PwC supports the board’s efforts in clarifying whether an entity is required to discontinue hedge accounting when an over-the-counter (OTC) derivative is novated to a central counterparty (CCP) as required by law or regulation. We also appreciate the board’s responsiveness in addressing this urgent issue in a pragmatic way, as requiring entities to treat such novations as a discontinuance of hedge accounting would not provide useful information to investors.
PwC agrees with the board’s objectives to amend IFRS 9 and commend the board on their progress in achieving those objectives. The letter includes key comments that we would like to raise with the board.
Following consultation with members of the PwC network of firms, this response summarizes the views of member firms who commented on the tentative agenda decision, published in the January 2013 edition of IFRIC Update.
PwC global network of firms submitted comments on the IASB's request for information on IFRS for SMEs. The comments provided have been grouped into six broad categories to simplify our response and to avoid repetition. The Firm comments specifically on the scope of the SME standard, convergence with IFRSs, income taxes, options, convergence with the EU directives and the use of additional IASB guidance for SMEs.
The PwC network global network of firms believes that the application of the conclusions in the draft interpretation will result in accounting that does not reflect the economic substance of many levies.
PwC global network of firms supports the Interpretations Committee's decision that the accounting for employee benefit plans with a promised return on contributions or notional contributions explored in the Draft IFRIC should be further considered.
PwC global network of firms agrees with the relief provided in the exposure draft with regards to the transition guidance in IFRS 10. However, the firm believes that the effect of the BoardÆs proposed relief is complicated to implement in practice. ...
PwC global network of firms welcomes the IASB's approach to provide differentiated fair value reporting for qualifying investment entities. The Firm, however, is concerned that there are significant differences between the IASB and FASB's respective proposals. The Firm believes that the Boards' differing approaches to the treatment of a controlling financial interest in an investment entity by a non-investment entity parent should be eliminated.
PwC global network of firms provides detailed responses to the questions included in the Agenda Consultation. The Firm also notes some of the broader issues that it believes the Trustees and the IASB should consider when establishing the agenda of the IASB.
PwC global network of firms strongly believes that the Implementation Group should not issue a Q&A that addresses the interpretation of "undue cost or effort" and/or "impracticable." The Firm believes that the SMEIG should not address through Q&As issues that might be relevant to full IFRS. The Firm notes that the SMEIG might use the "basis for conclusions" in the Q&As to limit the scope of the non-mandatory guidance, but there remains a danger that the Q&As might be considered in the interpretation of full IFRS, particularly in areas in which there is no guidance in full IFRS.
PwC global network of firms welcomes the decision of the Board to delay the mandatory effective date of IFRS 9. However, PwC global network questions whether the proposed date of January 1, 2015, will be enough of a delay. The firm believes that the Board should allow for a period of at least 18 months from the date of the finalizing IFRS 9 and the insurance project to the first comparative period covered by the new standard. Given that it does not appear that these projects will be completed before the second half of 2012, PwC global network recommends that the Board considers whether the proposed date is realistic in view of the most likely time line for the projects.
PwC global network of firms does not support the tentative agenda decision as drafted. The firm supports the committee's conclusion that this item should not be taken onto the agenda. The firm also supports the committee's conclusion that the presumption in paragraph 51C of IAS 12,'Income taxes can be rebutted in other circumstances, which is based on the guidance in IAS 12. However, the final two sentences of the tentative agenda decision contain an interpretation of IAS 12 that is not supported by the guidance in the standard.
PwC Global Network of Firms does not support the tentative agenda decision as drafted. The Firm supports the Committee's conclusion that this item should not be taken onto the agenda because it raises fundamental questions about the principles in IAS 12 that should be addressed by the IASB.
PwC global network of firms agrees in in principle with the proposed improvements. PwC global network provides its responses to the specific questions in the proposal, including suggestions to clarify the proposed wording of several of the proposed improvements.
PwC Global Network of Firms (1) provides some overall observations on what the Firm considers to be important issues connected with the IFRS Foundation Trustees' Strategy Review and (2) shares its views on the specific principles and recommendations proposed by the Trustees with respect to the organization's (1) mission, (2) governance, (3) due process, and (4) funding.
