United States: On The Horizon For IFRS - March 12, 2013

IASB / FASB JOINT MEETING FEBRUARY 2013

IASB issues February 2013 joint IASB / FASB meeting highlights

Key issues

At the February 2013 joint IASB / FASB meeting the following issues were discussed:

  • Annual Improvements 2010-2012: The IASB discussed the proposed Improvements to IFRSs from the Exposure Draft published in May 2012 and tentatively decided to finalize four of the proposed amendments.
  • Conceptual Framework: The IASB discussed an early draft of the Discussion Paper on the Conceptual Framework and reached certain tentative decisions on the following issues:
    • Purpose of the Conceptual Framework
    • Definitions of the elements of financial statements: asset, liability, equity, income, and expense
    • Recognition and derecognition
    • Boundary between liabilities and equity
    • Measurement
    • Reporting entity
  • Fair value measurement ‒ unit of account: The IASB discussed what the unit of account for an investment in a subsidiary, joint venture, or associate would be for fair value measurement. No decisions were made.
  • Financial instruments ‒ hedge accounting: The IASB tentatively decided to make certain changes to a proposed amendment to provide an exception from the requirement to discontinue hedge accounting for changes to the counterparty required by law or regulation. The IASB recently issued the Exposure Draft, Novation of Derivatives and Continuation of Hedge Accounting (proposed amendments to IAS 39 and IFRS 9).
  • Guide for micro-sized entities applying the IFRS for SMEs: The staff presented an update on the development of A Micro-sized Entity's Guide for Applying the IFRS for SMEs. The Guide is not a separate Standard, it is intended to accompany the IFRS for Small and Medium-sized Entities (IFRS for SMEs) and contains guidance to help micro-sized entities apply the requirements of the IFRS for SMEs.
  • IAS 41, Agriculture ‒ bearer biological assets: The IASB discussed the remaining issues in the limited scope project on bearer biological assets and reached certain tentative decisions. The Board will ask the staff to prepare an Exposure Draft of proposed amendments to IAS 16, Property, Plant and Equipment and IAS 41 after discussing with the Due Process Oversight Committee the due process steps that have been undertaken.
  • Insurance contracts: The IASB discussed the transition requirements for contracts acquired through a business combination and reached certain tentative decisions. The Board plans to publish the revised Exposure Draft in the second quarter of 2013.
  • Leases: Tentative decisions were reached on the following topics:
    • Transition for capital/finance leases (IASB and FASB)
    • Right-of-use assets that meet the definition of investment property under IAS 40, Investment Property (IASB only)
    • Transition for leveraged leases (FASB only)
  • Matters arising from the IFRS Interpretations Committee: The IASB discussed two matters relating to the application of IAS 19, Employee Benefits, and one relating to disclosures for transfers of financial assets that arose from the Committee meeting in January 2013.
  • Rate-regulated activities: The IASB discussed a number of issues related to the interaction of other IFRS with regulatory deferral account balances recognized under the interim IFRS to be proposed and made certain tentative decisions regarding the guidance to be included in the proposed interim IFRS for rate-regulated activities. The IASB also tentatively decided to publish a Request for Information to obtain additional information about different types of rate regulations.
  • Revenue recognition: The Boards reached tentative decisions on disclosures, effective date, and transition and have completed their substantive redeliberations of the 2011 Exposure Draft, Revenue from Contracts with Customers. As a result, the staff will begin drafting the final revenue standard.
  • Work plan: The work plan as of February 26, 2013, reflecting decisions made at the February 2013 meeting is available on the IASB website.

All decisions reached at IASB meetings are tentative and may be changed or modified at future meetings. Board decisions become final only after completion of a formal ballot to issue a Standard or Interpretation or to publish an Exposure Draft.

The International Accounting Standards Board has issued an IASB Update, which summarizes the joint IASB / FASB meeting that was held on February 18-22, 2013. The IASB met alone for certain sessions.

Highlights of the meeting are discussed below.

Annual Improvements 2010-2012

The IASB discussed the proposed Improvements to IFRSs from the Exposure Draft published in May 2012 and tentatively decided to finalize the following proposed amendments:

  • IFRS 2, Share-based Payment ‒ Definition of "vesting conditions"
  • IFRS 8, Operating Segments ‒ Aggregation of operating segments
  • IFRS 8, Operating Segments ‒ Reconciliation of the total of the reportable segments' assets to the entity's assets
  • IFRS 13, Fair Value Measurement ‒ Short-term receivables and payables

See the IASB project summary for more information on this project.

