ifrs update selected projects
DESCRIPTION
IFRS Update Selected projects. November 2009. Outline. 2. IAS 39 replacement Financial statement presentation Revenue recognition Fair value measurement. IAS 39 replacement. Wayne Upton, Director of International Activities. Major projects—financial crisis. 4. - PowerPoint PPT PresentationTRANSCRIPT
International Financial Reporting Standards
The views expressed in this presentation are those of the presenters, not necessarily those of the IASB or the IASC Foundation
IFRS UpdateSelected projects
November 2009
Outline
• IAS 39 replacement
• Financial statement presentation
• Revenue recognition
• Fair value measurement
2
International Financial Reporting Standards
The views expressed in this presentation are those of the presenters, not necessarily those of the IASB or the IASC Foundation
IAS 39 replacementWayne Upton, Director of International Activities
Major projects—financial crisis 4
Project Progress towards milestones
Financial instruments: recognition and measurement
Milestone 2010 converged requirements
Work done DP on complexity issued
ED on classification and measurement issued
DP on credit risk in liability measurement issued
FCAG issued report issued
FASB-IASB joint round table discussions in Tokyo, London and Norwalk
Major projects—financial crisis continued 5
Project Progress towards milestones
Financial instruments: recognition and measurementcontinued
Expect ED impairment methodology in November 2009
Final IFRS on classification and measurement of financial assets during November 2009. To be followed by IFRS on financial liabilities during 2010
ED hedge accounting in December 2009
FASB to issue comprehensive ED on financial instruments in late 2009/early 2010
TimetableOne project – three phases
2008 IASC Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.iasb.org
6
Project phase Exposure Draft Finalisation
1. Classification and measurement
July 2009 For financial assets in time for 2009 year end financial statements
For financial liabilities during 2010
2. Impairment methodology
November 2009 In 2010
3. Hedge accounting
(Board deliberations ongoing)
December 2009 In 2010
* The above is in addition to a project on derecognition of financial instruments. ED Derecognition was published in March 2009.
2009 IASC Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.iasb.org
7
Overview of classification model for financial assets only
Fair Value (No impairment)
Amortised cost(one impairment
method)Managed on a contractual cash flow
basis
Basic loan features
+FVO for
accounting mismatch (option)
All other instruments:• Equities• Derivatives• Some hybrid contracts• …
Equities: OCI presentation
available(option)
Tentative decision – reclassification to be required when business model changes
2008 IASC Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.iasb.org
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Current state:Incurred loss impairment
IAS 39 requires an incurred loss approach for financial assets
• What does that mean?Impairment loss only recognised when:
– Trigger (loss) event occurs– Impact can be reliably estimated
• Consequence: Expected losses not recognised before trigger events
2008 IASC Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.iasb.org
9
Impairment Exposure DraftExpected cash flow approach
• Main features:– interest revenue is recognised on the basis of expected
cash flows (including initial expected credit losses)
– impairment results from an adverse change in credit loss expectations
– reversal of impairment loss when expectations change favourably
– re-estimation of expected cash flows each period end
2008 IASC Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.iasb.org
10Hedging – Broad direction
• Consider using cash flow hedge accounting mechanics for fair value hedges
– Gains and losses on effective portion recognised in OCI – Hedged item not remeasured– ‘Lower of’ test NOT to be used for fair value hedges
• Simplify cashflow hedge accounting methodology
• Phasing:– broad hedging model first– then consider portfolio hedge accounting and net
investment hedging
2008 IASC Foundation | 30 Cannon Street | London EC4M 6XH | UK | www.iasb.org
11
Project to replace IAS 39Next steps
November 2009:
IASB publishes ED on impairment of financial assets
Q4/2009:
IASB to issue final IFRS on classification and measurement of financial assets
IASB to publish ED on hedge accounting
During 2010:
IASB to complete replacement of IAS 39 by issuing final guidance on:
• impairment
• derecognition*
• hedge accounting
• financial liabilities
1 January 2013:
Expected mandatory effective date for Phase I classification and measurement
*separate project
1 January 2014:Expected mandatory effective date forPhase II impairment
International Financial Reporting Standards
The views expressed in this presentation are those of the presenters, not necessarily those of the IASB or the IASC Foundation
Financial statement presentation
Tatsumi Yamada, IASB member
MoU projects 13
Project Progress towards milestones
Financial statement presentation
Milestone 2011 converged requirements
Work done DP issued
Expect ED in Q2 2010
Presentation objectives
Financial statements should:
• Portray a cohesive financial picture – Relationships are clear, statements are complementary
• Disaggregate information so that it is useful in assessing the amount, timing, and uncertainty of future cash flows
– Common sections and categories, more line items
• Present information about liquidity and financial flexibility
– Ability to meet financial commitments and invest in business opportunities
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Key features of the proposed approach
• Management approach to classification
• Single statement of comprehensive income– Current OCI treatment retained
– Current tax allocation retained
• Direct method for presenting operating cash flows
• Reconciliation schedule– Reconciliation of SCF and SCI
– Separate identification of remeasurements
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Redeliberation decisions (IASB to Oct)
• Liquidity and flexibility should not be core objectives
• Cohesiveness not required at line item level
• Disaggregation both by function and nature
• Retain discontinued operation presentation
• Retain financing section (consisting of debt and equity).
