This issue of Beyond the GAAP brings a piece of good news for our readers, as we all return to work following a well-deserved break: our financial instruments experts have saved you some effort by reading and summarising the IASB’s particularly dense Discussion Paper on the classification of financial instruments as liabilities or equity, published at the beginning of the summer. See our ‘A Closer Look’ feature for our summary of the DP.
After focusing on half-yearly reporting and on IFRS 15 and IFRS 9 in our last edition, this month’s special study presents a Benchmark on disclosures by entities at 31 December 2017 on the future impact of IFRS 16. The level of information provided varies greatly, and, unsurprisingly, is on average rather limited. It is as well to remember that entities should expand these disclosures at 30 June 2018.
The new IFRS 15 on revenue recognition came into effect on 1 January 2018. The first interim accounts, generally presented in condensed form under IAS 34 – Interim Financial Reporting, must take account of the implementation of this new standard.
Again this month IFRS 9 and IFRS 15 take centre stage in our highlights as they are the focus of attention for market regulators and the Monitoring Board of the IFRS Foundation.
The year began quietly with few major developments relating to standards, but March has seen a whole series of projects coming to fruition. Some of these are highly concrete, with three very detailed decisions published by the IFRS IC on the application of IFRS 15, which we explore in our ‘A Closer Look’ feature. Others are much more conceptual, such as the publication of the IFRS Conceptual Framework, and still others are forward-looking and are prompted by the European Union’s action plans on sustainable development and the fitness of public reporting by companies.
With less than a year to go before the effective date of IFRS 16 on Leases, the report of the ANC’s (The French accounting standards setter) decisions on the duration of 3/6/9 leases, published in February, is certainly the most anticipated announcement for French entities. This is because it should enable most of them to resolve this thorny question in their plans for implementation. This decision will of course also be useful to entities with subsidiaries in France.
Since 1 January 2018, IFRS 9 - Financial instruments and IFRS 15 - Revenue from Contracts with Customers have been effective, as the the IASB headline announced on its website on 8 January. In parallel, work to assess the impact of IFRS 9 on long-term investment is continuing at the European level, with the publication of the outcomes of a first factual analysis by EFRAG. This research has also acted as a spur to the IASB, which has followed up the EFRAG publication by issuing two presentations of its own on the contributions of IFRS standards to financial stability and long-term investment.
2017 ended fairly quietly, since the European Commission had already endorsed several texts in November and the IASB’s December meeting decided to postpone publication of most of its texts and draft texts, with the exception of the annual improvements to IFRSs, which we discuss in this month’s ‘A closer look’ study. This being the case, the implementation of IFRS 9 and IFRS 15 in January 2018 will be more than enough to keep entities and their auditors busy, on top of the preparation of the 2017 financial statements.
Over the past decade, the IASB has been working on the process of converging IFRS with US GAAP, and this month saw EU endorsement of the remaining resulting standards. With implementation now set to go ahead, this marks the end of a chapter. The one remaining major standard awaiting endorsement – namely IFRS 17 - Insurance Contracts – was not a joint project with the FASB, and moreover is not scheduled for endorsement until the end of next year.
The IASB has put some last-minute finishing touches to IFRS 9, with an amendment on debt instruments with symmetric prepayment options and with the inclusion (in the Basis for Conclusions) of its analysis of the standard’s provisions on the modification of financial liabilities. All that remains is for the European Union to accelerate the endorsement of the amendment so that European entities do not have to switch accounting policies between 2018 and 2019!