Monthly roundup - January 2011
Staying on top of developments
January 2011 edition
Issued 1 February 2011
In this edition:
- Monthly highlight: Quick recap of recent developments
- New pronouncements
- Standard setter meetings
- New Deloitte publications
- Other developments.
With the December reporting season in full swing, this month we provide a high level update of key recent developments and considerations:
- Floods and other natural disasters – the floods in Queensland, Victoria and other parts of Australia have caused substantial damage. Bush fires have raged in Western Australia. Where an entity is affected by these types of natural disasters, the accounting impacts should generally be reflected in the accounting period in which they occur. For example, as the Brisbane floods occurred in January, the majority of their impacts would not be accounted for in financial statements ending on 31 December 2010. However, material impacts arising before the finalisation of the financial statements should be disclosed in the notes as a non-adjusting subsequent event (“Type 2” in the old parlance) and may require disclosure to the ASX for listed entities. Furthermore, insurance recoveries are subject to a ‘virtually certain’ test, creating a high recognition hurdle which may mean recognition very late in the claim process. In extreme cases, going concern considerations may also arise
- ASIC focus areas – On 22 December 2010, ASIC released its review of 30 June 2010 financial reports and focuses for 31 December 2010, including:
- Reporting performance and business drivers - operating and financial review, alternate profits, segment reporting
- Control and significant influence
- Current market conditions - going concern, asset impairment, fair value of assets, financial instruments disclosures, current vs. non-current classifications and disclosures for estimates and accounting policy judgements
- Other matters - business combinations, debt vs. equity, other comprehensive income and providing information, explanations and assistance to auditors
- Recent amendments – early in January, the AASB released a number of amending standards (full details are below). One which may be of interest is the amendment to AASB 112 Income Taxes regarding the calculation of deferred taxes associated with certain investment properties. In most cases, entities will be able to assume sale of investment properties, rather than having to determine how the carrying amount of the property is expected to be recovered. This amendment, which can be early adopted, may be of assistance to entities with significant investment property holdings, or those with operations in New Zealand where recent tax changes resulted in the recognition of deferred tax liabilities
- IASB proposals – the IASB has released new exposure drafts in its push to rewrite accounting standards for financial instruments – proposals on hedge accounting were released in December, and during January two more pieces of the puzzle were completed with new exposure drafts on offsetting of assets and liabilities and impairment of financial assets (see below).
(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 December 2010 financial reporting cycle summary.)
International Accounting Standards Board (IASB)
|Pronouncement||Key dates||More information|
Supplement to ED/2009/12 Financial Instruments: Amortised Cost and Impairment*
Joint IASB and FASB proposals to replace the incurred loss impairment models in IAS 39 and US GAAP with an expected loss impairment model including separate approaches to recognising expected losses for performing assets in a "good book" and for troubled assets in a "bad book".
Expected credit losses in the "good book" would be recognised under a time-proportional approach based on the weighted average age and expected life of the assets in the portfolio, but subject to a minimum allowance of at least those credit losses expected to occur in the foreseeable future (a period on not less than twelve months from the reporting date). When assets are transferred from the "good book" to the "bad book" the proposals would require the expected credit loss to be immediately recognised.
Also includes separate IASB-only proposals on impairment of financial assets specifically addressing scope, presentation and disclosure.
|Open for comment until 1 April 2011||
IASB press release (PDF 42kb)
ED/2011/01 Offsetting Financial Assets and Financial Liabilities*
Proposes to amend the existing set-off criteria in IAS 32 Financial Instruments: Presentation.
An entity would be required to offset (i.e. present as a single net amount in the statement of financial position) a recognised financial asset and a recognised financial liability if, and only if, it has an enforceable unconditional right of set-off and intends either to settle the asset and liability on a net basis or to realise the asset and settle the liability simultaneously.
It is not expected that this proposed amendment will have a significant impact on IFRS reporters. It is a joint project with the FASB to more closely align IFRS and US GAAP.
|Open for comment until 28 April 2011||
IASB press release (PDF 53kb)
Exposure draft IFRS Taxonomy*
The proposed taxonomy is a translation of pronouncements as issued at 1 January 2011 into XBRL (eXtensible Business Reporting Language) and is consistent with IFRSs (International Financial Reporting Standards), including IASs (International Accounting Standards) and the IFRS for SMEs (Small and Medium-sized Entities).
|Open for comment until 18 March 2011|
* Equivalent pronouncement not yet issued by the AASB
Australian Accounting Standards Board (AASB)
|Pronouncement||Key dates||More information|
AASB 2010-8 Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets
Amends AASB 112 Income Taxes to provide a presumption that recovery of the carrying amount of an asset measured using the fair value model in IAS 40 Investment Property will, normally, be through sale. This change eliminates the need to determine ‘management expectations’ as to use or sale for eligible investment properties.
