Accounting Standards Update. CPA Congress 2013

Transcription

1 Accounting Standards Update CPA Congress 2013

2 AASB Disclaimer 2 This presentation provides personal views of the presenter and does not necessarily represent the views of the AASB or other AASB staff. Its contents are for general information only and do not constitute advice. The AASB expressly disclaims all liability for any loss or damages arising from reliance upon any information in this presentation. This presentation is not to be reproduced, distributed or referred to in a public document without the express prior approval of AASB staff.

3 Outline of Presentation 3 IASB and AASB Work Programs Leases Financial Instruments Revenue from Contracts with Customers Income of Not-for-profit Entities Control in the Not-for-profit Sector Reduced Disclosure Requirements (RDR) GAAP/GFS Harmonisation Related Party Disclosures Other AASB Projects & Activities

4 4 IASB & AASB Work Plans

5 IASB Work plan (as at 30 May 2013) 5 MAJOR IFRSs 2013 Q Q Q2 IFRS 9: Financial Instruments: Classification and Measurement Standard Impairment Standard General Hedge Accounting Standard Macro Hedge Accounting DP Insurance Leases Revenue Recognition Rate-regulated Activities: Redeliberations Redeliberations Standard Interim IFRS Redeliberations Comprehensive project DP IFRS for SMEs (comprehensive review ) Possible ED

6 IASB Work plan (as at 30 May 2013) 6 IFRS NARROW-SCOPE AMENDMENTS 2013 Q Q Q2 Acquisition of an Interest in a Joint Operation (IFRS 11) Standard Actuarial Assumptions: Discount Rate (IAS 19) Timing TBD Annual Improvements Annual Improvements Annual Improvements Bearer Plants (IAS 41) Clarification of Acceptable Methods of Depreciation and Amortisation (IAS 16 & IAS 38) Defined Benefit Plans: Employee Contributions (Proposed amendments to IAS 19) Standard Standard Standard ED comments close 28/10/13 Standard Standard Redeliberations

7 IASB Work plan (as at 30 May 2013) 7 IFRS NARROW-SCOPE AMENDMENTS 2013 Q Q Q2 Disclosure Initiative: Amendments to IAS 1 Disclosure Initiative: Disclosure Requirements about Assessment of Going Concern (IAS 1) Elimination of gains arising from 'downstream' transactions (IAS 28) Equity Method: Share of Other Net Asset Changes (IAS 28) Standard Fair Value Measurement: Unit of Account Put Options Written on NCI (IAS 32) Recognition of Deferred Tax Assets for Unrealised Losses (IAS 12) Sale or Contribution of Assets between an Investor and its Associate/JV (IFRS 10 & IAS 28) Separate Financial Statements (Equity Method) (IAS 27) ED Standard ED ED ED ED ED ED

8 IASB Work plan (as at 30 May 2013) 8 OTHER PROJECTS 2013 Q Q Q2 Interpretations: Interpretation 21 Levies on entities operating in specific market Effective 1 January 2014 Post-implementation reviews: IFRS 8 Operating Segments Report on PIR IFRS 3 Business Combinations Publish Request for Information Conceptual Framework (chapters on elements, measurement, reporting entity, presentation and disclosure) DP comments close 14/01/14 Redeliberations

9 IASB Research Projects 9 Commenced work: Business combinations under common control Disclosure Initiative Discount rates Emissions trading schemes Extractive activities Financial instruments with characteristics of equity Intangible assets Work pending: Income Taxes Post-employment benefits (including pensions) Share-based payments Equity method of accounting Financial reporting in high inflationary economies Foreign currency translation Liabilities amendments to IAS 37

10 AASB Work Program 10 IASB Work plan & domestic projects including: PROJECT EXPECTED TIMING: Income of NFP entities ED Q Related Party Disclosures by NFP public sector entities Std Q Control in the NFP sector Std Q Service Concession Arrangements: Grantor perspective ED Q Borrowing Costs of NFP public sector entities ED Q Std Q Superannuation Entities Std Q Service Performance Reporting (in the Private NFP sector) Reduced Disclosure Requirements CP Q Ongoing maintenance

