ifrs news - grant thornton türkiye · be unchanged under ifrs 10. ... equity accounting. although...

Quarter 4 2013

Our final edition of 2013 starts with a lookat several important Standards that will beeffective for the first time for companieswith December 2013 year ends.

We then discuss the proposedrevision of the IASB’s ConceptualFramework and its IFRS for SMEsbefore moving on to look at a round-upof IFRS-related news at Grant Thornton,as well as a more general round-up of activities affecting the IASB.

We end with an overview of theproposals that the IASB currently has out for comment, and the implementationdates of newer Standards that are not yet mandatory.

Welcome to IFRS News – a quarterly update from the Grant ThorntonInternational Ltd IFRSteam. IFRS News offers a summary of the moresignificant developments in International FinancialReporting Standards (IFRS)along with insights intotopical issues and commentsand views from the GrantThornton International LtdIFRS team.

IFRS News

IFRS 10 Consolidated Financial StatementsIFRS 10 introduces a new, principle-based definition of control that will beapplied to all types of investee (including special purpose entities and moreconventional voting interest entities) to determine which are consolidated. TheIASB hopes that a single model will make it more difficult to use specialstructuring to avoid consolidation of entities that are controlled in substance.

IFRS 10 also aims to promote clarity with new or amended guidance in areassuch as:• control as the result of a dominant minority shareholding (de facto control)• the role of potential voting rights such as options and convertible bonds• distinguishing control in an agency relationship.

We expect that, in most cases, conclusions as to what should be consolidated willbe unchanged under IFRS 10. However, some ‘borderline’ consolidationdecisions that were taken under the previous Standard (IAS 27) will inevitablyneed to be revised and this will of course have important implications.

December 2013 year ends – are youready for the changes?

2 IFRS News Quarter 4

With a number of newaccounting Standardscoming into effect forannual periods beginningon or after 1 January 2013,now is the time to ensurethat all necessary changesto your 2013 financialstatements have beenidentified. Plans toimplement any necessarychanges to accountingpolicies and disclosuresshould be well underway.

The following paragraphs are a briefreminder of some of the most significantchanges that will affect companies withDecember 2013 reporting dates. For a full list of new Standards andamendments that will come into effectfor December 2013 year ends, see our‘Effective dates of new standards andIFRIC interpretations’ at the back of the newsletter.

Now is the time to ensure that all necessary changes to

your 2013 financial statements have been identified.

More information on the requirements of IFRS 10can be found in our August 2012 detailed guide onthe Standard ‘Under Control? A practical guide toapplying IFRS 10 Consolidated Financial Statements’.Please get in touch with your local IFRS contact toobtain a copy.

Under control?

A PRACTICAL GUIDE TO APPLYING IFRS 10 CONSOLIDATED FINANCIAL STATEMENTS AUGUST 2012

IFRS 11 Joint ArrangementsIFRS 11 ‘Joint Arrangements’ replacesIAS 31 ‘Interests in Joint Ventures’. Itaims to enhance the accounting for, andthe quality of information beingreported about, joint arrangements. Itdoes this by establishing a principle-based approach that requires an entityto recognise its contractual rights andobligations from its joint arrangements.

Arrangements described in IAS 31as jointly controlled entities will nowbe classified as either joint ventures orjoint operations based on the economicsubstance of the parties’ rights andobligations. In practice we expect thatthese arrangements will more often beclassified as joint ventures, for whichIFRS 11 requires the use of the equityaccounting method (the accountingpolicy option to use proportionateconsolidation is removed). IFRS 11also removes IAS 31’s current

terminology of ‘jointly controlledoperations’ and ‘jointly controlledassets’. Most such arrangements willfall into the newly defined category of‘joint operation’.

The Standard is likely to have onlya small effect, if any, on arrangementsthat involve jointly controlledoperations or jointly controlled assets.The elimination of proportionateconsolidation of venturers’ interests ina joint venture will however have a

significant impact on the manycompanies that have selected thisaccounting policy in preference toequity accounting.

Although net assets will not beaffected by the elimination ofproportionate consolidation, theremoval of this method of accountingwill affect the process of preparing thefinancial statements and will changebalance sheet and performance ratios.

IFRS News Quarter 4 3

IFRS 13 Fair Value MeasurementIFRS 13 has been issued in order toprovide a single source of guidance forall fair value measurements and toclarify the definition of fair value. Priorto its publication, the guidance on fairvalue was distributed across manyIFRSs, with some containing quitelimited guidance while others containedextensive guidance that was not always consistent.

The Standard explains how tomeasure fair value for financialreporting and introduces significantlyenhanced disclosures about fair values.It does not address or change therequirements on when fair valuesshould be used. It does howeveraddress almost all fair value and ‘fairvalue-based’ measurements – includingthose for both financial and non-financial items. Fair values that arerequired to be disclosed in the notes arealso captured.

New definition of fair value IFRS 13 defines fair value as the pricethat would be received to sell an assetor paid to transfer a liability in anorderly transaction between market

participants at the measurement date (ie an exit price).

Using an exit price definition of fairvalue has the benefit of removingentity-specific factors that might existin an entry price. It will however haveimplications for some entities, inparticular those that acquire assets (orincur liabilities in one market) and sellor transfer them in another. Similarly, atransaction price or entry price may notnecessarily represent fair value whererelated parties are involved or atransaction takes place under duress.

3-level fair value hierarchyWhen measuring fair value, an entity isrequired to use valuation techniques

that maximise the use of relevantobservable inputs and minimise the useof unobservable inputs. IFRS 13establishes a fair value hierarchy fordoing this.

Significant differences in disclosurerequirements apply to each level withinthe hierarchy to provide users withinsight into the reliability of the fairvalue measurement. These disclosurescould be a challenge for some entities.For example, inputs into real estatevaluations may in some circumstancesresult in the valuation being classified inLevel 3 of the hierarchy, leading toextensive disclosures as to how thevaluation has been performed.

Our special edition of IFRS News ‘IFRS 13 Fair ValueMeasurement’, published at the time that IFRS 13 wasissued, contains more information on the requirementsof the new Standard. Please get in touch with yourlocal IFRS contact to obtain a copy.

