Grant Thornton - Second Quarter 2012 IFRS News

Quarter 2 2012

Our second edition of 2012 starts bylooking at the IASB’s revised work planand the projected targets for thedocuments it expects to issue later thisyear. We go on to consider some issuesarising from current economic conditionsthat may affect companies using IFRS.

We then turn to IFRS-related news atGrant Thornton, including several newpublications that we have issued. We endwith a more general round-up ofactivities affecting the IASB, and theimplementation dates of newer Standardsthat are not yet mandatory.

Welcome to IFRS News – aquarterly update from theGrant ThorntonInternational IFRS team.IFRS News offers asummary of the moresignificant developments inInternational FinancialReporting Standards (IFRS)along with insights intotopical issues andcomments and views fromthe Grant ThorntonInternational IFRS team.

IFRS News

The IASB’s revised work plan

At the end of March, the IASB releasedan updated version of its work plan. Theplan shows the IASB’s projected targetsfor work to be undertaken in 2012, andis an important resource for companieswishing to plan ahead for their futurefinancial reporting requirements.

Of particular interest are the revisedplans for the four remaining projectsfrom the Board’s convergence work withthe US, covering revenue recognition,leases, insurance contracts and thereplacement of IAS 39 – the currentStandard on financial instruments. Thetiming of deliverables on these majorprojects is set out in the table below. It isnotable that a new Standard on revenuerecognition is not expected before theend of 2012 and that no target date hasbeen set for the finalisation of a newleasing Standard.

In addition to the four main projectsreferred to in the table, the IASB plansto undertake post-implementationreviews of both IFRS 3 ‘BusinessCombinations’ and IFRS 8 ‘OperatingSegments’. The IASB will also carry outits Annual Improvements project, beinga process for making non-urgent, butnecessary, minor amendments to IFRSs.An Exposure Draft is expected on this inthe second quarter of the year.

apart from the remainingconvergence projects, the IASB findsitself with a relatively clean slate forthe first time

Overall, the revised work planindicates a slow-down in the IASB’space of standard-setting. This is perhapsto be expected as the IASB’s newleadership re-evaluates future priorities.Over the last ten years, the agenda of theIASB has been very much pre-determined. For the first five years, itwas dealing with improving IFRSs intime for adoption by Europe and othercountries, while the next five years werelargely dominated by its convergencework with the US. Apart from the fourremaining convergence projects referredto above, the IASB finds itself with arelatively clean slate for the first time.

2 IFRS News Quarter 2

IASB’s projected targets for 2012

Q2 2012 Q3 2012 Q4 2012

IFRS 9: Financial Instruments

• Classification and measurement Target ED

• Impairment Re-exposure

• General hedge accounting Target IFRS

• Macro hedging Target DP or ED

Revenue recognition Consider comments received

Leases Re-exposure

Insurance contracts RD or revised ED

Key: ED = Exposure Draft

DP = Discussion Paper

RD = Review Draft

Re-exposure = a new Exposure Draft will be issued

In a speech in Mexico in March, thenew IASB Chairman Hans Hoogervorstgave an indication of what the IASB’sfuture plans might be, whileacknowledging that a period of stabilitywill be welcomed by many. Post-completion of its convergence workprogramme, he suggested that one of theIASB’s projects would be to revise itsconceptual framework which serves as apoint of reference for the IASB’sdecision-making in general. Providing aclearer conceptual definition of OtherComprehensive Income will also be apriority. Other projects that the IASBmay turn to include agriculture, businesscombinations under common control,hyperinflation and rate-regulatedindustries. Finally, Mr Hoogervorstindicated a desire to address what isperceived by many as disclosureoverload under IFRS – one proposalwhich can be expected to have the broadsupport of preparers.

IFRS News Quarter 2 3

IASB and FASB seek to reduce differences in financial instrumentaccountingThe IASB and the US Financial Accounting Standards Board (FASB) announced inJanuary that they would work together to seek to reduce differences in theirrespective classification and measurement models for financial instruments.

