ifrs news - november 2010

8/3/2019 IFRS News - November 2010

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The Trustees of IASCF have taken aground-breaking step in appointing asuccessor to current chairman Sir DavidTweedie, following a Noah’s ark,two-by-two approach. Hans Hoogervorsta Dutch politician with financialregulatory experience will become thenext chairman of the IASB. He will be joined by a vice-chairman, IanMackintosh, current chairman of the Accounting Standards Board in the UK.

Mr Hoogervorst will succeed Sir DavidTweedie on his retirement as chairman of

the IASB at the end of June 2011. He iscurrently chairman of the Netherlands Authority for the Financial Markets (AFM),the Dutch securities and market regulator –he will resign this position before joiningthe IASB. He is also chairman of theTechnical Committee of the InternationalOrganization of Securities Commissions(IOSCO), stepping down from this role in April. He was also until recently theco-chair of the Financial Crisis Advisory

Group (FCAG), an independent body of senior leaders formed to advise accountingstandard-setters on their response to theglobal financial crisis.

Mr Mackintosh, a former chief accountantof the Australian Securities and InvestmentCommission, has more than 30 years’experience of national and internationalaccounting standard-setting. He is currently chairman of the UK Accounting StandardsBoard and chairman of the group of national accounting standard-setters, abody in which more than 20 national and

regional accounting standard-settingorganisations participate.

Sam Di Piazza, Trustee of the IFRSFoundation and former global CEO of PwC,called the appointment of Hans and Ian “anoutstanding choice”.

“I have known Hans for several years. Hisbackground as Minister of Finance in TheNetherlands gives him unique policy

IFRS newsIASB Trustees go for‘Noah’s ark’ approach

www.pwc.com/ifrs IFRS news – November 2010

Hans Hoogervorst

To be IASB chairman

from 1 July 2011

Ian Mackintosh

To be IASB

vice-chairman from

1 July 2011

➔ PRINT ➔ CONTINUED ➔ HOME

In this issue:

1 IASB appointschairman and vice-chairman

2 Financial instrumentsProject update

3 Cannon Street PressTransition and effectivedates

4 Contacts

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The IASB has put in place severalmore building blocks of the financialinstruments project. It has updatedIFRS 9, ‘Financial instruments’, toinclude guidance on financialliabilities and derecognition of financial instruments, and hasamended IFRS 7 to includedisclosures around transferredfinancial assets. The accounting andpresentation for financial liabilitiesand for derecognising financialinstruments has been relocated fromIAS 39, ‘Financial instruments:Recognition and measurement’, toIFRS 9. The guidance is unchanged with one exception: the accountingfor financial liabilities that aredesignated at fair value throughprofit or loss (FVTPL), as explained

below. IFRS 9 is applicable foraccounting periods beginning on orafter 1 January 2013. The IFRS 7amendments are applicable forannual accounting periodsbeginning on or after 1 July 2011.

Key provisions

Items unchangedThe requirements in IAS 39 regardingthe classification and measurement of

financial liabilities have been retained,

including the related application andimplementation guidance. The twoexisting measurement categories forfinancial liabilities remain unchanged:FVTPL and amortised cost. The criteriafor designating a financial liability atFVTPL also remain unchanged.

Entities are still required to separatederivatives embedded in financialliabilities where they are not closely related to the host contract. Theseparated derivative continues to bemeasured at FVTPL, and the residualdebt host continues to be measured atamortised cost. The existingapplication guidance relating toembedded derivatives has beenincluded in IFRS 9; it will continue toapply to derivatives embedded in

non-financial items − for example,foreign currency derivatives embeddedin purchase and sales contracts.

The requirements in IAS 39 fordetermining when financialinstruments are derecognised from thebalance sheet have also been relocatedto IFRS 9 without any change.

New measurement guidanceEntities with financial liabilities

designated at FVTPL recognise

changes in the fair value due tochanges in the liability’s credit risk directly in other comprehensiveincome (OCI). There is no subsequentrecycling of the amounts in OCI toprofit or loss, but accumulated gainsor losses may be transferred withinequity.

However, all fair value movements arerecognised in profit or loss if presenting the change in fair valueattributable to the credit risk of theliability in OCI would create anaccounting mismatch in profit or loss.Determination of the accountingmismatch is at initial recognition of the financial liability and thedetermination is not reassessed. Themismatch must arise from an

economic relationship between thefinancial liability and a financial assetthat results in the liability’s credit risk being offset by a change in the fair value of the asset.

All fair value movements will berecognised in profit and loss forfinancial liabilities that are required tobe measured at FVTPL (as distinctfrom those that the entity hasdesignated at FVTPL), including

financial guarantees and loan

experience of the issues faced by theIASB in its service to the publicinterest. On the crucial issue of

independence, Hans has beenabsolutely clear. He is committed toinvestor protection and believes theindependence of the IASB is primary.Having worked with him in his roleas chairman of the Monitoring Board,his actions have confirmed his views.

