Monthly roundup - June 2009
Staying on top of developments - Issued 1 July 2009
In this edition:
- Monthly highlight: ASIC announces focus areas for June financial reports
- New pronouncements
- Standard-setter meetings
- New Deloitte publications
- Other developments.
ASIC has announced its areas of focus for the June financial reporting season, as follows:
- Going concern - particularly in light of reduced liquidity, ability to raise finance and compliance with loan covenants
- Impairment - ASIC is expecting further write downs in this area, particularly where assets have been recently acquired. Key focuses include cash flow projections, reconciliation to market based information, need for expertise in developing models and compliance with disclosure requirements (key assumptions, forecast periods beyond five years, sensitivity analyses, etc)
- Fair value - investment property (impact of higher risk, rent incentives, vacancy rates, etc), available for sale securities (ASIC expects many ASX-listed securities to have either 'significant or prolonged' declines in value during the year ending 30 June 2009 when compared to their cost)
- Off-balance sheet arrangements - reassessment of risks and benefits, particularly in view of changed economic circumstances and possible future adverse conditions and the need for adequate disclosure
- Financial instrument disclosures - need to avoid 'boiler plate disclosure' and provide meaningful analyses of way in which the entity manages risks. A number of required disclosures have not been made or poorly disclosed
- Other matters - significant accounting policies, estimation uncertainties, current/non-current classification, debt/equity classification, revenue recognition and expense deferral, related party disclosure, after balance date events.
These focus areas are largely consistent with those announced for previous accounting periods, but are increasing in scope as additional non-compliance areas are identified.
|ASIC has also announced that it will review the 30 June 2009 financial reports of approximately 350 listed entities and unlisted entities with large numbers of users. Entities should pay careful attention to the focus areas noted by ASIC in preparing their financial reports for the current reporting season.|
More information: ASIC press release.
(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 2009 financial reporting cycle summary)
Australian Accounting Standards Board (AASB)
|Pronouncement||Key dates||More information|
|AASB 2009-4 Amendments to Australian Accounting Standards arising from the Annual Improvements Process
Introduces amendments into Accounting Standards that are equivalent to those made by the IASB under its program of annual improvements to its standards. A number of the amendments are technical changes to other pronouncements as the result of the issue of AASB 3 Business Combinations (2008), to align the scope of the pronouncements or to implement other consequential amendments. A further amendment changes the restriction in Interpretation 16 Hedges of a Net Investment in a Foreign Operation on the entity that can hold hedging instruments.
|Applies to annual reporting periods beginning on or after 1 July 2009||
AASB 2009-4 (PDF 106kb)
IAS Plus Update Newsletter (PDF 104kb)
AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Process
Other changes are more substantial, such as the current/non-current classification of convertible instruments, the classification of expenditures on unrecognised assets in the statement of cash flows and the classification of leases of land and buildings.
Note: The amendments made to the guidance to AASB 118 'Revenue' regarding determining whether an entity is acting as agent or principal have no explicit application date and we understand that they are taken to be immediately applicable.
|Applies to annual reporting periods beginning on or after 1 January 2010||
AASB 2009-5 (PDF 135kb)
IAS Plus Update Newsletter (PDF 104kb)
|AASB 1 First-time Adoption of Australian Accounting Standards (May 2009)
A new version of AASB 1 resulting from the IASB's 2007 annual improvements process which retains the substance of the previous version, but within a changed structure to make it easier for the reader to understand and to better accommodate future changes.
|Applies to an entity's first Australian-Accounting-Standards financial statements for reporting periods beginning on or after 1 July 2009||
AASB 1 (PDF 296kb)
IAS Plus Newsletter ( PDF 113kb)
|ED 181 Fair Value Measurement
Proposes guidance on how fair value should be measured where it is required by existing standards. The ED does not propose to extend the use of fair value measurements. However, it would add disclosure requirements about how fair values were determined. If adopted, the proposals would replace fair value measurement guidance contained within individual IFRSs with a single, unified definition of fair value, as well as further authoritative guidance on the application of fair value measurement in inactive markets.
|Comments to the AASB close on 28 August 2009||ED 181 (PDF kb)|
|ED 182 Prepayments of a Minimum Funding Requirement [AASB Interpretation 14]
This exposure draft contains proposals by the International Accounting Standards Board to amend IFRIC 14 IAS 19-The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. The proposals would remove an unintended consequence arising from the treatment of prepayments in some circumstances when there is a minimum funding requirement.
|Comments to the AASB close on 13 July 2009||
ED 182 (PDF 202b)
IAS Plus Update Newsletter (PDF 71kb)
ITC 21 Request for Comment on IASB Discussion Paper DP/2009/2 Credit Risk in Liability Measurement
Discusses the role of an entity's own credit risk in liability measurement and is accompanied by a staff paper that describes the most common arguments for and against including credit risk in measuring liabilities.