The IASB will consider the results of the discussions it holds with its UScounterpart as part of its project to undertake limited scope amendments to IFRS 9, the Standard which will replace IAS 39 ‘Financial Instruments: Recognitionand Measurement’.

Independently of this announcement, the two Boards are continuing with theirexisting work on developing a common approach to impairment of financial assets(see table). The latest discussions in relation to this separate work stream indicatethe two Boards are likely to adopt what is being labelled a “three bucket” approachto impairment.

On initial recognition financial assets would go into Bucket 1, with expected (asopposed to incurred) losses being recognised but only on a twelve month outlookperiod. Financial assets would then move from Bucket 1 to Buckets 2 and 3 shouldthere be a deterioration in recoverability. Estimates of expected lifetime losseswould be made for both Buckets 2 and 3. Bucket 2 would however be on aportfolio basis whereas Bucket 3 would be on an individual basis.

The end of 2011 and the first quarter of 2012 saw a slowdown in growth in many European countries and talk of a return torecession in some. There continues to be uncertainty over the prospects for economic recovery throughout the Eurozone andfurther afield. As a result market conditions are difficult for many companies, with management and those charged with governancefacing a number of challenges. We outline below some of the issues that companies using IFRS will need to think about.


IFRS issues related to currenteconomic conditions

Issues facing companies using IFRS

Issue Factors to consider

Austerity measures Companies that do significant business with the public sector in countries implementing austerity measures, are likely to face

pressures on volumes and margins. While these are primarily business issues, there could also be a pervasive impact on various

aspects of financial reporting – including the areas identified below. Even companies that do not trade directly with the public

sector may nevertheless be indirectly affected.

Impact on management Management will need to assess the impact that these wider economic factors will have on the future outlook for their business.

commentary It is important that the management commentary (or equivalent such as MD&A or operating and financial review) and the

financial statements are mutually consistent in areas such as growth expectations and the identification of operating segments.

Going concern The effects of economic uncertainty, public spending cuts, and the availability of finance need to be taken into account by

management in assessing risks relating to the business’s ability to continue as a going concern, and in making the related disclosures.

Impairment The current economic environment can be expected to have a widespread effect on the impairment of both financial and non-

financial assets. Impairment losses need to be determined on a case by case basis reflecting the specific facts and circumstances.

For financial assets, some specific points to consider include:

• for debt type assets, objective evidence of impairment includes financial difficulty of the debtor, breaches of the terms of

the instrument and it becoming probable that the debtor will enter bankruptcy or financial reorganisation

• for investments in equities, a significant or prolonged decline in fair value to below cost is one type of objective evidence of

impairment

• for available-for-sale assets, if objective evidence of impairment exists the entire decline in fair value that has been

recognised in other comprehensive income needs to be reclassified into profit or loss.

Impairment may also need to be recognised in respect of non-financial assets, while inventory write-downs may be required

under IAS 2 ‘Inventories’.

In addition, the Eurozone sovereign debt crisis may affect the discount rate to be used by some companies in carrying out

their impairment tests. The Eurozone sovereign debt crisis has increased the yield on long-dated government bonds in what are

perceived as the weaker countries in the Eurozone, while decreasing the yields on the government bonds of those countries that

are perceived as being safe havens. Putting this information into the impairment test calculation may result in a significant

increase in the discount rate to be used for the impairment testing of some assets and cash generating units.

Consequences of restructuring The requirements of IFRS 5 ‘Non-current Assets Held for Sale and Discontinued Operations’ may become relevant where a

decision is made to sell or terminate part of a company’s business.

Management will also need to consider whether provisions are required under IAS 37 ‘Provisions, Contingent Liabilities and

Contingent Assets’.


