Welcome to the IASB Update


The IASB met in public from 27-29 April 2015 at the IASB offices in London, UK.

The topics for discussion were:

• Fair Value Measurement
• Revenue from Contracts with Customers
• IFRS implementation issues
• Disclosure Initiative
• High Inflation

The IASB met on 27 April 2015 to discuss the proposals in the September 2014 Exposure Draft Measuring Quoted Investments in Subsidiaries, Joint Ventures and Associates at Fair Value (Proposed amendments to IFRS 10, IFRS 12, IAS 27, IAS 28 and IAS 36 and Illustrative Examples for IFRS 13) (the Exposure Draft). Specifically, the IASB discussed the example proposed in the Exposure Draft that illustrates the application of paragraph 48 of IFRS 13 Fair Value Measurement.

The IASB decided that the illustrative example proposed in the Exposure Draft appropriately illustrates the application of paragraph 48 of IFRS 13. That is, if an entity elects to use the exception in paragraph 48 of IFRS 13, the appropriate fair value measurement of the net risk exposure arising from a group of financial assets and financial liabilities whose market risks are substantially the same, and whose fair value measurement is categorised within Level 1 of the fair value hierarchy, would be determined by multiplying the financial instruments included in the resulting net position by the corresponding unadjusted Level 1 price. All fourteen IASB members agreed with this decision.

The IASB noted that the proposed illustrative example to IFRS 13 is non-authoritative, and the comments received did not reveal significant diversity in practice. Accordingly, the IASB concluded that it was unnecessary to publish the proposed illustrative example in IFRS 13 as a separate document. Thirteen IASB members agreed with this decision. One member disagreed.

Next steps

The IASB will continue the discussions on the remaining aspects of the project in future meetings.

The IASB met on 28 April 2015 to discuss the following issues related to IFRS 15 Revenue from Contracts with Customers:

1. effective date of IFRS 15; and
2. collectability considerations—issues emerging from meetings of the Transition Resource Group for Revenue Recognition (TRG)

Effective date of IFRS 15 (Agenda Paper 7A)

The IASB tentatively decided to defer the effective date of IFRS 15 by one year. Accordingly, entities would apply IFRS 15 for annual reporting periods beginning on or after 1 January 2018. Early application of the Standard continues to be permitted.

Eleven IASB members agreed and three disagreed.

Collectability considerations (Agenda Paper 7B)

The IASB tentatively decided not to make any clarifications or amendments to IFRS 15 in the light of the issues regarding the collectability highlighted during the TRG discussions in January 2015.

Twelve IASB members agreed and two disagreed.

Next steps

The IASB will publish a narrow-scope Exposure Draft regarding the effective date of IFRS 15, with a comment period of no less than 30 days. The IASB intends to finalise its discussions regarding the effective date of IFRS 15 at the July 2015 IASB meeting.

The IASB discussed the recommendations from the IFRS Interpretations Committee (‘the Interpretations Committee’) for a narrow scope amendment of paragraph 57 of IAS 40.

The IASB observed that, in accordance with paragraph 57, transfers into, or out of, investment property should occur when and only when there has been a change in use which is evidenced by the circumstances mentioned in paragraphs 57 (a) –(d). The IASB further observed that the use of the words “when and only when” in paragraph 57 implies that a change in use is limited to one of the circumstances described in paragraphs 57(a) –(d) and that the list in paragraphs 57(a) –(d) is exhaustive.

The IASB tentatively agreed to amend paragraph 57 to reinforce the principle for transfers into, or out of, investment property in IAS 40 to specify that:

1. a transfer into, or out of investment property should be made only when there has been a change in use of the property; and
2. such a change in use would involve an assessment of whether the property qualifies as an investment property. That change in use should be supported by evidence.

As recommended by the Interpretations Committee, the IASB tentatively decided that the list of circumstances set out in paragraph 57(a)–(d) should be re-presented as examples of evidence that a change in use has occurred, rather than as an exhaustive list.

All 14 IASB members agreed with this decision.

The IASB tentatively decided not to require disclosure of the evidence used to support a change in use for each transfer into, or out of, investment property. This disclosure had been recommended to the IASB by the Interpretations Committee.

Ten IASB members agreed with this decision and four disagreed.

Next steps

The IASB will consider the due process undertaken on the proposed narrow-scope amendment to IAS 40 at a future meeting. The IASB expects to issue an Exposure Draft of this proposed amendment in Q3 of 2015.






Annual Improvements to IFRSs 2014–2016 Cycle (Agenda Paper 12B)

On 28 April the IASB confirmed it would proceed with publishing an Exposure Draft arising from the Annual Improvements to IFRSs 2014–2016 Cycle. The Exposure Draft would include the following two proposed amendments that had been tentatively approved by the IASB:

1. IFRS 1 First-time Adoption of International Financial Reporting Standards: short-term exemptions for first-time adopters. This amendment was tentatively approved by the IASB in December 2013.
2. IAS 28 Investments in Associates and Joint Ventures: clarification that measuring investees at fair value through profit or loss is an investment- by- investment choice. This amendment was tentatively approved by the IASB in January 2015.

All 14 IASB members agreed with this decision.

