IFRS INTERPRETATIONS COMMITTEE (IC)
LATEST DECISIONS SUMMARY

The following is a summarised update on some of the main discussions or tentative decisions taken by the IC at its meeting on 20 November 2017.

For more detailed and comprehensive information on the IC’s discussions: http://www.ifrs.org/news-and-events/updates/ifric-updates/november-2017/

• Tentative conclusions (open for comment until 29 January 2018) that the principles and requirements in IFRS provide an adequate basis with respect to the following accounting matters:
  • The consequential amendment made by IFRS 9 to IAS 1.82(a) - requiring an entity to present separately in profit or loss interest revenue calculated using the effective interest method - does not apply to financial assets measured at fair value through profit or loss (e.g. derivative instruments).
  • Revenue recognition by real estate developers under IFRS 15 for the sale of (fact-specific contracts):
    • land and a building to be constructed on the land, in particular identification of performance obligations in the contract and recognition of revenue over time or at a point in time
    • a pre-completion unit in a residential multi-unit complex, in particular whether the entity has an enforceable right to payment for performance completed to date (paragraph 35(c)).
• Confirmation of the IC’s previous tentative decision (June 2017) on accounting for the acquisition of a group of assets that does not constitute a business under IFRS 3 https://www.rsm.global/insights/ifrs-news/issue-72-ifrs-news-brief

INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB)
LATEST DECISIONS SUMMARY

The following is a summarised update on the main tentative decisions taken by the IASB at its meeting on 14 November 2017. In addition, the Board discussed a summary of the comments received on its exposure draft arising from the post-implementation review of IFRS 8 Operating Segments.

For more detailed and comprehensive information on the IASB’s discussions: http://www.ifrs.org/news-and-events/updates/iasb-updates/november-2017/ 

Primary Financial Statements (discussion paper or exposure draft due H1/2018)

• In relation to the presentation of an investing category in the statement(s) of financial performance:
  • ‘investing’ category is to be relabelled as ‘income/expenses from investments’
  • ‘income/expenses from investments’ are to be defined using a principle-based approach as ‘income/expenses from assets that generate a return individually and largely independently of other resources held by the entity’
  • lists of some items that would typically be treated as ‘investing’ and of some items that would typically not be treated as ‘investing’ for non-financial entities should be provided
  • the subtotal before the ‘income/expenses from investments’ category should not be labelled as ‘operating profit’
  • the project’s forthcoming consultation document will include a discussion of different possible approaches for the presentation of the share of profit or loss from associates and joint ventures accounted for using the equity method
• Concerning the definition of ‘finance income/expenses’:
  • ‘cash and cash equivalents’ should be used as a proxy for cash and temporary investments of excess cash
  • ‘finance income/expenses’ should consist of the following line items: (i) interest income from cash and cash equivalents calculated using the effective interest method, (ii) other income from cash, cash equivalents and financing activities, (iii) expenses from financing activities, (iv) other finance income, (v) other finance expenses, and (vi) if material, a separate line item for impairment of cash and cash equivalents
  • IAS 7’s current description of ‘financing activities’ should indicate that a financing activity involves: (i) the receipt or use of a resource from a provider of finance (or provision of credit), (ii) the expectation that the resource will be returned to the provider of finance, and (iii) the expectation that the provider of finance will be appropriately compensated through the payment of a finance charge that is dependent on both the amount of the credit and its duration
• For better communication on the other comprehensive income (OCI) section of the statement(s) of financial performance, ‘OCI items that will not be reclassified subsequently to profit or loss’ and ‘OCI items that will be reclassified subsequently to profit or loss’ are to be retained as the only two categories and renamed ‘remeasurements reported outside profit or loss’ and ‘income and expenses to be included in profit or loss in the future’ respectively.

Dynamic Risk Management (discussion paper due H2/2018)

Discussions of two proposed approaches for an accounting model that better reflects dynamic risk management in financial reporting concluded with a tentative decision to focus on further developing a model based on cash flow hedge mechanics (as opposed to fair value hedge mechanics).

Wider Corporate Reporting

• Scope of the IFRS Foundation’s interest in wider corporate reporting should be limited to the provision of other financial information to meet the needs of existing and potential investors, lenders, and other creditors, as defined in the Conceptual Framework for Financial Reporting.
• The Board’s work plan now includes a project to revise and update the Management Commentary Practice Statement that was issued in 2010.

UPCOMING COMMENT DEADLINES