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Monthly Roundup - July 2011

Staying on top of developments

Author: Deepesh Malik and Debbie Hankey, Accounting Technical Group

July 2011 edition
Issued 2 August 2011

In this edition:

Monthly highlights

ASIC issues focus areas for 30 June 2011 financial reports

The Australian Securities & Investments Commission (ASIC) issued a media release highlighting a number of focus areas for directors in 30 June 2011 financial reports after releasing the results of its reviews of financial reports for the year ended 31 December 2010. The areas of focus include:

  • Reporting performance and business drivers - operating and financial review, alternate profits, segment reporting
  • Current market conditions - going concern, asset impairment, fair value of assets, financial instruments disclosures, and disclosures for estimates and accounting policy judgements
  • Other matters - business combinations, related party disclosures and consolidation of controlled entities.
Future direction of the IASB work plan

As anticipated in our June Monthly Roundup, there were a number of developments in the month of July surrounding the future direction of the International Accounting Standards Board’s (IASB’s) work plan, giving some indication that the complex suit of standards that the IASB had originally expected to have issued before June 2011, will in many cases not be mandatorily applicable for a number of years – possibly not even before June 2016. Companies should however continue to monitor the developments of these major projects as they could have significant impacts on entities’ reported results, balance sheets ratios and system requirements. The time to influence the direction of standard setting is in the exposure draft phase and the opportunity to do so should not be lost in the second round of refinement of many of these projects.

  • At its July meeting the IASB tentatively agreed to defer the mandatory effective date of IFRS 9 to annual periods beginning on or after 1 January 2015 with early application still permitted. The deferral of IFRS 9 will be proposed in an exposure draft with a 60 day comment period.
  • The finalisation of other aspects of the financial instruments project have slipped from previous expected dates (IASB updated work plan):
    • Finalised IFRS on general hedging remains targeted for the fourth quarter of 2011
    • Finalised IFRS on assets and liability offsetting now targeted for the fourth quarter of 2011
    • Re exposure or a review draft of the impairment proposals is expected in the second half of 2011
    • Exposure draft on macro hedging is now expected in late 2011 or 2012 with no stated target date for the finalisation of an IFRS
  • The IASB and FASB noted in a press release dated 21 July 2011, that the decisions taken to date in the leasing project were sufficiently different from those published in the exposure draft to warrant re-exposure of the revised leasing proposals. The boards intend to complete their deliberations during the third quarter of 2011 with a view to publishing a revised exposure draft shortly afterwards (IAS Plus article)
  • The IASB and FASB decided in June 2011 to re-expose the Revenue Recognition ED. The document will only contain a few questions on the technical changes and pose questions on clarity and consistency with Board decisions. The document will have a 120-day comment period (IAS Plus article)
  • The IASB now expects to re-expose or issue a review draft of the insurance proposals within the fourth quarter of 2011 or in 2012, with no stated target date for the finalisation of an IFRS
  • The investment company exposure draft is expected in August but there is no indication of a target IFRS finalisation date although it would not be unreasonable to expect the amendment to be finalised before the mandatory application date for the new consolidations standards IFRS 13 being financial period beginning on or after 1 January 2013.

The IASB also released on the 26 July an Agenda Consultation 2011 – Request for Views (PDF 308kb) seeking public consultation on the strategic direction and overall balance of its future work program. Comments on the consultation document are required by 30 November 2011. The IASB will hold a live webcast on the Agenda Consultation on 3 August 2011.

Broadening the scope of IFRS

The European Securities and Markets Authority (ESMA) has expressed a revised view on the International Financial Reporting Interpretations Committee’s (IFRIC’s) agenda rejection statements indicating that such rejection statements should lead to a retrospective adjustment in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (IAS Plus article) noting:

"Rejection notes published by the IFRS Interpretations Committee often provide clarification of the standards. There is an expectation on the part of the stakeholders in IFRS that rejection notes concluding that IFRSs are sufficiently clear will be carefully considered by preparers in determining their accounting policies. In the case of a change in a previous accounting treatment following the issue of a rejection note, an issuer should apply IAS 8 and provide proper and sufficient disclosure on the reasons for the change, having regard to the particular facts and circumstances of the individual case, including reference to the rejection note."

ASIC has not yet publicly indicated whether they have a similar view but entities claiming compliance with IFRS may now be required to not only consider published IFRS standards and IFRIC Interpretations, but also the rejection statements of the IFRIC - which in the past have not always been clearly worded. Concern has also been expressed that the retrospective application of some of these rejections statements could be onerous for entities and sometimes confusing for the market in the absence of an official pronouncement from the standard setters.