IFRS NewsSpecial EditionOctober 2011

The IASB has published IFRS 13 ‘Fair ValueMeasurement’. The Standard:• explains how to measure fair value by providing

a clear definition and introducing a single set ofrequirements for (almost) all fair valuemeasurements

• clarifies how to measure fair value when amarket becomes less active

• improves transparency through additionaldisclosures.

IFRS 13 applies to both financial and non-financialitems but does not address or change therequirements on when fair value should be used.

“Fair value is pervasive in IFRS – it’s permitted or required inmore than twenty of the IASB’s standards. But most reportedassets and liabilities do not have quoted market prices, so fairvalue needs to be estimated. Despite its widespread use, theguidance in IFRS on fair value estimation has been patchy andinconsistent. IFRS 13 aims to address this by providing a single,more comprehensive source of guidance that will apply toalmost all fair value estimates (including disclosed fair values).

Valuation techniques and assumptions used in makingthese estimates will need to be reviewed. For non-financialassets in particular, entities may find that they need to refinetheir valuation methods.

But will IFRS 13 actually change fair values significantly?The answer will often be no, as much of the new guidance isintended to be consistent with common valuation practices.However, its impact ultimately depends on the items beingfair valued and the techniques currently used. For example, if acompany includes ‘blockage’ adjustments when valuing a largeshareholding, then IFRS 13 will certainly make a difference.

Even entities largely unaffected by the valuation guidance are likely to be affected by IFRS 13’s extensive disclosures.”

Andrew Watchman Executive Director of International Financial Reporting

IFRS 13 Fair Value Measurement

Our special edition of IFRS News ‘New ConsolidationsStandards’, published at the time IFRS 11 was issued,contains more information on the requirements of thenew Standard. Please get in touch with your local IFRScontact to obtain a copy.

IFRS NewsSpecial EditionJune 2011

The IASB has published the following five newStandards dealing with group issues and off-balancesheet activity:• IFRS 10 ‘Consolidated Financial Statements’• IFRS 11 ‘Joint Arrangements’• IFRS 12 ‘Disclosure of Interests in Other

Entities’• IAS 27 (Revised) ‘Separate Financial Statements’• IAS 28 (Revised) ‘Investments in Associates and

Joint Ventures’.

This special edition of IFRS News informs youabout the new Standards and the implications theymay have.

“The new Standards on consolidations, joint arrangementsand related disclosures are part of a package that merits theattention of all companies with significant involvement inother entities.

IFRS 10 provides a revised framework to assess when oneentity controls another that will apply both to moreconventional subsidiaries and to special purpose vehicles. Weexpect that, in most cases, conclusions as to what should beconsolidated will be unchanged. However, ‘borderline’consolidation decisions taken under IAS 27 will need to bereassessed and some will inevitably be revised. IFRS 12’senhanced disclosure requirements will be particularlyimportant in bringing transparency to more judgementalsituations, including special purpose vehicles.

IFRS 11 meanwhile eliminates the use of proportionateconsolidation for joint ventures. This will be a significantpresentational change for the many venturers that chose thisaccounting policy under IAS 31. Although net assets will notbe affected, the removal of that method of accounting willaffect individual balance sheet and performance ratios.”


New consolidations standards


IAS 19 Employee Benefits (Revised)A revised version of IAS 19‘Employee Benefits’ was issued in2011 containing amendments that areintended to improve the recognition,presentation, and disclosure ofdefined benefit plans.

The changes made in the amendedversion of the Standard will result in:• immediate recognition of all

estimated changes in the cost ofproviding defined benefits and all changes in the value of planassets. The various methods which allowed deferral of some of those gains or losses under the previous version of IAS 19,

including the ‘corridor’ method,have been eliminated

• a new presentation approach todistinguishing the different typesof gains and losses arising fromdefined benefit plans.

The effect of presenting these itemsseparately is to remove from IAS 19the option for entities to recognise inprofit or loss all changes in definedbenefit obligations and in the fairvalue of plan assets.

One controversial change is thatpreparers will no longer be able toinclude the expected return on planassets in the profit and loss account.

The return on plan assets willinstead represent interest, dividendsand other income derived from theplan assets, together with realised andunrealised gains or losses on the planassets, less certain costs. The changemeans that instead of crediting theexpected return on pension planassets separately and charging thecalculated interest cost on the pensionprovision, the amended Standardrequires a charge or credit to becalculated by applying the marketyield on a high quality corporatebond to the net pension deficit orsurplus. This is likely to reduce thereported profit for many companies.

Investment entities In October 2012, the IASB published‘Investment Entities – Amendments to IFRS 10, IFRS 12 and IAS 27’ (the Amendments).

The Amendments define aninvestment entity and provide detailedapplication guidance on that definition.Entities that meet the definition arerequired to measure investments thatare controlling interests in anotherentity (in other words, subsidiaries) atfair value through profit or loss insteadof consolidating them. The Amendmentsalso introduce new disclosurerequirements for investment entities.

While the Amendments are noteffective until 1 January 2014, they canbe adopted early (subject to theprovisions of local law). There is then aconsiderable incentive for affectedentities to apply the Amendments atthe same time as they apply the rest ofIFRS 10 as they will be spared frommuch of the time and effort they

would otherwise need to spend onreassessing their control conclusionsunder IFRS 10’s new requirements.Entities that are likely to be affectedinclude private equity organisations,venture capital organisations, pensionfunds, sovereign wealth funds andother investment funds.

IFRS 12 Disclosures of interests in other entities IFRS 12 specifies enhanced disclosurerequirements for both consolidatedand unconsolidated entities where aninvestor or sponsor has significantinvolvement. These disclosures willhelp investors to assess the extent towhich a reporting entity has beeninvolved in setting up specialstructures and the risks to which it isexposed as a result.

Compared to the others in thepackage of new consolidationStandards, IFRS 12 may not have themost profound implications forpreparers. IFRS 10 for example couldresult in a previously unconsolidatedentity being consolidated, while IFRS 11 will result in some entitiesaccounting for joint ventures by usingequity accounting rather thanproportionate consolidation. IFRS 12will however affect the financial

statements of almost every entitywith interests in subsidiaries,associates or joint ventures – even ifthe other new Standards have little orno effect. IFRS 12 specifies minimumdisclosures that such entities mustprovide. Some of this informationwill be new and its preparation willrequire planning.