IASB amends IFRS 1 for governmentloans

The IASB has published ‘GovernmentLoans – Amendments to IFRS 1’,providing relief for first-time adopters ofIFRSs from the retrospective applicationof the requirements of IAS 20‘Government Grants’ on governmentloans. IAS 20 requires government loansto be measured at fair value on initialrecognition, with the correspondingbenefit of a below-market interest ratebeing accounted for as a governmentgrant.

the Amendments provide relief forfirst-time adopters of IFRSs from theretrospective application of therequirements of IAS 20

Under the new Amendments toIFRS 1, a first-time adopter: • classifies government loans received

as a financial liability or as equity inaccordance with IAS 32 ‘FinancialInstruments: Presentation’

• measures government loans at thedate of transition to IFRSs at theirprevious GAAP carrying value, andsubsequently applies IFRS 9Financial Instruments or IAS 39‘Financial Instruments: Recognitionand Measurement’

• applies IAS 20 to government loansreceived originated after the date oftransition.

Despite these requirements, an entitymay apply the requirements in IFRS 9‘Financial Instruments’ and IAS 20retrospectively to any government loanoriginated before the date of transitionto IFRSs, provided that the informationneeded to do so had been obtained at thetime of initially accounting for that loan.

Grant Thornton International comment We welcome the Amendments, which provide the same relief to first-time adoptersof IFRSs as is available to existing IFRS preparers when first applying IAS 20’srequirements on government loans. Prior to the Amendments a first-time adopterthat received a government loan with a below-market interest rate before itstransition date needed to estimate the fair value of that loan retrospectively whichwould require the use of hindsight.


SME Implementation Grouppublishes two final Q&AsThe SME Implementation Group(SMEIG) has published the followingtwo new question and answer documents(Q&As) on the IFRS for Small andMedium-sized Entities (SMEs). • Q&A 2012/01 IFRS for SMEs

General topics: Application of ‘unduecost or effort’

• Q&A 2012/02 IFRS for SMEsSection 3: ‘Jurisdiction requiresfallback to full IFRSs’

Q&As published by the SMEIG arenon-mandatory guidance that will helpthose who use the IFRS for SMEs tothink about specific accountingquestions. They are not intended tomodify in any way the application of fullIFRSs. The table summarises theguidance in the two Q&As.

Q&A 2012/01 Application of ‘undue cost or effort’• addresses how the phrase ‘undue cost or effort’ should be interpreted in relation

to the application of certain exemptions from the normal requirements of theIFRS for SMEs

The answer: • notes that ‘undue cost or effort’ is deliberately not defined in the IFRS for SMEs,

because it would depend on the SME’s specific circumstances and onmanagement’s professional judgement in assessing the costs and benefits

• makes it clear that if obtaining or determining the information necessary tocomply with the requirement would result in excessive cost or an excessiveburden for an SME, the SME would be exempt from the requirement.

Q&A 2012/02 Jurisdiction requires fallback to full IFRSs• addresses situations where a jurisdiction has added a requirement that, where

the recognition and measurement requirements for a particular transaction arenot specifically covered by the IFRS for SMEs, but are covered in full IFRSs, anSME must follow the recognition and measurement requirements in full IFRSs

• the question asks whether an entity in such a jurisdiction can state compliancewith the IFRS for SMEs?

The answer notes that:• the guidance in the IFRS for SMEs on the selection and application of accounting

policies allows the full IFRS principles to be used in the absence of specificguidance in the IFRS for SMEs, provided that they do not conflict withrequirements in the hierarchy set out in that part of the IFRS for SMEs

• this scenario is different from allowing a free choice to follow full IFRSrequirements when specific requirements exist in the IFRS for SMEs for atransaction, other event or condition. Where there are such specific requirementsin the IFRS for SMEs, they must be applied even if they differ from full IFRSs.

Comment letter on revenue recognition

Grant Thornton International Ltd andits US member firm, Grant ThorntonLLP, have submitted a joint commentletter to the IASB and FASB on theirExposure Draft ‘Revenue fromContracts with Customers’.

