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2017

November 2017 IASB meeting notes posted

16 Nov 2017

The IASB met at its offices in London on Tuesday 14 November 2017. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

The Board discussed four topics.

Primary Financial Statements

The Board supported refining the definition of investing income and expenses, providing a list of items that would be included or excluded from the investing category and renaming the investing category as ‘income from investments’. However, the Board did not support Labelling the subtotal above the ‘income from investments’ section as ‘operating profit’. 

There was an extended discussion about where the share of profit or loss from associates and joint ventures should be reported, and whether that should depend on whether the associate or joint venture is ‘integral’ to the reporting entity. No clear view emerged. The planned Discussion Paper will set out the pros and cons of different approaches.

The Board supported recommendations simplifying the composition of finance income/expense, clarifying what constitutes financing activities and using cash and cash equivalents as a proxy for excess cash. 

The Board narrowly agreed with renaming the two categories of OCI which would mean abandoning the use of the term ‘other comprehensive income’.

Wider Corporate Reporting

The Board decided to add a new project to its work programme called Wider Corporate Reporting. The focus of the project will be the Practice Statement issued in 2010 on Management Commentary which the Board will review and update to help address the lack of alignment and integration between wider corporate reporting and financial reporting.

Improvements IFRS 8 Operating Segments

The Board published Exposure Draft Improvements IFRS 8 Operating Segments (Proposed amendments to IFRS 8 and IAS 34) in March 2017. The Board had a preliminary discussion of the feedback received, but did not make any decisions. Respondents had mixed views on the proposals, and Board member views were also mixed. Several Board members cautioned against broadening the scope of the project in the light of the feedback received on the IFRS 8 PIR which indicated that IFRS 8 was generally working well.  The staff will provide recommendations at a future meeting.

Dynamic Risk Management

The Board generally supported developing a cash flow hedge accounting model for accounting for dynamic risk management.  Board members emphasised the need to test the model with stakeholders early in the process and get early feedback on its feasibility before the Board invests more time and resources in developing it.

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

ACCA report on current status of IPSAS adoption

16 Nov 2017

The Association of Chartered Certified Accountants (ACCA) has released a report on the current status and challenges in connection with the adoption of International Public Sector Accounting Standards (IPSASs).

The report examines progress across a sample of developing countries and aims to give select insights into the current status quo of IPSAS adoption, identifying commonalities and emerging issues. Specifically the study considers the adoption of IPSAS focusing on the date of announcement and date of adoption, an overview of progress to date, success factors, and challenges experienced.

The report can be downloaded from the ACCA website.

Agenda for the December 2017 Emerging Economies Group meeting

15 Nov 2017

The agenda is available for the 14th meeting of the IASB's Emerging Economies Group (EEG), which is being held in São Paulo on 4-6 December 2017.

The agenda for the meeting including a public outreach meeting on the third day is sum­marised below:

Monday 4 December 2017 (09:30-17:00)

  • Address by hosting country
  • Address by IASB
  • Presentation and discussion on Business Combinations Under Common Control (BCUCC)

Tuesday 5 December 2017 (09:00-17:15)

  • Accounting for micro-entities
  • Accounting for high-inflation
  • IAS 12 - Temporary differences on long-term non-depreciable assets
  • IASB update
  • Ad­min­is­tra­tive issues

Wednesday 6 December 2017 (09:00-17:00)

  • Application of IFRS 17 Insurance Contracts in Emerging Economies
  • Outreach event: Application of IFRS 17 Insurance Contracts

Agenda papers from this meeting are available on the IASB's website.

Agenda and pre-meeting summaries for the November 2017 IFRS Interpretations Committee meeting

10 Nov 2017

The IASB's IFRS Interpretations Committee will be meeting in London on 20 November 2017. The Committee will discuss six issues, including three new interpretation requests.

Finalisation of draft agenda decision

The Committee will consider the public feedback on a request related to IFRS 3 Business Combinations on the acquisition of a group of assets, which the Committee had tentatively decided not to add to its agenda.  The staff are recommending that the Committee finalise this decision.   

Continued discussions

In its September 2017 meeting, the IC tentatively decided to add a project to clarify the meaning of the term ‘unavoidable costs’, which is used in the definition of an onerous contract in IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The staff are recommending that the clarification be by way of an amendment to IAS 37 and that the scope of the project be limited to clarifying the meaning of ‘unavoidable costs’, and not consider broader issues related to identifying or measuring an onerous contract. 

