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© 2013 Deloitte Accountants B.V.
Agenda
3
• Introduction
• Developments in accounting
• Conceptual framework project
• Financial instruments project
• Revenue recognition project
• Leases project
• Platform changes 2013 – 2014
• Conclusions
© 2013 Deloitte Accountants B.V.
Testvraag
‘We moeten zo snel als mogelijk zien af te
komen van IFRS.’
Bent u eens met deze stelling?
a) Eens
b) Oneens
4
© 2013 Deloitte Accountants B.V.
IASB work plan – Current status
Planning
Q1 2010
Q4
2013
H1
2014
Financial instruments
May 2011
Impairment Finalised
IFRS
General hedge accounting Finalised
IFRS
published
Macro hedge accounting Discussion
paper
Classification and measurement Finalised
IFRS
6
© 2013 Deloitte Accountants B.V.
IASB work plan – Current status
Planning
Q1 2010
Q4
2013
H1
2014
Selection other projects
Leases 2011 Re-
deliberations
Revenue recognition 2011 Finalised
IFRS
Insurance contracts 2011 Re-
deliberations
Conceptual framework Re-
deliberations
7
© 2013 Deloitte Accountants B.V.
EU-Accounting Directive
9
Financial statements for financial years beginning on 1 January
2016 or during the calendar year 2016
EU-Accounting Directive 2013/34/EU
The new accounting directive is
adopted by the European
Parliament and the Council of the
European Union
© 2013 Deloitte Accountants B.V.
EU-Accounting Directive
10
‘Annual financial statements should
be prepared on a prudent basis’
‘Introduction of micro-undertakings’
‘Increase of size criteria’
‘No option to implement IFRS for SMEs’
© 2013 Deloitte Accountants B.V.
EU developments
11
Tying funding to the outcomes of standard-setting "something
we cannot accept" and "a threat to our independence" and
also warned "if Europe is going to do this, other parts of the
world might be encouraged to do so".
‘Funding IASB’
The IASB Chairman added, however, that he had the impression
that the European Commission has also realised that the current
situation is "not something to be wished for" and he
expressed the hope that the official trialogue now beginning and
involving the European Parliament, the Council and the
Commission would have a "positive outcome".
© 2013 Deloitte Accountants B.V.
EU developments
12
Maystadt report
Should IFRS standards be more European?
Mission to reinforce the EU’s contribution to international
accounting standards
‘Position EFRAG’
© 2013 Deloitte Accountants B.V.
Vraag
‘Wie betaalt, bepaalt’.
Bent u eens met deze stelling?
a) Eens
b) Oneens
13
© 2013 Deloitte Accountants B.V.
Convergence IFRS – US GAAP
14
• Ongoing projects with FASB:
• After finalising these majors, convergence projects
with FASB only will be ended (→ ASAF)
• FASB takes independent stand
Leases
Financial instruments
Insurance
© 2013 Deloitte Accountants B.V.16
‘The disclosure problem’
‘Better safe
than sorry’
attitude
‘Asking for
more
information’
‘Comply or
explain
approach’
‘Tick the box
approach’
IASB
AuditorsSecurities
regulators
Preparers
Users
‘Standing
data’
© 2013 Deloitte Accountants B.V.
Discussion Forum – Financial Reporting Disclosure
17
Feedback Statement
Amendments
to IAS 1
Application
of materiality
IAS 1, 7 & 8
General
review of
disclosure
requirements
© 2013 Deloitte Accountants B.V.
Vraag
Verwacht u dat het aantal disclosures
daadwerkelijk af zal nemen in de toekomst?
a) Ja
b) Nee
18
© 2013 Deloitte Accountants B.V.
Conceptual framework – Discussion paper
21
Definitions of
assets and
liabilities
Measurement Equity
P&L and OCIPresentation &
disclosures
Other matters
discussed
© 2013 Deloitte Accountants B.V.