PwC network of firms believes that the SMEIG should not address through Q&As issues that might be relevant to full IFRS. There is a danger that the Q&As, although not mandatory and specific to the IFRS for SMEs (the standard), might be applied in the interpretation of full IFRS. PwC does not believe this to be appropriate, and believes Q&As issued by the SMEIG should be restricted to issues that affect the IFRS for SMEs only.
PwC network of firms expressed concern that the draft agenda decision does not take into account the wide range of conditions that can arise in employee benefit plans and as a result presents a conclusion that is too definitive and might lead to inappropriate accounting.
PwC believes that overall the proposals in the exposure draft make significant progress towards aligning the accounting more closely with risk management, establishing a more principles-based approach and addressing many of the inconsistencies and weaknesses in IAS 39. PwC is particularly supportive of eliminating the current bright line for effectiveness testing, allowing effectiveness to be assessed on a qualitative basis, expanding the ability to hedge component risks to non-financial items, and allowing hedge accounting to be applied to groups of items that include offsetting positions. PwC believes, however, that there are some areas where changes to the proposed standard should be considered to better address the project's objective.
PwC global network notes the potential for overlap between the Trustees' strategy review and the Monitoring Board's review of governance, while applauding recent announcements around enhanced coordination of the two reviews. Overall, the PwC network continues to support the existing three-tier structure (Trustees, Monitoring Board, and the IASB), but suggests greater clarity in the roles and responsibilities of the Monitoring Board and the Trustees. The PwC network also emphasizes that the organizationÆs structure needs to be scalable to meet the growing need for interpretation and application guidance with the continued adoption of IFRS throughout the world and the high volume of new standards expected in the next year.
PwC does not agree with the decision to defer consideration of this issue until the IASB's project to replace the provisions standard (IAS 37), or with the reasons given for that decision. PwC is aware of some differences of view on this issue, and believes there may be limited diversity in practice today, but the Firm is concerned that the agenda decision might result in further diversity that does not exist today.
PwC supports the proposal to amend the Due Process Handbook to include criteria for assessing whether an issue should be dealt with through the annual improvements project. PwC agrees that it is helpful to have criteria for distinguishing between potential improvements and more significant projects. In the letter, PwC provides some comments drafting suggestions.
PwC expressed support for the boards' objective to report relevant and representationally faithful information to users of financial statements about the amounts, timing and uncertainty of cash flows arising from leases. The firm acknowledges that the proposals address the primary concern - that is, the recognition of assets and liabilities arising out of lease contracts - however, application of the proposals might reduce the income statement usefulness to many users. The firm believes that the proposals will result in significant cost and complexity for some preparers. The firm does not believe that the current proposals fully meet the objective in a number of key areas including the measurement of more complex leases, specifically...
PwC believes that an amendment to address severe hyperinflation should be made to IAS 29 rather than IFRS 1 because the entities that requested the board consider this issue are unable to prepare financial statements in accordance with IFRSs, as they cannot apply the measurement requirements of IAS 29. PwC is concerned that an amendment to IFRS 1 could be applied more widely than the board intends.
PwC believes the IASB should continue to work with the FASB in evaluating and making changes responsive to comments received, resolving current differences between the Boards, and developing a global insurance standard. PwC expresses concerns about certain aspects of both the IASB and FASB proposals. One key concern is how the proposals would interact with other standards that are relevant to insurers' financial statements. PwC believes the IASB and FASB need to resolve their remaining differences on this project, address the concerns regarding the proposed models raised in PwC's letter to the IASB, and finalize one converged financial instruments standard, in order for a proposed insurance contracts accounting standard to be...
PwC does not support the specific proposals in the exposure draft. PwC has suggested an alternative approach that addresses concerns with the current model in a way that reflects the economic consequences of recovering an asset measured at fair value but also minimizes the risk of unintended consequences.
Regarding IAS 36 calculation of value in use, PwC agrees with the decision of the IFRS IC not to take this item onto its agenda. PwC, however, encourages the IFRS IC to clarify the reasons for its conclusion so that the published rejection notice does not have unintended consequences. Regarding IAS 36 accounting for impairment testing of goodwill when non controlling interests (NCI) are recognized, PwC disagrees with the decision of the IFRS IC not to recommend this item for inclusion in Annual Improvements. PwC believes that the issue can and should be dealt with as part of the Annual Improvement projects to allow for resolution in a more timely manner than waiting for the outcome of an IFRS 3 post-implementation review. The firm...