In the comment letter, we welcome anumber of improvements from theearlier 2010 Exposure Draft andconsider that the overall package of changes reflects a pragmatic approach

that takes account of costs and benefits.Practical expedients, such as the use of atwelve month cut-off period for therecognition of onerous obligations andembedded financing components, havefor instance been included in order toreduce unnecessary disruption toestablished accounting practices, whileother changes clarify and simplifyapplication of the proposed Standard.

Nonetheless we believe there arecertain areas in which the revisedguidance should be clarified orsimplified. In particular we believe theguidance on performance obligationssatisfied over time to be overly complex,and that the interaction between theproposals on estimating variableconsideration and constraining theamount recognised needs attention.

New Grant Thornton Internationalfirst-time adopter’s example financialstatements

The Grant Thornton International IFRSteam has published an updated versionof its publication ‘First-time Adoptionof IFRS – Example ConsolidatedFinancial Statements’.

The 2011 version of the publicationhas been reviewed and updated to reflectchanges in IFRSs that are effective forannual periods beginning on or after 1 January 2011. Specifically, it reflectsamendments to IAS 1 ‘Presentation ofFinancial Statements’ included in‘Improvements to IFRSs 2010’.

To obtain a copy of the publication,please get in touch with the IFRScontact in your local Grant Thorntonoffice.

Grant Thornton International IFRSTop 20 Tracker – 2012 editionThe Grant Thornton International IFRSteam has published the 2012 edition ofits IFRS Top 20 Tracker.

The 2012 edition again takesmanagement through twenty of the topdisclosure and accounting issuesidentified by Grant ThorntonInternational as potential challenges forIFRS preparers.

Key themes driving selection of theissues in the 2012 edition are:• the need for a company’s

management commentary andfinancial statements to complementand be consistent with each other

• the effect that adverse economicconditions may have on a company’sfinancial statements, with particularemphasis on issues related to theEurozone sovereign debt crisis

• key areas of interest for regulators • challenging areas of accounting • recent and forthcoming changes in

financial reporting.


2012 EDITION

IFRS Top 20 Tracker

Reporting under IFRS:First-time adoption

Example consolidated financial statements 2011 and guidance notes


Malaysian firm issues guide to IFRS

Our Malaysian firm, SG GrantThornton, has issued ‘The Road toMFRS – Transition to IFRS-compliantMalaysian Financial ReportingStandards (MFRS)’.

2012 marks a new milestone inMalaysian financial reporting, with IFRScompliant Malaysian FinancialReporting Standards (MFRS) becomingeffective.

Our Malaysian firm’s publication:• introduces the MFRS framework• discusses the general principles of

MFRS 1: First-time Adoption ofMalaysian Financial ReportingStandards

• highlights certain transitionalexemptions available which may bebeneficial to entities in smoothingthe first-time adoption process.

Swedish partner looks at benefits of IFRS for SMEsEva Törning, a partner in our Swedishmember firm, has written an articleexamining the benefits of the IFRS forSMEs.

The article considers the advantagesthat the Standard offers in terms ofsimplified group reporting for listedentities using IFRS as well as for smallerSwedish companies that are not currently

using IFRS. The article demonstrates theever-growing interest in the IFRS forSMEs, with over 70 countries havingadopted the Standard already or havingcommitted to doing so.

UK firm featured in ICAEWmagazineThe online edition of ‘Economia’, themonthly magazine of the Institute ofChartered Accountants in England andWales, featured an article from JakeGreen and Katherine Martin of our UKmember firm.

The article looks at the latestproposals from the UK AccountingStandards Board (ASB) for financialreporting in the UK (see our round-upsection for more on those proposals). It notes some of the problems thatcurrently exist under UK GAAP, in

particular the lack of guidance on howto account for financial instrumentscompared to IFRS. While the articleacknowledges that there are still issues tobe resolved with the ASB’s proposals, ithails them as a step in the right direction.