Content of IFRS 9
23
Chapter 1 Objective
Chapter 2 Scope
Chapter 3 Recognition and derecognition
Chapter 4 Classification
Chapter 5 Measurement
Chapter 6 Hedge accounting
Chapter 7 Effective date and transition
© 2013 Deloitte Accountants B.V.
Classification & measurement – Debt instruments
24
Debt instruments
(including hybrid
contracts)
Contractual cash flows are
solely principal and
interest
Held to collect contractual
cash flows
Fair value option?
Amortised costFVOCI
(recycling)
Fair value option?
Held to collect contractual cash
flows and for sale
yes
yes
yes
no
yesno
no
yes
no
no
Proposed amendments
FVTPL
© 2013 Deloitte Accountants B.V.
Classification & measurement – Equity instruments
25
Equity instruments
Held for tradingFair value through OCI
option?
FVOCI
(no recycling)
yes no yes
no
Fair value through P&L
© 2013 Deloitte Accountants B.V.
Classification & measurement – Derivatives
26
Derivatives
yes
FVTPL
© 2013 Deloitte Accountants B.V.
Impairment
27
Stage 1 Stage 2 Stage 3
Deterioration in credit quality since initial recognition
12-month
expected
credit losses
Lifetime
expected
credit losses
Lifetime
expected
credit losses
Effective interest
on gross
carrying amount
Effective interest
on gross
carrying amount
Effective interest
on amortised
cost carrying
amount
Interest revenue
Recognition of expected credit losses
© 2013 Deloitte Accountants B.V.
Impairment – What are the three stages?
28
Stage 1 Stage 2 Stage 3
Deterioration in credit quality since initial recognition
• No significant
deterioration
in credit
quality
• ‘Investment
grade’
• Significant
deterioration
in credit
quality
• Not
‘investment
grade’
• Credit-
impaired or
incurred loss
has occurred
© 2013 Deloitte Accountants B.V.
General hedge accounting model – Objective
29
Represent in the financial statements the effect of an
enity’s risk management activities
Risk
management
activities
Hedge
accounting
© 2013 Deloitte Accountants B.V.
General hedge accounting model – Changes to IAS 39
• Broadening of the risks eligible for hedge accounting of non-
financial items
• Changes in the way forward contracts and derivative options
are accounted for in a hedge accounting relationship
• Effectiveness test has been replaced with the principle of an
‘economic relationship’
• Enhanced disclosures about an entity’s risk management
activities
• Effective date of IFRS 9 has been removed (previously 1
January 2015)
30
© 2013 Deloitte Accountants B.V.
Why this project on revenue recognition?
32
Eliminate inconsistencies and weaknesses
More robust framework
Improve
comparability
Improve disclosures
Simplify & reduce
number of
requirements
Effective date:
1 January 2017
© 2013 Deloitte Accountants B.V.
Core principle
33
Recognise revenue to depict the transfer of goods or services to
customers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods or
services
Steps to apply the core principle:
1.
Identify
contract
with the
customer
2.
Identify
performance
obligations
in contract
3.
Determine
transaction
price
4.
Allocate
transaction
price
5.
Recognise
revenue when
(or as)
performance
obligation is
satisfied
© 2013 Deloitte Accountants B.V.
Understanding the core approach
34
Contract
with
customer
Deliver
equipment
Provide
training
services
Provide
ongoing
services
Provide
warranty
€ 100
€ 5
€ 4
€ 1
When
delivered
When
performed
When
provided
When
provided
1. Identify
the contract
2. Identify
performance
obligations
3. Determine
transaction
price
4. Allocate
transaction
price
5. Recognise
revenue when /
as performance
obligation is
satisfied
© 2013 Deloitte Accountants B.V.
Operational challenges
35
Significant changes to
timing & amount of
revenue recognition
and to disclosure
requirements?
Need to revisit
current policies in
light of significant
increase in detailed
revenue guidance?
Information systems
Financial information
and links with
internal reporting
ALL COMPANIES
© 2013 Deloitte Accountants B.V.
Overview & timing project on leases
Effective Date
?
