The revised insurance contracts exposure draft (ED) proposes significant changes to insurer’s income statements, as well as prescribing a new measurement approach for the balance sheet? The revised proposals include the mandatory use of other comprehensive income (OCI) for changes in measurement relating to discount rates and could fundamentally change the amount and timing of revenue reported in the income statement.
The IASB’s revised ED incorporates comments received on the 2010 ED, which have added complexity to the measurement and presentation of balances associated with insurance contracts. The IASB is seeking comments on certain specified aspects of the revised ED by October 25, 2013.
The proposed changes will have a significant impact on data requirements, actuarial resources, modeling and financial reporting systems. Therefore, it is essential for insurers to assess the implications of the new proposals on their contracts and business practices.
that declining commodity prices may be an indicator of impairment?
Current economic conditions continue to be challenging for many energy and mining entities. Concerns over the continuing financial instability in Europe, the moderate US economic recovery and slowing economic growth in China have been contributing to highly volatile market prices for commodities. For several months now, commodity prices have weakened and, in mid April, there was a steep decline in the prices of many commodities. Following this, there was a major sell off of equity securities of energy and mining companies. These events raise many questions about the recoverability or valuation of assets of these companies. Many companies may need to address these issues in their next interim financial statements.
Impairment of assets for energy and mining companies is covered by a number of different standards depending on the nature of the asset. Some of these standards are complicated, and this makes getting the accounting and disclosures right more of a challenge.
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the IASB and FASB have reached decisions on disclosures, transition requirements and the effective date of the new revenue recognition standard?
These decisions substantially conclude the boards’ re-deliberations on this project and a final standard is expected to be issued before the end of 2013 and effective for annual reporting periods beginning on or after January 1, 2017.
The guidance will affect most entities that apply IFRS or US GAAP and will have the most significant impact on those currently following industry-specific guidance.
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the IFRS Interpretations Committee recently issued an interpretation on the accounting for levies?
IFRIC 21, Levies, sets out the accounting for an obligation to pay a levy that is not an income tax. The interpretation could result in recognition of a liability later than today, particularly in connection with levies that are triggered by circumstances on a specific date. The IFRIC is effective for annual periods beginning on or after January 1, 2014.
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your accounting and disclosures for the plan will change significantly in Q1 - 2013?
IAS 19, Employee Benefits (revised) applies retrospectively to years beginning on or after January 1, 2013. Key changes include:
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the IFRIC recently weighed in on the accounting for deferred stripping?
IFRIC 20, Stripping costs in the production phase of a surface mine, is effective January 1, 2013 and sets out the accounting for overburden waste removal (stripping) costs in the production phase of a mine. Stripping may create a benefit either through inventory produced or improved access to the ore and capitalization of direct costs incurred as inventory or an enhancement to an asset is appropriate in such cases. The IFRIC's new guidance requires that these capitalized costs be attributable to an identifiable component of an ore body, which is likely to require a significant amount of judgement and information, particularly as life-of-mine strip ratios will generally not be appropriate.
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there are 8 new or amended IFRS standards that apply starting in 2013?
Entities reporting under IFRS have to contend with no less than 8 new or amended standards in their first quarter of 2013. Significant new or amended standards include:
The 8th amendment is the annual improvements project, through which the IASB made changes to 5 other standards. Our best advice? Be prepared and start thinking about Q1 before your current year-end. Call us to learn more about the upcoming changes and what they mean for your company.
payments contingent upon the seller's continued employment will be compensation expense, separate from the acquisition?
Certain contingent consideration arrangements may be tied to the continued employment of the acquiree’s employees or the selling shareholders. Under IFRS 3, Business Combinations, these arrangements are recognized as compensation expense in the post-combination period, identical to the requirements under the provisions of U.S. GAAP. An acquirer, however, should consider the specific facts and circumstances of contingent consideration arrangements with selling shareholders that have no requirement for continuing employment to determine whether such payments represent part of the purchase consideration or are separate transactions to be recognized as compensation expense in the post-acquisition period.
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proportionate consolidation of joint ventures is no longer permitted?
A joint arrangement is an arrangement where two or more parties contractually agree to share control. Effective January 1, 2013, management will need to evaluate how the requirements of IFRS 11, Joint Arrangements, will affect the way they account for existing or new joint arrangements. The most significant change is likely to be the requirement to equity account for investments in joint ventures, removing proportionate consolidation as an option. As a result, there may be significant impacts on an entity's financial results and financial position, which could affect leverage, capital ratios, covenants, financing agreements and performance measures, including EBIT and EBITDA.