Conceptual Framework

The IASB discussed an early draft of a Discussion Paper on the Conceptual Framework, focusing on:

  • Purpose of the Conceptual Framework
  • Definitions of the elements of financial statements: asset, liability, equity, income and expense
  • Recognition and derecognition
  • Boundary between liabilities and equity
  • Measurement
  • Reporting entity

Purpose of the Conceptual Framework

The IASB discussed the purpose of the Conceptual Framework and reached the following tentative decisions:

  • The primary purpose of the Conceptual Framework is to assist the IASB in the development of future IFRS and in its review of existing IFRS. The Framework may also assist preparers of financial statements in developing accounting policies for transactions or events that are not covered by existing IFRS.
  • The Conceptual Framework is not an IFRS and does not override IFRS (as is the case currently).
  • The IASB could, in rare cases, issue a new or revised IFRS that conflicts with some aspect of the Conceptual Framework. The Board would do so only if necessary to meet the overall objective of financial reporting. Any such departure would be described and explained in the Basis for Conclusions of that IFRS.

Definition of the elements of financial statements

Definitions of an asset and a liability

The IASB discussed the following possible changes to the definitions of an asset and a liability:

  • Emphasize that the asset is the resource and a liability is an obligation, rather than the economic benefits that may flow from the resource or obligation
  • Remove the term "expected" from the definition. In the IASB's view, as long as an item is capable of producing an inflow or outflow of resources, it can meet the definition of an asset or liability, even if the probability of an inflow or outflow is very low (e.g. out of the money options). The reference to "expected" flows has caused confusion with the reference to probability in the recognition criteria.

The IASB also discussed whether to make the following additional changes to the definitions:

  • Remove the reference to "past events." This would emphasize that an asset is a present resource and a liability is a present obligation.
  • Remove the reference to "control" from the definition of an asset. Control would be addressed in the recognition criteria.

Additional guidance on applying the definitions

The IASB discussed additional guidance to support the definitions of an asset and a liability. For liabilities, the IASB discussed three approaches for identifying present obligations. As no preliminary views were reached, a description of all three approaches will be included in the Discussion Paper.

Definitions of income and expense and other elements of the financial statements

The IASB noted that significant changes to the existing definitions of income and expense were probably unnecessary. In March 2013, the IASB will consider whether to provide additional definitions of elements to distinguish items presented in profit or loss from items presented in other comprehensive income. The IASB also noted that the Discussion Paper may discuss whether to define elements for statements of cash flows and of changes in equity, e.g. cash receipts, cash payments, contributions to equity, distributions of equity, and transfers between classes of equity.

Recognition and derecognition

Recognition criteria

Currently, an element is recognized if (1) it is probable that any future economic benefit associated with the item will flow to or from the entity, and (2) the item has a cost or value that can be measured reliably.

The IASB tentatively decided on the following possible improvements to the recognition criteria:

  • Removing the term "probable":
    • The Discussion Paper would explain the difference between uncertainty about whether an asset or liability exists and uncertainty of outcome.
    • The Discussion Paper would discuss the different approaches with respect to the uncertainty over the existence of the asset or liability. The issues to be considered include whether to apply an explicit probability threshold, what the threshold should be (e.g. virtually certain, probable), and whether the threshold for an asset should be the same as for a liability.
    • The Discussion Paper would address uncertainty of outcome. Although an asset or a liability must be capable of generating inflows or outflows of economic benefits, there is no minimum probability threshold that those inflows or outflows must reach before a resource or an obligation qualifies as an asset or a liability.
  • Provide additional guidance on when an entity controls an asset:
    • The Discussion Paper will include a definition of control that is based on IFRS 10, Consolidated Financial Statements and the IASB's Exposure Draft, Revenue from Contracts with Customers.

The IASB also tentatively decided that:

  • In general, recognizing items that meet the definition of assets or liabilities is likely to provide useful information for assessing:
    • The amount, timing, and uncertainty of future cash flows
    • How effectively and efficiently management is using the entity's resources
  • There may be circumstances when an entity would not recognize some asset or liability, either because it would not provide relevant information, or because the cost to provide the information exceeds the benefits of providing the information.

