As IFRS (International Financial Reporting Standards) are evolving fast, we are continuing our focus on the latest IASB’s (International Accounting Standards Board) updates. The following synthesis aims to help SAP Customers and Partners anticipate the potential impact of short-term IFRS evolution both on their business processes and SAP® solutions for consolidation.
In our last blog dedicated to IFRS news, we noticed that the three major projects to be finalized in the short term were: financial instruments, leases and revenue. We could also have mentioned the project related to insurance contracts even though it is industry-specific.
Six months later, where are we up?
Financial Instruments (IAS 39 to be replaced by IFRS 9)
As a reminder, this project has been divided into three phases: classification and measurement, impairment and hedge accounting.
Regarding classification and measurement, Board deliberations on the final standard are still in progress. No target date has been announced yet.
The phase dedicated to the impairment of financial assets has taken a step forward during this semester. The exposure draft Expected Credit Loss was published in March with a comment period ending early July. No target date has been announced for the final standard.
The phase “Hedge accounting” is the most advanced one. Final IFRS is expected soon (mid-2013).
The IASB and the US FASB (Financial Accounting Standards Board) jointly published on 16 May 2013 the revised exposure draft Leases. The first exposure draft (ED) released in 2010 had attracted almost 800 comment letters, most of them critical. On the basis of this feedback, the proposals have changed substantively. For example, leases with a maximum lease term of 12 months or less would not give rise to the recognition of an asset and a liability (whereas the recognition of a right-of-use asset and a lease liability applied to all leases in the previous ED). However the revised proposals remain far more restrictive than the current standard (IAS 17).
The comment period ends 13 September; Board deliberations will re-start from Q4 with no target date announced for the final standard.
Board deliberations are still in progress. Final standard is expected in Q3 2013.
On 20 June 2013 the IASB published the exposure draft Insurance Contracts, built on the proposals contained in the 2007 discussion paper and the 2010 first exposure draft. The deadline for comments is 25 October 2013. Board deliberations will re-start afterwards. No target date is available.
Other projects & publications
Early July, a discussion paper was published regarding the revision of the Conceptual Framework, open to comment until January 2014. This is the first step, which will be followed by an exposure-draft and then the revised framework. No final target date is announced.
In September 2012, the IASB started a comprehensive Rate-regulated Activities project. Rate regulation is defined as “a restriction on the setting of prices that can be charged to customers for services or products”. Since the issues are complex, the IASB acknowledges that the project will take time. For that reason, an interim standard focusing on regulatory deferral accounts is to be issued in the short term. The corresponding exposure draft was published in April 2013 (comment period ending 4 September 2013).
The other projects currently carried out by the IASB are narrow scope amendments to existing standards. Some of them are expected to be completed by the end of 2013. We will get back to these projects in our next blog.