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Monthly roundup - May 2013

Staying on top of developments

Author: Deepesh Malik and Moana Overton, Accounting Technical Group

May 2013 edition
Issued 06 June 2013

In this edition:

Monthly highlights

IASB re-exposes proposals on lease accounting

The International Accounting Standards Board (IASB) has re-exposed its proposed approach for the recognition and measurement of leases as ED/2013/6 Leases (“revised ED”).

Re-exposing the revised proposals on lease accounting is a significant point in the long debate over whether all leases should be recorded on balance sheet. The IASB argue that all leases convey a right of use of the leased asset and that right and a matching liability should be recorded on balance sheet.

This revised ED addresses some of the concerns raised in submissions on the IASB’s original lease exposure draft published in August 2010 (the “2010 ED”), particularly around the profile of recognition in the income statement and the complex judgements around lease term and variable lease payments. Given the significance of changes to the proposals, the IASB has decided to re-expose the lease accounting proposals for comment.

For lessees, the revised ED proposes the recognition of a liability and a right-of-use asset for all leases with a profit or loss impact dependent on the classification of a lease. Under the proposals, leases would be classified as either ‘Type A’ or ‘Type B’ depending on the nature of the underlying asset:

  • Type A: leases of assets other than property, unless the lease term is an insignificant portion of the underlying asset’s economic life or the present value of fixed lease payments is insignificant relative to the fair value of underlying asset – i.e. most leases of equipment or vehicles would be type A leases
  • Type B: leases of property, including land, a building, or part of a building

This revised model results in what in profit & loss looks like operating lease accounting for property leases, while most equipment leases will be subject to the front-loaded expense recognition pattern. The lessor model in the revised ED is similar to current lease accounting with some nuances for the recognition of revenue and discounting of the residual asset. The proposals are only applicable for leases with a lease term of more than 12 months.

The proposals would significantly affect the accounting for lease contracts by both lessees and lessors. In addition, changes in recognition, measurement, and presentation of leases under the revised proposals may significantly impact financial statement metrics.

Submissions are due to the Australian Accounting Standards Board by 14 August 2013 and to the IASB by 13 September 2013.

Deloitte’s global edition of IFRS in focus outlines the proposals included in the May 2013 revised ED 'Leases' and summarises some of the significant changes from existing IFRSs.

Additional resources available:


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 June 2013 financial reporting cycle summary.)

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

Exposure Draft ED/2013/6 Leases

For lessees, the ED proposes the recognition of a liability and a right-of-use asset for all leases with a profit or loss impact dependent on the classification of a lease.

The lessor model in the ED is similar to current lease accounting with some nuances for the recognition of revenue and discounting of the residual asset

Comments due by 13 September 2013

IFRS in focus (PDF)


Deloitte Podcasts


IAS Plus article

IFRIC 21Levies

Provides guidance on when to recognise a liability for a levy imposed by a government, both for levies that are accounted for in accordance with IAS 37 'Provisions, Contingent Liabilities and Contingent Assets' and those where the timing and amount of the levy is certain

Effective for annual periods beginning on or after 1 January 2014

IFRS in focus (PDF)


IAS Plus article

Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36 Impairment of Assets)

Narrow-scope amendments to IAS 36 Impairment of Assets address the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal

Effective for annual periods beginning on or after 1 January 2014

IFRS in focus (PDF)


IAS Plus article

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

ED 240 Regulatory Deferral Accounts

Incorporates IASB ED/2013/5

Proposed interim standard - intended to allow entities that currently recognise regulatory assets and regulatory liabilities in accordance with their previous GAAP to continue to recognise the effects of rate regulation under IFRSs until the longer term rate-regulated activities project is completed

Comments to the AASB due by 5 August 2013 and to the IASB by 4 September 2013

IFRS in focus (PDF)


ED 240 (PDF)

ED 241 Amendments to AASB 1038 arising from AASB 10 in relation to consolidation and interests of policyholders

Proposes to remove the specific requirements in relation to consolidation from AASB 1038 Life Insurance Contracts, which would leave AASB 10 Consolidated Financial Statements as the sole source for consolidation requirements applicable to life insurer entities