Our special edition of IFRS News, published at the timethat the Investment Entities Amendments were issued,contains more information on the exception fromconsolidation and the conditions that must be met touse it. Please get in touch with your local IFRS contactto obtain a copy of the newsletter.

IFRS NewsSpecial EditionDecember 2012

The IASB has published ‘Investment Entities –Amendments to IFRS 10, IFRS 12 and IAS 27’ (theAmendments). The Amendments introduce an exception for investment entities to the well-established principle that a parent entity mustconsolidate all its subsidiaries. The Amendments: • define the term ‘investment entity’ and provide

supporting guidance• require investment entities to measure

investments in the form of controlling interestsin another entity (in other words, subsidiaries) at fair value through profit or loss in accordancewith IFRS 9 ‘Financial Instruments’ (or IAS 39‘Financial Instruments: Recognition andMeasurement’) instead of consolidating them

• specify disclosure requirements for entities thatapply the exception.

This special edition of IFRS News explains the keyfeatures of the Amendments and provides practicalinsights into their application and impact.

“Many commentators have long believed that consolidating thefinancial statements of an investment entity and its investeesdoes not provide the most useful information. Their concern isthat consolidation does not reflect the investment businessmodel and makes it harder for investors to understand whatthey are most interested in – the value of the entity’s investments.

We share these concerns and therefore welcome theseAmendments. Although consolidation normally provides themost relevant and useful information for a group, we believethere is a class of investment entity for which fair valueaccounting is significantly more useful. The IASB has workedhard to identify this class appropriately – aiming for a robustdefinition that still allows some flexibility and scope forreasonable judgement.

The timing of publication is significant given that IFRS 10 ‘Consolidated Financial Statements’ is effective from1 January 2013. The consolidation exception will have a hugeimpact on affected entities and, if adopted early, could sparethem from much time and effort on reassessing controlconclusions under IFRS 10.”


A consolidation exception forinvestment entities


Changes proposed for the IFRS for SMEs

At the time of its issue, the IASB statedthat it planned to undertake an initialcomprehensive review of the IFRS forSMEs after two years had passed inorder to assess the experience thatentities would have had in implementingit by then and to consider whether therewas a need for any amendments.

As many jurisdictions started usingthe IFRS for SMEs in 2010, the IASBbegan its initial comprehensive review in2012, issuing a Request for Informationto seek the views of those who have beenapplying the Standard. Following this

consultation, the IASB’s SMEImplementation Group (SMEIG) – on which Grant Thornton has beenrepresented by South African partnerFrank Timmins – developed a set ofrecommendations on possibleamendments to the IFRS for SMEs toassist the IASB in undertaking its initialcomprehensive view.

Apart from the proposal to changethe section in the Standard dealing withIncome Tax (which was based on anExposure Draft that proposed revisingIAS 12 ‘Income Taxes’ but which was

never finalised), the proposedamendments would make only minorchanges to the IFRS for SMEs. This isin keeping with the IASB’s aim that theStandard should provide a standalone,simplified set of accounting principlesfor entities that do not have publicaccountability and that typically haveless complex transactions than entitiesoperating under full IFRS. The tableoutlines the changes proposed in more detail.

The IASB has published an Exposure Draft of proposed amendments to the IFRS forSMEs, its self-contained Standard aimed at the needs of private companies. To date theIFRS for SMEs has been adopted by over 80 countries around the world.

Amendments toincorporate newand revised IFRSs

Proposed amendmentsHaving considered each new and revised IFRSissued since the IFRS for SMEs was published, theIASB proposes to include changes arising from thefollowing new and revised IFRSs:• IAS 1 ‘Presentation of Items of Other

Comprehensive Income’ (2011 Amendment)• IAS 32 ‘Classification of Rights Issues’ (2009

amendment) • IFRIC 19 ‘Extinguishing Financial Liabilities with

Equity Instruments’• Amendments to IFRS 1 relating to ‘Severe

Hyperinflation and Removal of Fixed Dates forFirst-time Adopters’ (2010) and ‘GovernmentLoans’ (2012)

• various minor amendments from 2010 and 2012Annual Improvements to full IFRSs and certainscope changes.

ImpactThe changes will modify a limited number ofparagraphs in the IFRS for SMEs and are expected tohave minimal impact as a result.

The IASB proposes not to include many of the mostrecent and significant changes to full IFRSs, includingthose under IFRS 3 (2008) ‘Business Combinations’,IFRS 10 ‘Consolidated Financial Statements’, IFRS 11‘Joint Arrangements’, IFRS 13 ‘Fair ValueMeasurement’ and IAS 19 (2011) ‘Employee Benefits’.


Amendments thatchange requirementsin the IFRS for SMEs

Proposed amendmentsThe proposed amendments would: • align the recognition and measurement principles

of the section dealing with Income Tax with therequirements of IAS 12

• require that if an entity is unable to make areliable estimate of the useful life of goodwill oranother intangible asset, the useful life should notexceed 10 years (as opposed to being fixed at 10years as is currently the case)

• account for leases with an interest rate variationclause linked to market interest rates under therequirements for leases, rather than requiringthem to be measured at fair value through profitor loss

• require the liability component of a compoundfinancial instrument to be accounted for in thesame way as a similar standalone financial liability.It is currently measured at amortised cost.

ImpactThe most significant change is the one relating toIncome Tax. When the IFRS for SMEs was issued in2009, Section 29 on Income Tax was based on theIASB’s 2009 Exposure Draft (ED) Income Tax. At thattime the 2009 ED was expected to amend IAS 12however it was never finalised.

Amendments thatintroduce newguidance

Proposed amendmentsThe proposed amendments would add new guidance on:• preparation of consolidated financial statements if

group entities have different reporting dates• calculation of non-controlling interest• classifying financial instruments as equity or

liability• accounting for the settlement of the dividend

payable for a distribution of non-cash assets• share-based payment transactions in which the

identifiable consideration appears less than thefair value of the equity instruments granted or theliability incurred

• accounting requirements for extractive activities• new definitions, including active market, foreign

operation, minimum lease payments andtransaction costs.

