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IFRS Foundation appoints new Chair of the IFRS Advisory Council

13 Dec 2013

The Trustees of the IFRS Foundation have announced that Joanna Perry has been appointed as new Chair of the IFRS Advisory Council.

Ms Perry follows Paul Cherry whose term ends in December 2013. She previously served as Chairman of the New Zealand Financial Reporting Standards Board (FRSB), leading the evolution of financial reporting standards in New Zealand, including the adoption of IFRSs from 2005. Ms Perry also represented New Zealand as a member of the Asia-Oceania Standard-Setting Group (AOSSG).

Currently, Ms Perry is a member of the IFRS Interpretations Committee. She will resign this position upon taking up the Chair of the Advisory Council.

Please click for more information in the press release on the IASB website.

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IMA suggests actions to reap the benefits of integrated reporting

13 Dec 2013

In a reaction to the release of the International Integrated Reporting <IR> Framework last Monday, the Institute of Management Accountants (IMA) has outlined several actions to transform corporate reporting to better serve the public interest. IMA opines that the goals behind integrated reporting must be defined and that producing an integrated report should not be a goal in itself.

IMA believes that four issues must be addressed to reap the benefits of IR:

    1. The ultimate goal should not be to produce a single, integrated report. Rather, it should be to motivate disclosures that better inform investors and other stakeholders.
    2. Market evidence should be developed by shifting the assessment of the benefits of integrated reporting more towards to "actual value delivery participants" of the value chain among which IMA sees business owners, business managers, CFOs, preparers, investors, and analysts.
    3. A "learning and growth" approach should be taken with tangible step changes such as improving disclosures and motivating more concise and informative financial reports including reporting on intangibles. IMA believes mandatory reporting would have an adverse effect.
    4. Supporting technology such XBRL/structured data standards that could potentially improve the cost/benefit of integrated reporting should be developed.

Please click for:

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Report from recent IFASS meeting released

12 Dec 2013

A report has been issued summarising the discussions at the meeting of the International Forum of Accounting Standard Setters (IFASS) held in Brussels on 19‐20 September 2013.

Highlights from the meeting included:

IASB and IFRS Foundation developments - general update and discussion

  • Participants discussed the strategies and governance of the work of the International Financial Reporting Standards Foundation Trustees, the IASB's efforts in developing and improving IFRSs and other noteworthy matters. General comments on the current projects of the IASB and the IFRS Foundation included concerns that the IASB and U.S. cultures regarding revenue recognition differ, the observation that the conceptual framework project is very challenging and that the issues need to be thoroughly thought through and a statement that participants are not necessarily aware where educational material is used.
  • It was also observed that although stakeholders have asked for a period of calm, IFRIC is dealing with a large number of issues, issuing negative agenda decisions and annual improvements. It was criticised that that many of the issues being dealt with through the annual improvements are not annual improvements as such but other minor amendments. Although IFRIC is very active, the output mainly consists of negative agenda decisions. Participants wondered how affected stakeholders should proceed when IFRIC issues are rejected by IFRIC because they are not widespread. They also noted that issues were not always addressed on a timely basis.

Topical Issues

Participants then discussed several topical issues:

  • Rate regulation: Potential basis for recognition,
  • Application issues related to IFRS 11 Joint Arrangements,
  • Integrated reporting – roles of NSS and views formed,
  • Disclosures required when partly owned subsidiaries are consolidated,
  • Report‐back regarding discount rate issues,
  • Presentation of exceptional items in the statement of profit or loss,
  • Post‐Implementation Review of IFRS 3 Business Combinations.

Conceptual Framework Issues

One focal point of the IFASS meeting was the conceptual framework project of the IASB, especially regarding the aspects of measurement and prudence. On measurement the key messages were that the IASB should not use a pragmatic approach as starting point and that the conceptual framework should be aspirational in nature. Prudence was discussed in three break‐out groups with one group coming to the conclusion that the conceptual framework should provide a clear definition or description of prudence, one opining that prudence should be discussed in the conceptual framework as an item to be considered in limited circumstances and one believing that an appropriate balance should be struck between all the qualitative characteristics.