Derecognition criteria

The existing Conceptual Framework does not define "derecognition," nor does it describe when derecognition should occur. The IASB tentatively decided that an entity would derecognize an asset or a liability when it no longer meets the recognition criteria. However, if the entity has retained some component of an asset or liability, the IASB will determine, at a standards level, how best to portray the change in those rights or obligations. Possible derecognition approaches include:

  • Enhanced disclosures
  • Presenting any rights or obligations retained on different lines from the line used for the original rights or obligations, to highlight the difference in risk profiles
  • Continuing to recognize the original asset or liability, and treating the proceeds received or paid for the transfer as a financing

Boundaries between liabilities and equity

The existing Conceptual Framework defines equity as the residual interest in the assets of the entity after deducting all its liabilities and the existing definition of a liability focuses on whether the entity has an obligation to transfer economic benefits. However, some Standards use complex exceptions to these basic definitions when distinguishing between liabilities and equity instruments.

The IASB directed the staff to develop for the Discussion Paper an approach that would retain the existing definition of a liability, and would remeasure equity claims through a statement of changes in equity to show wealth transfers between different classes of equity holders.

Measurement

The existing Conceptual Framework does not provide any guidance for when to use the four measurement bases that are currently listed.

General principles for measurement

The IASB tentatively decided on the following principles of measurement, which are derived from the objective of financial reporting and the qualitative characteristics of useful financial information.

  • Principle 1: the objective of measurement is to represent faithfully the most relevant information about the economic resources of the reporting entity, the claims against the entity, and how efficiently the entity's management and governing board have discharged their responsibilities to use the entity's resources
  • Principle 2: although measurement generally starts with an item in the statement of financial position, the relevance of information provided by a particular measurement method also depends on how it affects the statement of comprehensive income and if applicable, the statements of cash flows and of equity and the notes to the financial statements
  • Principle 3: the cost of a particular measurement must be justified by the benefits of reporting that information to existing and potential investors, lenders, and other creditors

The IASB noted that it will need to consider all three principles in selecting an appropriate measurement.

Initial and subsequent measurement

The IASB tentatively decided that the most relevant measurement method will depend on how the value of the asset will be realized and how the obligation will be fulfilled or settled.

Reporting entity

The IASB previously issued an Exposure Draft on the reporting entity and tentatively decided that it will not discuss the reporting entity proposals, including comments received on the 2010 Exposure Draft, until it begins to develop the Conceptual Framework Exposure Draft.

Next steps

In March 2013, the IASB expects to discuss presentation, disclosure, constructive obligations, and other measurement approaches. In April 2013, the IASB expects to discuss a revised draft of the Discussion Paper.

See the IASB project summary for more information on this project.

Fair value measurement ‒ unit of account

The IASB discussed whether the unit of account for investments in subsidiaries, joint ventures and associates should be the investment as a whole or the individual financial assets that make up the investment. The IASB also discussed the interaction between the unit of account of those investments and their fair value measurement.

The IASB did not make a decision and asked the staff to perform additional analysis for discussion at a future meeting.

See the IASB project summary for more information on this project.

Financial instruments ‒ hedge accounting

At the January 2013 IASB meeting, the IASB agreed to provide an exception from the requirement to discontinue hedge accounting when a derivative contract is required to be novated to a central counterparty (CCP) by law or regulation, through amendments to IAS 39, Financial Instruments: Recognition and Measurement and IFRS 9, Financial Instruments.

At this meeting, the IASB discussed the fact that the novation to a CCP may require other changes to the derivative arrangement such as changes to collateral requirements of the novated derivative.

The staff recommended that the IASB extend the proposed exception from the discontinuation of hedge accounting to other changes accompanying the novation. The staff also noted that changes to the collateral requirements for the novated derivative would affect the fair value of that derivative which would be reflected in the measurement of the derivative and in the assessment of the effectiveness of the hedge relationship.

The IASB tentatively agreed with the staff's recommendations.

Note: On February 28, 2013, the IASB issued an Exposure Draft, Novation of Derivatives and Continuation of Hedge Accounting (proposed amendments to IAS 39 and IFRS 9) with a 30 day comment period.