ImpactThe amendments are targeted at specific situationsand are not expected to have widespreadconsequences.

Proposed amendmentsThe following new exemptions are proposed: • ‘undue cost or effort’ exemptions from the

measurement of investments in equity instrumentsat fair value

• an ‘undue cost or effort’ exemption fromrecognising intangible assets separately in abusiness combination

• exemption from the requirements for distributionsof non-cash assets ultimately controlled by thesame parties before and after the distribution

• an ‘undue cost or effort’ exemption from therequirement to offset income tax assets and liabilities.

ImpactThe new exemptions will offer practical relief inthese specific situations.

Amendments thatintroduce newexemptions


Amendments thatreproduce guidancefrom SMEIG Q&As

Proposed amendmentsQ&A guidance developed by the SMEIG would beadded, covering• clarification of the use of the IFRS for SMEs in a

parent entity’s separate financial statements• guidance on the ‘undue cost or effort’ exemption

that is used in several sections of the IFRS for SMEs• clarification that all cumulative exchange

differences that arise from the translation of aforeign subsidiary are not recognised in profit orloss on disposal of the subsidiary.

ImpactThe SMEIG Q&As are already publicly available. Theeffect of incorporating them in the IFRS for SMEsitself however is that the guidance will becomemandatory.

Amendments thatsimplify disclosurerequirements

Proposed amendments• proposes relief from the need to prepare prior

year reconciliations of balances for biologicalassets and share capital

• proposes removing the requirement to disclosethe accounting policy for termination benefits.

ImpactThese changes provide practical relief in thesespecific situations.

Proposed amendmentsMinor amendments dealing with one or more of thefollowing:• clarifying wording/IASB’s intention• rewriting unclear sentences• clarifying the scope of certain sections• removing inconsistencies.

ImpactThese changes are not expected to result inchanges in practice or to affect the financialstatements for the vast majority of SMEs.

Amendments thatprovide minorclarifications

Proposed amendmentsA number of editorial amendments are included inthe ED that would not otherwise be exposed forpublic comment.

ImpactThese amendments are minor and have been madelargely to ensure consistency of terminology andwording throughout the IFRS for SMEs.

Editorialamendments

IASB reviews its framework fordeveloping and revising IFRSs

The IASB has issued a Discussion Paper which explores possible changesto the IASB’s Conceptual Frameworkfor Financial Reporting (the Conceptual Framework).

The Conceptual Framework itselfaddresses the underlying concepts forthe preparation and presentation offinancial statements and forms the basisfor specific recognition and

measurement requirements in IFRSs. It is of use not only to the IASB in termsof reaching consistent conclusions as itdevelops new Standards or revisesexisting ones, but also to entities whenaccounting for items not covered by aparticular IFRS.

A public consultation carried out in2011, revealed strong demand fromrespondents for a revision of the existing

Framework. The IASB has responded tothis demand by issuing the DiscussionPaper. It focusses on some importantareas which are not currently covered inthe Framework as well as some otherparts which are out of date and fail toreflect the IASB’s current thinking. Thetable provides more detail on these areas:

Project aims to improve financial reporting by providing a complete and updated set of concepts for developing or revising IFRSs


Definitions of assets and liabilities

Proposal Suggests revised definitions that: • focus more clearly on the fact that an asset is a

resource and a liability is an obligation • clarify the status of those resources and

obligations that are not certain to result ininflows and outflows of economic benefits.

BackgroundThe definitions of assets and liabilities that currentlyexist embody the concept of there being anexpectation that there will be an inflow or outflow ofresources. As a result people have questionedwhether or not an asset can exist or be recognisedunless a minimum probability threshold has been met.

Recognition andderecognition

Proposal Recognition: • suggests that an entity should recognise all its

assets and liabilities, unless the IASB decides that:− recognising an asset or a liability would provide

users of financial statements with informationthat is not relevant, or is not sufficientlyrelevant to justify the cost; or

− no measure of an asset or a liability wouldresult in a sufficiently faithful representation ofboth that asset or liability and the resultingincome or expense.

Derecognition: • indicates a preference for a control approach to

derecognition but leaves room for providingexceptions to this approach, for instance in relationto components of an asset or a liability.

BackgroundThe paper recommends that an entity should nothave to have a cost or value that can be reliablymeasured in order for an item to be recognised. Itreserves the right for the IASB to create exceptionsto this rule however.

The existing Conceptual Framework does notaddress derecognition.


Measurement Proposal • suggests limiting the number of measurement

bases used • in selecting an appropriate measurement basis for

a particular asset or liability, the IASB’s preliminaryview is that an entity should consider:− how the asset contributes to future cash flows

or how the entity will fulfil or settle the liability− what information that measurement basis will

produce in the statement of financial positionand the statement of comprehensive income.

BackgroundThe existing Conceptual Framework provides littleguidance on measurement and when a particularmeasurement basis should be used. The DiscussionPaper therefore suggests guidance that could assistthe IASB in selecting the most appropriatemeasurement basis for an asset or liability.

The Paper suggests for example, that while fair valuemight be the most relevant measurement basis for afinancial asset that has complex features and is held fortrading, depreciated cost might be more relevant for anasset – such as property, plant and equipment – thatcontributes to future cash flows indirectly.

Profit or loss andother comprehensiveincome (OCI)

Proposal The Discussion Paper evaluates various proposalsfor assisting the IASB in deciding which items shouldbe recognised in profit or loss and which itemsshould be recognised in OCI.

The IASB’s preliminary view is that itemsrecognised in OCI should be limited to items ofincome and expense resulting from changes incurrent measures of assets and liabilities, ieremeasurements.

BackgroundCurrently there is no principle in IFRS to determinewhich items of income or expense should bepresented in profit or loss and which should bepresented in OCI; and whether, and when, itemspreviously recognised in OCI should be recycledfrom OCI into profit or loss.

Proposal The Discussion Paper sets out what the IASBconsiders to be the objectives behind:• the presentation of the primary financial

statements • the presentation of the notes to the financial

statements• materiality • communication principles.