Charter

Participants discussed the draft of the new Charter indented to replace the existing statement outlining relationship of IASB and NSSs and taking the creation of ASAF and other developments into account.

Reports from regional groups

Reports were received from the AOSSG, EFRAG, GLASS, and PAFA representatives.

Update on the IASB's work plan

Participants were informed about the status of major projects (leases, insurance, macro hedging, impairment, and general hedge accounting) as well as the progress regarding several (in part new) narrow-scope projects.

 

Click for the full report (link to UK Financial Reporting Council website). The next IFASS meeting will be held in New Delhi on 6‐7 March 2014.

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EFRAG updates endorsement status report for annual improvements amendments

12 Dec 2013

The European Financial Reporting Advisory Group (EFRAG) has updated its endorsement status report to reflect the release by the IASB of annual improvements to IFRSs for the 2010–2012 and 2011–2013 cycles.

The endorsement status report notes the issuance of Annual Improvements to IFRSs 2010-2012 Cycle and Annual Improvements to IFRSs 2011–2013 Cycle, both on 12 December 2013. These collections of amendments are effective for annual periods beginning on or after 1 July 2014.  The report indicates that endorsement is currently expected in the third quarter of 2014.

The endorsement status report, dated 12 December 2013, is available here.

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IASB appoints Executive Technical Director

12 Dec 2013

The International Accounting Standards Board (IASB) has appointed Hugh Shields as Executive Technical Director. Mr Shields will lead the IASB's technical staff and be responsible for the efficient delivery of all technical activities.

Mr Shields follows Sue Lloyd who is currently Senior Director of Technical Activities for the IASB and has been appointed as IASB member beginning 1 January 2014. The change in title to 'Executive Technical Director' suggests that Mr Shields' portfolio of tasks will differ slightly from Ms Lloyd's.

Mr Shields currently serves as a Managing Director for Credit Suisse in the Europe, Middle East and Africa region and is responsible for both financial and regulatory reporting across the bank. He will begin his work at the IASB in March 2014.

Please click for more information in the press release on the IASB website.

Following the appointment of Hugh Shields, IASB Chairman Hans Hoogervorst provided an overview of recent changes to the leadership of the IASB's technical staff which recognises the changing landscape within accounting standard-setting.

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IASB concludes the 2011-2013 Annual Improvements cycle

12 Dec 2013

The IASB issued 'Annual Improvements to IFRSs 2011–2013 Cycle', a collection of amendments to IFRSs, in response to issues addressed during the 2011–2013 cycle. Four standards are affected by the amendments.

Annual Improvements 2011–2013 Cycle makes amendments to the following standards:

Standard Amendments
IFRS 1 First-time Adoption of International Financial Reporting Standards (changes to the Basis for Conclusions only) Meaning of effective IFRSs
Clarifies that an entity, in its first IFRS financial statements, has the choice between applying an existing and currently effective IFRS or applying early a new or revised IFRS that is not yet mandatorily effective, provided that the new or revised IFRS permits early application. An entity is required to apply the same version of the IFRS throughout the periods covered by those first IFRS financial statements.
IFRS 3 Business Combinations Scope of exception for joint ventures
Clarifies that IFRS 3 excludes from its scope the accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself.
IFRS 13 Fair Value Measurement Scope of paragraph 52 (portfolio exception)
Clarifies that the scope of the portfolio exception defined in paragraph 52 of IFRS 13 includes all contracts accounted for within the scope of IAS 39 Financial Instruments: Recognition and Measurement or IFRS 9 Financial Instruments, regardless of whether they meet the definition of financial assets or financial liabilities as defined in IAS 32 Financial Instruments: Presentation.
IAS 40 Investment Property Clarifying the interrelationship of IFRS 3 and IAS 40 when classifying property as investment property or owner-occupied property
Clarifies that determining whether a specific transaction meets the definition of both a business combination as defined in IFRS 3 Business Combinations and investment property as defined in IAS 40 Investment Property requires the separate application of both standards independently of each other.