See the IASB project summary for more information on this project.

Guide for micro-sized entities applying the IFRS for SMEs

The staff presented an update on the development of A Micro-sized Entity's Guide for Applying the IFRS for SMEs (the Guide). The Guide is not a separate Standard, but it is intended to accompany the IFRS for Small and Medium-sized Entities (IFRS for SMEs) and contains guidance to help micro-sized entities apply the requirements of the IFRS for SMEs.

IAS 41, Agriculture ‒ bearer biological assets

The IASB discussed the remaining issues in the limited scope project on bearer biological assets (BBAs).

Requirements for the bare BBAs (i.e. not including the produce growing on the BBAs)

The IASB made the following tentative decisions:

  • The recognition requirements of IAS 16, Property, Plant and Equipment (covering unit of measure, initial costs, and subsequent costs) could be applied to BBAs without modification.
  • The disclosure requirements of IAS 16 could be applied to BBAs without modification.
  • The revaluation model would be permitted for BBAs.
  • BBAs would be included within the scope of IAS 16, rather than adding requirements to IAS 41, Agriculture.

The IASB also tentatively decided to ask for feedback from investors in the Exposure Draft on whether the following disclosures are important to them:

  • Disclosures about the fair values of the BBAs (including assumptions and inputs used)
  • Disclosures about the significant inputs that would be required to determine the fair value of BBAs (but without the need to disclose the fair value of the BBAs)
  • Other disclosures about productivity, for example age profile, estimates of the physical quantities of BBAs, and output of agricultural produce etc.

Requirements for the produce growing on the BBAs

The IASB made the following tentative decisions:

  • The reliability exception in IAS 41.30 would not be modified for produce growing on BBAs.
  • The produce would remain in the scope of IAS 41.

Transition requirements

The IASB tentatively decided that

  • The amendments to IAS 16 would permit use of fair value as deemed cost for items of BBAs at the start of the earliest comparative period presented in the financial statements to avoid the need to reconstruct cost information.
  • The amendments to IAS 16 and IAS 41 would be available for early adoption.
  • The deemed cost exemptions provided for PPE in IFRS 1, First-time Adoption of International Financial Reporting Standards would also be available for items of BBAs.

Next steps

The Board will ask the staff to prepare an Exposure Draft of the proposed amendments to IAS 16 and IAS 41 after discussing with the Due Process Oversight Committee the due process steps that have been undertaken.

See the IASB project summary for more information on this project.

Insurance contracts

The IASB discussed the transition requirements for contracts acquired through a business combination and reviewed the due process necessary before beginning the balloting process on the revised Exposure Draft.

Transition requirements for contracts acquired through a business combination

The IASB tentatively decided that:

  • In applying the transition requirements for insurance contracts, an insurer would account for the contracts that are in force and were previously acquired through a business combination using:
    • The date of the business combination as the date of inception of those contracts
    • The fair value of those contracts at the date of the business combination as the premium received
  • When first applying the Standard to insurance contracts that were previously acquired through a business combination, an insurer would reflect any gains or losses as an adjustment to retained earnings, rather than to goodwill.

Permission to ballot a revised Exposure Draft for insurance contracts

At its meeting in September 2012, the IASB noted that, while the revised Exposure Draft would include the full text of the proposed Standard, it would also be necessary to clearly inform stakeholders that the IASB does not intend to revisit aspects of the proposed Standard other than the following issues that it targeted for re-exposure.

  • Treatment of participating contracts
  • Presentation of premiums and claims in the statement of comprehensive income
  • Treatment of the unearned profit in an insurance contract
  • Presenting, in other comprehensive income, the effect of changes in the discount rate used to measure the insurance contract liability
  • The approach to transition

At its meeting in February 2013, the IASB concluded that it had met the due process requirements to begin the balloting process on the revised Exposure Draft. The IASB tentatively decided that the revised Exposure Draft would be open for comments for 120 days.

Next steps

The IASB plans to publish the revised Exposure Draft in the second quarter of 2013.

See the IASB project summary for more information on this project.

