IASB update Agenda Paper 5 - AOSSG · The views expressed in this presentation are those of the presenter, not necessarily those of the IASB or IFRS Foundation. International Financial
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The views expressed in this presentation are those of the presenter,
not necessarily those of the IASB or IFRS Foundation.
International Financial Reporting Standards
November 2013
© IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
IASB update
IFRS technical update
• The new IASB work plan
• Recently issued IFRSs
• Major standards and projects – Financial Instruments
– IASB-FASB MoU projects
– Other projects
• Implementation – Interpretations
– Narrow scope amendments
– Post-implementation Reviews
• Research
November 2013 Project update and the future work plan
2
International Financial Reporting Standards
The views expressed in this presentation are those of the presenter,
not necessarily those of the IASB or IFRS Foundation
The new IASB work plan
November 2013 Project update and the future work plan
IASB agenda consultation
• The new work plan has been shaped by the Agenda Consultation
• Public review of the IASB’s technical programme every three
years
• Helps the IASB establish a broad strategic direction for its work
plan: – Establish a balance between:
– improvements (new IFRSs); and
– maintenance (implementation)
– Determine whether to return to projects that have been deferred
– Identify areas where improvements are needed
4
November 2013 Project update and the future work plan
Technical Programme
• Major projects – Research programme
– Standards-level programme
• Conceptual Framework
• Implementation and Maintenance – Interpretations
– Narrow-scope improvements
– Post-implementation Reviews
5
November 2013 Project update and the future work plan
International Financial Reporting Standards
The views expressed in this presentation are those of the presenter,
not necessarily those of the IASB or IFRS Foundation
Major Standards-level projects
November 2013 Project update and the future work plan
IASB Work plan – as at 5 November 2013 7
November 2013 Project update and the future work plan
Next major project milestonex
2013 Q4 2014 Q1 2014 Q2 2014 Q3
IFRS 9: Financial Instruments (replacement of IAS 39)
Classification and Measurement
(Limited amendments) IFRS
Impairment IFRS
Hedge Accounting IFRS
Accounting for Macro Hedging DP
Insurance Contracts Redeliberations
Leases Redeliberations
Rate-regulated Activities
Interim IFRS IFRS
Rate Regulation DP
Revenue Recognition IFRS
Major IFRSs
International Financial Reporting Standards
The views expressed in this presentation are those of the presenter,
not necessarily those of the IASB or IFRS Foundation
Revenue Recognition
© 2012 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Revenue recognition
• Objective – to develop a single, principle-based revenue standard
for IFRSs and US GAAP
• Expected publication of IFRS Q1 2014
• Effective date 1 January 2017 with early application permitted
9
November 2013 Project update and the future work plan
Main steps to apply Standard
© IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
10
Recognise revenue to depict transfer of goods or services in an amount of consideration to which expected to be entitled
Identify the contract with a customer
Identify the performance obligations in the contract
Determine the transaction price
Allocate the transaction price to the performance obligations
Recognise revenue when (as) a performance obligation is satisfied
1
2
3
4
5
Extensive due process 11
2010 2014 2011
December 2008
Discussion Paper
Preliminary Views on
Revenue Recognition
in Contracts with
Customers
211 comment letters
June 2010
Exposure Draft
Revenue from
Contracts with
Customers
974 comment letters
Roundtables
Q1 2014
Final Standard (IFRS)
IFRS X Revenue from
Contracts with Customers
Effective date: 1 Jan 2017
November 2011
Revised Exposure
Draft
Re-exposure of
Revenue from
Contracts with
Customers
358 comment letters
Roundtables
2008
© IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
• Collectibility (ie, customer credit risk)
• Constraint on estimates of variable consideration
• Implementation Guidance: Licenses
Topics discussed in October 2013
© IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
12
• Public discussion to support initial application of the new Revenue
Standard
• Will not issue authoritative guidance
• Limited life group
Revenue Transition Resource Group 13
International Financial Reporting Standards
The views expressed in this presentation are those of the presenter,
not necessarily those of the IASB or IFRS Foundation
Leases
© 2013 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
14
Leases
• The FASB and IASB have developed a common model
• Lessee accounting: – All leases of more than 12 months are on-balance sheet
– Most equipment leases: recognise amortisation and interest
expense separately
