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Monthly Roundup - May 2011

Staying on top of developments

Author: Deepesh Malik, Frank Betkowski and Debbie Hankey, Accounting Technical Group

May 2011 edition
Issued 1 June 2011

In this edition:

Monthly highlights

New batch of standards forming the ‘next wave’

During May, the IASB issued the "package of five" new and revised standards addressing the accounting for consolidation, involvements in joint arrangements and disclosure of involvements with other entities. Highlights include:

  • The introduction of a single consolidation model for all entities based on control, irrespective of the nature of the investee (i.e. whether an entity is controlled through voting rights of investors or through other contractual arrangements as is common in special purpose entities). Under IFRS 10 Consolidated Financial Statements, control is based on whether an investor has 1) power over the investee; 2) exposure, or rights, to variable returns from its involvement with the investee; and 3) the ability to use its power over the investee to affect the amount of the returns. The new model may impact in areas such as 'defacto control', funds management and special purpose vehicles
  • The removal of the option to apply the proportional consolidation method when accounting for jointly controlled entities (now termed 'joint ventures'). Additionally, IFRS 11 Joint Arrangements eliminates jointly controlled assets to now only differentiate between 'joint operations' and 'joint ventures'
  • Extensive new disclosures about an entity's involvement with other entities (subsidiaries, associates, joint ventures and unconsolidated 'structured entities').

In addition, the IASB has issued IFRS 13 Fair Value Measurements which replaces the guidance on fair value measurement in existing IFRS accounting literature with a single standard.

The new standards apply to annual reporting periods beginning on or after 1 July 2013 and the AASB is expected to issue equivalent pronouncements in due course. More details about the new standards are available in the tables below, along with resources such as newsletters and podcasts on each of the standards.

New Accounting alerts with guidance for 30 June reporting

We’ve published the following Accounting alerts during May, covering various relevant topics for 30 June 2011 reporting:

Trans-Tasman convergence standards issued

The AASB has released a number a standards to give effect to 'Phase 1' of the joint harmonisation programme being undertaken by the AASB and the New Zealand Accounting Standards Review Board (ASRB). The new Standards are applicable to annual reporting periods beginning on or after 1 July 2011 (except for the related Reduced Disclosure Requirements which apply from 1 July 2013).

The standards have the effect of reducing the disclosure in financial statements and deleting previous 'Aus' requirements, and early adoption may be attractive. Although the relief is not extensive, some of the amendments will be welcome in specific circumstances, e.g. the deletion from AASB 101 of disclosure requirements relating to capital and expenditure commitments. Accordingly, the new standards represent an opportunity to reduce some disclosures or adopt IFRS treatments not previously permitted in the Australian context.

Further details of the new Standards are included in the tables below.

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

IFRS 10 Consolidated Financial Statements*

Requires a parent to present consolidated financial statements as those of a single economic entity, replacing the requirements previously contained in IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation - Special Purpose Entities.

IFRS 10 identifies the principles of control, determines how to identify whether an investor controls an investee and therefore must consolidate the investee, and sets out the principles for the preparation of consolidated financial statements.

The Standard introduces a single consolidation model for all entities based on control, irrespective of the nature of the investee (i.e. whether an entity is controlled through voting rights of investors or through other contractual arrangements as is common in 'special purpose entities'). Under IFRS 10, control is based on whether an investor has:

  • Power over the investee
  • Exposure, or rights, to variable returns from its involvement with the investee, and
  • The ability to use its power over the investee to affect the amount of the returns.

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

Early adoption permitted subject to condition^

IAS Plus summary

IFRS in Focus newsletter (PDF 82kb)

Deloitte Podcast (mp3: 8mb,12 mins)

IFRS 11 Joint Arrangements*

Replaces IAS 31 Interests in Joint Ventures. Requires a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing its rights and obligations and then account for those rights and obligations in accordance with that type of joint arrangement.