11 AASB Work Program research 11 IASB work plan & domestic projects including: Principles underpinning presentation and disclosure Reporting entity, including policy issues around the lodgement of financial statements for public use Service Performance Reporting, particularly in the private NFP sector Application of Tier 2 general purpose financial reporting Fiscal Sustainability Reporting

12 12 Leases

13 Identifying a lease 13 Definition: A contract that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. Depends on use of an identified asset Conveys the right to control the use of the asset Asset explicitly specified Supplier cannot substitute Asset must be physically distinct a capacity portion cannot be an identified asset Customer must have both the ability to: direct the use, and derive the benefits from use

14 Lease classification test 14 Leases for equipment/ vehicles Leases for real estate Type A lease Type B lease U N L E S S Lease term is insignificant relative to total economic life of asset Present value of lease payments is insignificant relative to fair value of asset Lease term is major part of remaining economic life of asset Present value of lease payments is substantially all of the fair value of asset Short-term leases Leases that do not include any purchase option and for which the maximum possible term (including extension options) is 12 months

15 Lease term 15 Non-cancellable period Option to extend if significant economic incentive to exercise Option to terminate if significant economic incentive not to exercise Significant economic incentive Consider: Contractual terms compared with prevalent market rates Leasehold improvements with significant value to lessee Costs of terminating old and securing new lease Importance of underlying asset to lessee s operations, including whether it is a specialised asset

16 Lessee accounting Overview 16 All leases longer than 12 months on balance sheet lease contract creates a right-of-use Lessee Right-of-Use Model Recognise right-of-use asset Recognise liability to make estimated future lease payments Type A Leases (Interest and Amortisation Method) Type B Leases (Single Lease Expense Method) Recognised at amortised cost (applying the effective interest method)

17 Lessee accounting Lease Asset & Liability 17 Interest and Amortisation Method (Type A leases) ROU Asset Liability Initially measured at cost (equal to lease liability) and subsequently amortised (generally) on a straight-line basis Revaluation permitted Initially measured as PV of lease payments discounted using rate lessor charges lessee, if can be readily determined, or incremental borrowing rate Subsequent measurement at amortised cost using effective interest method Single Lease Expense Method (Type B leases) ROU Asset Initially measured at cost (equal to lease liability) Linked to the liability throughout the lease term Amortisation is the amount that, when combined with interest expense, (generally) results in straight-line total lease expense Revaluation permitted Liability Measured consistently with I&A Method (above)

18 Lessee accounting Impact on profit 18 Illustration of expense pattern for a 10-year lease (currently classified as operating lease) with escalating rental of 2% per year $145 $135 $125 $115 $105 $95 Cash payment I&A Method SLE Method $85 $ Year

19 Lessee accounting Some other issues 19 Variable lease payments Term option penalties Purchase options Residual value guarantees Lease payments that depend on an index or rate In-substance fixed lease payments Other contingent rent is excluded Consistent with the accounting for options to extend or terminate a lease Include exercise price in lease liability if the lessee has significant economic incentive to exercise Except for amounts payable under guarantees provided by unrelated third parties

20 Lessor accounting Overview 20 Receivable and Residual Model (Type A leases) Operating Lease Model (Type B leases) Derecognise leased asset Recognise right to receive lease payments Recognise residual asset Continue to recognise leased asset

21 Lessor accounting Type A leases 21 Lease receivable Net residual asset Present value of future lease payments + Initial direct costs Gross residual asset + Present value of variable lease payments Unearned profit # # Unearned profit = (FV of leased asset carrying amount of leased asset) (1 [PV of lease payments FV of leased asset])

22 Lessor accounting Type A leases 22 Receivable and residual model Any profit on the residual asset is deferred until the asset is re-leased or sold Gross residual asset accreted using interest rate the lessor charges the lessee No revaluation of receivable or residual asset

