should not prohibit an entity from including non-IFRS information in its financial statements as long as such information is clearly identified as not being prepared in accordance with IFRSs and the entity explains why the information is useful and has been included.

Section 5 (Use of performance measures in the financial statements). The fifth section is dedicated to the fair presentation of performance measures in the financial statements. The Board’s preliminary views are that the presentation of an EBITDA subtotal using the nature of expense method and the presentation of an EBIT subtotal under both a nature of expense method and a function of expense method comply with IFRSs if such subtotals are relevant to an understanding of the financial statements. The Board also believes that it should develop guidance in relation to the presentation of unusual or infrequently occurring items. However, the Board notes that both issues (EBITDA/EBIT and unusual items) will be dealt with within the Board’s project on primary financial statements. On fair presentation of performance measures, the Board notes that this information must be displayed with equal or less prominence than the line items in the primary financial statements, reconciled to the most directly comparable IFRS measure, accompanied by an explanation of its relevance and reason, be neutral, free from error and clearly labelled, include comparative information, be classified, measured and presented consistently, and indicate whether it has been audited. This is entirely in line with guidelines already published by various securities regulators but now finds its way into IFRS literature.

Section 6 (Disclosure of accounting policies). In this section, the IASB takes a closer look at how entities should disclose their accounting policies. The Board’s preliminary views are that a general disclosure standard should include requirements to explain the objective of providing accounting policy disclosures. It should describe the categories of accounting policies, which are accounting policies that are always necessary for understanding information in the financial statements, accounting policies that also relate to items, transactions or events that are material to the financial statements, and any other accounting policies. The Board has also come to the conclusion that there are alternatives for locating accounting policy disclosures, but that it can be presumed that entities disclose information about significant judgements and assumptions adjacent to disclosures about related accounting policies.

Section 7 (Centralised disclosure objectives). This section discusses the development of a central set of disclosure objectives that consider the objective of financial statements and the role of the notes. Such centralised objectives could be used by the Board as a basis for developing disclosure objectives and requirements in standards that are more unified and better linked to the overall objective of financial statements. The DP identifies two methods that could be used for developing centralised disclosure objectives: Method A would entail focusing on the different types of information disclosed about an entity’s assets, liabilities, equity, income and expenses; Method B focusing on information about an entity’s activities. The appendix to the DP provides two examples that illustrate the application of Method B to develop disclosure objectives and requirements. The DP notes that Board has not yet formed any preliminary views about the two methods. Finally, the DP asks whether respondents think that the Board should consider locating all disclosure objectives and requirements in IFRSs within a single standard (or set of standards) for disclosures.

Section 8 (New Zealand Accounting Standards Board staff’s approach to drafting disclosure requirements in IFRS Standards). The eighth section describes an approach that has been developed by the staff of the NZASB for drafting disclosure objectives and requirements in IFRSs. The main features of the approach are: an overall disclosure objective for each standard with subobjectives for each type of information required, a two-tier approach that would see the amount of information provided depend on the relative importance of an item or transaction to the reporting entity, greater emphasis on the need to exercise judgement, and less prescriptive wording in disclosure requirements. The DP notes that Board has not yet formed any views about the approach but would nevertheless welcome feedback as it could be used in the project on standards-level review of disclosures.

The IASB allows constituents an extended six months period to work their way through the document and to respond to the questions raised; hence, comment letters are to be submitted by 2 October 2017.


Additional information


IASB member Amaro Gomes to lead EEG

29 Mar 2017

IASB member Amaro Gomes has been chosen to lead the Emerging Economies Group (EEG) of the IASB.

The position fell vacant after the death of Wayne Upton in 2016. Please click to see the new composition of the EEG on the IASB website.

Agenda for the April 2017 IFRS Advisory Council meeting

29 Mar 2017

An agenda has been released for the upcoming meeting of the IFRS Advisory Council, which is being held in London on 4–5 April 2017. The meeting will feature discussions financial stability and the IFRS Foundation, materiality, principles of disclosures, corporate reporting, and supporting the implementation and application of IFRS.

A summary of the agenda is set out below:

Tuesday 4 April 2017

Morning session (09:15-12:45)

  • Welcome and Chairman's preview
  • Financial stability and the IFRS Foundation
    • Break-out session
  • Board and IFRS Foundation activities

Afternoon session (13:45-15:15)

  • Members' com­mu­ni­ca­tions
  • Trustee ac­tiv­i­ties

Wednesday 5 April 2017

Morning session (09:30-12:45)

  • Feedback on financial stability break-out session and plenary discussion
  • Materiality practice statement
  • Better communications — Principles of disclosures
  • Developments in wider corporate reporting

Afternoon session (14:15-15:15)

  • Supporting implementation and application of IFRS Standards
  • Sum up dis­cus­sions

Agenda papers for the meeting are available on the IASB website.

IASB issues 'Investor Update' newsletter

29 Mar 2017

The IASB has issued the twelfth edition of its newsletter 'Investor Update', which provides investors with quick access to information about current accounting and financial reporting topics.

This issue features:

  • An overview of proposed amendments to IFRS 8.
  • The usefulness of the new disclosures required in IAS 7.
  • Request for views on the Principles of Disclosure discussion paper, proposed amendments to IFRS 8, and primary financial statements.
  • Information on investor materials and current events.

The Investor Update newslet­ter is available on the IASB’s website.

FRC's budget plan notes Brexit's possible 'significant implications' for UK IFRS adoption

29 Mar 2017

The Brexit process will see the official notice given by the British government to the European Union later today saying that the UK desires departure from the Union. This happens to coincide with the UK's Financial Reporting Council (FRC) publishing its budget plan for 2017/2018 which notes possible 'significant implications' of the Brexit for IFRS adoption in the UK.

The budget plan notes that the FRC continues to believe in global financial reporting standards but that it cannot foresee the results of the Brexit negotiations. It states (quoted from pp. 6-7 of the document):

We will continue our work to influence the development of International Financial Reporting Standards (IFRS). The UK’s exit from the EU could have significant implications for the adoption of IFRS. The FRC continues to support the application of a single set of high quality global financial reporting standards for all listed companies. Investors have told us they want comparability when reading company accounts. The extent to which the framework for accounting and reporting will need to change will depend to a large degree on the outcome of the UK Government’s negotiations with the EU.

Please click to access the Plan & Budget and Levies 2017/18 document on the FRC's 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.