As we foresaw, the FASB and the IASB have decided to introduce amendments to their twin standards ASC 606 and IFRS 15 on revenue recognition. Although the amendments (and their due process) are likely to differ between the two Boards, the FASB taking a more prescriptive approach, they should not affect the principles of the standard, or the convergence achieved between the two accounting frameworks on the recognition of revenue.
As 2015 gets under way, discussions on the application of IFRS 15 are in full swing! Many technical subjects have now been discussed by the Joint Transition Resource Group, and already the idea of amending the standard as published has made some headway, at least on the FASB side.
While many businesses will spend 2015 working on the practical impact of the introduction of IFRS 15 and IFRS 9, the IASB has announced that other important publications will appear this year: the new draft conceptual framework should be available during the course of the first quarter, while the new standard on leases is expected at the end of the year.
The end of the year is fast approaching!
As entities begin to analyse the future impact of IFRS 15, the IASB and the FASB have published the report of the first meeting of the Transition Resource Group (TRG), charged with identifying any application problems that deserve the attention of the Boards. This is an opportunity for Beyond the GAAP to return to these discussions, and to the items on the agenda of the second meeting of the TRG.
After a short summer break, the IASB and the IFRS Interpretations Committee have returned to their work programme. September saw the publication of the Discussion Paper on rate-regulated activities and the continuation of discussions on the major insurance contracts and conceptual framework projects.
The IASB has taken advantage of the summer break to finalise a number of publications. These include the complete version of IFRS 9 on financial instruments, published in July.
At the beginning of the second half of 2014, it appears that some preparers have initiated an action plan to analyze their contracts with customers in the light of IFRS 15. Starting early this project will enable to identify practical implementation difficulties that deserve to be referred to the Transition Resource Group, which held its first meeting on 18 July.
At last! Between the publication in December 2008 of the Discussion Paper on Revenue Recognition, and the arrival of IFRS 15 at the end of May 2014, nearly five and a half years have passed. During this period, two exposure drafts were published (June 2010 and November 2011), and it took 30 months’ work to move from the second exposure draft to the final joint standard with the US GAAP.
In publishing the definitive version of the hedging provisions of IFRS 9, Financial instruments, the IASB had already taken a major step towards revising the accounting treatment of entities’ risk management activities.
In our January 2014 issue, we highlighted the ongoing differences of opinion between the IASB and the FASB as they tried to finalise the standard on financial instruments. After years of work on the joint standard, they seem unable to reach a consensus on either phase 1 (classification and measurement) or phase 2 (impairment).
The IASB published an update of its work plan on 25 February. According to this document, March 2014 should see the publication of the Discussion Paper on macro hedging and the draft amendment to IAS 1 resulting from the Disclosure Initiative. These two publications are eagerly awaited by stakeholders. Let us hope that they are not a disappointment!
November 2013 saw the publication of the final standard on hedge accounting that constitutes
phase 3 of IFRS 9, and which is explained in full detail in this issue of Beyond the GAAP. This standard represents a significant new direction for IFRSs, with a greater focus on entities’ operational risk management policy. From now on, the accounting treatment must be adapted to fit the management policy, rather than the other way around. This is the first step towards a “business model” approach that many have called for, and that is currently being discussed as part of the Conceptual Framework project.
Under the IASB work plan, 2014 should see the conclusion of two major projects which were launched several years ago: revenue recognition and the impairment of financial assets. However, no publication timescale has been announced for the other two major topics, accounting for leases and insurance contracts. The work plan merely mentions ‘redeliberations’ on these subjects in the first quarter of 2014. The duration of the redeliberations on revenue recognition does, however, suggest that we should treat this timetable with great caution.
The 2013 annual statements are drawing near! As every year, we present the list of IFRS standards and interpretations applicable to this reporting date. We also invite you to take a close look at the AMF’s Recommendations and ESMA’s Enforcement priorities for 2013.
After 8 years of good and loyal service, Beyond the GAAP adopts the colours of the new Mazars visual identity.
The comment period on the Leases exposure draft ended on 13 September 2013. The comments received by the IASB and the FASB are far from unanimous, and many criticisms have been expressed on both sides of the Atlantic, some even challenging the model upheld by the Boards. Even some organisations representing analysts or users of financial statements have suggested that the standard setters’ proposals do not meet their needs.
The IASB and the FASB expect to publish their joint standard on revenue recognition by the end of this year. However, the mandatory effective date is not likely to be before 2017.
After the May publication of the 2nd leases exposure draft, another long-term project now sees re-publication: on 20 June the IASB and the FASB published their new proposals for insurance contracts. It looks likely to be a busy summer for commentators!
When in August 2010, the IASB and the FASB published a joint exposure draft on leases, they could have had no idea that they would have to re-expose their proposals three years later. This, however, is what they were forced to do on 16 May 2013, so generally hostile were responses to the initial draft, so complicated the redeliberations and so changeable the positions.