Leases

Investment property (IASB only)

The IASB discussed the accounting for right-of-use assets that meet the definition of investment property under IAS 40, Investment Property, as a consequence of changes being proposed to lease accounting. The Board tentatively decided that an entity would account for right-of-use assets in accordance with IAS 40 if the leased property meets the definition of an investment property.

Transition: capital/finance leases (IASB and FASB)

The Boards tentatively decided to provide specific transition relief for existing finance, capital, sales-type, and direct financing leases. At transition to the new guidance, lessees and lessors would not be required to make any adjustments to the carrying amount of any assets and liabilities associated with those leases. The revised Exposure Draft on leases will include specific guidance on the subsequent measurement of those assets and liabilities. The Boards' intent for including that guidance is to provide accounting that is consistent with how most of those leases would be accounted for under ASC 840, Leases, and IAS 17, Leases.

Transition: leveraged leases (FASB only)

The FASB discussed the transition for leveraged leases and tentatively decided that a lessor would retrospectively apply the proposed guidance for leases to existing leveraged leases.

Next steps

The Exposure Draft is planned for publication in the first half of 2013.

See the IASB project summary for more information on this project.

Matters arising from the IFRS Interpretations Committee

The IASB discussed three matters arising from the IFRS Interpretations Committee (the Committee) meeting in January 2013. Two are related to the application of IAS 19, Employee Benefits, and one is related to disclosures for transfers of financial assets.

IAS 19, Employee Benefits ‒ actuarial assumptions: discount rate

In October 2012, the Committee was asked to provide guidance on determining the rate used to discount post-employment benefit obligations under the guidance in IAS 19, Employee Benefits (Revised 2011). The specific issue before the Committee is whether corporate bonds with a rating lower than "AA" can be considered high quality corporate bonds (HQCB).

In its January 2013 meeting, the Committee asked the staff to consult with the IASB on the underlying principle in paragraph 84 of IAS 19 (Revised 2011) for determining the discount rate as well as the following matters related to the application of that paragraph:

  • To clarify the sentence "the discount rate reflects the time value of money but not the actuarial or investment risk"
  • Whether the objective for the discount rate for post-employment benefit obligations should be a risk free rate
  • To confirm that IAS 19 should be amended to clarify that when government bonds are used to establish the discount rate in the absence of HQCB, those government bonds must be of high quality

At the February 2013 IASB meeting, the IASB discussed the matters raised by the Committee. Twelve members of the Board agreed with the staff that:

  • The objective for the determination of the discount rate is stated in paragraph 84 of IAS 19 (that is, the discount rate reflects the time value of money but not the actuarial or investment risk). In addition, the discount rate does not reflect the entity-specific credit risk borne by the entity's creditors, nor does it reflect the risk that future experience may differ from actuarial assumptions.
  • The Committee should clarify that the sentence "the discount rate reflects the time value of money but not the actuarial or investment risk" does not mean that the discount rate for post-employment benefit obligations should be a risk free rate
  • The discount rate should reflect the credit risk of HQCB and that a reasonable interpretation of HQCB could be corporate bonds with minimal or very low credit risk

On the matter related to government bonds, eleven Board members agreed that the Committee should propose amendments to IAS 19 to specify that when government bonds are used to determine the discount rate those bonds should be of high quality.

The IASB's views on the matters raised by the Committee, as well as proposals for guidance to clarify the requirements of IAS 19 consistently with those views, will be reported to the Committee.

IAS 19, Employee Benefits ‒ measurement of the net defined benefit obligation for post-employment benefit plans with employee contributions

Previously, the Committee was asked to clarify the guidance on accounting for employee contributions to defined benefit plans in paragraph 93 of IAS 19, Employee Benefits (Revised 2011), which is effective from annual periods beginning on or after January 1, 2013. Specifically, the submitter asked how to account for employee contributions in respect of service.

At its January 2013 meeting, the Committee proposed that the IASB should consider a narrow-scope amendment to IAS 19 that would treat contributions from employees or third parties as a reduction in short-term employee benefit cost and accounted for in that same period, if they are linked solely to the employee's service rendered in the same period in which they are paid (for example, if the contributions are a fixed percentage of salary throughout the entire period of the employment).

The IASB discussed the Committee's proposal in February 2013 and tentatively decided that the Board should make a narrow-scope amendment to IAS 19 on this issue. However, contributions from employees or third parties should be a reduction in service cost instead of a reduction in short-term employee benefit cost.