Final Standard
?
Analysis of comment letters on the agenda for the December 2013 ASAF meeting
ED (Re-exposure)
Issued in May 2013
Original Exposure Draft (ED)
Issued in November 2010
38
© 2013 Deloitte Accountants B.V.
FEEDBACK REPORT – Exposure Draft Leases ED/2013/06
Results of the field-test
39
• Why a lease creates assets and liabilities at
commencement?
• Most leases are ways to obtain a service rather than obtain
access to an asset
• Complex, involve significant judgment and would likely
result in inconsistent application
• No clear need for a change in accounting and the IASB
should rather considering improvements in disclosures
• The benefit was questionable or at best limited, while the
cost to apply it was extremely high especially for entities that
have thousands of individually small leases
• The proposals would result in time-consuming discussions
because of diverging interpretations from auditors
© 2013 Deloitte Accountants B.V.
Summary of outreach meetings with investors and analysts on
proposed accounting by lessees
40
• Credit analysts generally support the changes
proposed to a lessee’s balance sheet
• Analysts within the credit rating agencies also
generally support recognising lease assets and
lease liabilities on the balance sheet
• The views of equity analysts consulted are more
mixed
© 2013 Deloitte Accountants B.V.
Vraag
Bent u voor het opnemen van leases op de
balans?
a) Ja
b) Nee
41
© 2013 Deloitte Accountants B.V.
New approach
Financial
lease
Operational
lease
42
Lessee recognises an asset and a liability for all
lease contracts (other than short-term leases)
Lessor accounting will also change
© 2013 Deloitte Accountants B.V.
Proposed right-of-use model for lessees
43
Lessor Lessee
Right-of-use asset
Lease payments
© 2013 Deloitte Accountants B.V.
Lessee accounting
Statement of financial position
Right-of-use asset Lease liability
44
Right-of-use
model
© 2013 Deloitte Accountants B.V.
Lessee accounting
45
Type A Type B
Always straight-line total
expenseDecreasing total expense
Classification of lease determines allocation of
lease costs in P&L
I&A approach SLE approach
© 2013 Deloitte Accountants B.V.
Classification of leases
46
Is the leased asset ‘property’?
Y
E
S
N
O
Is the lease term a major portion
of the asset’s remaining
economic life or does the PV of
the lease payments accounts for
substantially all of the asset’s fair
value?
Y
E
S
N
O
Type A
Is the lease term insignificant to
the asset’s total economic life or
is the PV of the fixed lease
payments insignificant relative to
the asset’s fair value?
N
O
Y
E
S
Type AType B
© 2013 Deloitte Accountants B.V.
Classification of leases
47
Is the leased asset ‘property’?
N
O
Is the lease term insignificant to
the asset’s total economic life or
is the PV of the fixed lease
payments insignificant relative to
the asset’s fair value?
N
O
Type A
Example
car lease
(lease term:
4 years)
© 2013 Deloitte Accountants B.V.
Classification of leases
48
Is the leased asset ‘property’?
Y
E
S
Is the lease term a major portion
of the asset’s remaining
economic life or does the PV of
the lease payments accounts for
substantially all of the asset’s fair
value?
N
O
Type B
Example
property
lease
(lease term:
10 years)
© 2013 Deloitte Accountants B.V.
Lessee accounting
Statement of financial position
Right-of-use asset Lease liability
Statement of comprehensive income
Amortisation
Interest expense
49
Type A
© 2013 Deloitte Accountants B.V.
Lessee accounting
Statement of financial position
Right-of-use asset Lease liability
Statement of comprehensive income
Lease expense
50
Type B
© 2013 Deloitte Accountants B.V.
Lessee accounting
51
Type A Type B0 1 2 3 1 2 3
B/S
ROU asset 600 400 200 0 414 215 0
Lease liability 600 414 215 0 414 215 0
P&L
Operating expenses 200 200 200 231 231 231
Finance expense 45 32 16
Total lease expense 245 232 216 231 231 231
Example
© 2013 Deloitte Accountants B.V.
