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Monthly roundup - January 2009

Staying on top of developments

In this edition:

Monthly highlight: the global financial crisis continues to filter down to real reporting issues

In this monthly highlight we draw out a few common issues and areas of focus that have arisen due to the financial reporting crisis during the current December 2008 reporting season.

Share options

As share prices continue to drop and share option schemes become out of the money, many companies are starting to restructure these remunerations schemes. Directors need to consider the potential accounting implications before they restructure any share schemes as AASB 2 Share-based Payments is complex in this area.

The cancellation and/or modification of a share based payment scheme can result in an increased share based payment expense and possible acceleration of the entire share based payment expense in the current year.

Discount rates

The appropriate discount rates to use for the discounting of liabilities such as long service leave, and annual leave is proving contentious. Changes in interest rates over the past year have resulted in a significant increase in the level employee provisions. As a result there are some entities wishing to move to corporate bond rates, or a long term average rate which excludes the 'unusual' market movements over the last six months.

AASB 119 Employee Benefits requires that the rate is determined by reference to market yields at the reporting date on high quality corporate bonds, or if there is no deep market in such bonds, the market yields (at the reporting date) on government bonds.

We do not believe there is sufficient evidence to support the contention that a deep market currently exists in Australia for high quality corporate bonds, and accordingly, the market yield on government bonds should continue to be used.

Deferred tax assets

The global financial crisis has led to an increase in the number of impairment losses, losses on financial instruments, and other losses. In many cases, these losses result in the carrying amounts of assets being lower than their tax values, particularly where assets have been recently acquired.

The deferred tax assets (DTAs) arising in these situations need to be carefully assessed for recognition. In addition to the impacts of the global financial crisis on forecast taxable profits, many DTAs may represent anticipated capital losses. Because of the 'quarantining' of these losses under the tax law, recognition of these losses may be more difficult in the current climate and need to be closely monitored.

In some cases, DTAs are being derecognised that partially relate to items recognised in equity and in these cases, the split between profit or loss and equity can be troublesome.

More information on reporting issues arising in the current financial environment: Turbulent Times: Key Accounting Considerations in Today's Volatile Markets  (PDF 172kb), 'Credit crunch' page on IAS Plus, Deloitte Australia Insights podcast 'ASIC's perspective on the credit crunch and financial reporting - An interview with Doug Niven', Accounting alert 2008/14 'Financial reporting developments from the credit crunch'.

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 financial reporting for December 2008 summary)

International Accounting Standards Board (IASB)
Pronouncement Key dates More information
IFRIC 18 Transfers of Assets from Customers
Clarifies the requirements of IFRS for agreements in which an entity receives from a customer an item of property, plant, and equipment that the entity must then use either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services (such as a supply of electricity, gas or water)
Applies prospectively to transfers of assets from customers received on or after 1 July 2009 (limited retrospective application permitted).

IASB Press Release (PDF 61kb)

IAS Plus project summary

Exposure Draft ED/2009/1 Post-implementation Revisions to IFRIC Interpretations (Proposed amendments to IFRIC 9 and IFRIC 16)
Proposes to amend IFRIC 9 Reassessment of Embedded Derivatives to exclude embedded derivatives in contracts acquired in combinations of entities or businesses under common control or in the formation of a joint venture and amend IFRIC 16 Hedges of a Net Investment in a Foreign Operation to allow entities to designate as a hedging instrument in a hedge of a net investment in a foreign operation an instrument that is held by the foreign operation that is being hedged
Open for comment until 2 March 2009

ED/2009/1 (PDF 450kb)

Press Release (PDF 43kb)

IAS Plus Project summary

Australian Accounting Standards Board (AASB)
Pronouncement Key dates More information
ED 174 Amendments to Australian Accounting Standards to facilitate GAAP/GFS Harmonisation for Entities within the GGS
Proposes potential changes to the format of financial statements issued by certain government controlled entities, including government departments and statutory authorities
Open for comment until 19 May 2009 ED 174 (PDF 172kb)
ED 174 Amendments to Australian Accounting Standards to facilitate GAAP/GFS Harmonisation for Entities within the GGS
Proposes potential changes to the format of financial statements issued by certain government controlled entities, including government departments and statutory authorities
Open for comment until 19 May 2009

ED 174 (PDF 172kb)

Accounting alert 2008/16

ITC 19 Request for Comment on IASB Discussion Paper Preliminary Views on Financial Statement Presentation
Proposes a 'principle based' format of the financial statements, among other things proposing a categorisation into 'business', 'finance', 'taxes', 'discontinued operations' and other
Open for comment until 31 March 2009

ITC 19 (PDF 1,751kb)

IAS Plus Newsletter (PDF 208kb)

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 meeting 15-19 December 2008 Discussion of a large range of issues in preparation for the release of an exposure draft on fair value measurement, the imminent release of exposure drafts on financial instruments and a number of decisions in the ongoing annual improvements process

Deloitte observer notes

IASB Update (PDF 108kb)

IASB meeting 17-23 January 2009 A number of 'fast-track' exposure drafts proposed, the approval of a new IFRIC Interpretation on transfers of assets from customers, abandonment of proposals for additional disclosures on investments in debt instruments and new developments in the IFRS for private entities project (including requiring amortisation of goodwill and indefinite life intangibles)

Deloitte observer notes

IASB Update (PDF 106kb)

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  IAS Plus Update Newsletters )

IFRS publications
Deloitte comment letters
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  January historical summary on IAS Plus )

  • the IASB and FASB have established an advisory group in response to the recent global financial crisis and this group met for the first time on 20 January 2009 ( background information)
  • the IASB has updated its summary of its response to the global financial crisis ( access the summary)
  • the US Securities and Exchange Commission has submitted to the US Congress a 211-page report on 'fair value accounting' by financial institutions ( Press Release (PDF 34k), SEC Report (PDF 972k))

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