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August

'Introducing EFRAG'

31 Aug 2017

The European Financial Reporting Advisory Group (EFRAG) has published a brochure offering a compact introduction to the organisation.

It briefly outlines how the organisation delivers on its mandate of being the European voice in financial reporting. It also puts the spotlight on EFRAG's three core activities: upstream influence through evidence-based research; contributing to the development of IFRS; and providing endorsement advice to the European Commission, including the European public good assessment.

Please click to access the 8 page publication Introducing EFRAG.

FASB makes targeted improvements to hedge accounting requirements

28 Aug 2017

The US Financial Accounting Standards Board (FASB) has issued Accounting Standards Update (ASU) No. 2017-12, "Targeted Improvements to Accounting for Hedging Activities."

The ASU amends ASC 815 to "better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results." The Board believes that such amendments will (1) improve the transparency of information about an entity’s risk management activities and (2) simplify the application of hedge accounting.

In developing the targeted improvements, the FASB also considered opportunities to achieve convergence with IFRS 9 Financial Instruments. The FASB in Focus states:

How Does the FASB’s ASU Compare with International Financial Reporting Standards (IFRS)?

Although the language used to describe the hedge accounting guidance in the ASU and in IFRS 9, Financial Instruments, differs, there are several areas of alignment between the two standards, and it is expected that many common hedge accounting strategies will have similar outcomes related to hedging components of financial instruments and nonfinancial items and in the measurement of hedged items in fair value hedges of interest rate risk. However, differences still remain between the two standards in the criteria for qualifying for hedge accounting. Additionally, IFRS 9 retained the separate measurement and reporting of hedge ineffectiveness and does not have broad guidance on presentation.  

For public business entities, the ASU’s amendments are effective for fiscal years beginning after December 15, 2018, and interim periods therein. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods beginning after December 15, 2020. All entities are permitted to early adopt the ASU in interim periods after its issuance.

For more information, see the ASU, press release, FASB in Focus, video, and cost-benefit analysis on the FASB’s Web site. Also see Deloitte’s August 30, 2017, Heads Up newsletter.

AAOIFI proposes standard on impairment and credit losses

28 Aug 2017

The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) is an Islamic international autonomous non-for-profit corporate body that prepares accounting, auditing, governance, ethics and Sharia'a standards for Islamic financial institutions and the industry. The newest exposure draft published by the AAOIFI deals with impairment and credit losses covering current and expected losses.

Although the AAOIFI is part of the IASB's consultative group on Sharia'a-compliant instruments and transactions, the new proposed standard FAS 30 Impairment and credit losses is not converged with the corresponding requirements in IFRS 9 Financial Instruments. Rather, discussions at an expert workshop co-hosted by the AAOIFI and the IASB in 2015 to discuss the matters that Islamic financial institutions may have to deal with when applying the IFRS 9 formed the basis for developing the proposals in the exposure draft now published.

Please click to access the exposure draft on the AAOIFI website. Comments are requested by 30 September 2017.

IPSASB publishes financial instruments ED based on IFRS 9

25 Aug 2017

The International Public Sector Accounting Standards Board (IPSASB) has published an exposure draft (ED) to improve public sector reporting on financial instruments.

ED 62 Financial Instruments is based on IFRS 9 Financial Instruments and is intended to replace IPSAS 29 Financial Instruments: Recognition and Measurement, which is based on IAS 39. The new standard will introduce simplified classification and measurement requirements for financial assets, a forward looking impairment model, and a flexible hedge accounting model. Consistent with the relief provided in IFRS 9, the IPSASB proposes to allow an option for entities to continue to apply the IPSAS 29 hedging requirements.

The IPSASB applied its process for reviewing and modifying IASB documents to the requirements in IFRS 9 with the aim of keeping public sector requirements as closely as possible in line with IFRS while also including appropriate public sector specific modifications where necessary. Therefore, ED 62 includes public sector specific guidance on financial guarantees issued through non-exchange transactions and concessionary loans and examples illustrating how to apply the principles in ED 62 to transactions that are unique to the public sector.

In view of the significant chnages proposed, the IPSASB intends to provide a three year implementation period for the new standard. Early adoption will be permitted.

Please click to access the press release on the IPSASB website. The IPSASB's consultation page offers access to the ED and comprehensive background material, including a comparison between the requirements in IFRS 9 and those in ED 62.

Comments are requested by 31 December 2017.

Summary of the June 2017 joint CMAC-GPF meeting

23 Aug 2017

Representatives from the International Accounting Standards Board (IASB) met with both the Capital Markets Advisory Council (CMAC) and Global Preparers Forum (GPF) in London on 15 and 16 June 2017. Notes from the joint meeting have now been released.

The topics discussed at the meeting included:

  1. IASB update;
  2. Discussion Paper Principles of Disclosure;
  3. Primary financial statements and comparability and flexibility in performance reporting;
  4. Post-implementation review of IFRS 13 Fair Value Measurement;
  5. Impairment testing of goodwill;
  6. Preparers’ views on the proposals in the Exposure Draft Improvements to IFRS 8 'Operating Segments'.

Items (2) to (5) were also discussed in small break-out groups.

The next GPF meeting will be held on 4 October 2017; the next CMAC meeting will take place on 20 October 2017.

For more information, see the meeting page and the meeting summary on the IASB's website.

Hyperinflationary economies - updated IPTF watch list available

23 Aug 2017

IAS 29 'Financial Reporting in Hyperinflationary Economies' defines and provides general guidance for assessing whether a particular jurisdiction's economy is hyperinflationary. But the IASB does not identify specific jurisdictions. The International Practices Task Force (IPTF) of the Centre for Audit Quality (CAQ) monitors the status of 'highly inflationary' countries. The Task Force's criteria for identifying such countries are similar to those for identifying 'hyperinflationary economies' under IAS 29.

