FYI Article – Narrow-scope Amendments: Improving IFRSs
The International Accounting Standards Board (IASB) issued three significant new standards in 2014 – IFRS 9 Financial Instruments, IFRS 14 Regulatory Deferral Accounts and IFRS 15 Revenue from Contracts with Customers. However, these are not all the changes to International Financial Reporting Standards (IFRSs) in 2014. The IASB also has two processes to issue minor amendments to standards:
- Annual improvements, which clarify the wording of a standard or correct relatively minor unintended consequences, oversights or conflicts between existing requirements of standards.
- Narrow-scope amendments, which address concerns about a specific aspect of a standard that do not meet the criteria for inclusion in annual improvements. Unlike annual improvements, a separate exposure draft is issued by the IASB for each narrow-scope amendment.
Why Are Narrow-scope Amendments Important?
A narrow-scope amendment can significantly affect the accounting under the relevant IFRS. For example, consider the amendment “Accounting for Acquisitions of Interests in Joint Operations.” This amendment to IFRS 11 Joint Arrangements requires business combination accounting to be used for the acquisition of an interest in a joint operation that constitutes a business. As a result, goodwill will generally be recognized on such transactions.
Consequently, it is important to be up to date on narrow-scope amendments that have been issued. It is equally important to be aware of exposure drafts of narrow-scope amendments. This is the opportunity to let the IASB and the Accounting Standards Board (AcSB) know if you have any concerns about the proposals. Exposure drafts of narrow-scope amendments, as well as information on IASB projects to develop additional narrow-scope amendments, can be found on the IASB and AcSB websites.
What Narrow-scope Amendments Have Been Issued?
The following narrow-scope amendments were issued in 2014:
- Accounting for Acquisitions of Interests in Joint Operations;
- Agriculture: Bearer Plants;
- Clarification of Acceptable Methods of Depreciation and Amortization;
- Disclosure Initiative (IAS 1);
- Equity Method in Separate Financial Statements;
- Investment Entities: Applying the Consolidation Exemption; and
- Sale or Contribution of Assets between an Investor and its Associate or Joint Venture.
The above narrow-scope amendments are effective for annual periods beginning on or after January 1, 2016 and earlier application is permitted.
What Exposure Drafts of Narrow-scope Amendments Have Been Issued for Comment?
- Classification and Measurement of Share-based Payment Transactions;
- Classification of Liabilities (IAS 1);
- Disclosure Initiative (IAS 7);
- Fair Value Measurement: Unit of Account; and
- Recognition of Deferred Tax Assets for Unrealized Losses.
The proposed amendments to IAS 1 and IAS 7 have comment periods that end on June 10, 2015 and April 17, 2015 respectively. Comment periods on the other exposure drafts have closed. Final amendments for the above are expected to be issued in 2015.
Upcoming Narrow-scope Amendment Proposals
Exposure drafts are expected on the following narrow-scope amendments later this year:
- Elimination of Gains or Losses Arising from Transactions Between an Entity and its Associate or Joint Arrangement; and
- Remeasurement of a Plan Amendment, Curtailment or Settlement/Availability of a Refund of a Surplus from a Defined Benefit Plan.
While no other narrow-scope amendment projects are currently in progress, the IASB may well initiate further projects as the year progresses.
Rebecca Villmann, CPA, CA,
Director, Accounting Standards Board
Phone: +1 (416) 204-3464