Monthly roundup - November 2011

Author: Deepesh Malik and Debbie Hankey, Accounting Technical Group

November 2011 edition
Issued 06 December 2011

In this edition:

• Monthly highlights
• New pronouncements
• Standard setter meetings
• New Deloitte publications
• Other developments

Monthly highlights

AASB released a revised exposure draft on Revenue

The Australian Accounting Standards Board (AASB) released a re-exposure draft ED 222 Revenue from contracts with customers (‘the revised ED’) on 18 November 2011, which incorporates ED 2011/6 issued by the International Accounting Standards Board (IASB). The revised ED is the next step in developing an entirely new revenue recognition standard that would replace AASB 118 Revenue and AASB 111 Construction Contracts; and follows extensive outreach and redeliberations on the proposals in the original ED that was issued in July 2010.

The underlying conceptual basis is broadly consistent with that of the original ED and, like AASB 118 and AASB 111, is driven primarily by a model of recognising revenue as an entity delivers goods and services to a customer. However, the IASB and the US Financial Accounting Standards Board (FASB) (collectively ‘the Boards’) changed many detailed aspects of the original ED’s proposals.

• one significant change from the original ED is the introduction of a restriction on ‘unbundling’ performance obligations within a contract when an entity provides a significant service of integrating the elements of the contract into a combined item and the elements are significantly modified or customised
• the revised ED would require estimates of expected credit losses (both initial and subsequent) to be recognised in a separate line item adjacent to the gross revenue line item in the statement of comprehensive income
• the revised ED proposes that the estimate of variable or uncertain revenue would be based on either the probability weighted amount or the most likely amount depending on the method the entity expects to better predict the amount of consideration which it will be entitled to. The amount recognised however, should not exceed the amount which is reasonably assured
• the revised ED contains considerably more guidance on recognising revenue from service performance obligations
• there is also a subtle but significant shift in focus for construction type activity. Existing standards focus on whether an item is a customer specific design whereas the revised ED assesses whether the asset under construction has ‘alternative use’ to the entity constructing the asset. This may result in a different timing for revenue recognition especially for some property construction contracts.

The revised proposals would be effective no earlier than annual periods beginning on or after 1 January 2015 with early adoption permitted. The comment period ends on 13 March 2012, with a final standard expected to be published at the end of 2012.

Please refer below for further information.

New pronouncements

(A listing of new accounting standards, interpretations, exposure drafts, discussion papers and similar documents issued during the month by the AASB and IASB/IFRIC, along with other IFRS-related documents by other bodies that may be of interest and related links to Deloitte publications and alerts. See also our What’s new in the June 2011 financial reporting cycle summary.)

International Accounting Standards Board (IASB)

* Equivalent pronouncement not yet issued by the AASB

Australian Accounting Standards Board (AASB)

Standard setter meetings

(A listing of meetings of various standard setters during the month or where documents were issued during the month in respect of the previous month’s meetings, with links to our analysis, agenda papers and so on)

New Deloitte publications

(Key IFRS-related and other publications issued by Deloitte during the month, not covered elsewhere. You can find full details and back issues of our various publications by following these links: Accounting alerts, IAS Plus publications, IFRS in Focus Newsletters, Webcasts, and Podcasts)

IFRS publications

• AIFRS Half Year Illustrative Financial Statements for December 2011 (PDF 1,196kb) – an updated guide to best practice disclosures in half-year reports for 31 December 2011 or later periods for Australian entities
• IFRS Illustrative Financial Statements for 2011 (without early adoption) (PDF 1,506kb) illustrates the application of the presentation and disclosure requirements of International Financial Reporting Standards (IFRSs) for the year ended 31 December 2011 by an entity that is not a first-time adopter of IFRSs. The model financial statements illustrate the impact of a number of new and revised Standards and Interpretations that are mandatorily effective on 1 January 2011. Also available in MS word (Word file, Zipped 807kb)
• IFRS on Point — IFRS Accounting Developments and Information: October 2011 (PDF 82kb)
• Updated IASB Project Insights: Leases (PDF 141kb) Revenue recognition (PDF 324kb), Insurance Contracts (PDF 130kb),  Financial Instruments: Deferral of mandatory effective date of IFRS 9 (PDF 56kb),Financial Instruments — Impairment (PDF 239kb), Financial Instruments — asset and liabilities offsetting (PDF 44kb) Financial Instruments — Hedge Accounting (PDF 264kb).