The amendments are effective for annual periods beginning on or after 1 July 2014, but can be applied earlier. For more information, please see the press release on the IASB's website or our Annual improvements page.

Deloitte's IFRS Global Office has prepared an IFRS in Focus Newsletter explaining the amendments.

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IASB concludes the 2010-2012 Annual Improvements cycle

12 Dec 2013

The IASB issued 'Annual Improvements to IFRSs 2010–2012 Cycle', a collection of amendments to IFRSs, in response to issues addressed during the 2010–2012 cycle. Seven standards are affected by the amendments.

Annual Improvements 2010–2012 Cycle makes amendments to the following standards:

IFRS Amendments
IFRS 2 Share-based Payment Definition of 'vesting condition'
Amends the definitions of 'vesting condition' and 'market condition' and adds definitions for 'performance condition' and 'service condition' (which were previously part of the definition of 'vesting condition').
IFRS 3 Business Combinations
(with consequential amendments to other standards)
 		Accounting for contingent consideration in a business combination
Clarifies that contingent consideration that is classified as an asset or a liability shall be measured at fair value at each reporting date.
IFRS 8 Operating Segments

Aggregation of operating segments
Requires an entity to disclose the judgements made by management in applying the aggregation criteria to operating segments.

Reconciliation of the total of the reportable segments' assets to the entity's assets
Clarifies that an entity shall only provide reconciliations of the total of the reportable segments' assets to the entity's assets if the segment assets are reported regularly.
IFRS 13 Fair Value Measurement
(amendments to the basis of conclusions only, with consequential amendments to the bases of conclusions of other standards)
 		Short-term receivables and payables
Clarifies that issuing IFRS 13 and amending IFRS 9 and IAS 39 did not remove the ability to measure short-term receivables and payables with no stated interest rate at their invoice amounts without discounting if the effect of not discounting is immaterial.
IAS 16 Property, Plant and Equipment Revaluation method - proportionate restatement of accumulated depreciation
Clarifies that when an item of property, plant and equipment is revalued the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount.
IAS 24 Related Party Disclosures Key management personnel
Clarifies that an entity providing key management personnel services to the reporting entity or to the parent of the reporting entity is a related party of the reporting entity.
IAS 38 Intangible Assets Revaluation method - proportionate restatement of accumulated amortisation
Clarifies that when an intangible asset is revalued the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount.

The amendments are effective for annual periods beginning on or after 1 July 2014, but can be applied earlier. For more information, please see the press release on the IASB's website or our Annual improvements page.

Deloitte's IFRS Global Office has prepared an IFRS in Focus Newsletter explaining the amendments.

GRI (Global Reporting Initiative) (green) Image

Translations of GRI sustainability reporting guidance

12 Dec 2013

The Global Reporting Initiative (GRI) has announced the availability of four translations of its Sustainability Reporting Guidelines, dubbed 'G4'. Translation of the G4 Guidelines into various different languages is aimed at making them accessible to a global audience and thus mainstreaming sustainability reporting.

In its translation process of the G4 Guidelines published in English in May 2013, GRI prioritised five core languages - French, Spanish, Portuguese, German and Chinese (forthcoming) – as it estimated that with these the needs of approximately 75 per cent of current reporters and report users could be met. In a second step, GRI intended to cover Arabic, Japanese, Korean, Russian, and Bahasa-Indonesian. These will be available between January and April 2014 together with additional translations into Vietnamese, Croatian and Turkish.

The translations available so far can be accessed through the press release on the GRI website.