Comment letter submitted to theEuropean Securities and MarketsAuthority (ESMA)

Comment letter on the ConsultationPaper ‘Considerations of Materialityin Financial Reporting’ The Grant Thornton International IFRSTeam has submitted a comment letter toESMA on their Consultation Paper‘Considerations of Materiality inFinancial Reporting’. In the commentletter we:

• expressed our view that materialityshould be determined based on anassessment of the significance ofinformation to users and theirdecisions

• noted that current interest in thistopic has been heightened by awidely-held view that the volume ofdisclosure required by IFRS hasbecome excessive

• expressed our belief that the currentdefinition of materiality can andshould be used by preparers as a toolto ensure their disclosures are well-focused

• agreed that a re-examination of thecurrent IFRS definition ofmateriality, and additional guidanceon its application, might be useful

• stated that we firmly believe thedevelopment of any detailedguidance should fall to the IASB.

Grant Thornton thought leadershiparticle on leases John Hepp and Mark Scoles, twopartners in our US member firm, havewritten a thought leadership article onthe IASB’s leases project.

‘Are all leases created equal?’ hasbeen written against the background ofthe IASB and Financial AccountingStandards Board proposals for a newleasing Standard. The two Boards haveproposed a single accounting model forlessors (known as the receivable andresidual model) with some minorexceptions for investment property andleases of one year or less.

In ‘Are all leases created equal?’,Grant Thornton explores the genesis ofthe proposed Standard and argues thatthe single-model approach is overlysimplistic. The article instead makes acase for the use of two models, based onwhether the lessor is managing financialassets or operating assets, and dependingon what types of risks are inherent in thelessor’s business model.

The IASB is planning to re-expose itsproposals on leases in the second half of2012.

Investment property is different

Technical topics in leasing Are all leases created equal?

John Hepp, Partner, Accounting Principles Consultation Group and Mark Scoles, Partner in Charge, Accounting Principles Consultation Group

As the Financial Accounting Standards Board (FASB) continues its deliberations on the leasing project, some important issues have been raised about the proposed accounting models for both the lessor and the lessee. In this paper, we look at one of the fundamental issues: Is there a single accounting model that faithfully represents the economic substance of all leases? The original proposed FASB Accounting Standards Update, Leases, issued in August 2010, included two models for lessors. The International Accounting Standards Board (IASB) and the FASB (the Boards) decided on a single approach for lessors during redeliberations but subsequently decided to “scope out” leases of investment property, creating a de facto second model. Once again, the issue is on the table: Are all leases created equal? This paper looks at the issue from the perspective of the business model of the lessor. “Business model” is sometimes a term of derision in accounting circles, but it can be a useful means of comparing two transactions to determine whether the economic substance of the transactions is the same.

This paper looks at the issue, beginning with the lessor. Subsequent papers will look at the issue from the perspective of the lessee.

BackgroundIn the United States, leases are a flexible contractual means of sharing risk between consenting parties. Under existing GAAP, this is reflected in two accounting models:

Capital lease accounting, for situations in which substantially all the risks and rewards of ownership have been transferred from the lessor to the lessee. The lease is in substance a purchase.

Operating lease accounting for all other leases. The lease is in substance an executory contract between the lessor and the lessee. In accounting vernacular, the lease is off-balance sheet.

The main criticism of this accounting dichotomy is the ease with which it can be abused: The explicit criteria for recognizing a capital lease provide a road map for how to structure arrangements so that lessees qualify for operating lease accounting. Some critics, however, object to any distinction at all between capital and operating leases because they believe that all executory contracts should be recognized on the financial statements, preferably at fair value, and that operating leases are an excellent place to start.

Spotlight on our IFRS InterpretationsGroupGrant Thornton International’s IFRSInterpretations Group (IIG) consists of arepresentative from each of our memberfirms in the United States, Canada,Singapore, Australia, South Africa, India,the United Kingdom, France, Swedenand Germany as well as members of theGrant Thornton International IFRSteam. It meets in person two to threetimes a year to discuss technical matterswhich are related to IFRS.

