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Basis for conclusions on IFRS 12 effective date and transition

Basis for conclusions on IFRS 12 effective date and transition

Basis for conclusions on IFRS 12 effective date and transition

The Board decided to align the effective date for the IFRS with the effective date       for IFRS 10, IFRS 11 Joint Arrangements, IAS 27 Separate Financial Statements and IAS 28 Investments in Associates and Joint Ventures. When making this decision, the Board noted that the five IFRSs all deal with the assessment of, and related accounting and disclosure requirements about, a reporting entity’s special relationships with other entities (ie when the  reporting  entity  has  control  or  joint control of, or significant influence over, another entity). As  a  result,  the  Board concluded that applying IFRS 12 without also  applying  the  other  four  IFRSs  could  cause  unwarranted confusion.

The Board usually sets an effective date of between twelve and eighteen months     after issuing an IFRS. When deciding the effective date for those IFRSs, the Board considered  the  following factors:

  • the time that many countries require for translation and for introducing the mandatory requirements into
  • the consolidation project was related to the global financial crisis that started in 2007 and was accelerated by the Board in response to urgent requests from the leaders of the G20, the Financial Stability Board, users of financial statements, regulators and others to improve the accounting and disclosure of an entity’s ‘off balance sheet’
  • the comments received from respondents to the Request for  Views  Effective Date and Transition Methods that was published in October 2010 regarding implementation costs, effective date and  transition  requirements of the IFRSs to be issued in 2011. Most respondents did not identify the consolidation and joint arrangements IFRSs as having a high impact in terms of the time and resources that  their  implementation  would require. In addition, only a few respondents commented that the effective dates of those IFRSs should be aligned with those of the other IFRSs to be issued in

Basis for conclusions on IFRS 12 effective date and transition

With those factors in mind, the Board decided to require entities to apply the     five IFRSs for annual periods beginning on or after 1 January 2013

Most  respondents  to  the  Request  for  Views  supported  early  application  of  the IFRSs to be issued in 2011. Respondents stressed that early application was especially important for first-time adopters in 2011 and 2012. The Board was persuaded by these arguments and decided to  permit  early  application  of  the  five IFRSs (ie IFRS 10, IFRS 11, IFRS 12, IAS 27 (as amended in 2011) and IAS 28 (as amended in 2011)) but only if an entity applies all those IFRSs.

Basis for conclusions on IFRS 12 effective date and transition

Not with standing that decision, the Board noted that an entity should not be prevented from providing any information required by IFRS 12 early if by doing so users gained a better understanding of the entity’s relationships with other entities. In reaching that decision, the Board observed that if an entity chooses to apply some, but not all, of the requirements of IFRS 12 early, the entity would be required to continue to apply the disclosure requirements of IAS 27, IAS 28 and IAS 31 until such time that it applies all the requirements of IFRS   12.

In  June  2012,  the  Board  amended  the  transition  guidance  in  Appendix  C  to   IFRS 10 Consolidated Financial Statements. When making those amendments, the Board decided to limit the requirement to present adjusted comparatives to the annual period immediately preceding the date of initial application  of  IFRS  10. This is consistent with the minimum comparative disclosure requirements contained in IAS 1 Presentation of Financial Statements as amended by Annual Improvements to IFRSs 2009–2011 Cycle (issued May 2012). Those amendments confirmed that when an entity applies a changed  accounting  policy  retrospectively, it shall present, as a minimum, three statements of financial position (ie 1 January 2012, 31 December 2012 and 31 December 2013 for a calendar-year entity, assuming no early application of this IFRS) and two of each    of the other statements (IAS 1 paragraphs 40A–40B).         The Board also decided to make similar amendments to the transition guidance in Appendix C to IFRS   11 Joint Arrangements and Appendix C to this IFRS to be consistent with this decision.

Basis for conclusions on IFRS 12 effective date and transition

IFRS 12 introduces new disclosures relating to unconsolidated structured  entities. Feedback from interested parties informed the Board that the changes to their accounting and reporting systems that are needed to capture this information were more onerous than originally envisaged, particularly in respect of comparative periods prior to the effective date of IFRS 12. Consequently, the Board decided to provide additional transition relief by eliminating the requirement to present comparatives for this information for periods beginning before the first year that IFRS 12 is applied.

The  Board  decided  that  no  specific  transition  guidance  was  needed  and,  therefore, an entity should apply Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

Basis for conclusions on IFRS 12 effective date and transition

The International Financial Reporting Standards Foundation, or IFRS Foundation, is a nonprofit accounting organization. Its main objectives include the development and promotion of the International Financial Reporting Standards (IFRSs) through the International Accounting Standards Board (IASB), which it oversees.[1][3]

The foundation was formerly named the International Accounting Standards Committee (IASC) Foundation until a renaming on 1 July 2010, and as of 2012 is governed by a board of 22 trustees.

The IFRS Foundation also develops and maintains the IFRS Taxonomy, which is the representation of the IFRSs in eXtensible Business Reporting Language (XBRL), via its XBRL team. The team is supported by the XBRL Advisory Council and the XBRL Quality Review Team, which respectively provide strategic advice and reviews developed taxonomies.Additionally, in 2012 the foundation issued a call for industry participants in a project to develop “common industry practice concepts” for the taxonomy.

XBRL provides a “common, electronic format for business and financial reporting”, which will contribute to the global convergence of accounting standards towards IFRS; the director of XBRL activities at the IFRS Foundation, Olivier Servais, hopes that “everybody will be using it” in future.As of March 2012, the IFRS Taxonomies have “considerably fewer” tags than GAAP taxonomies, and the Security and Exchange Commission has not approved the IFRS Taxonomy for use in XBRL filings in the United States.

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