|Comments are due to the AASB by 7 August 2009 and to the IASB by 1 September 2009||
ITC 21 (PDF 312kb)
IASB Press Release (PDF 98kb)
International Accounting Standards Board (IASB)
|Pronouncement||Key dates||More information|
Group Cash-settled Share-based Payment Transactions - Amendments to IFRS 2
The amendments to IFRS 2 also incorporate guidance previously included in IFRIC 8 Scope of IFRS 2 and IFRIC 11 IFRS 2 - Group and Treasury Share Transactions. As a result, the IASB has withdrawn IFRIC 8 and IFRIC 11.
|The amendments are effective for annual periods beginning on or after 1 January 2010 and must be applied retrospectively||
IASB Press Release (PDF 103kb)
|IASB ED/2009/6 Management Commentary
Proposed non-mandatory guidance for preparing and presenting a 'management commentary' - sometimes called 'management's discussion and analysis' or 'operating and financial review'.
|Open for comment until 1 March 2010||
IASB Press Release (PDF 97kb)
|IASB DP/2009/2 Credit Risk in Liability Measurement
Discusses the role of an entity's own credit risk in liability measurement and is accompanied by a staff paper that describes the most common arguments for and against including credit risk in measuring liabilities. The paper notes that IFRSs require profit or loss resulting from changes in 'own credit' to be booked when debt is fair valued, but that some see the outcome as counter-intuitive (gains recognised in the face of deteriorating credit). The discussion paper addresses this concern and examines bases for liability measurement other than fair value.
|Open for comment until 1 September 2009||IASB Press Release (PDF 98kb)|
|Request for Information ('Expected Loss Model') - Impairment of Financial Assets: Expected Cash Flow Approach
Requests input into the feasibility of using an expected loss model for the impairment of financial assets. The expected loss model requires an entity to make an ongoing assessment of expected credit losses, which may require earlier recognition of credit losses than the 'incurred loss' model currently used. Proponents of the 'expected loss' model argue that this would better reflect the way that financial assets are priced and the way some companies manage their business.
|Responses to the Request for Information are due by 1 September 2009||
IASB Press Release (PDF 103kb)
(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 meetings 1, 5 and 15-19 June 2009||
The IASB's June meetings continued the IASB's fast-tracking of a replacement for IAS 39. Key elements include: amortised cost for certain 'vanilla lending instruments' and fair value for all other instruments, accounting for certain equity instruments at 'fair value through other comprehensive income' without recycling, the elimination of the 'embedded derivative' concept and retrospective application of the majority of the revised requirements.
Debate continued on a vast array of other significant projects including revenue recognition, lease accounting, joint ventures and rate-regulated activities.
IASB Update (PDF 94kb)
|AASB meeting 24-25 June 2009||The AASB's meeting largely consisted of the AASB taking a 'watching brief' on the various projects of other accounting standard setters. In addition, the AASB continued to develop its differential reporting proposals and made two amending standards to introduce a number of editorial corrections to various accounting standards.||
AASB Action Alert (PDF 51kb)
(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 IAS Plus Newsletters)
- Illustrative half-year financial report - a guide to interim reporting at 30 June 2009, including an analysis of key focus areas, a summary of the interim reporting requirements, illustrative financial statements and checklists
- Illustrative special purpose financial report - illustrates the reporting requirements relating to non-reporting entities, including the new requirements non-reporting entities will face when preparing their June 2009 special purpose annual reports.
- Extracting value Issue 5 - focus on the wider commercial aspects of a number of important financial reporting considerations - ASX Principle 7, JORC compliance and June financial reporting issues
- Property Intellectual (PDF 1.35MB) - discusses the 2009-10 Federal Budget continues the drive to promote Australia as a financial services hub for the Asia-Pacific region, briefly outlining three major initiatives: Trust Rollover, Guaranteed CGT Treatment and Foreign Income Attribution.
- Issue 4 of the Insurance Accounting Newsletter (PDF 117kb) - provides an update on progress being made by the IASB and FASB in their joint project on insurance
- iGAAP 2009 Financial Instruments: IAS 32, IAS 39 and IFRS 7 Explained (Fifth Edition) is available for purchase through www.lexisnexis.co.uk/deloitte - an authoritative guide for financial instruments accounting under IFRSs
Other publications of interest
- May 2009 Edition of Accounting Roundup (PDF 311kb) published by Deloitte & Touche LLP (United States)
Deloitte comment letters
- Deloitte Comment Letter on the IASB-FASB Discussion Paper: Preliminary Views on Revenue Recognition in Contracts with Customers (PDF 179kb)
- Deloitte Comment Letters on 13 IFRIC tentative decisions not to add an item to its agenda - ZIP file of our comment letters (ZIP 1,384kb).
(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)
- On Friday 3 July 2009 and again on Monday 6 July 2009, the IASB will host two live webcasts to keep interested parties up to date on progress of the IASB's comprehensive project to replace IAS 39 (more information and registration)