Each quarter we throw a spotlight onone of the members of the IIG. Thisquarter we focus on France’srepresentative:

Emmanuelle Guyomard, FranceEmmanuelle is Head of Accountingstandards at Grant Thornton, France.She joined our French member Firm in2006, becoming National technicalpartner in 2008.

Emmanuelle has specialised infinancial reporting standards for oversixteen years. In particular, she wasclosely involved with working groupsset up by the CNC (the former Frenchstandard-setter) and the CNCC (thenational auditing body in France) duringthe 2002-2005 period of transition toIFRS of French listed companies. Shehas also contributed to the translation ofthe IFRS bound volume in French onbehalf of the Review Committeeappointed by IASC from 2005 to 2008.

Emmanuelle is currently a memberof the French GAAP Commission at theANC (the French Standard-setter). Sheis also a member of the board ofdirectors of IMA France, a not-for-profit organisation affiliated with the USInstitute of Management Accountants,that aims at providing training andconferences for professionals in IFRS.


IASB Vice-Chairman speaks atGrant Thornton New Zealand event

IASB Vice-Chairman, Ian Mackintoshtook time during a recent visit to hisbirthplace of New Zealand to speak tosenior public sector officials at anexclusive event sponsored by GrantThornton and CPA Australia.

During his speech, Mr Mackintoshgave some interesting perspectives onthe factors affecting the IASB’s currentagenda, including • the desire from constituents for a

period of calm and a return to concepts

• increasing pressure from the G20 tocomplete the financial instrumentsproject

• potential Memorandums ofUnderstanding between the IASBand the International ValuationStandards Council, and the IASBand the International Association ofActuaries.


IFRS for SMEsThe IASB intends to start work on acomprehensive review of the IFRS forSMEs in the second half of 2012. Aninvitation to comment is expected in thefourth quarter of 2012, with an ExposureDraft in 2014, and a final version of therevised Standard planned for the firstquarter of 2014.

Following the publication of Q&As2012/01 and 2012/02 (see earlier in thenewsletter), the IASB has also stated thatit does not currently have any additionalQuestions & Answers (Q&As) on the IFRSfor SMEs under development. Itfurthermore expects that it will not issuemany, if any, additional draft Q&As beforethe start of the comprehensive review.

IASB and FASB roundtablesThe IASB and the US Financial AccountingStandards Board are to launch a series ofoutreach meetings on their revisedproposals for the recognition of revenuethat were published in November 2011.Meetings will take place in the UK, the US,Japan, Brazil and Malaysia.

The two Boards have also held round-table meetings on the proposals forinvestment entities that were issued lastyear.

Monitoring Board and Trustees of theIFRS Foundation reviewsThe Monitoring Board and the Trustees ofthe IFRS Foundation have jointlyannounced the conclusions of theirseparate reviews of the governance andstrategy of the IFRS Foundation.

The findings of the Monitoring Board’sreview are concentrated on institutionalaspects of governance, particularly thecomposition and respective roles andresponsibilities of the Monitoring Board,the Trustees and the IASB. The findings ofthe Trustees’ strategy review meanwhilelook to articulate a clear strategy andvision for the organisation as it enters itssecond decade by considering themission, governance, standard-settingprocess and financing of the IFRSFoundation. Recommendations includeimprovements to the oversight of theIASB’s due process and the establishmentof a dedicated research function.

The next steps following publication ofthe reviews will be for the MonitoringBoard to proceed with steps to put intooperation the improvement measures,while the Trustees will initiate the processfor considering revisions to theConstitution.

Round-up

IVSC to address valuation ofderivativesThe International Valuation StandardsCouncil (IVSC) has launched a projectaimed at improving the valuation offinancial derivatives.

The IVSC hopes to bring greatertransparency to the valuations placed onthe portfolios of derivative instrumentsheld by financial institutions, an area whichhas been the subject of extensive scrutinyby financial regulators following the 2008financial crisis. The project aims to bringgreater consistency and understanding ofthe techniques used in the valuationprocess in order to assist management,investors and other stakeholders inunderstanding the valuations.

