Agenda Item 5: Update of IPSASs 6 to 8 Joanne Scott IPSASB Meeting - - PowerPoint PPT Presentation

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Agenda Item 5: Update of IPSASs 6 to 8

Joanne Scott IPSASB Meeting June 24-27, 2014 Toronto, Canada

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Objectives of Agenda Item

• Discuss responses to EDs 48 to 52
• Directions for the development of standards
• Note issues for subsequent meetings
• Update on related IASB projects

Agenda item 5

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Process

Agenda item 5

IPSAS 6 IPSAS 7 IPSAS 8 GFSM

IFRS 10 IFRS 11 IFRS 12 IAS 27 (revised) IAS 28 (revised)

EDs 48-52

Identify key public sector issues and consider GFSM Modify IFRSs Seek feedback on proposals

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Matters for Consideration

Agenda item 5

MC 1-2 General issues MC 2 ED 48 MC 3-9 ED 49 MC 10-12 ED 50 MC 13-14 ED 51 MC 15-16 ED 52 MC 17 IASB projects

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General Issues

Agenda item 5.1, page 7 of 64

• 1. Does the IPSASB agree that there is sufficient

support for this project to proceed to develop standards based on EDs 48 to 52?

• 2. Does the IPSASB agree to develop standards

using the same structure as the EDs?

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ED 48 Separate Financial Statements SMC 1

Agenda item 5.1, page 8 of 64

Do you agree generally with the proposals for separate financial statements? In particular, do you agree with the proposal to permit the use of the equity method, in addition to cost or fair value, for investments in other entities?

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ED 48 Separate Financial Statements SMC 1

Agenda item 5.1, page 9 of 64

• 2. The IPSASB is asked to:

(a) NOTE respondents’ comments on ED 48 SMC 1, including the high level of support for the option to use the equity method in separate financial statements; (b) NOTE that (i) some respondents’ support was conditional upon the IASB proceeding to reintroduce the equity method in separate financial statements, and (ii) the IASB has tentatively agreed to proceed with this proposal; (c) NOTE the concerns raised regarding the use of three methods of accounting and the qualitative characteristic of comparability; and (d) AGREE to continue developing an IPSAS based on ED 48 which permits the use of the equity method in separate financial statements.

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ED 49 Consolidated Financial Statements SMC 1

Agenda item 5.1, page 11 of 64

Do you agree with the proposed definition of control? If not, how would you change the definition?

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ED 49 Consolidated Financial Statements SMC 1

Agenda item 5.1, page 15 of 64

• 3. The IPSASB is asked to:

(a) NOTE the high level of support for the proposed definition of control in ED 49; (b) NOTE respondents’ comments on ED 49 SMC 1; (c) NOTE that some of the comments by R10, R11 and R12 relate to the overall approach to this project and were considered in the general comments section earlier in the issues paper; (d) NOTE that the IPSASB did consider forms of aggregation other than consolidation in developing ED 49 and AGREE that this should be explained in the Basis for Conclusions;

Continued on next slide

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ED 49 Consolidated Financial Statements SMC 1

Agenda item 5.1, page 15 of 64

Continued (e) PROVIDE FEEDBACK on which option it prefers for the definition

• f power:

(i) Keep the definition that was in ED 49, with no change; (ii) Delete the phrase about directing the financial and operating policies of an entity from the definition; or (iii) Amend the definition to say that power is “often indicated by” the right to direct the financial and operating policies of an entity; and (f) AGREE that respondents’ suggestions for improving the discussion of benefits be taken into account in developing the standard based on ED 49.

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ED 49 Consolidated Financial Statements SMC 2

Agenda item 5.1, page 16 of 64

Do you agree that a controlling entity should consolidate all controlled entities (except in the circumstances proposed in this Exposure Draft)? If you consider that certain categories of entities should not be consolidated, please justify your proposal having regard to user needs and indicate your preferred accounting treatment for any such controlled entities. If you have any comments about temporarily controlled entities, please respond to Specific Matter for Comment 3.

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ED 49 Consolidated Financial Statements SMC 2

Agenda item 5.1, page 18 of 64

• 4. The IPSASB is asked to:

(a) NOTE the high level of support for the proposal that an entity should consolidate all controlled entities (except in the circumstances proposed in ED 49); (b) NOTE respondents’ comments on ED 49 SMC 2; (c) NOTE that a subset of respondents proposed that full consolidation be limited to certain types of entities; and (d) AGREE to proceed to develop a standard based on ED 49 that requires consolidation of all controlled entities, except in the circumstances proposed in ED 49.

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ED 49 Consolidated Financial Statements SMC 3

Agenda item 5.1, page 18 of 64

Do you agree with the proposal to withdraw the exemption in IPSAS 6, Consolidated and Separate Financial Statements (December 2006) for temporarily controlled entities? If you agree with the withdrawal of the exemption please give reasons. If you disagree with the withdrawal of the exemption please indicate any modifications that you would propose to the exemption in IPSAS 6 (December 2006).

