IFRS Updates

Donald B. Applegarth,
Joseph A. Bruce

IASB Completes Off-Balance-Sheet Activities and Joint Arrangements Accounting Improvements.

The IASB has announced the completion of its review of accounting treatment for off-balance-sheet activities. The IASB believes that this process broadly brings IFRSs and U.S. GAAP into alignment, and concludes an important element of the IASB’s comprehensive response to the financial crisis.

The IASB’s review resulted in the issuance of the following new and (or) amended standards:

  • IFRS 10 Consolidated Financial Statements builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. IFRS 10 supersedes IAS 27 Consolidated and Separate Financial Statements (as amended in 2008) and SIC 12 Consolidation – Special Purpose Entities.
  • IFRS 11 Joint Arrangements is intended to provide for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form (as is currently the case). The standard addresses inconsistencies in the reporting of joint arrangements by requiring a single method to account for interests in jointly controlled entities. IFRS 11 supersedes IAS 31 Interests in Joint Ventures and SIC 13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers.
  • IFRS 12 Disclosure of Interests in Other Entities is a new standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles, and other off-balance-sheet vehicles.
  • IAS 27 Separate Financial Statements (as amended in 2011) contains accounting and disclosure requirements for investments in subsidiaries, joint ventures, and associates when an entity prepares separate financial statements. The standard requires an entity preparing separate financial statements to account for those investments at cost or in accordance with IFRS 9 Financial Instruments. In completing IFRS 10, the IASB removed from IAS 27 all requirements relating to consolidated financial statements.
  • IAS 28 Investments in Associates and Joint Ventures (as amended in 2011) prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures.

The new and amended standards are effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. If early application is applied, an entity should disclose that fact and apply IFRS 10, IFRS 11, IFRS 12, IAS 27 (as amended in 2011), and IAS 28 (as amended in 2011) at the same time. An entity can, however, provide the information required by IFRS 12 early without complying with all of the requirements of IFRS 12 or applying IFRS 10, IFRS 11, IAS 27 (as amended in 2011), and IAS 28 (as amended in 2011) early.

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