EFRAG study on IFRS 10 and SPEsEFRAG has invited companies toparticipate in a study on how IFRS 10‘Consolidated Financial Statements’ willaffect the consolidation of SpecialPurpose Entities (SPEs).

The study is supplementary to theimpact assessment of IFRS 10 by theEuropean Commission, being in additionto and separate from EFRAG’sendorsement advice. It is meant toillustrate the impacts of IFRS 10 on thescope of consolidation in relation to SPEs.The study will be conducted by EFRAGstaff in close cooperation with the staff ofnational standard setters in Europe whoare interested in participating in the study.

EFRAG holds outreach meetings on itsproactive discussion papersThe European Financial ReportingAdvisory Group (EFRAG) has announced anumber of outreach meetings regardingits discussion papers ‘Accounting forbusiness combinations under commoncontrol’ and ‘Improving the FinancialReporting of Income Tax’.

The feedback from the meetings willbe used by EFRAG in future work with theIASB that relates to income taxes andbusiness combinations under commoncontrol.


FRC issues an update in response toeconomic uncertainties The UK Financial Reporting Council hasissued ‘An Update to Directors of ListedCompanies: Responding to increasedcountry and currency risk in financialreports’.

The Update, which aims to alert UKlisted companies to issues relating toincreasing country and currency risk whenfiling their financial reports, may also beof interest to a wider audience. Issuesraised in the Update include:• exposure to country risk through

financial instruments and fromexposure to trading counterparties

• the impact of austerity measuresbeing taken in some countries (effecton forecasts, impairment testing,going concern, etc)

• possible consequences of currencyevents that are not factored intoforecasts

• the potential need for enhanced postbalance sheet date event disclosures.

The Update can be viewed athttp://www.frc.org.uk/images/uploaded/documents/Update%20for%20Directors%20Jan%2012%20FINAL.pdf

Financial reporting in the UKThe UK Accounting Standards Board hasissued revised proposals for financialreporting in the UK. The proposals, whichare aimed at general financial reporting inthe UK rather than that of listedcompanies (who are already required toprepare their consolidated financialstatements under IFRS), would result in:• all current accounting standards being

replaced with a single FRS based onthe IFRS for SMEs

• introduction of a reduced disclosureframework which would permit certainentities (mainly subsidiaries) to applythe measurement and recognitionrequirements of EU-adopted IFRS with reduced disclosures

• retaining the UK’s Financial ReportingStandard For Smaller Entities (FRSSE).

IFRS Taxonomy 2012 The IFRS Foundation has published the IFRSTaxonomy 2012. The IFRS Taxonomy is atranslation of IFRSs into XBRL (eXtensibleBusiness Reporting Language). XBRL israpidly becoming the format of choice forthe electronic filing of financial information.By providing the IFRS Taxonomy, the IFRSFoundation is seeking to address thedemand for an electronic standard totransmit IFRS financial information.

The architectural framework of the2012 taxonomy is consistent with previousversions and consolidates all IFRSTaxonomy interim releases that werepublished in 2011. In addition, the IFRSTaxonomy 2012 is the first to include over700 concepts reflecting common practice.These extensions were derived from ananalysis of approximately 200 IFRS financialstatements and will reduce the need for preparers to customise the Taxonomyto fit their individual needs when filing IFRScompliant financial statements online.


The table below lists new IFRS Standards and IFRIC Interpretations with an effective date on or after 1 January 2010.Companies are required to make certain disclosures in respect of new Standards and Interpretations under IAS 8 ‘AccountingPolicies, Changes in Accounting Estimates and Errors’.

