#cpacongress b1: an accounting standard setting update: forthcoming standards and major projects...

#CPACONGRESS

B1: An accounting standard setting update: Forthcoming standards and major projects

Glenn Brady CPA

Director - Australian Activities

Australian Accounting Standards Board

Thursday 20 November 2014

2:10PM - 3:00PM

Accounting Standard Setting Update Forthcoming Standards and Major Projects

CPA Congress

Glenn BradyDirector – Australian Activities

© Australian Accounting Standards Board 2014

3Agenda


IASB agenda

Domestic agenda • NFP / public sector • Application issues

Addressing complexity in financial reporting

AASB communications and engagement

4AASB work program

Domestic Agenda

Research

IASB Agenda

NFPs

Public Sector

RDR

SPR

Reporting entity

Conceptual Framework

ETS

PIRs

FI

Leases

Insurance

Narrow Scope

Interpret’ns

Disclosure Initiative


5

Revenue from Contracts with Customers


6Revenue from Contracts with Customers

Status

• IFRS 15 issued by the IASB in May 2014

• AASB 15 expected to be issued by the AASB in Q4 2014

Effective date and transition

• annual reporting periods beginning on or after 1 January 2017. Early application permitted

• retrospective application (with optional practical expedients)

Objective is to develop a common revenue recognition standard for IFRSs and US GAAP that clarifies the principles for recognising revenue and that can be applied consistently across various transactions, industries and capital markets.


7A framework for recognising revenue

Recognise revenue on transfer of goods or services to a customer at an amount that reflects the amount of consideration to which the entity expects to be entitled in exchange for those goods or services

1. Identify contract(s) with customer

2. Identify separate performance obligations

3. Determine transaction price

4. Allocate transaction price

5. Recognise revenue when performance obligation is satisfied

Steps to apply the core principle

Core principle


8

Financial instruments


9Financial instruments: Impairment

Status

• IFRS 9 (2014) issued by the IASB in July 2014

• AASB 9 (2014) expected to be issued by the AASB in Q4 2014

Effective date and transition

• annual reporting periods beginning on or after 1 January 2018. Early application permitted

The main objective is to provide users of financial statements with more useful information about an entity’s expected credit losses on financial instruments by requiring an entity to:

• recognise expected credit losses at all times; and

• update the amount of expected credit losses at each reporting date to reflect changes in the credit risk of the financial instruments.


10AASB 9 Early application

Version of AASB 9

Requirement Classification and

measurement of assets

Classification and

measurement of assets and liabilities

Hedge accounting

Complete version

Classification and measurement

Own credit risk * * *

Hedge accounting

Improvements to C&M

Impairment

Note: Withdrawal of earlier versions


* Own credit risk amendments can be applied in isolation of the other AASB 9 amendments

11

Leases


12Leases

Status

• Redeliberations have commenced after considering feedback received on 2nd Exposure Draft, published in May 2013

Next steps

• Redeliberations are continuing

• Standard expected to be issued in 2015

Objective is to provide greater transparency about leverage, the assets an entity uses in its operations, and the risks to which it is exposed from entering into lease transactions


13Lessee accounting – ED proposals

All leases longer than 12 months on balance sheet – lease contract creates a ‘right-of-use’

Lessee Right-of-Use Model

Recognise right-of-use asset Liability to make estimated future lease payments

Type A Leases (Interest and Amortisation

Method)

Type B Leases

(Single lease expense)

Recognised at amortised cost (applying the effective interest

method)

Short-term leases

Recognise only lease expense


14Latest IASB decisions – a simplification?

Recognise lease asset and

lease liability

Recognise only lease expense

Type A leases (single lessee accounting model)

Expense recognition based on Interest and Amortisation method

i.e. 12 months or less (including leases with options to renew that are not reasonably

certain)

Short-term leases

‘Small ticket’ leases

i.e. small non-specialised assets


15

Domestic agenda:NFP / public sector projects


16Completing the current domestic NFP/ public sector agenda (cont.)

Key projects

Service Performance Reporting

Service Concession

Arrangements

Income from

Transactions of NFP Entities


17Income of not-for-profit entities

Status

• AASB ED targeted for Q4 2014

Effective date

• Expected to be 1 January 2017; early application permitted

Objective is to replace AASB 1004 Contributions with new requirements for recognising income from transactions of Australian NFP entities in the public and private sectors. Those requirements will be based on AASB 15 Revenue from Contracts with Customers.