In its September 2017 meeting, the IC asked the Staff to research into the scope of a potential narrow-scope amendment to IFRS 1 First Time Adoption of International Financial Reporting Standards with the aim of reducing compliance costs when a subsidiary becomes a first-time adopter later than its parent. The Staff are recommending the development of an amendment IFRS 1 to allow a subsidiary that applies paragraph IFRS 1.D16(a) to measure cumulative translation differences using the amounts reported by the parent based on the parent’s date of transition to IFRS.

New issues

There are three new issues. Two relate to IFRS 15 Revenue from Contracts with Customers:

  • Revenue recognition in a real estate contract that includes the transfer of land
  • Right to payment for performance completed to date

The third relates to IAS 1 Presentation of Financial Statements and IFRS 9 Financial Instruments:

  • Presentation of interest revenue for particular financial instruments

For all three issues the staff are recommending that the Interpretations Committee not add the issue to its agenda. 

Future items

The Staff are analysing requests received on whether a dual currency bond meets the solely payments of principal and interest condition in IFRS 9; whether an instrument for which the notional amount varies depending on the outcome of a transaction can be a hedging instrument applying IFRS 9; and how the initial recognition exemption in paragraphs 15 and 24 of IAS 12 applies to the recognition of right-of-use assets and lease liabilities arising under IFRS 16.

Further in­for­ma­tion

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

IFRS 9 amendments take next hurdle in EU endorsement process

10 Nov 2017

The European Financial Reporting Advisory Group (EFRAG) has issued positive endorsement advice on 'Prepayment Features with Negative Compensation (Amendments to IFRS 9)', confirming its preliminary assessment that the amendments meet all technical endorsement criteria of the IAS Regulation and are conducive to the European public good.

The amendments address the concerns about how IFRS 9 Financial Instruments classifies particular prepayable financial assets. They become effective for annual periods beginning on or after 1 January 2019, with earlier application permitted.

In order to allow European preparers enough time to implement the amendments before their effective date and possibly together with IFRS 9 (which has an effective date of 1 January 2018), the EFRAG moved uncommonly fast in order to allow sufficient time for feedback on the draft endorsement advice, the final EFRAG endorsement advice now published, the ARC vote (expected in 2018), and final endorsement (aimed for in 2018).

The endorsement advice can be found here and a corresponding press release here (both links to the EFRAG website). Please click here for an updated EFRAG status report.

IASB Chairman comments on the IASB's role in wider corporate reporting

10 Nov 2017

In a speech given at a Brazilian international accounting seminar held on 9 November in São Paulo, IASB Chairman Hans Hoogervorst discussed the IASB's present initiative on better communication in financial reporting, support of implementation and application of IFRSs, and the IASB’s role in reporting that goes beyond the financial statements.

On better communication Mr Hoogervorst offered no new insights but confirmed that the IASB feels that it now have a good suite of standards that cover the vast majority of transactions and would, therefore, prioritise better presentation and formatting of the information in the financial statements in the coming years. Similarly, on support of implementation and application he mainly stressed the importance of the work of the IFRS Interpretations Committee but offered no detailed insights.

Turning then to wider corporate reporting, Mr Hoogervorst stated that the IASB is often asked questions about its role this space and that some constituents would like the IASB to play a more central role in trying to create more uniformity in the multitude of sustainability standards. He admitted:

[T]he IASB knows that financial reporting in the narrow sense has its limitations. There are many elements of value creation which are important to the investor but which are not adequately captured in the financial statements. Investors need to understand a company’s business model and its strategy for long-term value creation. They need to understand the intangibles that are vital to their business model. And, yes, sustainability issues can also be important for long-term value creation in certain industries, just think of mining and car manufacturing.

And yet he also stated:

Let me be clear; we do not plan to get into environmental and sustainability reporting. That is not our area of expertise. There are many other players. Our remit is, and will remain, financial reporting—with focus on the participants in the capital markets. That is investors and potential creditors.

In conclusion, Mr Hoogervorst offered that there has been a lot of development in this area since 2010 when the IASB published its Management Commentary Practice Statement and the therefore, the IASB "is considering" whether to update the practice statement to capture the developments. (This topic is indeed on the IASB's agenda for its meeting next week - see our summary of the agenda paper).