23 Lessor accounting Type B leases 23 Receivable and residual model Lease payments Variable lease payments Recognised as income in profit or loss Straight-line basis or another systematic basis if more representative Recognised in profit or loss when earned

24 24 Financial Instruments

25 Financial Instruments 25 Phased approach to replacing IAS 39 with new standard IFRS 9: Classification & Measurement Redeliberations Q2/Q Hedge Accounting To be issued by end Q Impairment Redeliberations Q Mandatory application date deferred to 1 January 2015 But further deferral is expected! Fair value macro hedge accounting scoped out discussion paper in Q3 2013

26 Financial Assets 26 IAS 39 IFRS 9 AFS FVPL L&R- AC HTM- AC AFS FVPL FVOCI desig- nation FVPL AC FV OCI FVPL Recycle Recycle No Recycle Recycle Equity investments Debt investments Proposed for debt investments

27 Financial Instruments 27 Classification & Measurement Limited Amendments Current IFRS 9: debt assets at amortised cost only if: o contractual cash flows: solely principal and interest; and o business model: to collect cash flows Proposal to introduce FVOCI for debt: o contractual cash flows: solely principal and interest; and o business model: to collect cash flows AND sell Proposal to broaden what is solely principal and interest Hedge accounting Review Draft standard published September 2012 IASB discussed comments in January 2013: o basis risk of cross-currency swaps to be cost of hedging

28 Financial Instruments: Impairment 28 Financial Assets at Amortised Cost (& FVOCI) Incurred loss model criticised during the financial crisis for inflating income in early periods and recognising losses too late o ED issued November 2009; supplementary ED in January 2011 o Revised ED/2013/3 (AASB ED 237) published in March 2013 (comments due to the IASB 5 July 2013) IASB s expected loss model: dual-measurement based on deterioration of credit quality FASB s expected loss model: single measurement to recognise full probability of losses on day 1

29 IASB Impairment 29 At inception Lifetime losses in 12 months Day-1 loss EIR excludes effect of expected loss Interest revenue based on gross At reporting date Has credit quality significantly deteriorated since inception? Lifetime losses in 12 months Interest revenue based on gross No No Lifetime losses Interest revenue based on gross Yes Credit-impaired*? Yes Lifetime losses Interest revenue based on net *Financial assets are credit-impaired if there is objective evidence of incurred losses based on the criteria in paragraphs 59(a)-(e) of IAS 39

30 30 Revenue from Contracts with Customers

31 Core principle of revenue proposals 31 Recognise revenue on transfer of goods or services to a customer at an amount that reflects the amount of consideration to which the entity expects to be entitled in exchange for those goods or services Steps to apply the core principle: 1. Identify contract(s) with customer 2. Identify separate performance obligations 3. Determine transaction price 4. Allocate transaction price 5. Recognise revenue when performance obligation is satisfied

32 Project status 32 IASB/FASB redeliberations concluded in March 2013 Significant changes to the ED proposals: o Onerous contracts apply IAS 37 requirements o Credit risk presented as an expense o Licences two types of licence arrangements: The promise to transfer a right Transfers to the customer at a point in time The promise to provide access to the entity s intellectual property Transfers to the customer over time Expected effective date: 1 January Early adoption permitted Final IFRS expected to be issued in Q3 2013

33 33 Income of Not-For-Profit Entities

34 Income of NFP Entities 34 AASB ED will be based on forthcoming IFRS Revenue from Contracts with Customers Goal is to replace the following, currently applicable to NFP entities: o AASB 118 Revenue o AASB 111 Construction Contracts o AASB 1004 Contributions (income recognition requirements) AASB ED targeted for Q (timing depends on IFRS) Expected to be effective from 1 January early adoption permitted