Comments to the AASB due by 7 August 2013

ED 241 (PDF)

ED 242 Leases

Incorporates the IASB ED/2013/6, discussed above

Comments to the AASB due by 14 August 2013 and to the IASB by 13 September 2013

ED 242 (PDF)

Tier 2 Supplement to ED 235 'Recoverable Amount Disclosures for Non-Financial Assets'

Sets out the disclosures proposed in AASB ED 235 Recoverable Amount Disclosures for Non-Financial Assets from which it is proposed entities applying Tier 2 reporting requirements should be exempt

Comments to the AASB due by 15 July 2013

Tier 2 supplement (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
14-15 May 2013

Key issues discussed include:

  • IAS 10 Events after the Reporting Period — Reissue of financial statements
  • IAS 28/IFRS 3 Business Combinations — Associates and common control
  • IAS 7 Statement of Cash Flows: Disclosures — Definition of cash equivalents
  • IFRS 2 Share-based Payment — Timing of the recognition of intercompany recharges
  • IFRS 3 Business combinations — Input to IFRS 3 Post Implementation Review
  • IAS 19 Employee Benefits — Determination of discount rate
  • IAS 28 Investments in Associates and Joint Ventures — Elimination of intercompany profits between an issuer and its joint venture
  • IAS 32 Financial Instruments: Presentation — Classification of instruments when issuer has choice over how obligation is settled
  • IFRS 7 Financial Instruments: Disclosures — Servicing agreements
  • IFRS 10 Consolidated Financial Statements — Effect of protective rights on an assessment of control
  • Annual Improvements (2011-2013 cycle)
  • IAS 12 Income Taxes — Recognition of deferred tax assets for unrealised losses
  • IFRS 2 Share-based Payment — Transactions in which the manner of settlement is contingent on future events
  • IFRS 13 Fair Value Measurement — Portfolios
  • IFRS 5 Non-current Assets Held for Sale and Discontinued Operations - Classification in conjunction with a planned IPO and change of disposal method

Deloitte Observer notes


IFRIC update (PDF)

IASB regular meeting
21- 24 May 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)

AASB regular meeting
29-30 May 2013

Key issues discussed include:

  • Financial Instruments
  • Investment Entities
  • IASB Request for Information: Rate Regulation
  • IASB Conceptual Framework Project Update
  • Superannuation Entities
  • Repeat Application of AASB 1 and Disclosure Requirements
  • IFRS Interpretations Committee Update
  • Proposed Withdrawal of AASB 1031 Materiality
AASB alert (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 podcasts
Deloitte comment letters

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 May 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 Accounting Standards Board (AASB) has issued an agenda decision addressing the Board decision not to proceed with issuing a Standard on GAAP/GFS harmonisation for entities within the GGS
  • A revised version of ASX Guidance Note 8 'Continuous Disclosure' and disclosure-related listing rule amendments came into effect on 1 May 2013 (ASX Company update 02/13).
International Accounting Standards Board
  • The IASB has published a feedback statement (PDF) summarising the discussions at a forum hosted by the IASB on financial information disclosure, and outlining its response to the matters raised (IAS Plus article)
  • The IASB has updated its work plan - the timing of expected milestones have been deferred or clarified in relation to general hedge accounting, annual improvements and other narrow scope projects (IAS Plus article).
Other global news
  • The European Financial Reporting Advisory Group Technical Expert Group (EFRAG TEG) has published a draft comment letter on the IASB's exposure draft ED/2013/5 'Regulatory Deferral Accounts'. In the proposed comment letter the EFRAG makes clear that it does not agree with the pursuance of this interim project (IAS Plus article).

Related links

Related links

  • Monthly roundup - December 2013
    Key considerations for the December reporting season and ASIC findings from 30 June 2013 financial reports.
  • 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 - January 2013
    Financial reporting developments during January 2013. Monthly highlights discuss the EFRAG concerns on Hedge Accounting proposals and identification of a 'business' in a transaction
  • Monthly roundup - January 2009
  • 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 - April 2010
    Summary of developments in financial reporting during April 2010. Monthly highlight discusses the AASB's April meeting.

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