The full text of Mr Hoogervorst speech is available on the IASB website.

Summary of the September 2017 ASAF meeting now available

09 Nov 2017

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 28 September 2017.

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

  • Primary financial state­ments (1–15): ASAF members discussed (1) the results of a New Zealand user-needs survey related to alternative performance measures and (2) feedback from the UK Financial Reporting Council’s Discussion Paper Improving the Statement of Cash Flows.
  • Rate-regulated activities (16–27): ASAF members received an updated on the Board’s discussion on a possible new accounting model for activities subject to defined rate regulation and identified factors to considered in three areas: (1) nature of the asset, (2) appropriate discount rate to use with discounting is used, and (3) timing of recognition of gain or loss under certain conditions.
  • Definition of a business (28–36): ASAF members provided feedback on the Board’s tentative decisions reached at its April and June 2017 meetings.
  • Goodwill and impairment (37–51): ASAF members provided views on the following approaches to improve the impairment testing of goodwill: (1) goodwill accretion approach, (2) pre-acquisition headroom approach, and (3) single method.
  • Project updates and agenda planning (52–53): ASAF members were updated on the IASB technical projects and how the IASB used the ASAF advice from previous meetings.

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

European Union formally adopts IFRS 16 as well as several amendments to IFRSs

09 Nov 2017

The European Union has published a Commission Regulation endorsing IFRS 16 'Leases', 'Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)', 'Disclosure Initiative (Amendments to IAS 7)', 'Clarifications to IFRS 15 'Revenue from Contracts with Customers'', and 'Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance Contracts' (Amendments to IFRS 4)'.

  • IFRS 16 specifies how an IFRS reporter will recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17.
  • Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12) amends IAS 12 Income Taxes to address diversity in practice around the recognition of a deferred tax asset that is related to a debt instrument measured at fair value that has arisen because of uncertainty about the application of some of the principles in IAS 12.
  • Disclosure Initiative (Amendments to IAS 7) amends IAS 7 Statement of Cash Flows to clarify that entities shall provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities.
  • Clarifications to IFRS 15 'Revenue from Contracts with Customers' amends IFRS 15 Revenue from Contracts with Customers to clarify three aspects of the standard (identifying performance obligations, principal versus agent considerations, and licensing) and to provide some transition relief for modified contracts and completed contracts.
  • Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance Contracts' (Amendments to IFRS 4) amends IFRS 4 Insurance Contracts to provide two options for entities that issue insurance contracts within the scope of IFRS 4: the so-called overlay approach and the so-called deferral approach. The application of both approaches is optional.

The European Union effective date is the same as the IASB in case of all pronouncements. However, the text adopted for the IFRS 4 amendments includes a "top up" that allows a financial conglomerate to elect that none of its entities operating in the insurance sector apply IFRS 9 in the consolidated financial statements for financial years the commencement of which precedes 1 January 2021 where certain conditions are met.

The Commission Regulations amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council were all published in the Official Journal of the European Union on 9 November 2017.

As a result of the EU's adoption, the EFRAG has updated its endorsement status report.

IPSASB issues revised cash basis IPSAS

09 Nov 2017

The International Public Sector Accounting Standards Board (IPSASB) has released 'Financial Reporting under the Cash Basis of Accounting'.

The IPSASB's current cash basis standard was published in January 2003. It establishes requirements for the preparation and presentation of a statement of cash receipts and payments and supporting accounting policy notes. It also includes encouraged disclosures that enhance the cash basis report.

In an exposure draft published in February 2016, the IPSASB proposed to revise certain requirements and to recast them as encouragements. The draft also proposed amendments to ensure that the existing requirements and encouragements of the standard are better aligned with the equivalent accrual IPSAS, unless there is a reason to deviate as a result of adopting the cash basis of accounting.

These proposals have now been finalised and the preparation of consolidated financial statements, the disclosure of information about external and other assistance, and the disclosure of information about payments made by third parties are now voluntary and not longer mandatory.

The new IPSAS takes effect on 1 January 2019, with earlier adoption encouraged. Please click to access the press release and the new IPSAS on the IPSASB website.

IASB publishes editorial corrections

07 Nov 2017

The IASB has published editorial corrections that all relate to 'Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28)' issued in October 2017.

Editorial corrections do not change the meaning or application of pronouncements, but instead correct inadvertent errors. The editorial corrections can be viewed on the editorial corrections page of the IASB'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.