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Monthly roundup - March 2013

Staying on top of developments

Author: Deepesh Malik and Moana Overton, Accounting Technical Group

March 2013 edition
Issued 08 April 2013

In this edition:

Monthly highlights

ASIC Regulatory Guide 247 Effective disclosure in an operating and financial review

On 27 March 2013, the Australian Securities and Investments Commission (ASIC) released Regulatory Guide 247 Effective disclosure in an operating and financial review (RG 247) to provide guidance on preparing an operating and financial review (OFR) in the directors’ report of a listed entity.

RG 247 includes guidance on:

  • providing a narrative and an analysis of the entity’s operations and financial position
  • outlining the entity’s key business strategies and providing a discussion of the entity’s prospects for future financial years
  • the application of the ‘unreasonable prejudice’ exemption from disclosing specific business strategies and prospects

Directors of listed entities should consider reassessing their approach to disclosing information in the OFR in light of this new guidance, to ensure compliance with s.299A(1) of the Corporations Act 2001. Note, that although the adoption of regulatory guidance issued by ASIC is not mandatory, it reflects ASIC’s interpretation of the requirements of s.299A(1) of the Corporations Act 2001 and therefore the basis upon which ASIC will assess the disclosure of OFR information by listed entities.

Financial Instruments: Expected Credit Losses

The IASB and AASB have issued for public comment an exposure draft (ED) with respect to the recognition, measurement, presentation, and disclosure of expected credit losses in financial instruments. The proposals are intended to replace the guidance on impairment of financial assets in IAS 39 / AASB 139 and once finalised are to be integrated into IFRS 9 / AASB 9.

The ED proposes to use a forward looking model with the aim of achieving earlier recognition of (expected) credit losses on financial assets, guarantees and commitments as compared to the currently used ‘incurred loss model’ that delays recognition of credit losses until the occurrence of a loss event.

Expected credit losses are required to be measured through a loss allowance, in accordance with one of two approaches:

  • at an amount equal to full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument. This approach would apply to the following:
    • to a financial instrument whose credit risk has increased significantly since initial recognition
    • to all purchased or originated credit-impaired financial assets
    • to trade receivables that do not constitute a financing transaction in accordance with IAS 18 'Revenue'
    (Note: This approach may be applied as an accounting policy choice to trade receivables that do constitute a financing transaction in accordance with IAS 18 'Revenue'; and to lease receivables)
  • at an amount equal to the 12-month expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date). This approach would apply to all other financial instruments

The comment period for the AASB ED ends on 10 May 2013 (5 July 2013 for the IASB ED).

Please refer our IFRS in Focus (PDF) for further information.


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 December 2012 financial reporting cycle summary.)

International Accounting Standards Board (IASB)
Pronouncement Key dates More information

Exposure Draft ED/2013/3 Financial Instruments: Expected Credit Losses

Proposes to replace the 'incurred loss' model with an 'expected loss' model, i.e. entities must recognise expected credit losses before the occurrence of a credit-loss event

Expected credit losses on financial assets and on commitments to extend credit to be recognised, based upon current estimates of expected shortfalls in contractual cash flows as at the reporting date.

Comments due by 5 July 2013

ED 2013/3 (PDF)

IFRS in focus (PDF)

Exposure Draft ED/2013/4 Defined Benefit Plans: Employee Contributions (Proposed amendments to IAS 19)

Aims to provide a more straight-forward alternative for accounting for contributions from employees and third parties to defined benefit plans, when the contributions payable in a particular period are linked solely to the employee’s service rendered in that period.

Comments due by 25 July 2013

ED 2013/4 (PDF)

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

AASB 1055 Budgetary Reporting and AASB 2013-1 Amendments to AASB 1049 – Relocation of Budgetary Reporting Requirements

AASB 1055 sets out budgetary reporting requirements for not-for-profit entities within the General Government Sector (GGS) of the Australian Government and State and Territory Governments, and, together with AASB 2013-1, relocates the corresponding budgetary reporting requirements for the whole of government and GGS of the Australian Government and State and Territory Governments from AASB 1049

(Note: All budgetary reporting requirements applicable to public sector entities are now located in a single, topic-based, Standard AASB 1055 ‘Budgetary Reporting’)

Effective for annual reporting periods on or after 1 July 2014

AASB 1055 (PDF)

AASB 2013-1 (PDF)

AASB 2013-2 Amendments to AASB 1038 – Regulatory Capital 

Makes amendments to AASB 1038 Life Insurance Contracts, as a consequence of changes to the Australian Prudential Regulation Authority's (APRA) reporting requirements relating to life insurers

Effective for annual reporting periods on or after 31 March 2013

AASB 2013-2 (PDF)

ED 236 Novation of Derivatives and Continuation of Hedge Accounting (proposed amendments to AASB 9 and AASB 139)

Incorporates IASB ED/2013/2

Proposes changes to AASB 139 Financial Instruments: Recognition and Measurement and the forthcoming hedge accounting chapter of AASB 9 Financial Instruments to permit the continuation of hedge accounting where hedging instruments are novated to a central counterparty in accordance with laws or regulations introduced by jurisdictions to implement the G20's agreed reforms around over the counter (OTC) derivatives

Comments due to the AASB by 25 March 2013 and to the IASB by 2 April 2013

ED 236 (PDF)

IFRS in focus (PDF)

ED 237 Financial Instruments: Expected Credit Losses

Incorporates IASB ED 2013/3, discussed above

Comments due to the AASB by 10 May 2013 and to the IASB by 5 July 2013

ED 237 (PDF)

ED 238 Consolidated Financial Statements – Australian Implementation Guidance for Not-for-Profit Entities

Proposes implementation guidance to assist not-for-profit (NFP) entities in the private and public sectors to apply AASB 10 Consolidated Financial Statements and AASB 12 Disclosure of Interests in Other Entities.