The staff will prepare an Exposure Draft based on these decisions and will begin the balloting process for publication.

IFRS 7, Financial Instruments: Disclosures ‒ disclosures for transfers of financial assets

In October 2010, the IASB issued, Disclosures—Transfers of Financial Assets (Amendments to IFRS 7), to amend IFRS 7, Financial Instruments: Disclosures, which requires an entity to disclose information related to the transfer of financial assets, including its continuing involvement in the transferred assets. The amendment also includes a description of the term "continuing involvement" in paragraph 42C for the purpose of the transfer disclosures.

In October 2012, the Committee was asked to clarify through an Annual Improvement whether servicing rights and obligations are continuing involvement for the purpose of the transfer disclosures. In January 2013, the Committee noted that, based on the wording in IFRS 7 paragraph 42C, it was not clear whether servicing arrangements are continuing involvement for the purposes of applying the transfer disclosure requirements. Therefore, the Committee recommended that the IASB should consider clarifying the requirements for continuing involvement in paragraph 42C of IFRS 7.

In its February 2013 meeting, the IASB stated that their intention was that servicing arrangements would meet the definition of continuing involvement and that paragraph 42C includes servicing arrangements in the transfer disclosure requirements. The staff was asked to inform the Committee of the Board's view and to ask the Committee whether, and if so how, to clarify that servicing agreements are in the scope of the transfer disclosures.

Rate-regulated activities

Interim IFRS

The IASB continued its discussions on a proposal for an interim IFRS for rate-regulated activities that would allow entities adopting IFRS to continue to use their local GAAP requirements until the main project is completed.

Interaction with other IFRS

The IASB discussed the interaction of the following other IFRS with the regulatory deferral account balances that might be recognized as a result of the interim IFRS proposal and made the following tentative decisions:

  • An entity would present, with equal prominence, an earnings per share (EPS) ratio including the movements in the regulatory balances, and an EPS ratio excluding the movements in the regulatory balances based on the guidance in IAS 33, Earnings per Share.
  • Regulatory deferral account balances would be outside the scope of the measurement requirements of IFRS 5, Non-current Assets Held for Sale and Discontinued Operations. The IASB also tentatively decided that an entity would present regulatory balances that form part of a discontinued operation and/or disposal group within the appropriate regulatory line items. However, the entity would apply judgment to decide whether to highlight the discontinued/disposal amount by either presenting it alongside the regulatory balance or identifying it as part of the analysis of the regulatory line item in the notes to the financial statements.
  • The IASB previously decided that regulatory deferral account balances would be outside the scope of IAS 36, Impairment of Assets, and, instead, an entity would continue to apply its existing local GAAP impairment policy for such balances. At this meeting, the IASB clarified that the existing requirements of IAS 36 would also apply to any cash-generating unit (CGU) that includes regulatory balances, without modification of those existing requirements, in the same way as they apply when other specific items that are excluded from the scope of IAS 36 are included in the CGU.
  • Deferred tax would be calculated on regulatory deferral account balances in accordance with IAS 12, Income Taxes, but the amounts recognized would be included within the regulatory line items, instead of within the tax line items, with clear disclosure.

Other IFRS

The IASB tentatively decided that the proposed interim IFRS would include application guidance to clarify that, when an existing IFRS interacts with a regulatory deferral account balance (for example, when a regulatory balance is initially determined in a foreign currency but then has to be translated), the existing requirements in IFRS would apply to that regulatory balance, unless otherwise specified in the interim IFRS.

The staff will prepare an Exposure Draft of the interim IFRS based on these tentative decisions.

Comprehensive project

The IASB decided to publish a Request for Information to gather more factual evidence about different types of rate regulation. The Request for Information will have a 60-day comment period. The staff will prepare the Request for Information.

See the IASB project summary for more information on this project.

Revenue recognition

The IASB and the FASB continued their joint redeliberations of the revised Exposure Draft, Revenue from Contracts with Customers (the 2011 ED), with a discussion of the following topics.

Disclosures

Disaggregation of revenue

The Boards tentatively decided to retain both the proposed requirement in the 2011 ED to disaggregate revenue and the objective for that requirement and to add implementation guidance. The Boards also tentatively decided that an entity would be required to explain how disaggregated revenue information correlates with its reportable segments.

