#CPACONGRESS
B1: An accounting standard setting update: Forthcoming standards and major projects
Glenn Brady CPA
Director - Australian Activities
Australian Accounting Standards Board
Thursday 20 November 2014
2:10PM - 3:00PM
Accounting Standard Setting Update Forthcoming Standards and Major Projects
CPA Congress
Glenn BradyDirector – Australian Activities
© Australian Accounting Standards Board 2014
3Agenda
© Australian Accounting Standards Board 2014
IASB agenda
Domestic agenda • NFP / public sector • Application issues
Addressing complexity in financial reporting
AASB communications and engagement
4AASB work program
Domestic Agenda
Research
IASB Agenda
NFPs
Public Sector
RDR
SPR
Reporting entity
Conceptual Framework
ETS
PIRs
FI
Leases
Insurance
Narrow Scope
Interpret’ns
Disclosure Initiative
© Australian Accounting Standards Board 2014
6Revenue from Contracts with Customers
Status
• IFRS 15 issued by the IASB in May 2014
• AASB 15 expected to be issued by the AASB in Q4 2014
Effective date and transition
• annual reporting periods beginning on or after 1 January 2017. Early application permitted
• retrospective application (with optional practical expedients)
Objective is to develop a common revenue recognition standard for IFRSs and US GAAP that clarifies the principles for recognising revenue and that can be applied consistently across various transactions, industries and capital markets.
© Australian Accounting Standards Board 2014
7A framework for recognising revenue
Recognise revenue on transfer of goods or services to a customer at an amount that reflects the amount of consideration to which the entity expects to be entitled in exchange for those goods or services
1. Identify contract(s) with customer
2. Identify separate performance obligations
3. Determine transaction price
4. Allocate transaction price
5. Recognise revenue when performance obligation is satisfied
Steps to apply the core principle
Core principle
© Australian Accounting Standards Board 2014
9Financial instruments: Impairment
Status
• IFRS 9 (2014) issued by the IASB in July 2014
• AASB 9 (2014) expected to be issued by the AASB in Q4 2014
Effective date and transition
• annual reporting periods beginning on or after 1 January 2018. Early application permitted
The main objective is to provide users of financial statements with more useful information about an entity’s expected credit losses on financial instruments by requiring an entity to:
• recognise expected credit losses at all times; and
• update the amount of expected credit losses at each reporting date to reflect changes in the credit risk of the financial instruments.
© Australian Accounting Standards Board 2014
10AASB 9 Early application
Version of AASB 9
Requirement Classification and
measurement of assets
Classification and
measurement of assets and liabilities
Hedge accounting
Complete version
Classification and measurement
Own credit risk * * *
Hedge accounting
Improvements to C&M
Impairment
Note: Withdrawal of earlier versions
© Australian Accounting Standards Board 2014
* Own credit risk amendments can be applied in isolation of the other AASB 9 amendments
12Leases
Status
• Redeliberations have commenced after considering feedback received on 2nd Exposure Draft, published in May 2013
Next steps
• Redeliberations are continuing
• Standard expected to be issued in 2015
Objective is to provide greater transparency about leverage, the assets an entity uses in its operations, and the risks to which it is exposed from entering into lease transactions
© Australian Accounting Standards Board 2014
13Lessee accounting – ED proposals
All leases longer than 12 months on balance sheet – lease contract creates a ‘right-of-use’
Lessee Right-of-Use Model
Recognise right-of-use asset Liability to make estimated future lease payments
Type A Leases (Interest and Amortisation
Method)
Type B Leases
(Single lease expense)
Recognised at amortised cost (applying the effective interest
method)
Short-term leases
Recognise only lease expense
© Australian Accounting Standards Board 2014
14Latest IASB decisions – a simplification?
Recognise lease asset and
lease liability
Recognise only lease expense
Type A leases (single lessee accounting model)
Expense recognition based on Interest and Amortisation method
i.e. 12 months or less (including leases with options to renew that are not reasonably
certain)
Short-term leases
‘Small ticket’ leases
i.e. small non-specialised assets
© Australian Accounting Standards Board 2014
16Completing the current domestic NFP/ public sector agenda (cont.)
Key projects
Service Performance Reporting
Service Concession
Arrangements
Income from
Transactions of NFP Entities
© Australian Accounting Standards Board 2014
17Income of not-for-profit entities
Status
• AASB ED targeted for Q4 2014
Effective date
• Expected to be 1 January 2017; early application permitted
Objective is to replace AASB 1004 Contributions with new requirements for recognising income from transactions of Australian NFP entities in the public and private sectors. Those requirements will be based on AASB 15 Revenue from Contracts with Customers.