The IASB envisages certain short-term steps beingtaken as a result including narrow scopeamendments to IAS 1 as well as some longer-termones. The longer-term steps mooted in theDiscussion Paper include the replacement of IAS 1,IAS 7 and IAS 8 as well as the revision of disclosurerequirements in individual IFRSs.

BackgroundThe existing Conceptual Framework does not have asection on disclosure.

Many respondents to the public consultation thatthe IASB undertook in 2011 on its future agenda,told the IASB that a framework for disclosure isneeded to ensure that information disclosed is morerelevant to investors and to reduce the burden onpreparers.

Presentation anddisclosure


Next stepsThe Discussion Paper is the first steptowards revising the ConceptualFramework. The feedback that the IASBreceives will help it develop morespecific ideas into complete proposals.Once a revised Conceptual Frameworkhas been published, the IASB will thenuse it to develop new or revised IFRSs.

Grant Thornton International Ltd commentIn our response to the IASB’s 2011 Agenda Consultation we suggested that completing a

revised Conceptual Framework should be prioritised by the IASB in its work on developing

financial reporting. The lack of up-to-date guidance on certain areas has caused problems

in the past and we have, for example, frequently made observations on the lack of a clear

conceptual basis for determining which gains and loss should be recognised initially in

other comprehensive income rather than in profit or loss and for when they should

be reclassified.

We therefore welcome the IASB’s Discussion Paper. It will be interesting to see how the

debate progresses and whether some commentators’ calls for an increased emphasis on

the role of prudence, reliability and stewardship in standard-setting gain widespread support.

Equity Proposal Suggests: • the definition of equity should remain unchanged• using an enhanced statement of changes in equity

to provide more information about differentclasses of equity.

BackgroundUnder current IFRS it can be difficult to distinguishbetween equity and liabilities as existing IFRSs donot apply the definition of a liability consistently whendistinguishing liabilities from equity instruments.

Comment letter submitted on leases project

Grant Thornton International Ltd and itsUS member firm, Grant Thornton LLP,have jointly commented on the IASBExposure Draft ‘Leases’ (the ED) and theFinancial Accounting Standards BoardProposed Accounting Standards Update(Revised) ‘Leases (Topic 842), a revisionof the 2010 proposed FASB AccountingStandards Update, Leases (Topic 840)’.

In our comment letter, we welcomethe Boards’ decision to re-expose theirlease proposals and commend theBoards for continuing to work jointlyon the project. However, although wefully support the Boards’ goal toimprove lease accounting, we are not infavour of proceeding with finalisation ofthe ED in its current form, believing thatthe latest proposals would not improve

financial reporting and would requiresubstantial implementation costs.

Despite our concerns, we encouragethe Boards to continue to work togetherto improve lease accounting. We believethat it should be possible to develop analternative model that would provideusers with information that is morerelevant and representationally faithful,more understandable, less complex, andconceptually consistent with theaccounting for similar transactions withcustomers or acquisitions. We thereforeencourage the Boards to further developa model for classifying leases in a mannerthat would curtail current abuses andprovide relevant and representationallyfaithful information to users of thefinancial statements.

"Grant Thornton" refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton International Ltd (GTIL) and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate, one another and are not l

International Accounting Standards Board 30 Cannon Street London EC4M 6XH Technical Director, File Ref 2013-270 Financial Accounting Standards Board 401 Merritt 7 PO Box 5116 Norwalk CT 06856-5116 Re: File Reference No. 2013-270 10 September 2013 Submitted electronically through the IFRS Foundation website (www.ifrs.org)

Exposure Draft Leases (ED/2013/6), Proposed Accounting Standards Update (Revised) Leases (Topic 842) Grant Thornton International Ltd and its US member firm, Grant Thornton LLP, appreciate the opportunity to jointly comment on the International Accounting Standards Board (IASB) Exposure Draft Leases and Financial Accounting Standards Board (FASB) Proposed Accounting Standards Update (Revised) Leases (Topic 842), a revision of the 2010 proposed FASB Accounting Standards Update, Leases (Topic 840) (collectively, the ED). Our main comments are set out below. Our responses to the questions included in the ED are set out in Appendix I. We have also commented on some other significant matters not addressed by those questions in Appendix II. General comments

decision to re-expose their lease proposals. We also commend the Boards for continuing to work jointly on this critical and high profile project. However, although we fully goal to improve lease accounting, we are not in favor of proceeding with finalization of the ED in its current form at this time. Although we appreciate the efforts that the Boards have expended in undertaking to address the issues raised with the 2010 Exposure Draft Leases (2010 ED), we believe the latest proposals would not improve financial reporting and would require substantial implementation costs. Despite our concerns with the current ED, we encourage the Boards to continue to work together to improve lease accounting. We believe that it should be possible to develop an

Grant Thornton International Ltd Grant Thornton House 22 Melton Street London NW1 2EP Grant Thornton LLP 175 W Jackson 20th Floor Chicago, Il 60604


2013 Example IFRS Financial Statementsreleased

The new version of the publication hasbeen reviewed and updated to reflectchanges in IFRSs that are effective forannual periods ending 31 December 2013.In particular, the Publication reflectsthe application of IFRS 10 ‘ConsolidatedFinancial Statements’, IFRS 11 ‘JointArrangements’, IFRS 12 ‘Disclosure ofInterests in Other Entities’, IFRS 13‘Fair Value Measurement’ and therevised version of IAS 19 ‘EmployeeBenefits’. The publication does notreflect the early adoption of any otherchanges in IFRS that have been issuedbut are not yet effective.

To obtain a copy of the 2013Example Consolidated FinancialStatements, please get in touch with the IFRS contact in your local Grant Thornton office.

The Grant Thornton International Ltd IFRS Team has published the 2013 version of its IFRS ‘Example Consolidated Financial Statements’

Reporting under IFRSsExample consolidated financial statements 2013 and guidance notes

Comment letter submitted on regulatory deferral accounts

The Grant Thornton International Ltd IFRS Team has submitted its comment letter to the IASB on their Exposure Draft ‘Regulatory Deferral Accounts’In our letter we support the IASB’sobjective in developing an interimsolution pending the completion of a comprehensive project on rate-regulation while acknowledging thatthere are certain disadvantages and risksinherent in this approach.