Reconciliation of contract balances

The Boards tentatively decided to replace the proposed requirement in the 2011 ED to reconcile the contract balances with a combination of quantitative and qualitative disclosures that would include:

  • The opening and closing balances of contract assets, contract liabilities, and receivables from contracts with customers (if not presented separately)
  • The amount of revenue recognized in the current period that was included in the contract balance liability
  • An explanation of how the entity's contracts and usual payments terms will affect the entity's contract balances
  • A description of significant changes in contract assets and liabilities including both qualitative and quantitative data

The Boards also tentatively decided that an entity would be required to disclose revenue recognized in the period that arises from amounts allocated to performance obligations satisfied (or partially satisfied) in previous periods (for example, as a result of changes in transaction price or estimates related to the constraint on revenue recognized).

Remaining performance obligations

The Boards tentatively decided to retain the requirement to disclose information related to the remaining performance obligations in the 2011 ED and to clarify that

  • Renewals that are not a material right would not be included in the disclosure
  • The amount of the transaction price allocated to remaining performance obligations would not be subject to significant revenue reversals
  • Disclosure of remaining performance obligations for contracts with an original duration of less than one year would not be precluded

The Boards also tentatively decided to clarify that the disclosure of significant payment terms relating to an entity's performance obligations would include a qualitative discussion about any significant variable consideration that was not included in the disclosure of remaining performance obligations.

Contract costs

The Boards tentatively decided to replace the proposed requirement in the 2011 ED to reconcile the opening and closing balances of assets recognized from the costs incurred to obtain or fulfill a contract with a customer, with a combination of quantitative and qualitative disclosures that would include:

  • The closing balances of assets recognized from the costs incurred to obtain or fulfill a contract with a customer by the main category of asset
  • The amount of amortization recognized in the period and the amortization method used

Onerous performance obligations

The Boards tentatively decided to remove the proposed disclosure requirements for onerous performance obligations in the 2011 ED.

Qualitative information about performance obligations and significant judgments

The Boards tentatively decided to retain the proposed qualitative disclosures about performance obligations and significant judgments in the 2011 ED and to require certain additional qualitative disclosures, including a description of the methods and assumptions an entity uses to determine the amount of revenue constrained, among others.

Interim requirements

The IASB tentatively decided to amend IAS 34, Interim Financial Reporting, to require an entity to disaggregate revenue in its interim financial statements in accordance with the 2011 ED, as tentatively amended (see the discussion above). The IASB noted that an entity would have to consider the general principles in IAS 34 for the other revenue disclosures.

The FASB tentatively decided to retain the proposal in the 2011 ED to amend ASC 270, Interim Reporting, to require an entity to provide quantitative disclosures proposed in the 2011 ED, as tentatively amended (see the discussion above), in its interim financial statements. Such proposed disclosures would include disaggregated revenue and opening and closing balances of contract assets and contract liabilities, among others.

Effective date

The Boards tentatively decided that the proposed guidance would be effective for reporting periods beginning on or after January 1, 2017. Early adoption would not be permitted. However, the IASB would not prohibit early application for first-time adopters of IFRS.

Transition

The Boards tentatively decided that an entity would be permitted to apply the new revenue standard either retrospectively, including the use of some optional practical expedients, or through an alternative transition method. The alternative transition method would require an entity to apply the proposed guidance only to contracts not completed under existing IFRS or U.S. GAAP at the date of initial application and to recognize the cumulative effect of adoption as an adjustment to the opening balance of retained earnings in the year of initial application. An entity that chooses to apply the alternative transition method would not restate comparative years; however, it would be required to provide the following additional disclosures in the initial year of adoption:

  • The current-year impact of applying the new revenue standard by income statement line item
  • An explanation of the significant changes between the reported results under legacy IFRS or U.S. GAAP and the new revenue standard

Next steps

The Boards have completed their substantive redeliberations of the 2011 ED. Therefore, the staff will begin drafting the final revenue standard.

See the IASB project summary for more information on this project.

Work plan

The work plan as of February 26, 2013 reflecting decisions made at this meeting is available on the IASB website.

See the IASB work plan for additional information.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions