I recently attended a PwC conference where they provided some commentary on changes to the International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). IAS and IFRS changes are listed below and may be of use to those of you who take a fundamental approach to investing. This may also be of use to those of you going through exams.
Note that all IAS and IFRS definitions are from www.icaew.com
IAS and IFRS Changes already in force:
IAS19 Employee benefits
The accounting standard IAS 19 sets out the accounting treatment and disclosure for employee benefits
This standard has been revised this year (2013) and PwC made some observations, the key ones being:
- Actuarial gains and losses have been renamed “remeasurements”. These will now be recognised immediately in Other Comprehensive Income
- Regarding benefit plans, additional disclosures are required in presentation, amounts recognised and risks arising from defined benefit plans and multi-employer plans
IFRS13 Fair value measurement
The accounting standard IFRS 13 constitutes guidance on fair value measurement and disclosure requirements for IFRSs and US generally accepted accounting principles (GAAP)
- Any measurement changes will not result in restatements. For new disclosures, no comparatives are required.
- Fair value is clarified but it is not stated when it should be used
- Onus is on fuller disclosure of fair value
What will be new in 2014 – IAS and IFRS Changes:
IFRS10 Consolidated financial statements
The accounting standard IFRS 10 sets out the rules for presenting and preparing consolidated financial statements when an entity controls one or more other entities
For those of you studying CFA or accountancy exams, this IFRS will have loomed pretty large. Some pretty far reaching changes are coming:
- Control has some new definitions, as follows –
- Investor should have power over the investee
- The investor should have exposure or rights to variable returns from the investee
- Investor’s power should affect the amount of their returns
IFRS11 Joint arrangements
The accounting standard IFRS 11 clarifies the reporting procedures for joint arrangements
Another favourite for examiners, the good news is that the number of JV arrangements has been reduced to two:
- Joint operation – recognise the share of assets and liabilities, recognise share of revenues and expenses and recognise accounting entities booked in operator’s own financial statements
- Joint venture – in individual financial statements, the investment in the JV should be recognised at cost, or in accordance with IAS39. In the consolidated financial statements, the equity method of accounting (IAS 28), is prohibited
- The legal structure no longer determines the accounting, the underlying rights and obligations now determine this
IFRS12 Disclosure of interest in other entities
The accounting standard IFRS 12 sets out the disclosure requirements for all forms of interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities
Generally, there are more detailed disclosures required, summarised below:
- Significant judgements and assumptions
- Interests in subsidiaries
- Interest in joint arrangements and associates
- Interests in unconsolidated structured entities
Hope that this is useful for you, would recommend some further research, particularly for those of you sitting exams.
References:
- www.icaew.com
- PwC Accounting Developments Seminar – Glasgow, 31st October 2013
Twitter: @MillarAllan
Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.