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IASB publishes proposals for amendments under its annual improvements project (cycle 2012-2014)

11 Dec 2013

The International Accounting Standards Board (IASB) has published to its website an exposure draft (ED) of proposed amendments to four International Financial Reporting Standards (IFRSs) under its annual improvements project.

The IASB uses the annual improvements project to make necessary, but non-urgent, amendments to IFRSs that will not be included as part of another major project.

The ED proposes the following amendments:

IFRS Subject of amendment

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

To add specific guidance in IFRS 5 for cases in which an entity reclassifies an asset from held for sale to held for distribution or vice versa and cases in which held-for-distribution accounting is discontinued

IFRS 7 Financial Instruments: Disclosures

To add additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset for the purpose of determining the disclosures required

To clarify the applicability of the amendments to IFRS 7 on offsetting disclosures to condensed interim financial statements

IAS 19 Employee Benefits

To clarify that the high quality corporate bonds used in estimating the discount rate for post-employment benefits should be denominated in the same currency as the benefits to be paid (thus, the depth of the market for high quality corporate bonds should be assessed at currency level)

IAS 34 Interim Financial Reporting

To clarify the meaning of 'elsewhere in the interim report' and to require a cross-reference

The ED proposes that all of the amendments will be effective for annual periods beginning on or after 1 January 2016. Entities are permitted to early adopt all the proposed amendments. Click for IASB Press Release (link to IASB website).

You can access ED/2013/11 Annual Improvements to IFRSs 2012–2014 Cycle on the IASB's website. The IASB requests comments on the ED by 13 March 2014.

Deloitte's IFRS Global Office has prepared an IFRS in Focus Newsletter explaining the proposed amendments.

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Danish regulator suggests disclosure overload can be dealt with within existing IFRSs

11 Dec 2013

The Danish regulator overseeing non-financial entities (Erhvervsstyrelsen or Danish Business Authority (DBA)) has sent out its traditional communication covering relevant topics for consideration at year-end - the so-called 'Christmas letter'. This year, the DBA urges companies to actively look for any immaterial information/disclosure in the financial statements that could be omitted from them.

The DBA states:

We believe that it will be of great advantage if companies not only focus on fulfilling the law's formal and specific rules but also focus on the presentation of the accounts. The financial statements will have to live up to the demands of the law of course. And yet practice has shown that it often will be possible - within the legal framework - to improve the presentation of the accounts considerably.

To achieve this, the DBA suggests certain areas of focus including avoidance of repetitive information and of generic information as well as more marketing related presentation. The recommendations are:

  • Avoid repetitions - not only do they increase the length of the financial statements, there is also the significant risk that the descriptions are not the same in the different places.
  • Avoid generic statements - although model financial statements are available and offer excellent inspiration, they should not be used uncritically, as they are aimed at an average company which individual companies never are.
  • Leave out immaterial information - IFRSs contain many detailed disclosure requirements but a company should assess which information is immaterial and can (and should) therefore be left out.
  • Limit more marketing related presentation - leave out information that is more akin to marketing for the company (information that is not required by law and not strictly necessary for users); a good place for this kind of information would be the company's home page or other communications, not the financial statements.

In the current debate around the disclosure overload this is an interesting move of the DBA. In the past, enforcement decisions had shown that the DBA (like other regulators in Europe) focused quite extensively on every disclosure requirement in IFRS being included; now it seems the DBA is among the first regulators to act on the main message that came out of the IASB's disclosure discussion forum in January: that users, preparers, standard-setters, auditors and regulators all contribute to the perceived problems about disclosure, and that each of these parties can contribute to improvements.

The DBA communication is only available in the Danish language and can be downloaded from the DBA website. The disclosure overload is only one of the topics touched on. The communication also reminds Danish companies of new requirements of the Danish Financial Statements Act, ESMA enforcement priorities for 2012 and 2013 and selected topics and experiences from the DBA's review of financial statements as part of the enforcement in Denmark.

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