Deloitte resources for the June 2011 reporting season
For 30 June 2011 reporting period, Deloitte has issued illustrative financial statements for general purpose reports, special purpose reports, reduced disclosure regime and managed investment scheme entities. Click for Illustrative financial statements for reporting period ending 30 June 2011. See also our  What’s new in the June 2011 financial reporting cycle summary.

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)
Pronouncement Key dates More information

Agenda Consultation 2011: Request for views

Through the agenda consultation the IASB is seeking the input from all interested parties on the strategic direction and the broad overall balance of the work plan. It will provide the Board with important input when considering possible agenda items.

Comments due by 30 November 2011

Agenda consultation (PDF 308kb)

Heads Up newsletter (PDF 135kb)

IAS Plus article

Australian Accounting Standards Board (AASB)
Pronouncement Key dates More information

AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements

Amends AASB 124 Related Party Disclosures to remove the individual key management personnel (KMP) disclosures required by Australian specific paragraphs.

Such disclosures are more in the nature of governance disclosures that are better dealt with as part of the Corporations Act 2001.

Applicable to annual reporting periods beginning on or after 1 July 2013 (may not be early adopted) AASB 2011-4 (PDF 251kb)

AASB 2011-5 Amendments to Australian Accounting Standards – Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation

Extends relief from consolidation, the equity method and proportionate consolidation to not-for-profit entities in particular circumstances, by removing the requirement for the consolidated financial statements prepared by the ultimate or any intermediate parent entity to be IFRS compliant, provided that the parent entity, investor or venturer and the ultimate or intermediate parent entity are not-for-profit entities that comply with Australian Accounting Standards.

Applicable to annual reporting periods beginning on or after 1 July 2011 AASB 2011-5 (PDF 294kb)

AASB 2011-6 Amendments to Australian Accounting Standards – Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation – Reduced Disclosure Requirements

Extends relief from consolidation, the equity method and proportionate consolidation to Tier 2 entities in particular circumstances, by removing the requirement for the consolidated financial statements prepared by the ultimate or any intermediate parent entity to be IFRS compliant, provided that the parent entity, investor or venturer and the ultimate or intermediate parent entity comply with Australian Accounting Standards or Australian Accounting Standards – Reduced Disclosure Requirements.

Applicable to annual reporting periods beginning on or after 1 July 2013

Early adoption permitted provided that AASB 1053 is also adopted early for the same period

AASB 2011-6 (PDF 305kb)

Tier 2 Supplement to ED 201 Insurance Contracts

The AASB considers there to be no need for Tier 2 disclosure relief for entities with material insurance contracts and only those who do not agree with this view are asked to comment.

Comments to the AASB by 30 September 2011 Tier 2 Supplement to ED 201 (PDF 257kb)

ED 212 Not-for-Profit Entities within the General Government Sector

The proposals follow the AASB’s decision in June 2009 not to proceed with its earlier proposals contained in ED 174 Amendments to Australian Accounting Standards to facilitate GAAP/GFS Harmonisation for Entities within the GGS, on the grounds that the focus of ED 174 on harmonising generally accepted accounting principles (GAAP) with Government Finance Statistics (GFS) collected by the Australian Bureau of Statistics would not meet the needs of a broad range of users.

Through ED 212, the AASB is willing to explore whether the benefits of the revised approach, focusing on improved financial reporting rather than exclusively GAAP/GFS harmonisation, will outweigh the costs of implementation.

Comments to the AASB by 31 October 2011 ED 212 (PDF 950kb)

ED 213 Improvements to IFRSs

It is equivalent to proposals contained in the IASB's Annual Improvements project exposure draft ED/2011/2.

The exposure draft proposes seven necessary but non-urgent minor changes to five standards.

The AASB is seeking comment by 6 September 2011 as this will enable the AASB to consider Australian constituents’ comments in the process of formulating its own comments to the IASB, which are due by 21 October 2011.