Other publications of interest

• Submission to AASB on accounting for the proposed Minerals Resources Rent Tax (MRRT) and Petroleum Resource Rent Tax (PRRT) (PDF 74kb) made by Deloitte (Australia) deals with accounting for the proposed MRRT and PRRT that are currently being considered by the Australian Parliament
• Insurance Spotlight — October Roundtable and Joint Meeting Highlights (PDF 457kb)summarises Deloitte's October Insurance IFRS Roundtable, including highlights from the formal presentation on the status of the insurance contracts project, the associated commentary, and participant discussions as well as developments from the most recent joint meeting held in the United States and the Insurance Working Group session in October
• Insurance Spotlight — Insurance Contracts — A Look at the Current State of the Convergence Project (PDF 480kb) highlights the main details of the joint insurance contracts project in its current state. It summarizes tentative decisions reached by the FASB and the IASB as well as the key open points remaining. It further outlines the many challenges insurance companies are expected to face and examines what those companies should be doing, considering, and preparing for now
• Heads Up — SEC Receives Comments on Potential Method of Incorporating IFRSs Into U.S. Reporting System (PDF 155kb) discusses the main themes of the feedback received by the SEC on its staff paper 'Exploring a Possible Method of Incorporation'
• Robert Bruce Column 'Analysing the SEC's Staff Papers' discusses the two staff papers released by the United States Securities and Exchange Commission (SEC) as part of the SEC's work plan for convergence of US-GAAP with IFRS.

Deloitte comment letters

• Deloitte Comment Letter (PDF 126kb) to the IASB on its Request for Views on its Agenda Consultation 2011.

Deloitte Webcasts and Podcasts

• Exposure Draft: Revenue from Contracts with Customers (30 min MP3, 13mb) discusses the proposals in the revised exposure draft on revenue recognition released by the IASB in November 2011
• Stay Tuned Online — IFRS and UK GAAP update by Deloitte London IFRS Centre of Excellence that is aimed at helping finance teams keep up to speed with IFRSs and other financial reporting issues. The topics covered include:
  • Latest IFRS developments
  • IAS 19 (2011) Employee Benefits — update
  • The IASB’s revised revenue proposals.

Other developments

(A brief listing of other financial reporting developments during the month. A full summary of all IFRS-related developments can be found in our November historical summary on IAS Plus. You can also subscribe to our Deloitte IAS Plus RSS feed to be kept informed of developments as they happen)

Australian-specific topics

• The future of the Financial Reporting Panel (FRP) is currently under review with Treasury recently issuing a discussion paper (PDF 159kb) on this topic. The FRP was established in 2006 as an alternative and more timely dispute resolution mechanism to legal actions that might otherwise be involved when ASIC and the preparers of a lodged financial report disagreed on the application of an accounting standard. Since its inception, it has only ruled on four cases, referred to by ASIC in 2010 that FRP resolved quickly in proficient manner. The discussion paper presents options designed to enhance the process by which cases are referred to the FRP. It also considers whether there is a continuing role for the FRP in the financial reporting framework, in light of the costs of maintaining an inactive body
• The AASB has released summary and detailed work programs updated to reflect recent IASB changes
• The Third Annual Asian-Oceanian Standard-Setters (AOSSG) Group Meeting was held recently 23-24 November 2011 (Communiqué) (PDF 271kb).

International Accounting Standards Board

• Summary of the October 2011 Trustees' meeting (IAS plus article)
• The SME Implementation Group (SMEIG) has published two draft questions and answers (Q&As) on the IFRS for SMEs (IAS plus article)

External webcasts and Podcasts

• IASB Podcast (10 min MP3) discusses the proposals in the revised exposure draft on revenue recognition released by the IASB in November 2011
• IIRC webcast on integrated reporting (15 November) (60 mins) by the International Integrated Reporting Committee (IIRC) discusses the rationale behind the move towards integrated reporting, recent developments and the future directions
• Insurance contracts podcast (mp3, 22 mins) on the discussion held in the recent IASB meeting in November 2011
• Setting the IASB's Agenda for the Next Decade: Investor Update and Input Opportunity (9 November 2011) (60 mins) – a webcast by the IASB and CFA Institute discusses the IASB's first public agenda consultation, how the Board will decide what should be on its agenda and why investor input is crucial in that process.

Other global news

• The International Public Sector Accounting Standards Board (IPSASB) has released a new standard IPSAS 32 Service Concession Arrangements: Grantor that seeks to address a lack of international guidance on how governments and other public sector entities should report their involvement in service concession arrangements, often used to build the infrastructure necessary to maintain and improve critical public services (IAS Plus article)
• The Chartered Financial Analyst (CFA) Institute, a global association of investment professionals, has published a report entitled User Perspectives on Financial Instrument Risk Disclosures under IFRS (Part 1), providing user insights and recommendations regarding risk disclosures under IFRS 7 Financial Instruments: Disclosures (IAS Plus article)
• The United States Securities and Exchange Commission (SEC) have released two additional Staff Papers as part of the SEC's work plan for convergence of US-GAAP with IFRS: An analysis of IFRS in Practice (PDF 377kb) and A Comparison of U.S. GAAP and IFRS (PDF 411kb) (IAS Plus article)
• The European Securities and Markets Authority (ESMA) has posted to its website Public Statement: Sovereign Debt in IFRS Financial Statements(PDF 3,060kb) concerning the accounting treatment in relation with sovereign debt exposures in connection with current market developments. Special consideration is given to the accounting treatment of Greek sovereign debt.

Related links

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