november 2008 examination - The Malaysian Institute Of Certified ...

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currently accounted for in accordance with IAS 11 that donot meet the definition of a construction contract asinterpreted by the IFRIC and do not transfer to the buyercontrol and the significant risks and rewards of ownership ofthe work in progress in its current state as constructionprogresses.The IFRIC released draft Interpretation D21 Real EstateSales for public comment in July 2007 and received 51comment letters in response. In its redeliberations, the IFRICresponded to the concerns expressed by respondents byimproving the articulation between IAS 11 and IAS 18 andby providing additional guidance on how to account forrevenue in IAS 18. In addition, in its ratification process, theIASB specifically considered whether the IFRIC’sinterpretation was in line with the principles underpinningIAS 18 and agreed with the IFRIC’s consensus.IFRIC 15 applies to the accounting for revenue andassociated expenses by entities that undertake theconstruction of real estate directly or through subcontractors.The interpretation is effective for annual periods beginningon or after January 1, 2009 and is to be applied retrospectively.Introducing IFRIC 15, Robert Garnett, IFRIC Chairmanand IASB member, said:The real estate industry is an important sector acrosscountries and, especially in times of volatile markets,transparency and comparability of the accounting areimportant.However, at present there is widespread divergence inpractice when accounting for the recognition of revenue for‘off plan’ contracts. IFRIC 15 clarifies how the existingprinciples in IAS 11 and IAS 18 apply for the revenuerecognition in the real estate sector and by doing so willensure consistent accounting. In some cases this means thatcompanies will have to change their accounting.(Source: www.iasb.org)Trustees publish proposals onenhancements to public accountabilityand to IASB compositionThe Trustees of the International Accounting StandardsCommittee (IASC) Foundation on July 21, 2008 published adiscussion document, Review of the Constitution: PublicAccountability and the Composition of the IASB - Proposalsfor Change.The document contains proposals that are dealt within the first phase of the organisation’s five-yearlyConstitution Review. The deadline for public comment onthe document is September 20, 2008.The proposals would:• establish a formal link between the organisation anda Monitoring Group comprising representatives ofpublic authorities and international organisations thathave requirements for accountability to publicauthorities• expand the membership of the InternationalAccounting Standards Board (IASB) to 16 membersand add new guidelines regarding the geographicaldiversity of the members of the IASBThe establishment of the link to a Monitoring Group,a group established by public authorities outside the IASCFoundation’s organisational framework, is aimed atenhancing the transparency and public accountability ofthe IASC Foundation, while not impairing the independenceof the standard-setting process.As contemplated by the proposal, the initialmembership of the Monitoring Group would comprise theresponsible member of the European Commission, themanaging director of the International Monetary Fund, thechair of the IOSCO Emerging Markets Committee, the chairof the IOSCO Technical Committee, the commissioner of theJapan Financial Services Agency, the chairman of the USSecurities and Exchange Commission, and the president ofthe World Bank.The Monitoring Group would have the responsibility ofapproving the selection of Trustees. The Trustees would alsoreport to the Monitoring Group regularly to enable it toaddress whether and how the Trustees are fulfilling their roleset out in the Constitution.Regarding the IASB’s composition, the Trusteesreiterate in their proposals that the Constitution’s emphasison ‘professional competence and practical experience’should remain paramount. At the same time, the expansionof the IASB would enable it to engage more efficiently andeffectively with interested parties throughout the world andbring new perspectives to its deliberations. Furthermore, theaddition of a geographical component would strengthen thelegitimacy of the IASB in the view of the countries choosingto adopt IFRSs.The Trustees’ proposals reflect consultations that theyhave had with many parties with an interest in thedevelopment of accounting standards. The Trustees havediscussed their proposals with members of the proposedMonitoring Group, the Standards Advisory Council (theorganisation’s primary advisory group) on two occasions,and stakeholders in their respective countries.Most recently, and in advance of the formalconsultation period, the Trustees held a series of round-tablemeetings in London on June 19, 2008 with thirtyparticipating organisations. As a result of those discussionsthe Trustees revised and clarified their proposals.The Trustees expect to complete the first part of theConstitution Review at their meeting in Beijing in October,with the changes taking effect from January 1, 2009.A review of other elements of the IASC Foundation’s28 | The Malaysian Accountant | August 2008 www.micpa.com.my