The IPTF's notes from the 16 May 2017 meeting are now available and state the following view of the Task Force:

Countries with three-year cumulative inflation rates exceeding 100%:

  • South Sudan
  • Ukraine
  • Venezuela

Countries where the three-year cumulative inflation rates had exceeded 100% in recent years:

  • Malawi
  • Sudan

Countries (a) with projected three-year cumulative inflation rates greater than 100%; (b) with projected three-year cumulative inflation rates between 70% and 100%; (c) where the last known three-year cumulative inflation rates previously exceeded 100% and current actual inflation data has not been obtained; or (d) with a significant increase in inflation during the current period

  • Argentina
  • Libya
  • Suriname
  • Angola
  • Yemen
  • Egypt
  • Mozambique

The report also notes that there may be additional countries with three-year cumulative inflation rates exceeding 100% or that should be monitored which are not included in the above analysis because the sources used to compile the list do not include inflation data for all countries or current inflation data. An example cited is Syria.

The full list, including exact numbers, detailed explanations of the calculation of the numbers, and observations of the Task Force are available on the CAQ website. We also offer an overview of the IPTF's assessment of hyperinflationary jurisdictions at the end of our summary of IAS 29.

IPSASB consults on accounting for revenue and non-exchange expenses

23 Aug 2017

The International Public Sector Accounting Standards Board (IPSASB) has published a consultation paper on potential recognition and measurement approaches for revenue and non-exchange expenses. The paper proposes updating existing IPSAS 23 'Revenue from Non-Exchange Transactions (Taxes and Transfers)' as well as to replace current IPSAS dealing with revenue arising from exchange transactions and construction contracts with an IPSAS based on IFRS 15.

The IPSASB's motivation for the proposed updates is to address some key IPSAS implementation issues, to maintain IFRS convergence, and to address gaps in literature that have been identified in accounting for non-exchange expenses.

For non-exchange transactions with performance obligations the paper discusses two potential revenue recognition approaches, one that maintains the principles within IPSAS 23 and one that builds on recognising revenue when identified performance obligations have been met.

The paper also offers two possible approaches for the recognition of non-exchange expenses. The first one relies on the IPSASB’s Conceptual Framework to determine when a resource provider has a liability and an expense while the second one mirrors the equivalent revenue approach.

The implementation issues addressed relate to the recognition of revenue from capital grants and services in-kind; initial and subsequent measurement of non-contractual receivables; and subsequent measurement of non-contractual payables.

Please click for the following additional information on the IPSASB website:

Comments are requested by 15 January 2018.

We comment on four IFRS Interpretations Committee tentative agenda decisions

21 Aug 2017

We have published our comment letters on IFRS Interpretations Committee tentative agenda decisions on IFRS 3, IAS 38, IAS 37, and IAS 28, as published in the June 2017 IFRIC Update.

More in­for­ma­tion about the issues is set out below:

Issue

Agenda decision supported?

More in­for­ma­tion

IFRS 3 Business Combination — Acquisition of a group of assets that does not constitute a business

Yes.

IAS 38 Intangible Assets — Goods acquired for promotional activities

Yes, however, we do not believe with the assertion that transaction described is within the scope of IAS 38.

IAS 37 Provisions, Contingent Liabilities and Contingent Assets — Costs considered in assessing whether a contract is onerous

Yes.

IAS 28 Investments in Associates and Joint Ventures — Acquisition of an associate or joint venture from an entity under common control

Yes, however, we believe issues arising from common control transactions should be addressed holistically.

Click to access all our comment letters to the IASB, IFRS Foun­da­tion, and IFRS In­ter­pre­ta­tions Committee.

Recent sustainability and integrated reporting developments

17 Aug 2017

A summary of recent developments at GRI/GSSB, CPA Canada, and IFA.

The Global Sustainability Standards Board (GSSB) of the Global Reporting Initiative has launched a public consultation for draft revisions to GRI Standards 303 Water and 403 Occupational Health and Safety. Running from 10 August through 9 October 2017, this public consultation invites feedback from all stakeholders. Please click for the review page for GRI 303 and the review page for GRI 403.

Chartered Professional Accountants of Canada (CPA Canada) has posted two articles on climate change aspects to its website: It’s time to make climate change a business issue notes that the business cost of climate change is real and growing. But that not everyone is aware of the issues. Planning for climate change and a carbon-reduced economy discusses the impact of climate change on business model and strategy and points out a corresponding online learning on 19 October 2017.

The Institut Français des Administrateurs (IFA) have released a report calling on Boards of Directors to produce an integrated report. The report concludes, that one of the key functions of the Board of Directors is to define a value creation strategy for the company's shareholders and that integrated thinking and integrated reporting are an inherent part of this function. Please click for the English language report on the IFA website.

IAASB, IESBA, and IAESB outline need for more professional scepticism

15 Aug 2017

The International Auditing and Assurance Standards Board (IAASB), the International Ethics Standards Board for Accountants (IESBA), and the International Accounting Education Standards Board (IAESB) have jointly published 'Toward Enhanced Professional Skepticism'.

The three standard-setters that operate under the auspices of the International Federation of Accountants (IFAC) note that the importance of enhanced professional scepticism is underscored by the increasing complexity of business and financial reporting, including the greater use of estimates and management judgment, business model changes due to technological developments, and the fundamental reliance of the public on dependable financial reporting.

Please click to access the new publication on the IFAC website.

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