Joint arrangements are either joint operations or joint ventures:

  • A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement (joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint operators recognise their assets, liabilities, revenue and expenses in relation to its interest in a joint operation (including their share of any such items arising jointly)
  • A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (joint venturers) have rights to the net assets of the arrangement. A joint venturer applies the equity method of accounting for its investment in a joint venture in accordance with IAS 28 Investments in Associates and Joint Ventures (2011). Unlike IAS 31, the use of 'proportionate consolidation' to account for joint ventures is not permitted.

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

Early adoption permitted subject to condition^

IAS Plus summary

IFRS in Focus (PDF 69kb)

Deloitte Podcast (mp3: 7mb, 10 mins)

IFRS 12 Disclosure of Interests in Other Entities*

Requires the extensive disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with, interests in other entities and the effects of those interests on its financial position, financial performance and cash flows.

In high-level terms, the required disclosures are grouped into the following broad categories:

  • Significant judgements and assumptions - such as how control, joint control, significant influence has been determined
  • Interests in subsidiaries - including details of the structure of the group, risks associated with structured entities, changes in control, and so on
  • Interests in joint arrangements and associates - the nature, extent and financial effects of interests in joint arrangements and associates (including names, details and summarised financial information)
  • Interests in unconsolidated structured entities - information to allow an understanding of the nature and extent of interests in unconsolidated structured entities and to evaluate the nature of, and changes in, the risks associated with its interests in unconsolidated structured entities.

IFRS 12 lists specific examples and additional disclosures which further expand upon each of these disclosure objectives, and includes other guidance on the extensive disclosures required.

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

Early adoption permitted subject to condition^

IAS Plus summary

IFRS in Focus newsletter (PDF 65kb)

IAS 27 Separate Financial Statements (2011)*

Amended version of IAS 27 which now only deals with the requirements for separate financial statements, which have been carried over largely unamended from IAS 27 Consolidated and Separate Financial Statements.

Requirements for consolidated financial statements are now contained in IFRS 10 Consolidated Financial Statements.

The Standard requires that when an entity prepares separate financial statements, investments in subsidiaries, associates, and jointly controlled entities are accounted for either at cost, or in accordance with IFRS 9 Financial Instruments.

The Standard also deals with the recognition of dividends, certain group reorganisations and includes a number of disclosure requirements.

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

Early adoption permitted subject to condition^

IAS Plus summary

IAS 28 Investments in Associates and Joint Ventures (2011)*

This Standard supersedes IAS 28 Investments in Associates and prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures.

The Standard defines 'significant influence' and provides guidance on how the equity method of accounting is to be applied (including exemptions from applying the equity method in some cases). It also prescribes how investments in associates and joint ventures should be tested for impairment.

The revised standard was issued as a consequence of the issue of IFRS 10 and IFRS 11 (see above) but does not change existing requirements on the application of the equity method.

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

Early adoption permitted subject to condition^

IAS Plus summary

IFRS 13 Fair Value Measurement*

It replaces the guidance on fair value measurement in existing IFRS accounting literature with a single standard.

IFRS 13 defines fair value, provides guidance on how to determine fair value and requires disclosures about fair value measurements. However, IFRS 13 does not change the requirements regarding which items should be measured or disclosed at fair value.

Applicable to annual periods beginning on or after 1 January 2013 with early application permitted.

IFRS in Focus newsletter (PDF 78kb)

IAS Plus summary

Deloitte podcast (mp3: 13mb, 18 mins)

Press release

New editorial corrections to IFRSs*

The IASB has posted to its website two new batches of Editorial Corrections to IFRSs. These batches make editorial corrections and changes to 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), IFRS 12 Disclosure of Interests in Other Entities and IFRS 13 Fair Value Measurement.