– Most property leases: recognise a single lease expense on a
straight-line basis
• Lessor accounting: – Most equipment leases: recognise lease receivable and residual
asset
– Most property leases: continue to recognise the property being
leases
15
November 2013 Project update and the future work plan
Investors and analysts – General support for proposals
Leases create assets and liabilities
Current disclosures insufficient
Proposals an improvement to financial reporting
Industry-specific analysts agree with income statement proposals
– Some concerns
Any change affects trend information
Some prefer ‘whole asset’/ongoing commitments approach to
measurement
Some prefer single model—treat all leases as financing
Feedback (as of 30 September) 16
Preparers – Most agree leases create assets and liabilities
– Concerns about complexity
Dual model
Materiality / short-term / small ticket leases
– Very few indicate behavioural changes
– Some don’t support the proposals
Costs outweigh benefits
Others (regulators; standard setters; audit firms) – Support recognition of assets and liabilities on the balance sheet
– Prefer single model—treat all leases as financing
– Some audit firms—cost/benefit concerns
Feedback (as of 30 September) 17
Next Steps 18
Issued Exposure Draft May 2013
Comment period ends
September 13, 2013
Joint Redeliberations
Q413
New Standard Issued
TBD
New Standard Effective
TBD
International Financial Reporting Standards
The views expressed in this presentation are those of the presenter,
not necessarily those of the IASB or IFRS Foundation
Other projects
November 2013 Project update and the future work plan
International Financial Reporting Standards
The views expressed in this presentation are those of the presenter,
not necessarily those of the IASB or IFRS Foundation
Rate-regulated Activities
© 2012 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
20
The new Rate-regulated Activities project
IASB started renewed Rate-regulated Activities
project in September 2012
2 distinct paths
Short-term interim solution (Exposure Draft (ED) Regulatory Deferral Accounts published in November 2013 – deadline for comment 4 September 2013)
Longer-term comprehensive project (starting with a research phase to develop a Discussion
Paper (DP))
21
© IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Interim solution: ED Regulatory Deferral Accounts 22
Interim solution:
• permit first-time adopters of IFRS to continue to recognise regulatory balances in accordance with their existing local GAAP (recognition and measurement)
• require the impact of recognising regulatory balances to be isolated in order to allow direct comparison with rate-regulated entities that do not recognise regulatory balances (presentation and disclosure)
© IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Will be issued in Q1 2014
Rate-regulated Activities DP
More research is needed on the nature of different types of rate regulation
• Request for Information-Rate Regulation (issued in March 2013)
• IASB Consultative Group established (first meeting July 2013)
Responses will feed into the DP:
• what information about the effects of rate regulation are most useful to users
• does rate regulation create assets/liabilities (links to restarted Conceptual Framework project)
23
© IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
• Authority of rate regulator is established by statute
• Rates must balance interests of customers and the supplier
• Rate regulation supports monopoly supplier – explicit licence
– other barriers to competition
• Supplier has obligations to maintain supply – “essential” goods/services
– price inelasticity
– low demand risk
Common features (1)
© IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
24
• Rate regulation establishes prices (rates) – limits negotiation with customers
– prices require approval of rate regulator
• Rate-regulatory mechanism provides strong assurance about
certainty of future cash flows that relate to past events – objective mechanism
– ‘automatic’ adjustment
Common features (2)
© IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
25
Rate-regulated activities project timeline
July 2009
IASB published Exposure Draft of
Rate-regulated Activities proposals
September 2010
IASB suspended project
March 2013
IASB published Request for Information -
Rate Regulation (research project)
November 2013
IASB published Exposure Draft of
Regulatory Deferral Accounts
(interim ED)
Q1 2014
IASB expects to publish
Discussion Paper for Rate-regulated
Activities (research project)
Q1 2014
IASB expects to finalise interim
IFRS on Regulatory
Deferral Accounts
26
International Financial Reporting Standards
The views expressed in this presentation are those of the presenter,
not necessarily those of the IASB or IFRS Foundation
Implementation
November 2013 Project update and the future work plan
IASB Work plan – as at 5 November 2013 28
November 2013 Project update and the future work plan