• Categories in the business section (investing and operating) and definitions being revised.
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Redeliberation decisions (IASB to Oct)
• Require information about net debt– Net debt = financing section less resources available to
service those liabilities
• Statement of cash flows:– present cash flows using direct method
– only significant operating cash flows
• Reconciliation schedule– replace it with an analysis of the changes in balances of
all significant asset and liability line items.
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Other key decisions for the boards
• Cohesiveness– Application to 2 or 3 statements
• Presentation of statement of financial position
• Disaggregation– Overall principle and segment reporting
• Statement of comprehensive income– Disaggregation of remeasurements information
• Basket transactions– Single line or disaggregation
• Presentation of net debt information
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International Financial Reporting Standards
The views expressed in this presentation are those of the presenters, not necessarily those of the IASB or the IASC Foundation
Revenue recognitionPrabhakar Kalavacherla (PK), IASB member
MoU projects 20
Project Progress towards milestones
Revenue recognition
Milestone 2011 converged requirements
Work done DP issued
Expect ED in Q2 2010
Project objective
• To converge, simplify, and clarify the principles for recognising revenue across various industries
• Improvements to financial reporting:– Remove inconsistencies and weaknesses
– Provide a robust framework for resolving issues
– Improve comparability
– Simplify preparation
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Overview of proposals
• Single revenue recognition model for contracts with customers
• Revenue recognised when a performance obligation in the contract is satisfied
– a performance obligation is satisfied when a good or service has been transferred to the customer, which is when customer obtains control of the good or service
• Amount of revenue recognised is the amount of the transaction price allocated to the performance obligation
Revenue depicts the transfer of goods and services to the customer, not necessarily the activities of the entity
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23Recent decisions: Control
Proposals
• Entity recognises revenue when it transfers goods or services to the customer
• Transfer of good or service depends on when customer obtains control of it
Recent decisions
• Definition of control: the present ability to direct the use of and receive the benefit from the good or service
• Indicators of control:
• Payment / legal title / ability to sell / physical possession/ customisation / continuing involvement
Not abolishing continuous revenue recognition for many construction contracts
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Recent decisions: Allocating the transaction price
Proposals
• Transaction price allocated to individual performance obligations on a relative standalone selling price basis
• Standalone selling price estimated if good/service not sold separately
Recent decisions
• When goods and services are transferred continuously, transaction price allocated to contract segments rather than to individual performance obligations
• A contract segment includes one or more performance obligations for which the entity has evidence of a market—ie evidence that a segment could be sold separately
International Financial Reporting Standards
The views expressed in this presentation are those of the presenters, not necessarily those of the IASB or the IASC Foundation
Fair value measurement guidance
Wei-Guo Zhang
Major projects—financial crisis continued 26
Project Progress towards milestones
Fair value measurement guidance
Milestone 2010 converged guidance
Work done ED issued
Expect Round table discussions in Q4 2009
IFRS in Q2 2010
Project overview 27
When?
How? IFRS on fair value measurement guidance
IAS 39
IAS 41
IFRS 3 IFRS 5 ...
does not introduce new fair values does not change the measurement objective in
existing IFRSs
What does ‘fair value’ mean?
• Proposed definition in exposure draft
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
– an exit price (directly or indirectly)
– a current price (as of the measurement date)
– the transaction takes place between market participants (it is market-based, not entity-specific)
282828
Overview of the proposals 29
Guidance and other requirements
Fair value at initial recognition
Valuation techniques
Inputs to valuation techniques
Fair value hierarchy
Core principle
The asset or liability
The transaction
Market participants
The price Disclosures
Application to assets, liabilities and equity
Milestones 30
Discussion paper
(using SFAS 157 as a basis for forming preliminary views)
Nov 2006
Expert Advisory Panel report Measuring and disclosing the fair value of financial instruments in markets that are no longer active
Oct 2008
Exposure draft
May 2009
Round-table meetings
(USA, Japan, UK)
Nov/Dec 2009 2010
IFRS
31Questions or comments?
Expressions of individual views by members of the IASB and its staff are encouraged. The views expressed in this presentation are those of the presenters. Official positions of the IASB on accounting matters are determined only after extensive due process and deliberation.