(These Standards apply mandatorily to NFP entities for periods beginning on or after 1 January 2014, following amendments by the AASB in December 2012)

Comments due to the AASB by 30 June 2013

ED 238 (PDF)

ED 239 Defined Benefit Plans: Employee Contributions (proposed amendments to AASB 119)

Incorporates IASB ED 2013/4, discussed above

Comments due to the AASB by 24 June 2013 and to the IASB by 25 July 2013

ED 239 (PDF)

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
IFRIC regular meeting
12-13 March 2013

Key issues discussed include:

  • IFRS 3 Business Combinations
    • Accounting for reverse acquisition transactions where the acquiree is not a business
    • Accounting for contingent consideration in a business combination
    • Mandatory purchase of non-controlling interest in a business combination obtaining control of listed entity
  • IAS 19 Employee Benefits
    • Determination of discount rate
    • Post vs pre-tax discount rate
  • IFRS 2 Share-based payment
    • Share-based payment awards settled net of tax withholdings
    • Modification of a share-based payment transaction from cash-settled to equity-settled
  • IAS 7 Statement of Cash Flows — Review of definitions of operating, financing and investing
  • IAS 28 Investments in Associates and Joint Ventures — Elimination of intercompany profits between an issuer and its joint venture
  • IAS 37 Provisions, Contingent Liabilities and Contingent Assets and IFRIC 6 Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment — IFRIC Interpretation X Levies
  • IAS 16 Property, Plant and Equipment, IAS 38Intangible Assets, and IFRIC 12 Service Concession Arrangements - Variable payments for the separate acquisition of PPE and intangible assets
  • IFRS 5 Non-current Assets Held for Sale and Discontinued Operations — Classification in conjunction with a planned IPO and change on disposal method
  • IFRS 10 Consolidated Financial Statements — Protective rights and continuous assessment of control under IFRS 10
Deloitte observer notes

IFRIC update (PDF)

IASB regular meeting
19-21 March 2013

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

Deloitte Observer notes

IASB update (PDF)

 

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, IFRS in Focus Newsletters, Webcasts, and Podcasts)

IFRS publications
Deloitte webcasts
  • Deloitte Dbriefs webcast discusses the latest standard-setting developments at the IASB focus on financial instruments. The topics to be covered include:
    • Exposure Draft ED/2013/3 'Financial Instruments: Expected Credit Losses'
    • Exposure Draft ED/2013/2 'Novation of Derivatives and Continuation of Hedge Accounting'
    • Other accounting, standard setting, and reporting developments for the quarter.
Deloitte comment letters
  • Deloitte comment letter (PDF) on the IASB Exposure Draft 2012/3 'Equity Method: Share of Other Net Asset Changes'
  • Deloitte comment letter (PDF) on the IASB Exposure Draft 2012/4 'Classification and Measurement: Limited Amendments to IFRS 9'
  • Deloitte comment letter (PDF) on the IASB Exposure Draft 2013/1 'Recoverable Amount Disclosures for Non-Financial Assets'.

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 March 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 Australian Securities and Investments Commission (ASIC) released Regulatory Guide 247 Effective disclosure in an operating and financial review (RG 247) (PDF) to provide guidance on preparing an operating and financial review (OFR) in the directors' report of a listed entity (also discussed in 'Monthly Highlights' above)
  • The Australian Securities Exchange (ASX) has released updated guidance to assist Australian listed entities to comply with their continuous disclosure obligations (ASX company update 01/13)
  • The Australian Accounting Standards Board (AASB) to establish a new Research Centre and a Standard setting Directorate (Media release).
International Accounting Standards Board
Other global news
  • The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment letter on the IASB's Exposure Draft ED/2013/2 'Novation of Derivatives and Continuation of Hedge Accounting (Proposed amendments to IAS 39 and IFRS 9)' (IAS Plus article)
  • The EFRAG has submitted to the IASB a letter outlining the results of its analysis of the impact on macro hedge relationships of the consequential amendments proposed by the Review Draft (RD) 'IFRS 9 General hedge accounting' on existing macro hedge relationships under IAS 39, which was published by the IASB in September 2012. EFRAG suggests an option of either following IAS 39 or IFRS 9 (IAS Plus article).

Related links

Related links

  • Monthly roundup - January 2014
    ASIC has extended Class Order [CO 13/1050] which allows issuers of stapled securities (stapled entities) to continue to present consolidated or combined financial statements
  • Monthly roundup - January 2012
    Financial reporting developments during January 2012. Monthly highlights include the IASB and the FASB discussion to reduce differences in classification and measurement models for financial instruments.
  • 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 - December 2012
    Financial reporting developments during December 2012. Monthly highlights discuss the key considerations for the December 2012 reporting season and a series of pronouncements by the AASB
  • 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 - 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.
  • 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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