We also support the proposedlimitations in the Exposure Draft’sapplication to first-time adopters thatrecognised regulatory balances inaccordance with local GAAP.

We also support the proposed limitations in

the Exposure Draft’s application to first-time adopters that

recognised regulatory balances in accordance with

local GAAP.


Raymond Chabot Grant Thorntonorganises Mining Industry Information Event

A wide range of topics was coveredduring the course of this day-long event,including recent developments in theQuebec mining tax regime and IFRS;improvements and changes to RaymondChabot Grant Thornton’s standardfinancial statements for 2013; calculatingmining exploration tax credits;impairment testing of prospective andexploration properties; IFRSimplementation in the mining industry;and changes in mining company social

responsibility and the socialacceptability of projects.

The event also featured a round tablediscussion on the financing issues ofmineral exploration companies. Theround table discussion was moderatedby RCGT Mining Sector Leader AnandBeejan and featured prominent industryplayers TSX Vice President, LouisDoyle; Ressources Québec DirectorGeneral, Denis Williams; Caisse dedépôt et placement du Québec Director

of Private Equity, Danny Pelletier; aswell as Quebec Mineral ExplorationAssociation President and RessourcesCartier Chairman and CEO, PhilippeCloutier.

On 25 September 2013, Raymond Chabot Grant Thornton held a day-long miningindustry information event that drew some 40 clients and potential clients

Valuation expert joins GT Japan

Masafumi Takeno, a member of theIASB’s valuation experts group which isdeveloping educational material tosupport IFRS 13 ‘Fair ValueMeasurement’, has joined our Japanesemember firm, Grant Thornton TaiyoASG LLC.

Masafumi is a Managing Director inthe Tokyo office where he works aspart of the valuation practice. He hasmore than 15 years of experience inbusiness valuation, fair valuemeasurement and financial advisoryservices including M&A advisory.

Prior to joining Grant Thornton,Masafumi was a Managing Director in aglobal valuation firm and a Partner of aBig 4 firm in charge of valuationservices. Throughout his career he has

developed expertise in performingbusiness valuations, impairment tests,intangible asset valuation, and purchaseprice allocations. During that period, hehas provided advice across multipleindustries including banking, ITservices and manufacturing.

As well as being a member of theIASB’s valuation expert group,Masafumi has advised the Accounting Standards Board

of Japan on intangible asset valuation.He has also published several booksand articles and provided lecturesregarding valuation.


Spotlight on our IFRS Interpretations Group Grant Thornton International’s IFRSInterpretations Group (IIG) consists ofa representative from each of ourmember firms in the United States,Canada, Singapore, Australia, SouthAfrica, India, the United Kingdom,Ireland, France, Sweden and Germanyas well as members of the GrantThornton International IFRS team. Itmeets in person twice a year to discusstechnical matters which are related to IFRS.

Each quarter we throw a spotlighton one of the members of the IIG. Thisquarter we focus on Grant ThorntonCanada’s representative:

Rinna Sak, Grant Thornton CanadaRinna Sak is the National Director ofAccounting Standards at GrantThornton Canada, where she overseesand participates in all importantinitiatives related to IFRS, includingassessing complex and judgementalaccounting and reporting issues forclients and professional staff andperforming quality reviews. Rinnajoined Grant Thornton in early 2012.At both Grant Thornton and her priorfirm, Rinna was heavily involved intransition projects when Canadianpublic entities adopted IFRSs in 2011.

Rinna speaks regularly on financialreporting matters to internal andexternal audiences and on fairy tales to her 3 children.

Grant Thornton Argentina assists indevelopment of IFRS certificate

Gabriel Righini, Audit Partner withGrant Thornton Argentina, has beenappointed to the Consulting Committeeof Universidad Austral (the AustralUniversity) as it works towards thedevelopment of an IFRS InternationalCertificate course.

The Austral University is a prestigiousArgentine institution with over 30 yearsof higher learning in many professionalcareers such as law, engineering,economics and medicine. It has nowbecome the only institution to berecognized as “Partner in Learning” bythe Institute of Chartered Accountants inEngland and Wales (ICAEW) in order todevelop a training programme andevaluate students for an IFRS InternationalCertificate issued by the ICAEW.

Based on Grant ThorntonArgentina’s position in the market andexperience in IFRS, Austral Universityinvited the Firm to nominate a delegatefor the IFRS International CertificateConsulting Committee, which will beresponsible for the training programme,covering the assessment and selection ofprofessors and other high level tasks.Gabriel Righini was selected for thisposition and will now help theUniversity with its programme.

The programme itself is aimed atpreparers and users of financialstatements. It will appeal to anyonelooking to deepen their knowledge intoIFRS, including accountants and financepersonnel, analysts, investors andportfolio managers, teams in charge of

legal affairs, regulatory compliance and risk management and officials from regulatory authorities and standard setters.

The programme itself is aimed at preparers and users of financial

statements.


Round-up

IASB completes Post-implementationReview of IFRS 8 Operating SegmentsThe IASB has completed its Post-implementation Review of IFRS 8‘Operating Segments’. The purpose ofthe review was to consider whether thenew Standard is functioning asanticipated, has achieved its objectivesand improved financial reporting.

The review of IFRS 8 concluded thatthe Standard was generally functioningas anticipated. Further investigation will

be made into a number of limited areas.These will also be subject to liaison withthe FASB and will be considered withinthe context of the convergence with USGAAP achieved by IFRS 8.

IFRS 8 was the first Standardsubjected to a Post-implementationReview by the IASB since therequirement to do so was added to itsdue process by the Trustees of the IFRSFoundation in 2007.

IASB begins the Post-implementationReview of its Business CombinationsStandardThe IASB has begun its Post-implementation Review of IFRS 3‘Business Combinations’ which will lookat the changes introduced by the 2004and 2008 versions of this Standard.