IASB EU
IFRS 13 Fair Value Measurement 2013 2013
IAS 19R (Amendments to IAS 19 Employee Benefits) 2013 2013
Disclosures - Offsetting Financial Assets and Financial
Liabilities (Amendments to IFRS 7)
2013 2013
53
IFRIC 21 Levies 2014 ?
Offsetting Financial Assets and Financial Liabilities
(Amendments to IAS 32)
2014 2014
Platform changes 2013 – 2014
IFRS 10 Consolidated Financial Statements 2013 2014
Investment Entities
(Amendments to IFRS 10, IFRS 12 and IAS 27)
2014 2014
IFRS 11 Joint Arrangements 2013 2014
IFRS 12 Disclosures of Interests in Other Entities 2013 2014
© 2013 Deloitte Accountants B.V.
IFRS 13 – What is fair value?
55
The price that would be received to sell an asset
or paid to transfer a liability in an orderly
transaction between market participants at the
measurement date
‘not entity specific’
‘market-based measurement’
IFRS 13.9
EXIT PRICE
© 2013 Deloitte Accountants B.V.
IFRS 13 – CVA & DVA
Statement of financial position
Financial asset
(at fair value)
Financial liability
(at fair value)
56
Credit value
adjustment
(CVA)
‘Counterparty
credit risk’
Debit value
adjustment
(DVA)
‘Own credit risk’
© 2013 Deloitte Accountants B.V.
Vraag
Was u reeds op de hoogte van de
problematiek rond CVA en DVA?
a) Ja
b) Nee
57
© 2013 Deloitte Accountants B.V.
IFRS 13 – Fair value hierarchy
58
IFRS 13.72
Quoted prices (unadjusted) in active markets for
identical assets or liabilities that the entity can access
at the measurement date
Inputs other than quoted prices included within Level
1 that are observable for the asset or liability, either
directly or indirectly
Unobservable inputs for the asset or liability
Level 1
Level 2
Level 3
© 2013 Deloitte Accountants B.V.
IFRS 13 – Disclosures
59
IFRS 13.91
Disclose information that help users assess both of the
following:
for assets and liabilities that are measured at fair value on a
recurring or non-recurring basis in the B/S after initial
recognition, the valuation techniques and inputs used to
develop those measurements
for recurring FVMs using significant unobservable inputs
(Level 3), the effect of the measurements on profit or loss
or other comprehensive income for the period
© 2013 Deloitte Accountants B.V.
IFRS 13 – Disclosures
60
IFRS 13.93
RecurringFVMs
Non-recurringFVMs
Those that other IFRSs
require or permit in B/S
at the end of each
reporting period
Those that other IFRSs
require or permit in B/S
in particular
circumstances
© 2013 Deloitte Accountants B.V.
IFRS 13 – Disclosures
Recurring
FVMs
Fair value at
the end of
reporting period
Valuation
techniques and
inputs
Transfers
between Level 1
and Level 2Level 3
information
61
IFRS 13.93
Sensitivity
analysis
(qualitative and
quantitative)
Level within fair
value hierarchy
© 2013 Deloitte Accountants B.V.
IFRS 13 – Disclosures
Non-recurring
FVMs
Fair value at
the end of
reporting period
Valuation
techniques and
inputs
Reason for FVM
62
IFRS 13.93
Level within fair
value hierarchy
© 2013 Deloitte Accountants B.V.
IFRS 13 – Disclosures
FV in notes
only
Valuation
techniques and
inputs
63
IFRS 13.93
Level within fair
value hierarchy
© 2013 Deloitte Accountants B.V.
IFRS 13 – Disclosures
64
Recurring
FVMs
Non-
recurring
FVMs
FV in
notes
only
If the highest and best use of a non-
financial asset differs from its current use,
disclose that fact and why the non-financial
asset is being used in a manner that differs
from its highest and best use
Ѵ Ѵ Ѵ
IFRS 13.93
Non-financial assets
© 2013 Deloitte Accountants B.V.