© Australian Accounting Standards Board 2014
18Income of not-for-profit entities
Identify a contract
Identify performance obligations
Enforceable rights and obligations
Key issues
Donations or other contribution
No identified customer required
Recognised as income
Disclosure Additional NFP requirements
© Australian Accounting Standards Board 2014
20Recycling of property, plant and equipment
Status
• Initiated in September 2014 in response to constituent submissions
• Not limited to not-for-profit entities
How can you get involved in the project?
• Let us know your views: Targeted outreach Q4 2014
Objective is to consider the accounting for recyclable assets in accordance with the requirements of AASB 116 Property, Plant and Equipment.
© Australian Accounting Standards Board 2014
21DRC as a measure of value in use
Status
• Initiated in September 2014 in response to constituent submissions
• The Board is concerned that it is unclear that depreciated replacement cost as used in AASB 136 does not have the same meaning as current replacement cost as used in AASB 13
How can you get involved in the project?
• Let us know your views: ED expected Q4 2014 – Q1 2015
Objective is to clarify the application of depreciated replacement cost as a measure of value in use for certain assets of not-for-profit entities.
© Australian Accounting Standards Board 2014
22FV disclosures for NFP public sector entities
Status
• Initiated in September 2014 in response to feedback by not-for-profit public sector constituents of their concerns relating to the disclosure requirements of AASB 13
How can you get involved in the project?
• Let us know your views: Targeted outreach Q4 2014
Objective is to consider whether to modify the disclosures specified by AASB 13 for not-for-profit public sector entities.
© Australian Accounting Standards Board 2014
24 Disclosure initiative
IASB short-term projects
• Materiality
• IAS 1 amendments
IASB medium-term projects
• Research project on presentation and disclosure in IFRS
• Standards-level review of disclosure
Objective is explore how disclosures in financial reporting can be improved.
© Australian Accounting Standards Board 2014
25
• A pragmatic and substantive response to the need to reduce the burden of disclosure requirements on Australian reporting entities
• Effective from 1 July 2013• Post-implementation review will commence in 2015
Reduced disclosure regime (RDR)
© Australian Accounting Standards Board 2014
26Reporting entity: AASB Research Report
Key findings
• Majority lodge SPFS (58.7%) large proprietary 80% lodge SPFS
• Classification as reporting entity ≠ SAC 1 factors
• Variation in application of the reporting entity concepto Different views on the definition of the reporting entity
Next steps
• Policy implications are being discussed with key stakeholders
Examined the extent to which financial statements lodged with ASIC are GPFSs or SPFSs and the accounting policies applied in preparing SPFSs.
© Australian Accounting Standards Board 2014
27 Reporting entity: Recent AASB decisions
• Tentatively decided that the application paragraphs of Standards that currently apply to corporate non-reporting entities should be amended to apply to reporting entities/GPFSs only
• Considerable consultation with stakeholders should be undertaken before commencing a formal due process of proposing the amendment
AASB 107
AASB 108
AASB 101
AASB 1031
AASB 1048
AASB 1053
AASB 1054
© Australian Accounting Standards Board 2014
29
• Improved work plan and project communications
• LinkedIn and web alerts• Opportunities for
engagement– Exposure drafts and
invitations to comment– Project specific outreach
and consultation– Research Centre
publications– Post-implementation
reviews
Communicating and engaging with you
© Australian Accounting Standards Board 2014
30Your chance to share your views
Consultation topic Comments close
ED 253 Recognition of Deferred Tax Assets for Unrealised Losses
20 November
ED 254 Measuring Quoted Investments in Subsidiaries, Joint Ventures and Associates at Fair Value
12 December
ITC 32 Reporting the Financial Effects of Rate Regulation 15 December
© Australian Accounting Standards Board 2014
31
www.aasb.gov.au
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• See AASB Work Program and Project Summaries for the latest developments on AASB projects
• See Work in Progress section for all Exposure Drafts and AASB submissions
• Use Pronouncements search to get a list of mandatory Standards or Interpretations applicable to a particular reporting period
Further information
© Australian Accounting Standards Board 2014
32
Glenn Brady
Director – Australian Activities
(03) 9617 7605
Contact details
© Australian Accounting Standards Board 2014
33AASB disclaimer
This presentation provides personal views of the presenter and does not necessarily represent the views of the AASB or other AASB staff. Its contents are for general information only and do not constitute advice. The AASB expressly disclaims all liability for any loss or damages arising from reliance upon any information in this presentation. This presentation is not to be reproduced, distributed or referred to in a public document without the express prior approval of AASB staff.
© Australian Accounting Standards Board 2014
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