Constitution will begin after the meeting in Beijing. TheTrustees will publish a further discussion document invitingrespondents to suggest topics for consideration by theTrustees. It is expected that consultations will be held duringthe course of 2009, with changes taking effect from January1, 2010.(Source: www.iasb.org)IASB amends standard to giveadditional guidance on thedesignation of a hedged itemThe IASB on July 31, 2008 issued Eligible Hedged Items (anamendment to IAS 39 Financial Instruments: Recognition andMeasurement).The amendment clarifies how the existing principlesunderlying hedge accounting should be applied in twoparticular situations.The International Financial Reporting InterpretationsCommittee (IFRIC) asked the IASB to provide additionalguidance on what can be designated as a hedged item.The responses to an exposure draft of proposedguidance (published in September 2007) indicated thatdiversity in practice existed, or was likely to exist, in thedesignation of:• a one-sided risk in a hedged item, and• inflation in a financial hedged item.The IASB has therefore focused on developingapplication guidance to illustrate how the principlesunderlying hedge accounting should be applied in thosesituations.Entities are required to apply the amendmentretrospectively for annual periods beginning on or after July1, 2009, with earlier application permitted.(Source: www.iasb.org)IASB publishes proposals foramendments under its annualimprovements projectThe IASB on August 7, 2008 published for public commentan exposure draft of proposed amendments to eightInternational Financial Reporting Standards (IFRSs) underits annual improvements project.The proposed amendments reflect issues discussed bythe IASB in the project cycle that began last year. Theproposals range from guidance added to the Appendix ofIAS 18 Revenue, on how to determine whether an entity isacting as a principal or as an agent, to changes of wordingto clarify the meaning and remove unintendedinconsistencies between IFRSsThe IASB adopted an annual process in 2006 to makenecessary, but non-urgent, amendments to IFRSs that willnot be included in another project. By presenting theproposed amendments in a single document rather than asa series of piecemeal changes the IASB aims to ease theburden for all concerned.Unless otherwise specified, the proposed effective datefor the amendments is for annual periods beginning on orafter January 1, 2010, although entities are permitted toadopt them earlier. The proposed effective date for thoseamendments arising from the revised IFRS 3 BusinessCombinations is July 1, 2009 (in line with the effective datefor the revised standards on business combinations - IFRS 3and IAS 27 Consolidated and Separate FinancialStatements).The exposure draft can be accessed via the ProjectWebsite or on the ‘Open to Comment’ section onwww.iasb.org. The IASB requests comments on the exposuredraft by November 7, 2008.(Source: www.iasb.org)IASB proposes amendments tosimplify and achieve convergence inthe calculation of EPSThe IASB on August 7, 2008 published for public commentproposals to simplify the calculation of earnings per share(EPS) and to eliminate differences between the methodsrequired by International Financial Reporting Standards(IFRSs) and US accounting standards to calculate EPS. Theproposals are part of the short-term convergence project thatthe IASB is conducting jointly with the US FinancialAccounting Standards Board (FASB). Consequently the FASBhas also published an exposure draft to amend SFAS 128Earnings per Share on August 7, 2008.In particular, the proposals aim to achieveconvergence by:• providing a clear principle to determine whichinstruments should be included in the EPS calculation;• clarifying the EPS calculation for particularinstruments, such as contracts to sell or repurchase anentity’s own shares and participating instruments; and• simplifying the EPS calculation for instruments thatare accounted for at fair value through profit or loss.The IASB believes that the proposals would, if implemented,simplify the calculation of EPS and increasetransparency for users of financial statements.The IASB invites comments on the exposure draftSimplifying Earnings per Share (proposed amendments toIAS 33) by December 5, 2008. The exposure draft is availableon the ‘Open for Comment ’ section on www.iasb.org.(Source: www.iasb.org)www.micpa.com.myAugust 2008 | The Malaysian Accountant |29
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