Monthly Roundup - June 2011

Author: Deepesh Malik and Debbie Hankey, Accounting Technical Group

June 2011 edition
Issued 4 July 2011

In this edition:

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

Monthly highlights

IASB issues two new standards

The IASB released amendments to two standards during the month of June, Presentation of Items of Other Comprehensive Income (amendments to IAS 1) and amendments to IAS 19 Employee Benefits.

The amendments to IAS 1 are far narrower than anticipated in the exposure draft which proposed mandatory presentation of profit and loss and other comprehensive income in one statement. The actual amendments have been limited to grouping disclosure of items of other comprehensive income into those that will and will not subsequently be reclassified into profit and loss and allocating the related tax on the same basis. The amendments to IAS 1 are effective for reporting periods beginning on or after 1 July 2012 with earlier application permitted. (IFRS in focus newsletter PDF 67kb)

The amendments to employee benefits are somewhat more substantial but may only have a significant impact on entities with defined benefit plans (DBPs). The amendments have limited the choices in accounting for actuarial gains and losses requiring all remeasurements to be through other comprehensive income without any recycling. The major concern for entities with significant DBPs however would be the requirements to calculate net interest on DBP liabilities/assets using the high quality corporate bond rate (or in Australia the government bond rate where a deep market for highly quality bonds is still debatable). This bond rate may be lower than the rate used under the current standard to calculate the expected return on plan assets and will therefore increase the pension expense recognised in entities profit and loss in relation to DBPs.

The definition of short-term employee benefits has also been modified to refer to “expected to be settled wholly” in place of the currently used “due to be settled” which will cause most annual leave provisions in Australia to be classified as long-term benefits where the entire provision is not expected to be settled within 12 months of the reporting period end. Where this is the case the provision would need to be measured on a discounted basis using actuarial assumptions. (IFRS in focus newsletter PDF 71kb)

The amendments to IAS 19 are effective for annual reporting periods beginning on or after 1 January 2013 with earlier application permitted.

It is anticipated that AASB will issue equivalent amendments to the related AASB standards within the next month.

What is the likely application date for other major outstanding projects?

In April, at the time of the release of the IASB’s  progress report (PDF 80kb) on Improving International Financial Reporting Standards, its work plan revealed ‘targets’ of completing the projects on financial instruments (with the exception of portfolio hedging) in the third quarter of 2011, with all other major projects (leases, revenue recognition and insurance) scheduled for completion by the fourth quarter of 2011 rather than the original expectation of having these revised standards before the end of June 2011.

Since then the IASB has announced a decision to re-expose the revenue recognition exposure draft in the third quarter of 2011 with a 120 day comment period. It has also posted a Staff Paper (PDF 42kb) on its website discussing the application date of IFRS 9. The paper is scheduled to be discussed at the IASB meeting in July. The Staff Paper notes that the impairment and hedging phases of the project to replace IAS 39 are not yet complete nor is the insurance project. On this basis the staff have recommended that the effective date of IFRS 9 be moved from annual reporting periods beginning on or after 1 January 2013 to 1 January 2015. The IASB will also be issuing in July a Request for views on the IASB’s overall strategic direction and balance of it agenda as well as on the balance between financial reporting needs of stakeholders and the IASB’s resource capacity and existing priorities.

The question that therefore remains unanswered is what will be the effective dates of these revised standards. The revisions are likely to have a significant impact for many entities on reported net assets and profit and may require significant system amendments. Entities also need to take the financial reporting implications of these standards into account in the negotiation of certain long terms contracts. Planning for the implementation of these revisions becomes increasing difficult when project milestones keep moving.