The review will consist of twophases. During Phase I the IASB willundertake targeted outreach to identifyareas in which implementation problemsor unexpected costs with IFRS 3 wereencountered. It will also review academic

and other studies about the applicationof the Standard. The areas identifiedduring this phase will be included in aRequest for Information (RFI), which willbe published for public comment andwhich will lead to Phase II of the review.During the second phase, the IASB willundertake extensive outreach andanalyse the public comments received inresponse to the RFI to learn aboutexperience in applying the Standard andthe experience of investors and others inusing the results it produces.

IASB work planThe IASB released the latest versionof its work plan for the developmentof IFRSs at the end of September.Notable highlights include thefollowing expected publications:

Q4 2013Finalised IFRSs on:• revenue recognition • IFRS 9 – general hedge accounting• Discussion Paper on

macro-hedging

Q1/Q2 2014Finalised IFRSs on:• IFRS 9 – impairment• IFRS 9 – classification

and measurement


IFRS jurisdiction profiles The IFRS Foundation is continuing itsefforts to develop profiles on the useof IFRSs in individual jurisdictionsaround the world. Profiles have so farbeen completed for 81 jurisdictions,including all of the G20 jurisdictions.The profiles are available on theIASB’s website athttp://www.ifrs.org/Use-around-the-world/Pages/Jurisdiction-profiles.aspx.

IASB Exposure Draft on IFRSTaxonomy interim releaseThe IFRS Foundation has published anExposure Draft on the Interim ReleasePackage of the IFRS Taxonomy 2013.

The IFRS Taxonomy 2013 is atranslation of IFRS as issued at 1 January 2013 into XBRL (eXtensibleBusiness Reporting Language). Theinterim release contains additionaltaxonomy concepts that reflect new

IFRSs and improvements to IFRSspublished by the IASB, thereby allowingentities wishing to report electronicallyusing the latest IFRSs to do so withouthaving to create their own taxonomyconcepts. The interim release isdesigned to be part of an acceleratedtimeline for the release of the IFRSTaxonomy 2014. The Exposure Draft isopen for comment until 11 November.

FASB and IASB to form jointtransition resource group forrevenue recognitionThe IASB and the US FinancialAccounting Standards Board haveannounced plans to create a jointtransition resource group which willfocus on the upcoming convergedrevenue recognition Standard (the twoBoards plan to issue the final Standardlater this year).

The transition group will beresponsible for informing the IASB andthe FASB about interpretive issues thatcould arise when companies,institutions, and other organisationsimplement the revenue recognitionStandard, and which could reasonablycreate diversity in practice. It will notissue guidance itself but will help theBoards determine what, if any, actionwill be needed to resolve that diversityahead of the Standard’s expected 2017effective date.

IASB provides increased supportfor those teaching IFRSThe IFRS Foundation EducationInitiative has published free-to-download Framework-based teaching material in Arabic, Chinese,English, French, Russian, Spanish and Portuguese.

The Framework-based teachingproject is designed to help educatorstrain the next generation ofaccountants in how to make soundjudgements in the preparation offinancial reports in accordance withprinciple-based accounting standards.

IOSCO and IFRS Foundation agreejoint protocols to enhanceconsistency in the implementation ofIFRS globallyThe International Organisation ofSecurities Commissions (IOSCO) and theIFRS Foundation have agreed on a set ofprotocols under which the twoorganisations will deepen theircooperation in support of their sharedcommitment to the highest standards offinancial reporting globally.

Under the protocols the twoorganisations will deepen theircooperation in both the development ofIFRS and implementation of IFRS on aglobally consistent basis. IOSCO itselfdevelops and promotes adherence tointernationally recognised standards forsecurities regulation. Its membershipincludes more than 120 securitiesregulators overseeing 95% of the world’s securities markets.


IASB announces new staff group tofocus on Disclosure InitiativeThe IASB has announced the formationof a new staff group to work on itsDisclosure Initiative. The IASB has beendeveloping short and medium-termstrategies to address concerns abouthow financial information is disclosed.The Disclosure Initiative brings togethermembers of the IASB’s standard-settingteam with the eXtensible BusinessReporting Language (XBRL) team, and

will be led by Kristy Robinson, an IASBTechnical Principal. The creation of acombined team of standard-setting andelectronic reporting experts reflects theincreasing importance of electronicfiling of financial information. Theintegration of the XBRL team into theIASB’s work programme also completesa major aspect of the recent strategicreview of XBRL by the IFRS FoundationTrustees, who oversee the work of the IASB.

G20 reiterates its calls forconvergence At its summit in St Petersburg inSeptember, the Group of 20 FinanceMinisters and Central Bank Governors(G20), repeated its calls for globalconvergence in accountingstandards, urging the IASB and theUS Financial Accounting StandardsBoard to complete their work on keyoutstanding projects for achieving asingle set of high-quality accountingstandards. The G20 declaration alsoencouraged the public and privatesector to further their efforts inenhancing disclosures of the risksthey face.

Canadian investment funds totransition to IFRSThe Canadian SecuritiesAdministrators have announced thatthey have finalised changes that willtransition financial reporting forinvestment funds to IFRS. While the majority of Canadiancompanies were required to transitionto IFRS as of 1 January 2011, thetransition date for investment fundswas deferred in order to allow for theIASB’s exception from consolidationfor investment companies to be inplace prior to the transition. The CSAconsiders that the obstacles to theadoption of IFRS for these funds havebeen removed by the IASB’spublication of ‘Investment Entities(Amendments to IFRS 10, IFRS 12and IAS 27)’.

Voluntary application of IFRS in JapanThe Japanese Financial Services Agencyhas released proposals that would relaxthe requirements relating to the voluntary application of IFRS byJapanese companies.

Under the proposals, a company willno longer need to be a listed company inJapan and be conducting financial orbusiness activities internationally.Assuming the proposals are adopted,the only remaining requirement for a

Japanese company wishing to adoptIFRS would be to show that it hasestablished an appropriate internalframework for IFRS-based consolidatedfinancial reporting.

Relaxing the requirements forvoluntary application of IFRS is expectednot only to increase the number ofJapanese companies that apply IFRS ona voluntary basis, but also to ensure thatJapan has a voice in the development of IFRS.


