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June IFRS Highlights

June 25, 2018

IFRS Highlights

The Monitoring Board Work Plan

On 30 April 2018 the Monitoring Board, a body composed of market regulators in jurisdictions requiring or authorizing the use of IFRSs and charged with oversight of the IFRS Foundation, published its 2018-2019 work plan.

This plan encompasses two key areas:

  1. Reviewing the oversight of the IASB’s activities, conducted by the Trustees of the IFRS Foundation. This area includes continuing the Monitoring Board’s dialogue with the Trustees on accounting matters of broad public interest, such as the impact and consistent implementation of the accounting standards that come into force this year and over the next few years (IFRS 9, IFRS 15, IFRS 16 and IFRS 17).
  2. Monitoring and conferring with the Trustees of the IFRS Foundation. The subjects envisaged here include:
    • Governance of the IFRS Foundation (strengthening the governance framework, in particular with respect to conflicts of interest; follow-up of the IFRS Reputation Research Report; the Trustees’ review of the operational risks to which the IFRS Foundation is exposed, including the development of evaluation metrics and key performance indicators).
    • The funding of the organization, and
    • The nomination of Trustees, including the Chair, whose mandate has expired.

The Monitoring Board work plan can be consulted here.


European Highlights

ESMA: 22nd extract from the enforcement database

On 19 April 2018, the European Securities and Markets Authority, ESMA, published the 22nd extract from its enforcement database, containing 10 decisions taken by European regulators on the following topics:

  1. Classification of an asset that is not expected to be sold within one year (IFRS 5)
  2. Presentation and disclosure of restricted cash balances (IAS 7)
  3. Perpetual notes classified as liabilities (IAS 32)
  4. Disclosure of quantitative commodity price assumptions that have significant risk of resulting in material adjustments to carrying amounts (IAS 1 and IAS 36)
  5. Purchase price allocation to a group of acquired assets (IFRS 3, IFRS 13 and IAS 38)
  6. Demerger and distribution of a segment to the issuer’s shareholders (IFRIC 17)
  7. Presentation of revaluation losses of assets used in operating activities (IAS 1)
  8. Obtaining power over an investee following a tender offer (IFRS 10)
  9. Lack of foreign currency exchangeability and hyperinflation (IAS 8, IAS 21 and IAS 29)
  10. Amortization of content rights for films and television programs (IAS 38).

This 22nd extract from the enforcement database and the list of all the decisions published by ESMA can be consulted here.


ESMA’s 2017 report on the activities of IFRS enforcers in Europe

On 3 April 2018 ESMA (the European Securities and Markets Authority) published its annual report on the activities of European regulators.

This report is an opportunity for ESMA to review the activities conducted in 2017 to promote good practices in the matter of financial reporting.

The interim and/or annual financial statements of 1,141 issuers were examined, representing an average examination rate of 19% of all IFRS issuers with securities listed on regulated markets. These examinations resulted in actions being taken towards 328 issuers (32% of the issuers examined), in order to address anomalies found mainly in the following areas:

  • Presentation of financial statements,
  • Impairment of non-financial assets,
  • Recognition of financial instruments.

The financial statements of 204 issuers were examined a posteriori in light of the 2016 ESMA enforcement priorities (for more details of these priorities, see the October 2016 edition of Beyond the GAAP no 104). These resulted in 76 enforcement actions being taken against 56 issuers, related to:

  • The presentation of financial statements,
  • The distinction between equity instruments and financial liabilities, and
  • Transitional disclosures of the expected impact of IFRS 9.

As always in this report, ESMA and the enforcers indicate the areas in which they plan to focus their efforts in 2018, namely the new IFRS 9 and IFRS 15, in terms of both supervision and the promotion of good practices.

The 2017 activity report can be consulted here.


EFRAG research agenda consultation

On 6 April 2018 EFRAG published a consultation on its research agenda. This consultation has a number of objectives:

  • To determine how the influence of its research activities on the IASB’s work could be substantiated;
  • To assess and enhance the use of evidence in research, in particular for impact studies; and
  • To obtain the views of constituents regarding a number of proposed research topics, and to gather further suggestions, in the light of the following criteria:
    • Importance or urgency of the project topic to European constituents,
    • Probability that the project will reach a useful conclusion in a reasonable time,
    • Interaction with projects from other organizations, including the IASB.

EFRAG has put forward five research topics, in two categories:

  1.  Addressing new developments:
  • Intangible assets: how can a full picture be provided of internally-generated intangibles without aligning the carrying amount of equity to market prices?
  • Cryptocurrencies: what accounting treatment should be used for the different constituents and transactions involving cryptocurrencies (currency miners, issuers, investors)?

2. Enhancing current financial reporting:

  • Derecognition: analysis of the consistency of existing derecognition practices under different IFRSs, and a conceptual approach to the notions of performance or realization.
  • Transaction-related costs: analysis of the consistency of the accounting for and of the nature of costs regarded as transaction-related in different IFRSs, and search for a common principle.
  • Variable and contingent payments: identification of the accounting issues involved and inventory of the frequency, magnitude and nature of these payments and their treatment in IFRSs in order to develop alternative accounting treatments, including improvements in presentation and disclosure.

The consultation document is available on the EFRAG website here.

Responses to this consultation can be submitted until 1 June 2018 using the online questionnaire on the EFRAG website.

 


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