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ED 49 Consolidated Financial Statements SMC 3

Agenda item 5.1, page 20 of 64

• 5. The IPSASB is asked to:

(a) NOTE the strong level of support for the IPSASB’s proposal to withdraw the temporary control exemption in IPSAS 6; (b) NOTE respondents’ comments on ED 49 SMC 3; (c) AGREE not to provide an exemption from consolidation for temporarily controlled entities; and (d) NOTE that the issue of whether the IPSASB should develop a standard based on IFRS 5 is addressed in the analysis of ED 52 SMC 1.

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ED 49 Consolidated Financial Statements SMC 4

Agenda item 5.1, page 20 of 64

Do you agree that a controlling entity that meets the definition of an investment entity should be required to account for its investments at fair value through surplus or deficit?

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ED 49 Consolidated Financial Statements SMC 4

Agenda item 5.1, page 22 of 64

• 6. The IPSASB is asked to:

(a) NOTE the strong level of support for the IPSASB’s proposal to require that a controlling entity that meets the definition of an investment entity account for its investments at fair value through surplus or deficit; (b) NOTE respondents’ comments on ED 49 SMC 4; (c) AGREE to add an additional example of an entity that would not be an investment entity (as proposed by R23); and (d) AGREE not to amend the definition of an investment entity (as proposed by R17).

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ED 49 Consolidated Financial Statements SMC 5

Agenda item 5.1, page 23 of 64

Do you agree that a controlling entity, that is not itself an investment entity, but which controls an investment entity should be required to present consolidated financial statements in which it: (i) measures the investments of the controlled investment entity at fair value through surplus or deficit in accordance with IPSAS 29, Financial Instruments: Recognition and Measurement, and (ii) consolidates the other assets and liabilities and revenue and expenses of the controlled investment entity in accordance with this Standard? Do you agree that the proposed approach is appropriate and practicable? If not, what approach do you consider would be more appropriate and practicable?

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ED 49 Consolidated Financial Statements SMC 5

Agenda item 5.1, page 25 of 64

• 7. The IPSASB is asked to:

(a) NOTE the strong level of support for the IPSASB’s proposals regarding the accounting by a controlling entity, that is not itself an investment entity, but which controls an investment entity; (b) NOTE respondents’ comments on ED 49 SMC 5; (c) AGREE to continue with the proposals set out in ED 49 SMC 5; and (d) AGREE to consider, at a future meeting, whether more guidance could be provided on distinguishing between fund management and ancillary services within the same investment entity.

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ED 49 Consolidated Financial Statements SMC 6

Agenda item 5.1, page 25 of 64

The IPSASB has aligned the principles in this Standard with the Government Finance Statistics Manual 2013 (GFSM 2013) where feasible. Can you identify any further opportunities for alignment?

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ED 49 Consolidated Financial Statements SMC 6

Agenda item 5.1, page 26 of 64

• 8. The IPSASB is asked to:

(a) NOTE respondents’ comments on ED 49 SMC 6; (b) AGREE to more explicitly highlight, in the Basis for Conclusions, ways in which the proposed standard and GFSM 2013 are aligned; and (c) AGREE to note, in the Basis for Conclusions, that although the IPSASB decided not to provide guidance in this ED on the presentation of information on statistical sectors, it is possible for a government to present consolidated financial statements that are disaggregated by statistical sector.

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ED 49 Consolidated Financial Statements: Other Comments

Agenda item 5.1, page 27 of 64

• 9. The IPSASB is asked to:

(a) NOTE that staff will consider more detailed comments on ED 49 in the process of revising the proposed standard; (b) AGREE to review the examples in ED 49 having regard to: (i) Respondents’ comments; (ii) The final examples in AASB 2013-8 Amendments to Australian Accounting Standards – Australian Implementation Guidance for Not-for-Profit Entities – Control and Structured Entities [AASB 10, AASB 12 & AASB 1049]; and (iii) Examples from other jurisdictions, such as the United Kingdom, where the application of IFRS 10 to public sector entities has been considered.

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ED 50 Investments in Associates and Joint Ventures SMC 1

Agenda item 5.1, page 28 of 64

Do you generally agree with the proposals in the Exposure Draft? If not, please provide reasons?

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ED 50 Investments in Associates and Joint Ventures SMC 1

Agenda item 5.1, page 29 of 64

• 10. The IPSASB is asked to:

(a) NOTE respondents’ comments on ED 50 SMC 1; and (b) PROVIDE FEEDBACK on whether to: (i) keep the public sector modification in ED 50 paragraph 26; or (ii) require that, in the absence of published price quotations, an entity should first consider the guidance in IPSAS 29 paragraph AG114 in determining the initial cost of the financial asset.

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ED 50 Investments in Associates and Joint Ventures SMC 2

Agenda item 5.1, page 33 of 64

Do you agree with the proposal that the scope of the Exposure Draft be restricted to situations where there is a quantifiable

• wnership interest?

