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Financial Reporting Council
MONTHLY UPDATES (September 2014) – What’s new from IASB
1.
Meetings of the International Accounting Standards Board (IASB)
The topics discussed at the IASB’s September 2014 meetings were with respect
to:
 Insurance Contracts
 Conceptual Framework
2.
Insurance Contracts
The IASB continued its discussions on insurance contracts and the following
decisions were made:
(a) Premium-allocation
approach:
revenue
recognition
pattern
The IASB clarified that when an entity applies the premium-allocation
approach to account for an insurance contract, it should recognise insurance
contract revenue in profit or loss:

on the basis of the passage of time; but

if the expected pattern of release of risk differs significantly from the
passage of time, then on the basis of expected timing of incurred claims
and benefits.
(b) Determination of interest expense in the premium-allocation approach
The IASB tentatively decided that when an entity applies the premiumallocation approach to contracts for which the entity:
 discounts the liability for incurred claims; and
 chooses to present the effect of changes in discount rates in OCI;
the interest expense in profit or loss for the liability for incurred claims
should be determined using the discount rate that is locked in at the date the
liability for incurred claims is recognised.
This tentative decision also applies to the presentation of interest expense for
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any onerous contract liability that is recognised when the entity applies the
premium - allocation approach.
3.
Conceptual Framework
The IASB continued its redeliberations on the Conceptual Framework and the
following were discussed:
(a) Measurement
 Use of a single or default measurement basis
The IASB tentatively reconfirmed its decision not to develop a single or
default measurement basis.
 Selection of a measurement
The IASB tentatively decided that the Exposure Draft should state that:

consideration of the objective of financial reporting, of the qualitative
characteristics of useful information and of the cost-benefit constraint
is likely to result in the IASB selecting different measurement bases
for different assets and liabilities;

the factors to be considered when selecting a measurement basis for an
asset or liability should include:
o how the asset or liability will contribute to future cash flows; and
o the characteristics of the asset or liability;

the relative importance of each of the factors to be considered when
selecting a measurement basis will depend upon facts and
circumstances; and

it may be appropriate to use one measurement basis for the statement
of financial position and a different measurement basis for the
statement of profit or loss when such an approach better reflects the
nature of the business activities conducted.
 Initial Measurement
The IASB tentatively decided to amend the discussion of initial
measurement that was included in the Discussion Paper by:
 replacing references to the three measurement bases described in the
Discussion Paper with references to historical cost and current value;
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 removing some Standards-level detail, to be consistent with the agreed
strategy for the measurement section;
 removing the statement that, for exchanges of equal value, initial
measurement issues are rarely significant; and
 clarifying that cost and fair value are only the same if transaction costs
are excluded from cost or are negligible.
(b) Implications of long-term investment for the Conceptual Framework
The IASB discussed the implications of long-term investment for
the Conceptual Framework and tentatively decided that:
 the IASB’s tentative decisions on measurement and on profit or loss and
other comprehensive income (OCI) would provide sufficient tools so that
the IASB would be able to make appropriate standard-setting decisions if
future projects were to consider:
o how to measure the long-term investments (or liabilities) of entities
whose business activities include long-term investment; and
o whether such entities should present changes in the carrying amount of
those investments (or liabilities) in profit or loss or in OCI;
 no other areas of the Conceptual Framework need to include a specific
reference to reporting entities whose business activities include holding
long-term investments;
 the Conceptual Framework contains sufficient and appropriate discussion
of primary users and their information needs, and about the objective of
general purpose financial reporting, to address appropriately the needs of
long-term investors in a reporting entity; and
 when updated for the IASB's tentative decisions in May 2014,
the Conceptual Framework would contain sufficient and appropriate
discussion of stewardship and prudence to address appropriately the needs
of long-term investors in a reporting entity.
(c) Equity and liabilities
The IASB discussed the role of the definitions of a liability and of equity in
distinguishing liabilities from equity claims, and considered possible
amendments to the definition of a liability to implement the combined
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settlement and value approach. The IASB tentatively decided not to amend
those definitions at this time.
4.
Proposals for measuring quoted investments in subsidiaries, joint ventures
and associates at fair value
The IASB published for public comment an Exposure Draft detailing proposals
concerning the measurement of investments in subsidiaries, joint ventures and
associates at fair value when those investments are quoted in an active market.
The proposed amendments to IFRS 10 Consolidated Financial Statements, IFRS
12 Disclosure of Interests in Other Entities, IAS 27 Separate Financial
Statements, IAS 28 Investments in Associates and Joint Ventures and IAS
36 Impairment of Assets aim to address questions received on:

the unit of account for investments in subsidiaries, joint ventures and
associates and on the fair value measurement when those investments are
quoted in an active market (quoted investments); and

the measurement of the recoverable amount of cash-generating units
(CGUs) on the basis of fair value less costs of disposal when they
correspond to entities that are quoted in an active market (quoted CGUs).
The proposed amendments clarify that an entity should measure the fair value of
quoted investments and quoted CGUs as the product of the quoted price for the
individual financial instruments that make up the investments held by the entity
and the quantity of financial instruments.
The Exposure Draft also includes proposed amendments to the Illustrative
Examples for IFRS 13 Fair Value Measurement to clarify questions received
relating to the application of the exception in paragraph 48 of IFRS 13. The
example illustrates the fair value measurement of an entity’s net exposure to
market risks arising from a group of financial assets and financial liabilities whose
market risks are substantially the same and whose fair value measurement is
categorised within Level 1 in the fair value hierarchy.
The Exposure Draft is open for comments until 16 January 2015.
5.
IASB issues Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)
The IASB issued narrow-scope amendments to IFRS 10 Consolidated Financial
Statements and IAS 28 Investments in Associates and Joint Ventures (2011).
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The amendments address an acknowledged inconsistency between the
requirements in IFRS 10 and those in IAS 28 (2011), in dealing with the sale or
contribution of assets between an investor and its associate or joint venture.
The main consequence of the amendments is that a full gain or loss is recognised
when a transaction involves a business (whether it is housed in a subsidiary or
not). A partial gain or loss is recognised when a transaction involves assets that do
not constitute a business, even if these assets are housed in a subsidiary.
The amendments will be effective from annual periods commencing on or after 1
January 2016.
6.
IASB concludes the Annual Improvements to IFRSs 2012–2014 Cycle
The International Accounting Standards Board (IASB) issued Annual
Improvements to IFRSs 2012 2014 Cycle.
These amendments result from proposals that were contained in the Exposure
Draft for proposed amendments to IFRS, Annual Improvements to IFRSs 2012–
2014 Cycle, published in December 2013.
The IASB uses the Annual Improvements process to make necessary, but nonurgent, amendments to IFRSs if those amendments will not be included as part of
any other project.
The following table shows the topics addressed by these amendments:
The effective date of the amendments is 1 January 2016.
For further information: http://www.ifrs.org
Financial Reporting Council
02 October 2014
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