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

Editorial corrections to IFRSs (PDF 10kb)

IAS Plus article (batch 1)

IAS Plus article (batch 2)

*   Equivalent pronouncement not yet issued by the AASB
^   Entities early adopting this standard must also adopt the other standards included in the 'suite of five' standards on consolidation, joint arrangements and disclosures: IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosures of Involvement with Other Entities, IAS 27 Separate Financial Statements (2011) and IAS 28 Investments in Associates and Joint Ventures (2011). However, entities may elect to early adopt IFRS 12 without applying the other standards if they wish. Entities complying with Australian Accounting Standards would only be permitted to apply these standards once equivalent pronouncements have been made by the AASB.

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

AASB 1054 Australian Additional Disclosures

It sets out the Australian-specific disclosures that are additional to IFRSs in areas such as compliance with Australian Accounting Standards, the nature of financial statements (general purpose or special purpose), audit fees, imputation (franking) credits and the reconciliation of net operating cash flow to profit (loss).

Applicable to annual reporting periods beginning on or after 1 July 2011

Early adoption permitted for annual reporting periods beginning on or after 1 January 2005 provided that AASB 2011-1 is also adopted early for the same period

AASB 1054 (PDF 245kb)

AASB press release

AASB 2011-1 Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project

AASB 2011-1 makes amendments to a range of Australian Accounting Standards and Interpretations for the purpose of closer alignment to IFRSs and harmonisation between Australian and New Zealand Standards. The Standard deletes various Australian-specific guidance and disclosures from other Standards (Australian-specific disclosures retained are now contained in AASB 1054), and aligns the wording used to that adopted in IFRSs.

The 'true and fair override' is introduced into AASB 101 Presentation of Financial Statements, but its application in the Australian context is limited by an additional 'Aus' paragraph.

Applicable to annual reporting periods beginning on or after 1 July 2011

Early adoption permitted for annual reporting periods beginning on or after 1 January 2005 provided that AASB 1054 is also adopted early for the same period

AASB 2011-1 (PDF 94kb)

AASB press release

AASB 2011-2 Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project – Reduced Disclosure Requirements

It establishes reduced disclosure requirements for entities preparing general purpose financial statements under Australian Accounting Standards – Reduced Disclosure Requirements in relation to the Australian additional disclosures arising from the Trans-Tasman Convergence Project.

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

Early adoption permitted for annual reporting periods beginning on or after 1 July 2009 provided that AASB 1053, AASB 1054 and AASB 2011-1 are also adopted for the same period.

AASB 2011-2 (PDF 48kb)

AASB press release

AASB 2011-3 Amendments to Australian Accounting Standards – Orderly Adoption of Changes to the ABS GFS Manual and Related Amendments

This Standard makes amendments to AASB 1049 Whole of Government and General Government Sector Financial Reporting to amend the definition of the ABS GFS Manual, provide relief from adopting the latest version of the ABS GFS Manual, and require related disclosures where the latest version of the ABS GFS Manual has not been applied.

Applicable to annual reporting periods beginning on or after 1 July 2012 AASB press release


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-FASB special meeting

4 May 2011

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

Wednesday, 4 May 2011

Detailed Deloitte Observer notes

IFRS Interpretations Committee meeting

5-6 May 2011

Some of the topics discussed include:

  • IAS 16 – Accounting for stripping costs in the production phase of surface mine; Cost of testing; Revaluation model and proportionate restatement
  • IAS 16 and IAS 38 – Contingent pricing of PPE and intangible assets
  • IFRIC 15 – Meaning of continuous transfer of control in real estate transactions
  • IAS 19 – Defined contribution plans with vesting conditions
  • IAS 7 – Classification of interest paid that is capitalised as part of the cost of the asset
  • IFRS 2 – Modification of a share based payment from cash settled to equity settled
  • IAS 27 – Contributions to a jointly controlled entity of an associate
  • IAS 28 – Equity method
  • IAS 37 – Use of IFRIC 6 by analogy

Detailed Deloitte Observer notes

IFRIC review (PDF 72 kb)

