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Monthly Roundup - June 2011

Staying on top of developments

Author: Deepesh Malik and Debbie Hankey, Accounting Technical Group

June 2011 edition
Issued 4 July 2011

In this edition:

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
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

Amendments to IAS 1 Presentation of Financial Statements*

The amendments to IAS 1 Presentation of Financial Statements require companies preparing financial statements in accordance with IFRSs to group together items within OCI that will and will not subsequently be reclassified to profit or loss. Tax on items in OCI is also required to be allocated on the same basis.

The amendments also reaffirm existing requirements that items in OCI and profit or loss should be presented as either a single statement or two consecutive statements.

Applicable to annual reporting periods beginning on or after 1 July 2012, with early adoption permitted

 IFRS in Focus newsletter (PDF 67kb)

 IFRS podcast (mp3, 12 mins)

Amendments to IAS 19 Employee Benefits*

The amendments make important improvements by:

  • Eliminating an option to defer the recognition of gains and losses, known as the ‘corridor method’
  • Remeasurement of net defined benefit liabilities (assets) required to be recognised in OCI with no recycling
  • Net interest is calculated using high quality corporate bond yield (or government bond yield when no deep market) which may be lower than the rate currently used to calculate the expected return on plan assets. This could result in decrease in net income
  • Definition of short term benefits changed which may result in entitlements such as annual leave being discounted based on expected payments
Applicable on a modified retrospective basis to annual periods beginning on or after 1 January 2013, with early adoption permitted

 IFRS in Focus newsletter (PDF 67kb)

 IFRS podcast (mp3, 8 mins)

Exposure draft ED/2011/2 Improvements to IFRSs*

Proposed amendments to five IFRSs under the annual improvements project include:

  • IFRS 1 - Repeated application of IFRS 1 (relevant under the RDR) and transitional criteria for capitalised borrowing costs
  • IAS 1 - Clarification of requirements for comparative information
  • IAS 16 - Classification of servicing equipment as PPE or inventory
  • IAS 32 - Income tax consequences of distributions to holders of an equity instrument, and of transaction costs of an equity transaction to be calculated in accordance with IAS 12
  • IAS 34 - Classification of when segment asset information is required in interim reports

Comments on ED to be submitted by 21 October 2011

Proposed effective date is for annual periods beginning on or after 1 January 2013

 ED/2011/2 Improvements to IFRSs

IFRS in Focus newsletter (PDF 71kb)

Exposure draft IFRS Taxonomy 2011 interim release: common-practice concepts

The proposed interim release contains supplementary tags for the IFRS Taxonomy that reflect disclosures that are commonly reported by entities in their IFRS financial statements. The supplementary tags are intended to enhance the comparability of financial information, and are consistent with IFRSs and with the XBRL (eXtensible Business Reporting Language) architecture of the IFRS Taxonomy 2011.

Comments on the exposure draft are requested by 31 August 2011

IFRS Foundation announcement

IAS Plus article

New editorial corrections to IFRSs*

The IASB has posted to its website a new batch of Editorial Corrections to IFRSs. This batch makes editorial corrections and changes to IFRS for SMEs (issued July 2009), Conceptual Framework for Financial Reporting (issued September 2010), Bound Volume (Red Book) 2011, Bound Volume (Blue Book) 2011, IFRS 10 Consolidated Financial Statements (issued May 2011), IFRS 11 Joint Arrangements (issued May 2011), IAS 19 Employee Benefits (issued June 2011) and Presentation of Items of Other Comprehensive Income (issued June 2011).

As minor editorial corrections, these changes are effectively immediately applicable under IFRS

 Editorial corrections to IFRSs (PDF 18kb)

IAS Plus article

*  

Equivalent pronouncement not yet issued by the 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)

Meeting Highlights More information

Special IASB meeting

31 May – 2 June 2011

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

Tuesday, 31 May 2011 (IASB/FASB)

Wednesday, 1 June 2011 (earlier sessions)

Thursday, 2 June 2011 

Detailed Deloitte Observer notes

Regular AASB meeting

8-9 June 2011

Main issues discussed include:

  • Fair value Measurement – IFRS 13
  • Financial Statement Presentation
  • Post-employment benefits
  • Consolidation, Associates & Joint Arrangements
  • Differential Reporting
  • IPSASB Conceptual Framework and the draft exposure draft on Income of Not-for-Profit Entities
  • IASB Projects- Leases, Revenue recognition, Insurance Contracts, Financial Instruments
AASB alert (PDF 226kb)

Regular IASB meeting

13-15 June 2011

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

Monday, 13 June 2011 (IASB-FASB)

Tuesday, 14 June 2011 (IASB-FASB)

Wednesday, 15 June 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
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

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
Other global news

Related links

Related links

  • Monthly roundup - January 2014
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  • 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
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    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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