Monthly roundup - January 2012

Author: Deepesh Malik and Debbie Hankey, Accounting Technical Group

January 2012 edition
Issued 06 February 2012

In this edition:

• Monthly highlights
• New pronouncements
• Standard setter meetings
• New Deloitte publications
• Other developments

Monthly highlights

IASB and FASB seek to reduce differences in classification and measurement for financial instruments

The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) have agreed to work together to seek to reduce differences in their respective classification and measurement models for financial instruments. The IASB has however acknowledged that significant changes would be disruptive for companies that have early adopted IFRS 9 or made significant implementation efforts; and thus the IASB decided that any changes should be made as soon as possible and that their scope should be limited.

More specifically, the IASB will consider:

(1) amending the contractual cash flow characteristics test to address issues raised by some constituents, including the application of this test to debt instruments with interest rate reset provisions that refer to rates that do no match the remaining maturity of the instrument;

(2) amending the cash flow characteristics test to address constituents’ concerns about the prohibition in IFRS 9 against bifurcating embedded derivatives from a financial asset host, or possibly providing an option to bifurcate such derivatives; and

(3) developing a third business model category under which some debt instruments would be classified as fair value through other comprehensive income (FV-OCI).

The changes are still under consideration with the final outcome to be decided at future meetings.

Assessing the increased country/currency risk in financial reports

The UK Financial Reporting Council (FRC) has issued an Update for Directors of Listed Companies (PDF 761 KB) that highlights the issues that directors may need to consider in the wake of increased uncertainties in numerous countries and the related impact of exposure to currency risk The purpose of the Update is to draw directors’ attention to the importance of reporting a balanced and understandable assessment of a company’s position and prospects in light of these uncertainties. It identifies some of the more significant annual and interim reporting requirements that directors of listed companies may need to consider, many of which are the same for Australian listed companies who report under similar requirements to those of UK listed companies. Directors have the opportunity to manage the risk that markets misunderstand their exposures by keep the market informed of the material risks the company faces and how these risks are managed.

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 2011 financial reporting cycle summary.)

International Accounting Standards Board (IASB)/Australian Accounting Standards Board (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)

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

• IFRS on Point — IFRS Accounting Developments and Information: December 2011 (PDF 98kb) highlights the month’s important IFRS developments and information
• Updated IASB Project Insights: Leases (PDF 166kb) Revenue recognition (PDF 324kb), Insurance Contracts (PDF 445kb), Financial Instruments: Deferral of mandatory effective date of IFRS 9 (PDF 56kb),Financial Instruments — Impairment (PDF 232kb), Financial Instruments — asset and liabilities offsetting (PDF 44kb), Financial Instruments: Classification & Measurement (PDF 176kb), Financial Instruments — Hedge Accounting (PDF 264kb).

Other publications of interest

• Accounting for Eurozone Sovereign Debt Holdings (PDF 83kb) – a financial reporting alert by Deloitte (US) discusses the impairment of Greek government bonds (GGBs) and debt issued by other eurozone states
• The Sustainable Board (PDF 407kb) released by Deloitte's Global Center for Corporate Governance that explores the issue of sustainability as it is increasingly becoming a top-of-mind issue for boards that are seeking to enhance performance and reputation, mitigate risks, and foster innovation and growth
• Robert Bruce Column 'Integrating the thinking' discusses the current level of debate on the need for integrated reporting system that reflect the links between an organisation’s financial performance and its social, environmental and economic context and performance, and to place the effects centre stage.

Deloitte comment letters

• Deloitte Comment Letter (PDF 83kb) to the International Accounting Standards Board (IASB) on its Exposure Draft ED 2011/4 Investment Entities.

Deloitte Webcasts and Podcasts

• Global Financial Reporting Dbriefs Webcast discusses the latest standard-setting developments at the International Accounting Standards Board (IASB). The topics covered include:
  • updated timeline for the issuance of exposure drafts and new accounting standards
  • status update on the major convergence projects
  • detailed update on the financial instruments project, with key insights on what to expect
• Global Insurance Webcast — 'Tackling the core issues of risk diversification and discounting of claims liabilities' (WMV 14,884kb) reports on the insurance project joint meetings between the IASB and the FASB during December 2011, providing a summary of progress and key developments.

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 January 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 & Investment Commission (ASIC) has released new disclosure benchmarks and principles for infrastructure entities to improve investor awareness of the risks associated with investing in these products. ASIC Regulatory Guide 231 Infrastructure entities: Improving disclosure for retail investors (RG 231) outlines nine benchmarks and eleven disclosure principles that apply to infrastructure entities, aimed at addressing the risks peculiar to infrastructure entities.

International Accounting Standards Board

• The IFRS Foundation has issued for public comment an exposure draft of the IFRS Taxonomy 2012. The Taxonomy is a translation of IFRSs and interpretations as issued on 1 January 2012 into eXtensible Business Reporting Language (XBRL) (IAS plus article)
• The Trustees of the IFRS Foundation discussed the progress towards global adoption of IFRSs at their January meeting (IAS plus article)
• The IASB has released a summary of the Capital Markets Advisory Committee (CMAC) meeting held in October 2011. The CMAC is a group of professional financial analysts who regularly meet with members of the IASB to provide the views of professional investors on financial reporting issues (IAS plus article).

External webcasts and Podcasts

• Podcast summary (mp3, 24mins) of the IFRS Interpretations Committee meeting (January 2012)
• Webcast summary of the IFRS Foundation Trustees Meeting (January 2012).

Other global news

• The European Financial Reporting Advisory Group (EFRAG) has issued its draft comment letter on IASB Exposure Draft ED/2011/6 Revenue from Contracts with Customers (IAS Plus article)
• The UK Financial Reporting Council (FRC) has issued an Update for Directors of Listed Companies: Responding to increased country and currency risk in financial reports (PDF 761 KB) highlighting the issues that directors may need to consider in wake of the current economic uncertainties in numerous countries
• The Asian-Oceaniac Standard-Setters Group (AOSSG) Islamic Finance Working Group has released a new publication titled AOSSG Survey – Accounting for Islamic Financial Transactions and Entities (PDF 2.46Mb) that outlines the findings of an online survey it undertook during the second half of 2011 to better understand the significance of Islamic financial transactions and entities worldwide (IAS Plus article).

Related links

• Monthly roundup archive
• Assurance & Advisory QuickLinks
• Assurance and advisory services
• IFRS
• IAS Plus website