18Income of not-for-profit entities

Identify a contract

Identify performance obligations

Enforceable rights and obligations

Key issues

Donations or other contribution

No identified customer required

Recognised as income

Disclosure Additional NFP requirements


19

Domestic agenda:Application issues


20Recycling of property, plant and equipment

Status

• Initiated in September 2014 in response to constituent submissions

• Not limited to not-for-profit entities

How can you get involved in the project?

• Let us know your views: Targeted outreach Q4 2014

Objective is to consider the accounting for recyclable assets in accordance with the requirements of AASB 116 Property, Plant and Equipment.


21DRC as a measure of value in use

Status

• Initiated in September 2014 in response to constituent submissions

• The Board is concerned that it is unclear that depreciated replacement cost as used in AASB 136 does not have the same meaning as current replacement cost as used in AASB 13


• Let us know your views: ED expected Q4 2014 – Q1 2015

Objective is to clarify the application of depreciated replacement cost as a measure of value in use for certain assets of not-for-profit entities.


22FV disclosures for NFP public sector entities

Status

• Initiated in September 2014 in response to feedback by not-for-profit public sector constituents of their concerns relating to the disclosure requirements of AASB 13


• Let us know your views: Targeted outreach Q4 2014

Objective is to consider whether to modify the disclosures specified by AASB 13 for not-for-profit public sector entities.


23

Addressing complexity in financial reporting


24 Disclosure initiative

IASB short-term projects

• Materiality

• IAS 1 amendments

IASB medium-term projects

• Research project on presentation and disclosure in IFRS

• Standards-level review of disclosure

Objective is explore how disclosures in financial reporting can be improved.


25

• A pragmatic and substantive response to the need to reduce the burden of disclosure requirements on Australian reporting entities

• Effective from 1 July 2013• Post-implementation review will commence in 2015

Reduced disclosure regime (RDR)


26Reporting entity: AASB Research Report

Key findings

• Majority lodge SPFS (58.7%) large proprietary 80% lodge SPFS

• Classification as reporting entity ≠ SAC 1 factors

• Variation in application of the reporting entity concepto Different views on the definition of the reporting entity

Next steps

• Policy implications are being discussed with key stakeholders

Examined the extent to which financial statements lodged with ASIC are GPFSs or SPFSs and the accounting policies applied in preparing SPFSs.


27 Reporting entity: Recent AASB decisions

• Tentatively decided that the application paragraphs of Standards that currently apply to corporate non-reporting entities should be amended to apply to reporting entities/GPFSs only

• Considerable consultation with stakeholders should be undertaken before commencing a formal due process of proposing the amendment

AASB 107

AASB 108

AASB 101

AASB 1031

AASB 1048

AASB 1053

AASB 1054


28

AASB communications and engagement


29

• Improved work plan and project communications

• LinkedIn and web alerts• Opportunities for

engagement– Exposure drafts and

invitations to comment– Project specific outreach

and consultation– Research Centre

publications– Post-implementation

reviews

Communicating and engaging with you


30Your chance to share your views

Consultation topic Comments close

ED 253 Recognition of Deferred Tax Assets for Unrealised Losses

20 November

ED 254 Measuring Quoted Investments in Subsidiaries, Joint Ventures and Associates at Fair Value

12 December

ITC 32 Reporting the Financial Effects of Rate Regulation 15 December


31

www.aasb.gov.au

• Follow us on LinkedIn

• Register for Alerts to keep up to date

• See AASB Work Program and Project Summaries for the latest developments on AASB projects

• See Work in Progress section for all Exposure Drafts and AASB submissions

• Use Pronouncements search to get a list of mandatory Standards or Interpretations applicable to a particular reporting period

Further information


mailto:http://www.linkedin.com/company/aasb?trk=nmp_rec_act_company_photo

32

Glenn Brady

Director – Australian Activities

(03) 9617 7605

[email protected]

Contact details


33AASB disclaimer

This presentation provides personal views of the presenter and does not necessarily represent the views of the AASB or other AASB staff. Its contents are for general information only and do not constitute advice. The AASB expressly disclaims all liability for any loss or damages arising from reliance upon any information in this presentation. This presentation is not to be reproduced, distributed or referred to in a public document without the express prior approval of AASB staff.


#cpacongress b1: an accounting standard setting update: forthcoming standards and major projects...

Documents

pm slide

engagement slide

update forthcoming standards

hedge accounting improvements

recognising revenue

expected credit losses

reporting date

credit risk