Survey finds that IFRS transitioncosts in Canada were manageableA survey into the costs borne byCanadian companies in their transitionfrom Canadian GAAP to IFRS has foundthat overall, the costs were significantbut manageable, and broadly in line withthose planned for and expected.

The study showed that, for abouthalf of respondents, the costs ofpreparing and auditing financialstatements under IFRS are about thesame as under Canadian generallyaccepted accounting principles (GAAP).Others found some savings, whileothers found it more costly. The studyalso found that:• 62% of companies’ transition

budgets were under $500,000• for some, the key drivers of costs

were identifying more issues thananticipated and resolving differinginterpretations of IFRS

• some managed their costs by hiringemployees who were well versed inIFRS, often from experienceimplementing IFRS abroad

• nearly all respondents saidtransition required little to nochanges in their contracts, thus,minimal renegotiation costs

• three-quarters said they did nothave to make significant changes to their IT infrastructure as systemswere more flexible than had been thought.

The survey was jointly funded by theCanadian Accounting Standards OversightCouncil and the IFRS Foundation.

The Appraisal FoundationThe Appraisal Practices Board (APB)of the Appraisal Foundation hasissued a concept paper ‘ValuationIssues in Separating Tangible andIntangible Assets’, to kick off adiscussion that will lead tostandardising valuation practices in this area.

By discussing similarities anddifferences, and offering voluntaryguidance as to which methods andtechniques may be appropriate, theAPB hopes to improve the way thatvaluations are prepared.

ACCA report on the road to real-timereportingThe Association of Chartered CertifiedAccountants (ACCA) has released areport ‘Understanding investors: the roadto real-time reporting’, highlighting a demand from investors for ‘real-time’ reporting.

While real-time data analysis isbecoming a reality for internal

management teams, investors can onlyaccess periodic corporate reportinginformation. The ACCA’s survey of 300investors and leading figures from theinvestment community highlights thatthere is a demand for information to beavailable in a continuous manner, ratherthan at set time intervals, as at present.

The table below lists new IFRS Standards and IFRIC Interpretations with an effective date on or after 1 January 2012.Companies are required to make certain disclosures in respect of new Standards and Interpretations under IAS 8 ‘AccountingPolicies, Changes in Accounting Estimates and Errors’.

Effective dates of new standards and IFRIC interpretations

New IFRS Standards and IFRIC Interpretations with an effective date on or after 1 January 2012

Title Full title of Standard or Interpretation Effective for accounting Early adoption permitted?

periods beginning on

or after

IFRS 9 Financial Instruments 1 January 2015 Yes (extensive transitional rules apply)

IAS 39 Novation of Derivatives and Continuation of Hedge Accounting 1 January 2014 Yes

(Amendments to IAS 39)

IAS 36 Recoverable Amount Disclosures for Non-Financial Assets 1 January 2014 Yes (but only when IFRS 13 is applied)


IFRIC 21 Levies 1 January 2014 Yes

IFRS 10, 12 and IAS 27 Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) 1 January 2014 Yes

IAS 32 Offsetting Financial Assets and Financial Liabilities 1 January 2014 Yes (but must also make the

(Amendments to IAS 32) disclosures required by Disclosures –

Offsetting Financial Assets and

Financial Liabilities)

IFRS 10, 11 and 12 Consolidated Financial Statements, Joint Arrangements and 1 January 2013 Yes

Disclosure of Interests in Other Entities: Transition Guidance

– Amendments to IFRS 10, IFRS 11 and IFRS 12

Various Annual Improvements 2009-2011 Cycle 1 January 2013 Yes

IFRS 1 Government Loans – Amendments to IFRS 1 1 January 2013 Yes

IFRS 7 Disclosures – Offsetting Financial Assets and Financial 1 January 2013 Not stated (but we presume yes)

Liabilities (Amendments to IFRS 7)

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine 1 January 2013 Yes

IFRS 13 Fair Value Measurement 1 January 2013 Yes

IFRS 12 Disclosure of Interests in Other Entities 1 January 2013 Yes

IFRS 11 Joint Arrangements 1 January 2013 Yes (but must apply IFRS 10, IFRS 12,

IAS 27 and IAS 28 at the same time)


New IFRS Standards and IFRIC Interpretations with an effective date on or after 1 January 2012

Title Full title of Standard or Interpretation Effective for accounting Early adoption permitted?

periods beginning on

or after

IFRS 10 Consolidated Financial Statements 1 January 2013 Yes (but must apply IFRS 11, IFRS 12,

IAS 27 and IAS 28 at the same time)

IAS 28 Investments in Associates and Joint Ventures 1 January 2013 Yes (but must apply IFRS 10, IFRS 11,

IFRS 12 and IAS 27 at the same time)

IAS 27 Separate Financial Statements 1 January 2013 Yes (but must apply IFRS 10, IFRS 11,

IFRS 12 and IAS 28 at the same time)

IAS 19 Employee Benefits (Revised 2011) 1 January 2013 Yes

IFRS Practice Statement Management Commentary: A framework for presentation No effective date as Not applicable

non-mandatory guidance

IAS 1 Presentation of Items of Other Comprehensive Income 1 July 2012 Yes


IAS 12 Deferred Tax: Recovery of Underlying Assets 1 January 2012 Yes



Open for commentThis table lists the documents that theIASB currently has out to commentand the comment deadline. GrantThornton International Ltd aims torespond to each of these publications.

www.gti.org

© 2013 Grant Thornton International Ltd. All rights reserved.“Grant Thornton” refers to the brand under which the Grant Thorntonmember firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton International Ltd (GTIL) and the member firms are not aworldwide partnership. GTIL and each member firm is a separate legal entity.Services are delivered by the member firms. GTIL does not provide servicesto clients. GTIL and its member firms are not agents of, and do not obligate,one another and are not liable for one another’s acts or omissions.

Current IASB documents

Document type Title Comment deadline

Discussion Paper A Review of the Conceptual Framework for Financial 14 January 2014

Reporting

Exposure Draft IFRS for SMEs: Proposed amendments to the 3 March 2014

International Financial Reporting Standard for Small

and Medium-sized Entities

ifrs news - grant thornton türkiye · be unchanged under ifrs 10. ... equity accounting. although...

Documents