Deloitte resources for the June 2011 reporting season

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)

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 and IFRS in Focus Newsletters)

IFRS publications

• IFRS Industry Insights: The Revenue Recognition Project — An update for the manufacturing industry (PDF 484kb)
• IFRS Industry Insights: Joint Arrangements in the Energy and Resources Industry (PDF 116kb)
• IFRS on Point — IFRS Accounting Developments and Information: May 2011 (PDF 85kb)
• Updated IASB Project Insights: Leases (PDF 134kb), Revenue recognition (PDF 359kb), Insurance contracts (PDF 129kb), Financial instruments - asset and liabilities offsetting (PDF 164kb), Financial instruments - impairment (PDF 206kb)
• IFRSs In Your Pocket 2011 (PDF 553kb): new edition of Deloitte's popular guide to IFRS

Deloitte Comment Letter

• Deloitte Comment Letter (PDF 71kb) on SME Implementation Group draft Q&As
• Deloitte Comment Letter (PDF 24kb) on IFRS Interpretations Committee tentative agenda decisions: IAS 16 Property, Plant and Equipment (Cost of testing) and IAS 19 Employee Benefits (Defined contribution plans with vesting conditions)

Other publications of interest

• Heads Up: SEC Staff Paper Explores Method of Incorporating International Standards Into U.S. Reporting System (PDF 118kb)
• Heads Up: FASB Finalizes Guidance on Presentation of Comprehensive Income (PDF 121kb), discusses ASU 2011-05, which revises the manner in which entities present comprehensive income in their financial statements
• Insurance Accounting Newsletter (PDF 192kb) "Progress continues, divergence remains" (PDF 128kb) – an update from Deloitte (UK)
• Accounting Alert — Quarterly update (PDF 424kb) – an update from Deloitte (NZ) that outlines new and revised pronouncements that either are to be applied for the first time at 30 June 2011, or which may be early adopted at that date
• Accounting Roundup — May 2011 (PDF 323kb) – an update from Deloitte (US)
• EITF Snapshot — June 2011 (PDF 96kb)
• The Bruce Column ‘Condorsement Still in the Pending File’

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 June 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 extended the deadline for their intangible asset survey to 15 July 2011 in an effort to encourage a greater response  (IAS plus article)
• The Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Bill 2011 was passed by the Senate, paving the way for the reforms contained in the legislation to commence on 1 July 2011. The reforms aim to ensure an internationally competitive system of executive remuneration that is transparent and accountable to shareholders.
  Under the new 'two-strikes' rule, if the company's remuneration report has received a 'no' vote of 25 per cent or more at two consecutive annual general meetings, shareholders will have the opportunity to vote on a motion to spill the board. Where a spill motion has been supported by a majority of shareholder votes, directors will face fresh elections at a subsequent spill meeting (media release)
• As listed companies prepare for the release of the 30 June 2011 financial reports, the ASIC has called for companies to provide more clarity on the remuneration arrangements for their directors and executives (media release)
• ASIC intends to grant further extension of the interim class order relief granted to lawyers and funders involved in legal proceedings structured as funded representative proceedings and funding claims lodged with liquidators to prove in the winding up of an insolvent company  (media release)

International Accounting Standards Board

• The IASB has uploaded to its site an article on the due process, Robert Bruce's Due process oversight which defines how the IASB goes about its work and discharges its responsibilities to act in the public interest at all times
• The XBRL Assurance Task Force of the AICPA Assurance Services Executive Committee (ASEC) has issued an exposure draft titled Proposed Principles and Criteria for XBRL-Formatted Information. The exposure draft includes a set of principles and criteria for preparers, reviewers, and practitioners to use in evaluating information formatted in eXtensible Business Reporting Language (XBRL)  (IAS Plus article)
• The SME Implementation Group (SMEIG) has published its first final question and answer  (Q&A) guidance on the IFRS for SMEs (PDF 64kb)  (IAS plus article)
• Two new issues of the IASB's Investor Perspectives Gross or net? That is the question and Developing accounting standards consistent with the CFA Institute’s vision (Chartered financial analyst (CFA) program is a globally recognised program for investment professionals)

Other global news

• The International Integrated Reporting Committee (IIRC) has called for expressions of interest from companies interested in participating in its Integrated Reporting Pilot Programme
• EFRAG has published an executive summary of the feedback received on the Revenue Recognition and Leases projects during the meetings with European constituents (PDF 63kb)

Related links

• Monthly roundup archive
• Assurance & Advisory QuickLinks
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• IFRS
• IAS Plus website