Comments to the AASB by 6 September 2011

ED 213 (PDF 370kb)

IFRS in Focus (PDF 71kb)

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)

Meeting Highlights More information

IASB special meeting

28 July 2011

Topics discussed were as follows (click on the links for direct access to the Deloitte observer notes for that topic):

Thursday, 28 July 2011

Detailed Deloitte Observer notes

IASB regular meeting

20-22 July 2011

Topics discussed were as follows (click on the links for direct access to the Deloitte observer notes for that topic):

Wednesday, 20 July 2011

Thursday, 21 July 2011

Friday, 22 July 2011

Detailed Deloitte Observer notes

AASB regular meeting

13-14 July 2011

Some of the topics discussed include:

  • Differential reporting
  • Status of IASB’s leasing project
  • Income of NFPs
  • Service concession arrangements – grantor
  • GAAP/GFS harmonisation – post implementation review of AASB 1049
AASB action alert (PDF 259kb)

IFRIC meeting

7-8 July 2011

Topics discussed were as follows (click on the links for direct access to the Deloitte observer notes for that topic):

Thursday 7 July 2011

Friday 8 July 2011

Detailed Deloitte Observer notes

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 publications
Other publications of interest
Deloitte comment letter

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 July 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 AASB has submitted comments (PDF 317kb) to the IFRS Foundation Trustees on their Strategy Review “IFRSs as the Global Standard: Setting a Strategy for the Foundation’s Second Decade”
  • ASX clarified the position on carbon tax disclosures, that the obligation to make a disclosure under Listing rule 3.1(PDF 127kb) will arise if, following a consideration and analysis of the effect of the proposed carbon tax and associated measures, a listed entity forms the view that the impact of the tax on the entity is materially price sensitive. Until the entity becomes aware of the materiality of the incidence of the proposed carbon tax, there would not be an obligation to disclose (ASX company update)
  • ASX confirmed that listing rules concerning the composition of the remuneration committee for listed entities in the S&P/ASX 300, came into effect on 1 July 2011. Under Listing rule 12.8(PDF 76kb), a listed entity included in the S&P/ASX 300 at the beginning of its financial year must have a remuneration committee comprised solely of non-executive directors for the whole year (ASX company update)
  • The ASX has released its latest Analysis of Corporate Governance Disclosures in Annual Reports (PDF 183kb) for the year ended 30 June 2010 which indicates continuing high and improving levels of compliance (over 90%) with its disclosure principles and recommendations for listed entities
  • ASIC published its second report on ASIC supervision of markets and participants: January to June 2011(PDF 181kb) (media release)
International Accounting Standards Board
Other global news
  • The German Institute of Auditors (Institut der Wirtschaftsprüfer, IDW) has published a press release that identified a need for recognition of impairments of Greek sovereign debt in interim financial statements at 30 June 2011 in light of current developments (IAS Plus article)
  • The European Securities and Markets Authority (ESMA) has published a public statement on disclosures related to sovereign debt to be included in IFRS financial statements (IAS Plus article)
  • The International Valuation Standards Council (IVSC) has published new International Valuation Standards that updates the previous version published in 2007, and cover valuation of a wide range of assets for financial reporting and other purposes (IAS Plus article)
  • The SEC held roundtable discussions with representatives from investors, smaller public companies, and regulators to discuss benefits and challenges related to potentially incorporating IFRSs in the United States financial reporting system (IAS Plus article)
  • The US Financial Accounting Standards Board (FASB) has published a report "FASB in Focus — Private Companies: The Path to a Differential Standard-Setting Framework" (PDF 315kb) about its initial assessment on differential standard-setting framework for private companies

Related links

Related links

  • Monthly roundup - January 2014
    ASIC has extended Class Order [CO 13/1050] which allows issuers of stapled securities (stapled entities) to continue to present consolidated or combined financial statements
  • Monthly roundup - January 2012
    Financial reporting developments during January 2012. Monthly highlights include the IASB and the FASB discussion to reduce differences in classification and measurement models for financial instruments.
  • Monthly roundup - July 2013
    Financial reporting developments during July 2013. Monthly highlights discuss the ASIC areas of focus for July 2013 reporting period.
  • Monthly roundup - June 2013
    Financial reporting developments during June 2013. Monthly highlights discuss the ASIC areas of focus for June 2013 reporting period.
  • Monthly roundup - January 2009
  • Monthly roundup - March 2011
    Financial reporting developments during March 2011. Monthly highlight discusses the updated IASB work plan, ASIC's proposed guidance on additional financial information and a joint UK/NZ project to reduce disclosures under IFRS.
  • Monthly roundup - March 2009
  • Monthly roundup - August 2010
    Summary of developments in financial reporting during August 2010. Monthly highlight discusses the possible impact of changes in the IASB and FASB chairs on global standard setting.
  • Monthly roundup - June 2010
    Summary of developments in financial reporting during June 2010. Monthly highlight discusses recent financial reporting reform.
  • Monthly roundup - May 2010
    Summary of developments in financial reporting during May 2010. Monthly highlight discusses the financial reporting impacts of recent and proposed tax changes.

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