Effective dates of new standards and IFRIC interpretations

New IFRS Standards and IFRIC Interpretations with an effective date on or after 1 January 2010

Title Full title of Standard or Interpretation Effective for accounting Early adoption permitted?

periods beginning on

or after

IFRS 9 Financial Instruments 1 January 2015 Yes (extensive transitional rules apply)

IAS 32 Offsetting Financial Assets and Financial Liabilities 1 January 2014 Yes (but must also make the

(Amendments to IAS 32) disclosures required by Disclosures –

Offsetting Financial Assets and

Financial Liabilities)

IFRS 1 Government Loans – Amendments to IFRS 1 1 January 2013 Yes

IFRS 7 Disclosures – Offsetting Financial Assets and Financial 1 January 2013 Not stated (but we presume yes)

Liabilities (Amendments to IFRS 7)

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine 1 January 2013 Yes

IFRS 13 Fair Value Measurement 1 January 2013 Yes

IFRS 12 Disclosure of Interests in Other Entities 1 January 2013 Yes

IFRS 11 Joint Arrangements 1 January 2013 Yes (but must apply IFRS 10, IFRS 12,

IAS 27 and IAS 28 at the same time)

IFRS 10 Consolidated Financial Statements 1 January 2013 Yes (but must apply IFRS 11, IFRS 12,

IAS 27 and IAS 28 at the same time)

IAS 28 Investments in Associates and Joint Ventures 1 January 2013 Yes (but must apply IFRS 10, IFRS 11,

IFRS 12 and IAS 27 at the same time)

IAS 27 Separate Financial Statements 1 January 2013 Yes (but must apply IFRS 10, IFRS 11,

IFRS 12 and IAS 28 at the same time)

IFRS Practice Statement Management Commentary: A framework for presentation No effective date as Not applicable

non-mandatory guidance

IAS 19 Employee Benefits (Revised 2011) 1 January 2013 Yes


New IFRS Standards and IFRIC Interpretations with an effective date on or after 1 January 2010

Title Full title of Standard or Interpretation Effective for accounting Early adoption permitted?

periods beginning on

or after

IAS 1 Presentation of Items of Other Comprehensive Income 1 July 2012 Yes

(Amendments to IAS 1).

IAS 12 Deferred Tax: Recovery of Underlying Assets 1 January 2012 Yes

(Amendments to IAS 12)

IFRS 1 Severe Hyperinflation and Removal of Fixed Dates for 1 July 2011 Yes

First-time Adopters (Amendments to IFRS 1)

IFRS 7 Disclosures – Transfers of Financial Assets (Amendments 1 July 2011 Yes

to IFRS 7)

Various Annual Improvements 2010 1 January 2011 unless Yes

otherwise stated (some are

effective from 1 July 2010)

IFRIC 14 Prepayments of a Minimum Funding Requirement 1 January 2011 Yes

– Amendments to IFRIC 14

IAS 24 Related Party Disclosures 1 January 2011 Yes (either of the whole Standard or

of the partial exemption for

government-related entities)

IFRS 1 Limited Exemption from Comparative IFRS 7 Disclosures 1 July 2010 Yes

for First-time Adopters (Amendment to IFRS 1)

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments 1 July 2010 Yes

IAS 32 Classification of Rights Issues (Amendment to IAS 32) 1 February 2010 Yes

IFRS for SMEs International Financial Reporting Standard for Small and Immediately subject to approval N/A

Medium-sized Entities within the individual jurisdiction

Various Annual Improvements 2009 1 January 2010 unless Yes

otherwise stated (some are

effective from 1 July 2009)

IFRS 1 Additional Exemptions for First-time Adopters (Amendments 1 January 2010 Yes

to IFRS 1)

IFRS 2 Group Cash-settled Share-based Payment Transactions 1 January 2010 Yes

(Amendments to IFRS 2)


At the time of writing, the IASB did nothave any documents out for publiccomment.

Open for comment

www.gti.org

© 2012 Grant Thornton International Ltd. All rights reserved.References to “Grant Thornton” are to the brand under which the GrantThornton member firms operate and refer to one or more member firms, as the context requires. Grant Thornton International and the member firmsare not a worldwide partnership. Services are delivered independently bymember firms, which are not responsible for the services or activities of oneanother. Grant Thornton International does not provide services to clients.

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Grant Thornton - Second Quarter 2012 IFRS News