Monthly roundup - October 2010
Staying on top of developments
October 2010 edition
Issued 1 November 2010
In this edition:
- Monthly highlight: Getting ready for the ‘great leap forward’?
- New pronouncements
- Standard-setter meetings
- New Deloitte publications
- Other developments
October saw two important developments that will shape the future financial reporting landscape.
Firstly, in a surprise announcement, the IASB announced that Sir David Tweedie would be replaced in effect by two people: Hans Hoogervorst as Chairman and Ian Mackinntosh as his Deputy. The appointment of a ‘non accountant’ as Chair of an accounting body has caused quite a stir in accounting circles, but is being seen as positive by most on reflection. Managing expectations and politics on a global scale is of crucial importance in ensuring success of the global IFRS experiment. Tweedie himself last week noted current circumstances represents the ‘last chance’ to implement a global accounting framework,. Read more about the appointments in The Bruce Column on IAS Plus.
The second development is the joint IASB and FASB documents seeking input on how the swathe of forthcoming new pronouncements – financial instruments, fair value measurement, leases, revenue, insurance contracts and more – should be implemented. The documents ask whether there should there be a ‘big bang’ or ‘phased in’ approach and when the transformation should begin. With some such as the US AICPA already calling for a five year implementation period for IFRS in the United States, there is much at stake here in how the transition occurs, and its success. Read more about the consultation process in this IAS Plus article.
Will these developments represent a ‘great leap forward’? History aside, the consultative process being undertaken offers hope and opportunity, but also great responsibility. Great responsibility on the IASB, its current and new chair (and deputy chair) to listen to constituent concerns and to ensure a fair and balanced system that is effective in its goals. And great responsibility on all those affected – preparers, users, auditors, regulators and others – to consider the proposals, provide insightful feedback and participate in the process.
|Given the public holiday for some on Melbourne Cup Day, we will issue our Accounting alert on the October AASB meeting on Wednesday 3 November 2010.|
(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)
Australian Accounting Standards Board (AASB)
|Pronouncement||Key dates||More information|
Exposure Draft ED 206 Severe Hyperinflation (Proposed amendment to AASB 1)
It proposes guidance on how an entity should resume presenting financial statements in accordance with International Financial Reporting Standards (IFRSs) after a period when the entity was unable to comply with IFRSs because its financial currency was subject to severe hyperinflation.
|Comments are due to the AASB by 8 November 2010 or to the IASB by 30 November 2010||
ED 206 (PDF 163kb)
IFRS in Focus newsletter (PDF 65k)
International Accounting Standards Board (IASB)
|Pronouncement||Key dates||More information|
Request for Views Effective Dates and Transition Methods*
The IASB and FASB have published documents seeking views on when new financial reporting standards resulting primarily from their work to improve and achieve convergence of IFRS and US-GAAP should become effective.
With a number of major projects planned to be completed in 2011, the boards are seeking views on whether or how to sequence effective dates in order to reduce the burden to interested parties. Feedback from the consultation will inform the boards as they jointly develop an implementation plan for those new standards that helps stakeholders to manage both the pace and cost of change.
|Open for comment until 31 January 2011|
IFRS 9 Financial Instruments (October 2010)*
A revised version of IFRS 9 which now incorporates requirements for the classification and measurement of financial liabilities.
The requirements maintain the existing amortised cost measurement basis for most liabilities. New requirements apply where an entity chooses to measure a liability at fair value through profit or loss – in these cases, the portion of the change in fair value related to changes in the entity's own credit risk is presented in other comprehensive income rather than within profit or loss.
|Applies to annual periods beginning on or after 1 January 2013||
IAS Plus article
IASB press release (PDF 33kb)
Amendments to IFRS 7 Financial Instruments: Disclosures*
Issued by IASB as part of its comprehensive review of off balance sheet activities.
The amendments will allow users of financial statements to improve their understanding of transfer transactions of financial assets (for example, securitisations), including understanding the possible effects of any risks that may remain with the entity that transferred the assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period
Entities shall apply the amendments for annual periods beginning on or after 1 July 2011
(In the first year of application, comparative information is not required.)
IFRS in Focus newsletter (PDF 139kb)
IASB Press Release (PDF 36kb)
This batch includes editorial corrections and changes to IFRS for SMEs (issued July 2009), IFRS 9 Financial Instruments (issued November 2009), Bound Volume (Red Book) 2010, Bound Volume (Blue Book) 2010, Improvements to IFRSs (issued May 2010) and IFRS 7 Financial Instruments: Disclosures – Transfers of Financial Assets (issued October 2010)
|As minor editorial corrections, these changes are effectively immediately applicable||IAS Plus article|
* Equivalent document not yet issued by the AASB
(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 special meeting 5 October 2010||
The topics discussed were as follows (click through to detailed Deloitte observer notes for that topic):
|Notes Taken by Deloitte Observers|
|IASB regular meeting 19-22 October 2010||The topics discussed were effective dates and transition, annual improvements, extractive activities, hedge accounting, leases, fair value measurement guidance, emissions trading schemes, impairments, asset and liability offsetting, conceptual framework, financial instruments with characteristics of equity, other comprehensive income, and financial statement presentation.|
|IASB special meeting 27 October 2010||
This special meeting was held to finalise deliberations on the hedge accounting project. Topics discussed included use of intragroup non-derivative financial instruments as hedging instruments, eligible hedged items, time value of options, cash instruments as eligible hedging instruments and transition.