Next major project milestone
Narrow-scope amendments 2013 Q4 2014 Q1 2014 Q2 2013 Q4
Acquisition of an Interest in a Joint Operation
(proposed amendments to IFRS 11) Target IFRS
Actuarial Assumptions: Discount Rate
(proposed amendments to IAS 19) TBD
Annual Improvements 2010-2012 Target IFRS
Annual Improvements 2011-2013 Target IFRS
Annual Improvements 2012-2014 Target ED
Bearer Plants
(proposed amendments to IAS 41) Redeliberations
Clarification of Acceptable Methods of Depreciation
and Amortisation
(proposed amendments to IAS 16 and IAS 38)
Target IFRS
Defined Benefit Plans: Employee Contributions
(proposed amendments to IAS 19) Target IFRS
Implementation
IASB Work plan – as at 5 November 2013 29
November 2013 Project update and the future work plan
Next major project milestone
Narrow-scope amendments 2013 Q4 2014 Q1 2014 Q2 2014 Q3
Amendments to IAS1 (Disclosure Initiative) Target ED
Disclosure Requirements about Assessment of
Going Concern
(proposed amendments to IAS 1)
Target ED
Elimination of gains arising from ‘downstream’
transactions
(Proposed amendments to IAS28)
Target ED
Equity Method: Share of Other Net Asset
Changes
(proposed amendments to IAS 28)
Target IFRS
Fair Value Measurement: Unit of Account Target ED
Put Options Written on Non-controlling Interests
(proposed amendments to IAS 32) Target ED
Recognition of Deferred Tax Assets for
Unrealised Losses
(proposed amendments to IAS 12)
Target ED
Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture
(proposed amendments to IFRS 10 and IAS 28) Target IFRS
Separate Financial Statements (Equity Method)
(proposed amendments to IAS 27) Target ED
Implementation (cont.)
International Financial Reporting Standards
The views expressed in this presentation are those of the presenter,
not necessarily those of the IASB or IFRS Foundation
Bearer Plants
© 2012 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
30
Overview
Biological assets
Plants Animals
© 2013 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
31
IAS 41 Fair value through
profit or loss
Current
requirements for
agricultural activity
Overview
Biological assets
Plants
Bearer plants Produce
growing on bearer plants
Other plants
Animals
© 2013 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
32
IAS 16 Cost
or revaluation
model
IAS 41 Fair
value through
profit or loss
Proposed
requirements for
agricultural
activity
33 Scope of the amendments
• A bearer plant is plant that meets all of the following:
• used in production or supply of agricultural produce
• expected to bear produce for more than one period
• not intended to be sold as a living plant or harvested as
agricultural produce
• except incidental scrap sales
© 2013 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
Scope of the amendments
The following are not bearer plants:
• Plants to be harvested as agricultural produce
trees grown for lumber
• Plants both to produce agricultural produce and to
be harvested as agricultural produce or sold (other
than as scrap)
trees used for lumber and fruit
• Plants cultivated for sale only
plants in a garden centre
• Annual crops
© 2013 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
34
International Financial Reporting Standards
The views expressed in this presentation are those of the presenter,
not necessarily those of the IASB or IFRS Foundation
Post-implementation Reviews
November 2013 Project update and the future work plan
International Financial Reporting Standards
The views expressed in this presentation are those of the presenter,
not necessarily those of the IASB or IFRS Foundation
IFRS 3 Business Combinations
© 2013 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
37 PiR of IFRS 3 Business Combinations
• The PiR of IFRS 3 Business Combinations is the IASB’s second review.
• The IASB discussed the PiR of IFRS 3 at its July 2013 meeting. At that meeting, the
IASB tentatively agreed that the scope of the PiR of IFRS 3 will include:
– the whole Business Combinations project (ie the first and second phases of the
project), which resulted in the issuance of IFRS 3 (2004) and IFRS 3 (2008); and
– any consequential amendments resulting from the Business Combinations project
(ie amendments to IAS 12 Income Taxes, IAS 27 Consolidated and Separate
Financial Statements, IAS 36 Impairment of Assets and IAS 38 Intangible Assets)
© 2013 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
38 What we have heard so far • The following tables summarise the main areas of concern raised so far:
Conceptual matters
• Non-amortisation of goodwill: impairment test or amortisation?
• Recognition of intangibles separately from goodwill. Different recognition
criteria for intangibles: IFRS 3 vs. IAS 38 Intangible Assets.
• Different accounting treatments between IFRS 3 and other IFRSs: acquisition-
related costs, contingent consideration.
• Step acquisitions: recognition of gains/losses when remeasuring previously
held interests.
