IASB concludes the Annual Improvements to IFRSs 2012–2014 Cycle

The International Accounting Standards Board (IASB) has issued Annual Improvements to IFRSs 2012–2014 amending the following standards, effective 1 January 2016:

IFRS 5: Adds specific guidance in IFRS 5 Non-current Assets Held for Sale and Discontinued Operations for cases in which an entity reclassifies an asset from held for sale to held for distribution or vice versa and cases in which held-for-distribution accounting is discontinued.

IFRS 7: Adds additional guidance in IFRS 7 Financial Instruments: Disclosures (with consequential amendments to IFRS 1) to clarify whether a servicing contract is continuing involvement in a transferred asset for the purpose of determining the disclosures required and clarifies the applicability of the amendments to IFRS 7 on offsetting disclosures to condensed interim financial statements.

IAS 19: Clarifies in IAS 19 Employee Benefits that the high quality corporate bonds used in estimating the discount rate for post-employment benefits should be denominated in the same currency as the benefits to be paid (thus, the depth of the market for high quality corporate bonds should be assessed at currency level).

IAS 34: Clarifies the meaning of ‘elsewhere in the interim report’ and requires a cross-reference in IAS 34 Interim Financial Reporting.

IASB changes IAS 27 to again allow application of the equity method

The IASB has published ‘Equity Method in Separate Financial Statements (Amendments to IAS 27)’. Effective for annual periods beginning on or after 1 January 2016, the amendments are to be applied retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. The amendments allow an entity to account for investments in subsidiaries, joint ventures and associates in its separate financial statements: (a) at cost; (b) in accordance with IFRS 9 Financial Instruments (or IAS 39 Financial Instruments: Recognition and Measurement for entities that have not yet adopted IFRS 9); or (c) using the equity method as described in IAS 28 Investments in Associates and Joint Ventures. The amendments also clarify that when a parent ceases to be an investment entity, or becomes an investment entity, it shall account for the change from the date when the change in status occurred. The accounting option must be applied by category of investments.

IASB publishes a Discussion Paper on reporting the financial effects of rate regulation

The IASB published for comments the Discussion Paper ‘Reporting the Financial Effects of Rate Regulation’. The Discussion Paper describes a type of rate regulation that contains elements of both cost recovery and incentive approaches. The Discussion Paper seeks comments on whether or not the distinguishing features of defined rate regulation sufficiently capture the type(s) of rate regulation that have the most significant financial effects. Comments are due 15 January 2015.

IASB publishes proposals for measuring quoted investments in subsidiaries, joint ventures and associates at fair value

The IASB has published Exposure Draft of proposed amendments to IFRS 10, IFRS 12, IAS 27, IAS 28, IAS 36, and IFRS 13. The IASB has proposed amendments that would confirm that the unit of account for investments in subsidiaries, joint ventures and associates is the investment as a whole, but that the fair value measurement of quoted investments in subsidiaries, joint ventures and associates should be the product of the quoted price multiplied by the quantity of financial instruments held, without adjustments. The IASB also proposes to align the fair value measurement of a quoted CGU to the fair value measurement of a quoted investment. The proposed amendments also include an addition to the Illustrative Examples for IFRS 13 to illustrate the application of paragraph 48 of that standard to a net risk exposure of Level 1 financial assets and financial liabilities. Comments are requested by 16 January 2015.

IASB publishes proposed amendments to IAS 12 Income Taxes

The International Accounting Standards Board (IASB) has published an Exposure Draft ‘Recognition of Deferred Tax Assets for Unrealised Losses (Proposed amendments to IAS 12) ‘considering that diversity in practice around the recognition of a deferred tax asset that is related to a debt instrument measured at fair value is mainly attributable to uncertainty about the application of some of the principles in IAS 12. Comments are requested by 18 December 2014. The amendments aimed at clarifying the following aspects:

• Unrealised losses on debt instruments measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference regardless of whether the debt instrument’s holder expects to recover the carrying amount of the debt instrument by sale or by use.
• The carrying amount of an asset does not limit the estimation of probable future taxable profits.
• Estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible temporary differences.
• An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law restricts the utilisation of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type.

Ethics code proposals seek to enhance auditor independence

The International Ethics Standards Board for Accountants (IESBA) has released an exposure draft of proposed changes to the Code of Ethics for Professional Accountants ‘Proposed Changes to Certain Provisions of the Code Addressing the Long Association of Personnel with an Audit or Assurance Client’. The changes are designed to strengthen auditor independence through addressing threats created by the long association of audit firm personnel with an audit client. The proposals are open for comment until         12 November 2014.