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ED 50 Investments in Associates and Joint Ventures SMC 2

Agenda item 5.1, page 35 of 64

• 11. The IPSASB is asked to:

(a) NOTE respondents’ comments on ED 50 SMC 2; (b) AGREE to revise the scope section of ED 50 in line with R26’s suggestions; (c) AGREE to revise ED 50 paragraphs 10 and 11 so that they are consistent with the scope section; and (d) PROVIDE FEEDBACK on whether there are likely to be any non-quantifiable ownership interests that have a reliably determinable fair value or cost and which could be accounted for as an investment in accordance with IPSAS 29.

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ED 50 Investments in Associates and Joint Ventures SMC 3

Agenda item 5.1, page 35 of 64

Do you agree with the proposal to require the use of the equity method to account for investments in joint ventures? If not, please provide reasons and indicate your preferred treatment.

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ED 50 Investments in Associates and Joint Ventures SMC 3

Agenda item 5.1, page 39 of 64

• 12. The IPSASB is asked to:

(a) NOTE the strong level of support for the proposal to require the use of the equity method to account for investments in joint ventures; (b) NOTE respondents’ comments on ED 50 SMC 3; (c) AGREE to keep the option (in ED 50 paragraphs 24 and 25) for an entity to use fair value through surplus or deficit or the equity method in accounting for investments in an associate or a joint venture held in a venture capital organization, mutual fund, unit trust or similar entity; and (d) AGREE to consider, at a future meeting, recent implementation issues raised by IASB constituents.

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ED 51 Joint Arrangements SMC 1

Agenda item 5.1, page 40 of 64

Do you agree that joint arrangements should be classified as joint ventures or joint operations based on whether an entity has: (i) rights to assets and obligations for liabilities; or (ii) rights to net assets?

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ED 51 Joint Arrangements SMC 1

Agenda item 5.1, page 41 of 64

• 13. The IPSASB is asked to:

(a) NOTE the high level of support for the proposal that joint arrangements should be classified as joint ventures or joint

• perations based on whether an entity has (i) rights to assets

and obligations for liabilities, or (ii) rights to net assets; (b) AGREE to retain the term “binding arrangement” in ED 51; and (c) NOTE that unanimous consent is not a common feature of joint arrangements in one jurisdiction.

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ED 51 Joint Arrangements SMC 2

Agenda item 5.1, page 42 of 64

Do you agree that joint ventures should be accounted for in consolidated financial statements using the equity method?

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ED 51 Joint Arrangements SMC 2

Agenda item 5.1, page 42 of 64

• 14. The IPSASB is asked to:

(a) NOTE the strong level of support for the proposal to require the use of the equity method to account for investments in joint ventures; and (b) NOTE respondents’ comments on ED 51 SMC 2.

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ED 52 Disclosure of Interests in Other Entities SMC 1

Agenda item 5.1, page 43 of 64

Do you agree the proposed disclosures in this draft Standard? If not, why? Are there any additional disclosures that would be useful for users

• f financial statements?

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ED 52 Disclosure of Interests in Other Entities SMC 1

Agenda item 5.1, page 52 of 64

• 15. The IPSASB is asked to:

(a) NOTE respondents’ comments on ED 52 SMC 1; (b) AGREE to require disclosure of any non-quantifiable ownership interest other than a controlled entity; (c) CONFIRM that development of a standard based on IFRS 5 should remain outside the scope of the project to update IPSASs 6 to 8; (d) AGREE to require disclosure of “expenses” of joint ventures and associates in ED 52 paragraphs AG12 and AG16 (in line with the suggestion by R17); (e) AGREE to retain the proposed disclosures about unconsolidated structured entities;

Continued on next slide

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ED 52 Disclosure of Interests in Other Entities SMC 1

Agenda item 5.1, page 52 of 64

Continued

(f) AGREE to retain the proposals in ED 52 paragraph 20 regarding the disclosure of significant restrictions on an entity’s ability to access or use the assets and settle the liabilities of the economic entity; and (g) AGREE that paragraph 13 be amended to acknowledge that the use of cross-referencing may be subject to jurisdictional restrictions.

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ED 52 Disclosure of Interests in Other Entities SMC 2

Agenda item 5.1, page 53 of 64

Do you agree with the proposal that entities for which administrative arrangements or statutory provisions are dominant factors in determining control of the entity are not structured entities? If not, please explain why and explain how you would identify entities in respect of which the structured entity disclosures would be appropriate?

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ED 52 Disclosure of Interests in Other Entities SMC 2

Agenda item 5.1, page 54 of 64

• 16. The IPSASB is asked to:

(a) Note the high level of support for the proposals regarding the identification of structured entities in ED 52; (b) NOTE respondents’ comments on ED 52 SMC 2; (c) AGREE to retain the concept of a structured entity and the definition of a structured entity that was in ED 52; (d) AGREE to consider developing more guidance and/or illustrative examples to illustrate the concept of a structured entity; and (e) PROVIDE feedback on the proposal to seek post- implementation feedback on the structured entity disclosures.

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Related IASB Projects

Agenda item 5.1, page 56 of 64

• 17. Does the IPSASB agree with the recommendations

set out in Table 4?