“It has long been my view that thesuccessor of Sir David Tweedie would

require a keen sense of business andfinance,” said Sam, “but moreimportantly a skill in public policy not

often found in the accountingprofession. The IASB has madetremendous progress in its firstdecade, but the next 10 years willrequire both technical and publicpolicy experience. I believe we havethe perfect combination in Hans.”

Sam said of Ian MackIntosh, “His deepexperience in the profession and in

standard setting will serve him well inthis new role. He has served in anoutstanding manner as chair of the

National Standard Setters since 2004, which gives him great perspectives of the global issues we face at the IASB.His diverse background, including hisroots in New Zealand, his service in Australia and the UK, his work at theWorld Bank and the AustralianSecurities and Investment Commission will also aid in his service to theIASB.”

2 IFRS news – November 2010

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Financial instruments project moves forward


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commitments measured at FVTPL. Allderivatives and a bank’s own liabilitiesthat it holds in its trading portfolio are

in this category.

Effective date and transition – IFRS 9amendmentsThe effective date and transitionrequirements are consistent withIFRS 9 issued in November 2009 forthe classification and measurement of financial assets. That is, IFRS 9 ismandatory for annual periodsbeginning on or after 1 January 2013.Early adoption is possible, but the

rules are complex. There are threepossible choices for adoption of thestandard:

■ The financial asset accountingprovisions of IFRS 9 can be early adopted without adopting thefinancial liability requirements;

■ All of the requirements (financialassets and financial liabilities) canbe early adopted; or

■ An entity can wait and adopt thestandard at the mandatory adoptiondate, for a calendar year entity that would be 2013 and restatement of comparatives would be required.

An entity that chooses either of theearly adoption options prior to1 January 2012 would not be required

to restate comparatives.

There is additional transition guidancefor the designation of financialliabilities or financial assets at FVTPLon initial application of IFRS 9.Entities that are affected should beaware of the requirements, as they arespecific and detailed.

Effective date and transition – IFRS 7 amendments

The additional disclosure requirements will be required for annual periodsbeginning on or after 1 July 2011, withearlier application permitted.Disclosures are not required for any period presented that is before the datethe amendments are adopted; in other words, there is no requirement forcomparatives in the year of adoption.

Impact

The changes to IFRS 9 will impactentities that have designated financialliabilities at FVTPL. For example, itimpacts financial institutions that have

designated liabilities at FVTPL toeliminate an accounting mismatch orto avoid separating an embedded

derivative. The additional disclosurerequirements will impact any entity that sells, factors, securitises, lends orotherwise transfers financial assets.

What do I need to do?

Management of entities that currently designate (or in future may wish todesignate) financial liabilities at fair value through profit or loss shouldfamiliarise themselves with the

updated requirements of IFRS 9.Management should also considercarefully the planned timing of theiradoption of IFRS 9.

However, the financial instrumentsproject is still evolving, and additionalchanges are expected for theimpairment and hedging phases. TheIASB has recently requested views onthe effective date and transitionrequirements for the entire group of standards in the US GAAP convergenceprogramme. This may well impact thetransition dates and requirements setout above.

A number of major projects arescheduled for completion in 2011, sothe IASB and FASB are seeking viewson how to sequence the effective datesof new standards in order to reducethe burden on preparers. The IASB willconsider the needs of jurisdictionsalready using IFRSs and thoseplanning to do so. The projectscovered by the ‘request for views’ are:■ all phases of the financial

instruments project;

■

revenue from contracts withcustomers;

■ insurance contracts and leases;■ pensions;

■ other comprehensive income;

■ consolidation; and

■ joint arrangements.

Some of the new standards that arethe subject of this ‘request for views’are being developed by the IASB andthe FASB. The FASB has published adiscussion paper inviting comments onthe same issues.

The IASB has asked for views on four

broad issues:■ preparing for transition to the new

requirements;

■ the implementation approach andtimetable (effective dates for thenew requirements and early adoption);

■ international convergenceconsiderations; and

■ considerations for first-timeadopters of IFRS.

Comments are requested by 31 January 2011.

Request for views on effective dates andtransition methods

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For further help on IFRS technical issues contact:

Business Combinations and Adoption of IFRS

[email protected]: Tel: + 44 (0)20 7804 2930

[email protected]: Tel: +44 (0)20 7804 7392

Financial Instruments and Financial Services

[email protected]: Tel: + 44 (0)20 7213 1175 [email protected]: Tel: + 44 (0)20 7212 5700

[email protected]: Tel: + 44 (0)20 7804 0306

Liabilities, Revenue Recognition and Other Areas



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