Offsetting financial assets and financial liabilities
66
IFRS 7
Disclosures
IAS 32
Offsetting
2013
2014
© 2013 Deloitte Accountants B.V.
Offsetting – Additional disclosures in IFRS 7
67
Information about the effect or potential effect of netting
arrangements on an entity’s financial position
These disclosures will also provide comparable information between:
• F/Ss prepared in accordance with IFRS; and
• F/Ss prepared in accordance with US GAAP
All financial instruments set off in the statement of financial
position in accordance with IAS 32, and financial instruments
subject to a master netting arrangement or similar agreement
even if not set off in the statement of financial position
The disclosures apply to:
© 2013 Deloitte Accountants B.V.
Offsetting – Application guidance in IAS 32
68
the meaning of ‘currently has a legally enforceable right of
set-off’
that some gross settlement systems would be considered
equivalent to net settlement if they eliminate or result in
insignificant credit and liquidity risk and process receivables
and payables in a single settlement process or cycle
Clarification of:
© 2013 Deloitte Accountants B.V.
Vraag
Was u reeds op volledig op de hoogte van
deze nieuwe in 2013 vereiste disclosures?
a) Ja
b) Nee
69
© 2013 Deloitte Accountants B.V.
Control under IFRS 10
Variablereturns
Power
Link between
power and
variable returns
IFRS 10.7
71
Consider all
facts and
circumstances
© 2013 Deloitte Accountants B.V.
Power arises from existing rights
Voting rights
Potential voting rights
Rights to appoint key personnel
Decision-making rights within a contract
Kick-out rights
Protective rights
72
Consider only
substantive
rights
© 2013 Deloitte Accountants B.V.
Investment entities – Definition
73
An investment entity is an entity that…
Multiple
investments
Multiple
investors
Equity /
partnership
interests
Additional
characteristicsUnrelated
investors
Investment Entity
Obtain funds from one or more
investors
Invest funds for returns for either capital appreciation or a
combination of capital appreciation and
investment income
Manage and evaluate its
investments on a fair value basis
IFRS 10.28
© 2013 Deloitte Accountants B.V.
An investment entity would be required to account for its investments as follows:
74
Accounting by a non-investment entity parent company:
If a non-investment entity parent has subsidiary that is an investment entity, it
is not permitted to retain the specialised accounting guidance of the
subsidiary in its consolidated financial statements
Equity
investments
Debt
securitiesReal Estate
>50% 20%-50% <20%
Fair value(exception
to IFRS 10)
Fair value(exception to
IAS 28)
Fair value(IFRS 9 /
IAS 39)
Fair value(IFRS 9 /
IAS 39)
Fair value(IAS 40)
Investment entities – Measurement guidance IFRS
10.B85L
© 2012 Deloitte Accountants B.V.IFRS Update 2012
IFRS 11 Joint arrangements – Classification
76
Structure of the joint arrangement
Not structured through a
separate vehicle
Structured through a
separate vehicle
Joint operation Joint venture
Legal form
Contractual terms
Other facts and
circumstances
IFRS 11.B
© 2012 Deloitte Accountants B.V.IFRS Update 2012
IFRS 11 – Joint venture
77
IFRS 11.16
A joint arrangement whereby the parties that have joint control
of the arrangement have rights to the net assets of
the arrangement
Joint venture
(assets &
liabilities)
Joint
venturer A
Joint
venturer B
© 2012 Deloitte Accountants B.V.IFRS Update 2012
IFRS 11 – Joint operation
78
IFRS 11.15
A joint arrangement whereby the parties that have joint control
of the arrangement have rights to the assets, and
obligations for the liabilities, relating to the
arrangement
Joint
operation
(assets &
liabilities)
Joint
operator A
Joint
operator B
© 2013 Deloitte Accountants B.V.
Vraag
Heeft u al analyses verricht om na te gaan
wat de gevolgen zijn van toepassing van
IFRS 10 en IFRS 11?
a) Ja
b) Nee
79
© 2013 Deloitte Accountants B.V.
IFRIC 21 Levies
81
2013
31 December
2014
At any point in
2013 the entity
has a present
obligation
Levy is triggered
progessively as an
entity generates revenue
in 2013
© 2013 Deloitte Accountants B.V.
IFRIC 21 Levies
82
2013
31 December
2014
The amount of the levy
is calculated by
reference to the revenue
generated by the entity
in 2013
Levy is triggered in full
as an entity generates
revenue in 2014
Liability is
recognised in
full on 3 January
2014
On 3 January 2014 first
generation of revenue
© 2013 Deloitte Accountants B.V.
IFRIC 21 Levies
83
2013
31 December
2014
The amount of the levy
is calculated by
reference to the
amounts in the financial
statements at the end of
2013
Levy is triggered in full if
an entity operates as a
bank on 1 January 2014
Liability is
recognised in
full on 1 January
2014
© 2013 Deloitte Accountants B.V.
IAS 19R – Presentation
85
Categories Components
Comprehensive
income
Service cost
• Current service cost net of employee
contributions
• Non-routine settlement gain/loss
• Curtailment loss/gain
• All past service cost
Service cost in
P&L (under operating)
Net interestTime value of money on the net defined
benefit liability (asset)
Net interest cost in
P&L (under operating
or finance)
Remeasurements
• Actual return net of time value of
money on plan assets
• Routine settlement gain/loss
• Gain/loss on DBO
• Effect of asset ceiling
In Other
comprehensive
income (OCI)
© 2013 Deloitte Accountants B.V.
IAS 19R – Objective of disclosures
Information
that
Explains the
characteristics of
and risks
associated with its
defined benefit
plans
Identifies and
explains the
amounts in the
F/S’s arising
from its defined
benefit plans
Describes how its
defined benefit
plans may affect
the amount,
timing and
uncertainty of the
entity’s future
cash flows
86
IAS 19.135
© 2013 Deloitte Accountants B.V.
IAS 19R – Disclosures defined benefit plans
Plan
characteristics
and risks
Regulatory
framework of
the plan Nature of the
benefits provided
by the plan
Any other
entity’s
responsibility for
plan governance
Description of
risks to which
the plan
exposes to the
entity
Description
of amendments,
curtailments and
settlements
87
IAS 19.139
© 2013 Deloitte Accountants B.V.
IAS 19R – Disclosures defined benefit plans
Amount, timing
and
uncertainty of
future cash
flows
The results of a
sensitivity
analysis that
indicates the
influence of
each significant
actuarial
assumption on
the outcome of
the pension
valuation
A description of
any asset-liability
matching
strategies used
by the plan or the
entity
A narrative
description of
funding
arrangements
88
IAS 19.145-
147
Information about
the maturity
profile including
the duration of
the pension
liabilities
© 2013 Deloitte Accountants B.V.
IAS 19R – Disclosures defined benefit plans
Multi-employer
plans
The extent to
which the entity
is liable for
other entities’
obligations
Qualitative
information about
agreed
deficit/surplus
allocation on
wind-up or
withdrawal
A narrative
description of
funding
arrangements
(method used to
determine the
entity’s rate of
contributions and
any minimum
funding
requirements
89
IAS 19.148
© 2013 Deloitte Accountants B.V.
IAS 19R – Application problems
• Discount rate (IFRIC)
• Employee contributions (Amendment to IAS 19R)
• Liability ceiling
90
‘Handreiking voor de toepassing
van IAS 19R in de Nederlandse
pensioensituatie’
© 2013 Deloitte Accountants B.V.
Areas of focus AFM/ESMA in 2014 (FY 2013)
Impairment of non-financial assets
Measurement and disclosure of post-employment benefit obligations
Fair value measurement and disclosure
Disclosures related to significant accounting policies, judgements and estimates
Measurement of financial instruments and disclosure of related risks
92