These amendments arise from the issuance of Deferred Tax: Recovery of Underlying Assets (Amendments to IAS 12) by IASB in December 2010.
|Applicable to annual reporting periods beginning on or after 1 January 2012||
AASB 2010-8 (PDF 62kb)
IFRS in Focus newsletter (PDF 61k)
AASB 2010-9 Amendments to Australian Accounting Standards – Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters
Amends AASB 1 First-time Adoption of Australian Accounting Standards to:
Note: This amendment, particularly in relation to 'fixed dates', may be relevant for entities moving to 'Tier 1' under the AASB's revised differential reporting framework
|Applicable to annual reporting periods beginning on or after 1 July 2011. Early adoption is permitted for annual reporting periods beginning on or after 1 January 2005 but before 1 July 2011||
AASB 2010-9 (PDF 50kb)
IFRS in Focus newsletter ('fixed dates', PDF 77kb)
IFRS in Focus newsletter (severe hyperinflation, PDF 59kb)
AASB 2010-10 Further Amendments to Australian Accounting Standards – Removal of Fixed Dates for First-time Adopters
This Standard makes amendments to AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010).
The amendments ultimately affect AASB 1 First-time Adoption of Australian Accounting Standards and provide relief for first-time adopters of Australian Accounting Standards from having to reconstruct transactions that occurred before their date of transition to Australian Accounting Standards.
Note: The amendments to AASB 2009-11 will only affect early adopters of AASB 2009-11 (and AASB 9 ‘Financial Instruments’ as issued in December 2009) as it has been superseded by AASB 2010-7 for annual reporting periods beginning on or after 1 January 2013.
Applicable to annual reporting periods beginning on or after 1 January 2013.
Early adoption is permitted as set out in AASB 2009-11 and AASB 2010-7.
AASB 2010-10 (PDF 48kb)
IFRS in Focus newsletter (PDF 77kb)
(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)
|IASB meeting 18-21 January 2011||
Topics discussed were as follows (click on the links for direct access to the Deloitte observer notes for that topic):
Tuesday, 18 January 2011
Wednesday, 19 January 2011
Thursday, 20 January 2011
Friday, 21 January 2011
|IFRIC meeting 6-7 January 2011||Topics discussed included accounting for production phase stripping costs in the mining industry, contingent pricing of property, plant and equipment and intangible assets, annual improvements and the current/non-current classification of debt (rollover agreements).||
IFRIC Review (PDF 67kb)
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 and IFRS in Focus Newsletters)
- IFRS on Point IFRS Accounting Developments and Information: December 2010 (PDF 92kb)
- Updated IASB Project Insights: Leases (PDF 94kb), Post-employment benefits (PDF 75kb) Revenue recognition (PDF 73kb)
- The Bruce Column ‘The Challenges of the Year Ahead’
- The Bruce Column ‘At a Loss to Explain’
- Property Intellectual issue 40 - January 2011 Revenue recognition – current state of play
Other publications of interest
- IFRS Insights December 2010/January 2011 (PDF 992kb)
- Heads Up newsletter Snow Day for TDRs - FASB Finalizes ASU Delaying Effective Date of Disclosures About TDRs by Creditors (PDF 89kb)
- Heads Up newsletter One Size Does Not Fit All – Blue-Ribbon Panel Reports on Private-Company Accounting Standards
- Year in Review: Accounting Roundup newsletter (PDF 749kb)
- New Zealand Accounting Alert update (January 2011) (PDF 313kb) - includes discussion of relief for some entities affected by the NZ Budget 2010 in relation to loss of tax depreciation on buildings (see the discussion above regarding the amendments to AASB 112 Income Taxes on this topic), changes to financial instruments, management commentary, Securities Commission review of financial reporting and other topics
Deloitte comment letters
- Deloitte comment letter (PDF 109kb) on IFRS Foundation Trustees’ questionnaire in regards to IFRS Interpretations Committee Review
- Deloitte comment letter (PDF 46kb) on IASB Request for Views on Effective Dates and Transition Methods
- Deloitte comment letter on AASB ED 205 Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation
(A brief listing of other financial reporting developments during the month. A full summary of all IFRS-related developments can be found in our January 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)
- AASB is hosting outreach meetings with constituents and representatives of the IASB to discuss the IASB's exposure draft IASB's exposure draft ED/2010/13 Hedge Accounting
- The ASX has announced that listed entities who have been significantly affected by the recent flooding in Queensland and other States and who are likely to encounter difficulties in finalising their financial reports in time to meet their lodgement deadlines may be eligible for an extension of time to lodge periodic financial reports. For more information, refer to ASX Companies Update 01/11
International Accounting Standards Board
- IASB feature article by Robert Bruce Africa embraces IFRSs (PDF 34kb) has been released
- Two new issues of the IASB's Investor Perspectives have been released: 'Reforming hedge accounting' and 'The objective of financial reporting and the qualitative characteristics of useful information – what investors should know?'
- The IASB has posted to its website a podcast (link to IASB website) on the latest developments concerning the insurance contracts project
- The IASB has published new web-pages on risk components and the time value of options to assist the understanding of exposure draft on hedge accounting published in December 2010
Other global news
- The US Financial Accounting Standards Board (FASB) has relented on its previous plans to require companies to report all of their financial instruments at fair value, bringing the FASB closer to the mixed measurement approach adopted by IASB under which some assets would be reported at fair value and others at amortised cost (IAS Plus article)
- The International Valuation Professional Board, an independent technical body of the International Valuation Standards Council (IVSC), has released for comment an exposure draft of Technical Information Paper 1 The Discounted Cash Flow (DCF) Method – Real Property and Business Valuations (IAS Plus article)
- The International Public Sector Accounting Standards Board (IPSASB) has released an updated and improved version of Study 14, Transition to the Accrual Basis of Accounting: Guidance for Governments and Government Entities (press release).