Financial Accounting Standards: IAS and IFRS Changes in 2013 and 2014

Allan Millar

financial accounting standardsI recently attended a PwC conference where they provided some commentary on changes to the International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). IAS and IFRS changes are listed below and may be of use to those of you who take a fundamental approach to investing. This may also be of use to those of you going through exams.

Note that all IAS and IFRS definitions are from www.icaew.com

IAS and IFRS Changes already in force:

IAS19 Employee benefits

The accounting standard IAS 19 sets out the accounting treatment and disclosure for employee benefits

This standard has been revised this year (2013) and PwC made some observations, the key ones being:

  • Actuarial gains and losses have been renamed “remeasurements”. These will now be recognised immediately in Other Comprehensive Income
  • Regarding benefit plans, additional disclosures are required in presentation, amounts recognised and risks arising from defined benefit plans and multi-employer plans

IFRS13 Fair value measurement

The accounting standard IFRS 13 constitutes guidance on fair value measurement and disclosure requirements for IFRSs and US generally accepted accounting principles (GAAP)

  • Any measurement changes will not result in restatements. For new disclosures, no comparatives are required.
  • Fair value is clarified but it is not stated when it should be used
  • Onus is on fuller disclosure of fair value

What will be new in 2014 – IAS and IFRS Changes:

IFRS10 Consolidated financial statements

The accounting standard IFRS 10 sets out the rules for presenting and preparing consolidated financial statements when an entity controls one or more other entities

For those of you studying CFA or accountancy exams, this IFRS will have loomed pretty large.  Some pretty far reaching changes are coming:

  • Control has some new definitions, as follows –
  • Investor should have power over the investee
  • The investor should have exposure or rights to variable returns from the investee
  • Investor’s power should affect the amount of their returns

IFRS11 Joint arrangements

The accounting standard IFRS 11 clarifies the reporting procedures for joint arrangements

Another favourite for examiners, the good news is that the number of JV arrangements has been reduced to two:

  • Joint operation – recognise the share of assets and liabilities, recognise share of revenues and expenses and recognise accounting entities booked in operator’s own financial statements
  • Joint venture – in individual financial statements, the investment in the JV should be recognised at cost, or in accordance with IAS39. In the consolidated financial statements, the equity method of accounting (IAS 28), is prohibited
  • The legal structure no longer determines the accounting, the underlying rights and obligations now determine this

IFRS12 Disclosure of interest in other entities

The accounting standard IFRS 12 sets out the disclosure requirements for all forms of interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities

Generally, there are more detailed disclosures required, summarised below:

  • Significant judgements and assumptions
  • Interests in subsidiaries
  • Interest in joint arrangements and associates
  • Interests in unconsolidated structured entities

Hope that this is useful for you, would recommend some further research, particularly for those of you sitting exams.

References:

  • www.icaew.com
  • PwC Accounting Developments Seminar – Glasgow, 31st October 2013

Twitter:  @MillarAllan

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