The exposure draft will now be drafted with the view of issuing it before the end of calendar 2010.
|Detailed Deloitte observer notes|
|AASB meeting 27-28 October 2010||This meeting was partially a joint meeting with the New Zealand Financial Reporting Standards Board (FRSB). Topics discussed included comment letters on various IASB/IFRIC projects, trans-Tasman convergence and IPSASB developments. We will issue an Accounting alert once the official outcomes from the meeting are known.||AASB meetings page|
(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 in Focus IASB completes first phase of joint project on Conceptual Framework for Financial Reporting (PDF 67kb)
- IFRS in Focus IASB issues Exposure Draft on Deferred Tax: Recovery of Underlying Assets (PDF 67k)
- Deloitte IFRS Podcast on financial instruments: classification and measurement
- Deloitte IFRS Podcast on financial instruments: hedge accounting
- Deloitte IFRS Podcast on financial instruments: impairment
- The Bruce Column ‘The Kings College Lecture‘ (discusses convergence of global financial reporting)
- The Bruce Column ‘Hans Hoogervorst and Ian Mackintosh: Some Insights into their Thinking’
- The Bruce Column ‘Around the Table: The Arguments over Leasing’
Other publications of interest
- Heads Up Newsletter FASB and IASB Complete First Phase of Joint Project on Conceptual Framework for Financial Reporting (PDF 116kb)
- Accounting Roundup: Third Quarter in Review–2010 (PDF 1,552kb) published by Deloitte & Touche LLP (United States) – covers United States and international accounting and auditing matters, including IASB-FASB convergence
- Revenue recognition for technology companies (PDF 2,295kb) Describes the key proposals in the recently issued Exposure Draft (ED) on Revenue from Contracts with Customers and provides insights on how the proposed approach in the ED will be applied in scenarios common to technology companies who report under both IFRS and US GAAP
- Enhancing the quality of IFRS financial statements (PDF 153kb) Presents 10 easy ways to improve the quality of IFRS financial statements, including how information is presented, the level of detail provided and the linkages between disclosures.
Deloitte comment letters
- Deloitte comment letter on the IASB's removal of fixed dates exposure draft Exposure draft ED/2010/10 Removal of Fixed Dates for First-time Adopters (PDF 40kb)
- Deloitte comment letter on the IASB's revenue from contracts with customers exposure draft Exposure draft ED/2010/6 Revenue from Contracts with Customers ((PDF 94kb)
- Deloitte comment letter on IASB Exposure Draft ED/2010/5 Presentation of Items of Other Comprehensive Income (PDF 22kb)
- Deloitte comment letters to the IFRS Interpretations Committee on five tentative agenda decisions:
- IAS 1 Presentation of Financial Statements — Current/non-current classification of a callable term loan (PDF 27kb)
- IAS 19 Employee Benefits — Accounting for a statutory employee profit sharing arrangement (PDF 27kb)
- IAS 32 Financial Instruments: Presentation — Put options written over non-controlling interests (PDF 33kb)
- IAS 36 Impairment of Assets — Calculation of value in use (PDF 27kb)
- IFRS 2 Share-based Payment — Share-based payment awards settled net of tax withholdings (PDF 33kb)
(A brief listing of other financial reporting developments during the month. A full summary of all IFRS-related developments can be found in our October 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)
- The Financial Reporting Panel has released its first four reports on complex accounting matters referred to it. The Panel is an independent statutory authority which was established in 2006 to determine disputes between ASIC and entities concerning the application of accounting standards and other financial reporting requirements of the Act in lodged financial reports. The Panel supported ASIC’s view on two of the matters, but supported the company’s adopted accounting treatment in the other two matters (FRP press release [first batch], FRP press release [second batch], ASIC press release)
International Accounting Standards Board
- IASB and FASB decide to decelerate three projects Reporting Entity (Conceptual Framework, phase D), Financial Statement Presentation and Financial Instruments with Characteristics of Equity (Liabilities and Equity) . Both boards concluded that all three projects deserve much more attention than the current Boards’ capacity allows (IAS Plus article)
- IASB has posted an overview (PDF 234kb) of the tentative decisions to date on its hedge accounting project page to assist those following the hedge accounting phase of the project to replace IAS 39
- New issue of the IASB's Investor Perspectives newsletter: Making sense of Insurance contracts
- IASB and FASB decided to have a three day special meeting on Financial Instruments: Impairment in November 2010 (IAS Plus article)
Other global news
- The Asian-Oceanian Standard Setters Group (AOSSG) meeting was held in Tokyo on 29-30 September, topics discussed included emissions trading, Islamic finance and various IASB projects (Communiqué from the meeting [PDF 40kb])
- AICPA comment letter to SEC (PDF 269kb) warns that companies will need five years preparation time to adopt IFRS if the SEC requires two years of historical comparative financial statements (IAS Plus article)
- The Committee of European Securities Regulators (CESR) has published its ninth batch of extracts from its confidential database of enforcement decisions taken by EU national enforcers of financial information. The extracts are a source of information to foster appropriate and consistent application of IFRSs in the EU (IAS Plus article).