As IFRS (International Financial Reporting Standards) are evolving fast, we continue our focus on the latest IASB’s (International Accounting Standards Board) updates. Since our last blog published in January 2018, the following publications have been issued by the IASB:
Amendments to IAS 19
These amendments clarify the calculation of service cost and net interest when a plan amendment, curtailment or settlement occurs. As they do not affect accounting schemes but only amounts to be recognized, it is not necessary to elaborate on these changes that will not have any impact on the Financial Consolidation starter-kit.
New Conceptual Framework
The IASB has issued a revised Conceptual Framework that replaces the one initially published in 1989. The Conceptual Framework is not a standard. It provides concepts and guidance that underpin the decisions the Board makes when developing standards (e.g. definition of an asset, a liability, …).
The main changes introduced in the new Framework can be summarized as follows:
- Definitions of assets and liabilities have been updated. In particular, any reference to the expected flows of economic benefits have been removed. Definitions are now based on the existence of a right (or an obligation) that potentially gives rise to an economic benefit (or a transfer of an economic benefit). It does not matter if this probability is low. The Board explains that uncertainty about the flow of economic benefits is best dealt with in recognition criteria or measurement, instead of within the definitions of an asset and a liability.
- New chapters have been added such as “Financial statements and the reporting entity”, “Measurement” and “Presentation and disclosure”.
- The financial statements of a parent entity are described as “unconsolidated financial statements”, which is a new term. Until then, the IASB usually used the term “separate financial statements”.
- The Framework does not make a conceptual distinction between profit or loss and other comprehensive income (OCI). It states that all income and expenses are presented in profit or loss except when, in exceptional circumstances, a standard requires to present them in OCI.
The new framework is immediately effective; however, practical consequences should be very limited in the short term.
The other H1-2018 publications are only proposals that do not call for comments at that stage.
Update of the Board’s Work Plan
The latest workplan published in June 2018 is available here on the official IFRS website.
In the next months, we will pay particular attention to the “Better communication” project that may have significant impact on the primary financial statements.