IASB-FASB special meeting

11-12 May 2011

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

Tuesday, 11 May 2011

Wednesday, 12 May 2011

Detailed Deloitte Observer notes

IASB regular monthly meeting

17-19 May 2011

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

Tuesday, 17 May 2011 (IASB/FASB)

Wednesday, 18 May 2011 (IASB/FASB)

Thursday, 19 May 2011 (IASB/FASB)

Thursday, 19 May 2011 (IASB)

Detailed Deloitte Observer notes

Note: A special IASB meeting has been scheduled for 31 May – 2 June 2011 (IAS Plus article). Due to time differences, this meeting will be included in next month’s edition of Monthly Roundup.

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

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 May 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 Corporations and Markets Advisory Committee (CAMAC) has published a report on executive remuneration outlining ideas for simplification of remuneration reports, which may provide the basis for a non-prescriptive legislative approach to remuneration reporting at some future time. The report includes a recommendation to remove the requirement to use accounting standard methodology in remuneration reports. Other recommendations include permitting companies to withhold commercially sensitive information concerning a performance condition, require the disclosure of all termination payments, require disclosure, for each executive, of crystallised past pay, present pay and future pay.(press release)
  • Treasury has released an exposure draft of the Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Bill 2011, which seeks to amend the Corporations Act 2001 to strengthen the regulatory framework relating to the remuneration of company directors and executives (details)
  • The AASB has written a letter to IASB expressing its concern with some of the tentative decisions made by IASB on the Leases (PDF 86kb) and Revenue recognition (PDF 80kb) projects
  • The Australian Prudential Regulation Authority (APRA) has released a consultation package relating to refinements to the prudential and reporting framework for general insurance groups (GI Level 2 groups) (press release)
  • Recent budget proposed reforms in ‘Not-for-profit’ sector and seeks to establish a new statutory agency — the Australian Charities and Not-for-profits Commission (ACNC) by 1 July 2012 (press release)
  • The AASB staff research questionnaire on initially accounting for intangible assets acquired in business combinations is open until 17 June 2011 (press release)
  • Australian forum discussed how integrated reporting can drive good governance (IAS Plus article)
International Accounting Standards Board
Other global news
  • The International Public Sector Accounting Standards Board (IPSASB) has released for comment an exposure draft (ED), Key Characteristics of the Public Sector with Potential Implications for Financial Reporting (press release)
  • The International Valuation Standards Council (IVSC) has issued the latest edition of its 'E-Newsletter', which includes an update on the IVSC's work on guidance for the determination of the fair value of financial instruments
  • International Integrated Reporting Committee (IIRC) reviewed a draft Discussion Paper on Integrated Reporting which is due to be published for public consultation in the third quarter of 2011 (IAS plus article)
  • The National Standard Setters (NSS) have released a report (PDF 274kb) from their March 2011 meeting (IAS plus article)
  • A paper released by the Staff of the U.S. Securities and Exchange Commission (SEC) outlines explores the so-called "condorsement" approach to adoption of IFRS in the United States suggested by Paul A. Beswick (Deputy Chief Accountant) at a AICPA National Conference in Washington, D.C. in December 2010 (IAS Plus article)

Related links

Related links

  • Monthly roundup - October 2012
    Financial reporting developments during October 2012. Monthly highlights discuss the recently issued investment entity consolidation amendments by the IASB; and the developments in the IASB lease project
  • Monthly roundup - July 2012
    Financial reporting developments during July 2012. Monthly highlights discuss the financial reporting implications of tax ruling on frankable dividends, IASB revised work plan and Transitional relief and guidance on IFRS 10, IFRS 11, and IFRS 12
  • Monthly roundup - November 2011
    Financial reporting developments during November 2011. Monthly highlight is the discussion on the revised exposure draft on revenue
  • 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 - 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 - November 2010
    Financial reporting developments during November 2010. Monthly highlight discusses resources available for the December reporting season and the IASB's updated work plan issued late in the month.
  • 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.

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