The MoU seeks to assist both organisations in reaching their mutual interests, which include the following:

• The development of their respective reporting frameworks, guidelines and standards to be complementary and compatible with each other.
• Transparency and sharing of relevant and significant information.

The MoU is effective from the date of signing on 17 December 2013 until 31 December 2016, but may be extended by mutual agreement.

For more information, see the press release and the full text of the MoU on the IIRC website.

EFRAG-SDS-paper on the equity method

Currently, the guidance in IAS 28 relating to the application of the equity method lacks clarity and is causing diversity in practice. It is not always clear whether the measurement basis or one-line consolidation concept should be applied to situations and issues that are not specifically addressed in IAS 28. The objective of this SDS paper is to gather feedback from constituents on their views regarding the equity method, which the EFRAG will consider when addressing this issue with the IASB and thus assisting the IASB to develop a clear set of principles for the basis of the equity method.

Comments are requested by 15 May 2014.

For more information, see the press release and the Short Discussion Series paper on the EFRAG website.

EFRAG-SDS-paper on the implications for standard setting following from the results of a literature review on the use of information by captial providers

The academic literature review was published by the EFRAG and the ICAS in December 2013. It examined how capital providers use financial statements. As a second step in its proactive project, EFRAG discusses in this SDS paper the implications for standard setting following from the findings of the academic literature review. While it seems not to be possible to meet the needs of all types of users simultaneously, the findings may, however, provide some directions for, for example, measurement, other comprehensive income, the importance of the statement of profit or loss, and other topics.

For more information, see the press release and the Short Discussion Series paper on the EFRAG website.

In the assessment, he stated that of the 122 jurisdictions profiled by the IASB, 115 have made public statements in support of a single set of global accounting standards. Many of the jurisdictions believe that IFRS should be the global accounting standard. In addition, 101 of the 122 jurisdictions require use of IFRS for most or all domestically listed companies with most the remaining 21 jurisdictions using IFRS to some extent. Further, 57 of the 122 jurisdictions require or permit the use of the IFRS for SMEs.

The article also provides the examples where modifications to IFRS were made by jurisdictions; however, the number of modifications remain limited.

Looking ahead, the report noted that the IFRS Foundation Trustees is conducting research to expand on the number of jurisdictions profiled. Also, the Trustees intend to issue a follow-up survey in early 2014 to (1) review current data for any updates, (2) clarify some information in the original survey, and (3) gather more information on the adoption of IFRS.

For more information, see Paul Pacter’s article, Global Accounting Standards — From Vision to Reality, on the IASB website.

The material was developed to support those teaching IFRS, helping them to progressively develop students' abilities to make the necessary estimates and judgements when applying IFRS and IFRS for SMEs. The material is presented in three stages, to accommodate students at different levels in their learning process:

• Stage 1 — A student’s first financial reporting course.
• Stage 2 — A financial reporting course midway to qualifying as a CA or CPA.
• Stage 3 — A course immediately before qualifying as a CA or CPA.

The additional educational material is presented in four parts:

• Stage 3 material covering the IAS 8 hierarchy.
• Multimedia presentations introducing IFRS teachers to Framework based teaching and other material.
• Updates to non-financial assets (2014 edition) material in Stages 1 through 3.
• Chinese, Portuguese, and Spanish translations are updated for IAS 8 hierarchy and non-financial assets.

For more information, see (links to IASB website):

• Press release on the IASB website with links to the teaching material.
• Upcoming IFRS teaching sessions being held worldwide.

After the IASB had published its revised Exposure Draft Insurance Contracts on 20 June 2013 EFRAG and the National Standard Setters from France, Germany, Italy and the UK, in coordination with the IASB staff, carried out a field-test on the proposed new requirements from July to October 2013.

The focus of the field test was the practical application of the new requirements and was intended to gather solely facts and objective data, rather than views and opinions.

The most commonly stated areas of concern related to: 

Applying the 'mirroring approach' to contracts that specify a link to the returns on underlying items.

Applying the revenue proposals to life insurance contracts.

The mandatory requirement to use other comprehensive income for presenting the effects of changes in the discount rate on insurance.

More information on the results of the field test are available on the EFRAG website.

The new Advisory Council members are:

• Olav Jones — Insurance Europe.
• Anne Simpson — Council of Institutional Investors.
• Surya Subramanian — Emirates NBD.

This is the second wave of appointments for 2014 (see previous article), which leaves two remaining appointments to be made.

The press release is available on the IASB’s website.

Some key suggestions made in the comment letter include:

To serve its intended purpose, the Board should treat the Framework as a living document to be updated as necessary to keep pace with changes in thinking on conceptual matters. There should be an established process for reviewing the Framework on a recurring basis. Unless the Framework is kept up to date, there is a risk of tension and conflicts between the Framework and conclusions that the Board reaches in individual projects. As the IASB develops new standards, it should have such a process to evaluate whether decisions it makes are consistent with the Framework. Departures should be identified and justified.

The IASB should have a plan for identifying and addressing any conflicts between the concepts and guidance in a revised Framework and existing IFRSs. It should identify any existing requirements that are contrary to the revised Framework and an action plan for resolving such conflicts. It would be unhelpful and potentially confusing to permit conflicts to exist for an extended period of time, in particular since those who apply and interpret existing IFRS requirements do so in the context of the Framework as it exists at any given time (see, for example, IAS 8.11).

The IASB should not amend the Framework to include new ideas and concepts that have not been fully deliberated and tested. This is another reason that the Framework should be a living document and amended only as work in different areas is completed.

The IASB should provide an appropriate level of detail in the Framework. The Framework should provide sufficient detail in its discussion of concepts such that it is clear how they are intended to be applied. However, the Framework should not to go into excessive detail about the accounting for particular transactions or events (e.g., how to measure or present particular transactions or when to derecognise elements of the financial statements). The IASB should not ‘hardwire’ views on accounting issues that would more suitably be resolved in individual standard-setting projects. In some areas, the discussion paper is too general and does not go into sufficient detail to be helpful (e.g., in Section 9 related to unit of account). In other areas, the discussion paper goes into more detail than seems suitable for a framework document (e.g., in Section 5 on distinguishing between liabilities and equity).

Click for access to the full comment letter.

Although the proposal would not affect presentation and disclosure of consolidated financial statements prepared in accordance with designated IFRSs in Japan (which are effectively IFRSs as issued by the IASB), this measure was included in the BAC report to promote further use of IFRSs by Japanese companies by reducing overall burden of financial reporting. Comments are requested by 14 February 2014, and the revisions could be effective for the fiscal year ending March 2014 (at the earliest). 

This action by the FSA marks the visible progress of all of three major recommendations in the BAC report as follows:

For more information, please see:

• The proposal, available on the FSA’s website (in Japanese)
• Our June 2013 story on the BAC report

The full agenda for the meeting, dated 10 January 2014, can be found here.  We will post any updates to the agenda, and our Deloitte observer notes from the meeting, on this page as they are available.