Next steps

The IASB will consider the due process undertaken on the annual improvements to IFRSs 2014-2016 Cycle at a future meeting. The IASB expects to issue an Exposure Draft on Annual Improvements to IFRSs 2014–2016 Cycle in Q3 of 2015.






Draft IFRIC Interpretation—Accounting for uncertainties in income taxes
Due process document (Agenda Paper 12C)

At its meeting on 28 April 2015, the IASB considered a draft IFRIC Interpretation—Accounting for uncertainties in income taxes, developed by the Interpretations Committee. The draft Interpretation proposes guidance on:

• the recognition and measurement of income tax payable (recoverable) when there are uncertainties for income taxes; and
• the determination of units of measurement for uncertainties and on assumptions for tax authorities’ examinations and would explain the existing relevant disclosure requirements.

The IASB reviewed the due process steps relating to the development and publication of the draft IFRIC Interpretation Accounting for uncertainties in income taxes. All IASB members confirmed that they are satisfied that the IASB has undertaken sufficient due process steps and therefore instructed the staff to start the balloting process.

One IASB member indicated a possible intention to object to the release of the draft Interpretation.

Next steps

The release of the draft Interpretation is expected in Q2 2015.

The IASB met on 29 April to discuss the Principles of Disclosure and Materiality projects as part of its Disclosure Initiative.

Materiality

The IASB reviewed the due process steps taken in the project. All thirteen IASB members present confirmed that they are satisfied that the IASB has completed all of the necessary due process steps to date and agreed that:

1. a limited Basis for Conclusions should be issued with the Exposure Draft of a proposed Practice Statement Application of materiality to financial statements; and
2. a comment period of 120 days is sufficient.

The IASB therefore instructed the staff to commence the balloting process for the Exposure Draft. No IASB members indicated that they intend to dissent from its publication.

Agenda Paper 11B: Aligning the definition and additional paragraphs for IAS 1

The IASB tentatively decided that a general disclosure Standard (such as IAS 1 Presentation of Financial Statements or a replacement Standard) should include proposed amendments to the definition of materiality and clarifying paragraphs on the key characteristics of materiality.

Twelve of the thirteen IASB members present agreed with this decision and one disagreed.

Principles of Disclosure

Agenda Paper 11C: Aggregation and summarisation of information

The IASB tentatively decided that the Principles of Disclosure Discussion Paper should include proposed amendments to the materiality and aggregation section of IAS 1 Presentation of Financial Statements. That section would be eventually be included in a general disclosure Standard (such as IAS 1 or a replacement Standard). Those amendments would provide additional guidance on:

1. when an item should be separately presented in a primary financial statement or in the notes; and
2. how much detail should be disclosed in the notes with regard to a specific disclosure requirement.

Twelve of the thirteen IASB members present agreed with this decision and one disagreed.

Agenda Paper 11E: Content of the notes

The IASB tentatively decided that a general disclosure Standard (such as IAS 1 or a replacement Standard) should include:

1. a description of the role of the notes; and
2. a central set of disclosure objectives built on the objective of Financial Statements and the role of the notes.

In addition, the IASB tentatively decided that the Discussion Paper should include two approaches for developing these objectives, either focusing on:

1. the different types of information disclosed in the notes; or
2. how users commonly assess the prospects for future net cash inflows to an entity and management’s stewardship of that entity’s resources.

Twelve of the thirteen IASB members present agreed with this decision and one disagreed.

Agenda Papers 11F: Drafting of disclosure requirements

The IASB tentatively decided to field test a proposed new approach to drafting the disclosure requirements for Standards to be included in the Principles of Disclosure Discussion Paper, with particular reference to:

1. IAS 16 Property, Plant and Equipment as discussed in Agenda Paper 11G; and
2. IFRS 3 Business Combinations as discussed in Agenda Paper 11H.

The IASB plans to field test the proposed approach with preparers, auditors, regulators and users in different jurisdictions, prior to publication of the Discussion Paper.

All thirteen IASB members present agreed with this decision.

Next steps

At its May 2015 meeting, as part of the Principles of Disclosure project, the IASB plans to discuss:

1. Accounting policies (follow-up);
2. Review of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors;
3. Presentation on the face or in the notes; and
4. Non-IFRS Information (follow-up).

The IASB discussed high inflation, a project in the research program. The purpose of this project is to consider the requests made by the Federación Argentina de Consejos Profesionales de Ciencias Económicas, the Argentinian standard-setter, and the Group of Latin American Standard Setters (GLASS) to:

• eliminate or reduce the cumulative inflation rate threshold currently included in IAS 29 Financial reporting in Hyperinflationary Economies to identify when hyperinflation exists; and
• to modify the procedures for reporting the adjustments resulting from restating the financial statements.

The IASB tentatively decided that it would not propose lowering the inflation threshold in IAS 29 and nor would it do any work on developing an alternative to IAS 29 or a Standard that addresses inflation more generally. The project will therefore be designated as having a low priority but will remain on the research programme to enable interested parties to comment on these decisions in the Agenda Consultation. The 13 IASB members present supported this decision.

In addition, the IASB plans to ask its Emerging Economies Group to examine whether there could be merit in developing disclosure requirements for entities in jurisdictions suffering from high inflation.