35 NFP Income ED 35 Modification of IASB Revenue ED Additional NFP guidance on performance obligations The promise to transfer a good or service must both: o Be sufficiently specific to enable identification of how and when the obligation is satisfied the nature or type of goods or services to be provided; and the cost, value, volume, or period to be provided o Arise from an enforceable arrangement eg specific performance; return obligation; severe penalty not economic compulsion

36 NFP Income ED 36 Modification of IASB Revenue ED If transaction includes/is wholly a donation o Recognise donation as income immediately (IASB ED doesn t address donations) o Measure donation at fair value of assets received minus fair value of any performance obligations arising from the transaction (Exception: volunteer services) Income from satisfying performance obligations o Recognise income when goods/services transferred o Amount of income is an allocation of the fair value of all performance obligations

37 37 Control in the NFP Sector

38 Control in the NFP Sector project 38 AASB 10 New definition of control : An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee Will the new definition o change the entities consolidated into NFP entities? o change whether States consolidate local governments or universities? AASB ED 238 implementation guidance for NFPs (March 2013)

39 39 Reduced Disclosure Requirements (RDR)

40 Differential Reporting Framework 40 No Does the entity prepare GPFSs? SPFSs prepared as directed by Stakeholders Yes For-profit entity? Yes No Public sector? Yes No Not-for-profit private sector Publicly accountable? Federal, State, Territory or Local Government? No No Yes Tier 1: Full IFRSs as adopted in Australia Yes Choice Tier 1: Full IFRSs as adopted in Australia Tier 2: Reduced Disclosure Requirements, subject to requirements of relevant regulators

41 RDR Recent Developments 41 Compiled RDR versions of Standards on AASB website for early RDR adopters RDR amending Standards: o AASB Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements o AASB Reduced Disclosure Requirements and Other Amendments

42 42 GAAP/GFS Harmonisation

43 GAAP/GFS Harmonisation project 43 The project is now complete o Phase 1: AASB 1049 Whole of Government and General Government Sector Financial Reporting Post-implementation review resulted in some improvements Defence weapons platforms gave rise to a subsequent amendment o Phase 2: Entities within the GGS AASB decided not to proceed Ongoing care and maintenance o Each new ED seeks comments on any GAAP/GFS harmonisation issues o Monitor and comment on IPSASB work and ABS review of GFS

44 Budgetary Reporting 44 AASB 1055 Budgetary Reporting Issued March 2013 Applies to the following Australian Operative 1 July 2014 Government and State & Territory Government entities: o Whole of Governments o General Government Sectors (GGSs) o Not-for-profit entities within those GGSs Requires that if a budget (for controlled and/or administered items) is presented to parliament, disclose: o The original budget (restated to align with the actual financial information, if necessary) o Explanations of major variances

45 45 Service Concession Arrangements: Grantors

46 Service Concession Arrangements: Grantors 46 Key issues: How to recognise and measure the outflows and returns to the grantor from the arrangement: o Returns in the form of public services provided on government s behalf o Outflows in the form of compensation to operator, either: direct payments granting access to a revenue-generating asset Should the grantor continue to recognise underlying asset in the arrangement? o Does grantor control asset so as to receive economic benefits from it?

47 47 Related Party Disclosures

48 Related Party Disclosures project 48 AASB 124 does not currently apply to NFP public sector Revisions to IAS 24 (AASB 124) in December 2009 make it less onerous for NFP public sector ED 214 Extending Related Party Disclosures to the Not-for-Profit Public Sector proposed to remove the NFP public sector exemption AASB decisions after reviewing submissions on ED 214 Develop additional guidance o Ministers as key management personnel o Ministerial transactions Limited optional relief re Ministerial remuneration GGS would also apply AASB 124 Apply from 1 July 2014

49 49 Other AASB Projects & Activities

50 Other key AASB projects & activities 50 Service performance reporting Related party disclosures Service Concession Arrangements Grantor perspective Superannuation Entities SPFSs research project Emission Trading Schemes o Staff papers (carbon tax) Accounting by emitters Accounting by Government o Monitoring IASB ETS

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