• Remeasurement of contingent consideration and recognition of gains/losses in
profit or loss.
• Measurement inconsistencies between initial recognition and subsequent
measurement for certain assets/liabilities; for example, decommissioning
liabilities.
© 2013 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
39 What we have heard so far—continued
Matters for which further guidance or clarification may be needed
• Definition of a business
• Measurement of certain assets and liabilities at fair value has proved to be challenging (eg
intangibles, contingent consideration, previously held interests).
• Measurement of the settlement of pre-existing customer relationships.
• Distinguishing contingent consideration from remuneration.
• Measurement option for non-controlling interests (NCIs): should the option be per business
combination or should it be an accounting policy choice for all business combinations of an
entity?
• Accounting for impairment testing of goodwill when NCIs are recognised. In particular,
clarification of the requirements relating to:
(a) calculating the ‘gross up’ of the carrying amount of goodwill when partial goodwill is
recognised because NCI is measured on a proportionate share basis;
(b) allocation of impairment losses between the parent and NCI; and
(c) reallocation of goodwill between NCI and controlling interests after a change in a parent’s
ownership interest in a subsidiary that does not result in a loss of control.
© 2013 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
40 What we have heard so far—continued
Matters on which further guidance or clarification may be needed
• Mandatory purchases of NCIs in business combinations and put options written on NCIs.
• Accounting treatment of acquisition-related costs and step acquisitions in separate financial
statements.
© 2013 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
41 What have we heard so far—continued
Matters raised by users
• Information needed to be able to estimate the enterprise value of the acquiree. What are the
debts, pension liabilities, finance lease obligations assumed etc?
• Some users have stated that the measurement of assets and liabilities at fair value (eg
tangible/intangible assets, inventory) impairs the ability to assess the underlying performance
in the quarters subsequent to an acquisition. More information needed about inputs and
assumptions used in the valuations (sometimes ‘significant step-ups’ are observed).
• Require disclosure of the carrying amounts of the assets acquired and liabilities assumed
(former paragraph 67 of IFRS 3 (2004) removed in 2008).
• Information about the nature of the intangible assets acquired (intangibles with finite lives,
indefinite lives, intangibles that are sustained through expenditure that goes to profit or loss).
• Different views on the usefulness of goodwill amortisation vs impairment test.
• Comparative information should be required for proforma disclosures.
• It is difficult to track subsequent performance. Information about subsequent performance
would be useful for assessing whether an acquisition was successful.
© 2013 IFRS Foundation. 30 Cannon Street | London EC4M 6XH | UK. www.ifrs.org
42 Next steps
• We will bring the result of the consultations and activities undertaken during Phase I to
the November 2013 IASB meeting.
• At that meeting we will propose to the IASB the main areas that the Request for
Information (RfI) should focus on. Phase I of the PiR will conclude with the publication
of the RfI, which will set the scope for Phase II of the PiR.
• We aim to publish the RfI early next year with a comment period of 120 days.
International Financial Reporting Standards
The views expressed in this presentation are those of the presenter,
not necessarily those of the IASB or IFRS Foundation
Research
November 2013 Project update and the future work plan
The standard-setting process 44
Research Discussion
Paper
Post-
implementation
Review
Exposure
Draft Final IFRS
Research
programme
Standards
programme
Review
programme
Proposal
Research programme
• A broad research and development programme
• Emphasis on defining the problem – Identify whether there is a financial reporting matter that justifies an
effort by the IASB
– Evidence based
• Discussion Papers – IASB staff papers
• Research Papers – Commissioned from others in the IFRS network
• Leads to project proposals, or recommendations not to develop an
IFRS
45
November 2013 Project update and the future work plan
Standards-level Programme
• Major projects feed from the research programme
• Narrower scope improvements feed from the interpretations
committee and the other implementation outreach
• More focused and disciplined development of standards
46
November 2013 Project update and the future work plan
Priority research projects
• Rate-regulated activities
• Business combinations under common control
• Discount rates
• Equity method
47
November 2013 Project update and the future work plan
Priority research projects
• Emissions trading schemes
• Extractive activities | Intangible assets | Research and
Development activities
• Financial Instruments with the Characteristics of Equity
• Foreign Currency Translation
• Liabilities – amendments to IAS 37
• Hyperinflation, and high inflation
48
November 2013 Project update and the future work plan
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