10 TH European IFRS power and utilities roundtable. 29 November 2016

Transcription

1 10 TH European IFRS power and utilities roundtable 29 November 2016

2 10 TH European IFRS power and utilities roundtable Jane Pike, IASB 29 November 2016

3 IFRS Foundation IASB Activities EY European IFRS Power and Utilities Roundtable 29 November 2016 Jane Pike IASB Technical Principal The views expressed in this presentation are those of the presenter, not necessarily those of the International Accounting Standards Board (the Board) or IFRS Foundation. Copyright IFRS Foundation. All rights reserved

4 Agenda 4 IASB Work Plan Key messages received from the 2015 Agenda Consultation Complete remaining large standard-setting projects Promote better communication in financial reporting Continued development of implementation support Focus on fewer research projects Emissions trading Conceptual issues Asset-type Day 1 liability Threshold Rate regulation ASAF Concerns Scope and enforceability A supplementary approach Customer-base Executory contract and performance Next steps Copyright IFRS Foundation. All rights reserved

5 5 IASB Work Plan Feedback Statement Copyright IFRS Foundation. All rights reserved

6 2015 Agenda Consultation 6 Four themes in the feedback received Complete remaining large standard-setting projects Promote better communication in financial reporting Continued development of implementation support 4 Focus on fewer research projects Copyright IFRS Foundation. All rights reserved

7 1. Complete standard-setting projects 7 Key messages received: Complete Leases (now completed) and Insurance Contracts as a high priority Prioritise finalising the revised Conceptual Framework It is fundamental to developing IFRS Standards based on clear principles IFRS Standards should continue to be principle-based Focus on fewer standard-setting projects To allow stakeholders to implement new IFRS Standards Copyright IFRS Foundation. All rights reserved

8 Standard-setting projects 8 Project Conceptual Framework Materiality Practice Statement Insurance Contracts Rate-regulated Activities Expected completion 2017 with some education activities in 2017 and part of the Disclosure Initiative 2017 followed by support activities during 2017 and 2018? Staff are developing an accounting model. The Board expects to consult stakeholders in 2017

9 2. Promote better communication 9 Key messages received: Prioritise projects that are important to investors Especially better communication of financial performance Primary financial statements Disclosure initiative IFRS Taxonomy Enhanced communication effectiveness of IFRS financial statements Copyright IFRS Foundation. All rights reserved

10 3. Implementation and maintenance 10 Key messages received: Additional guidance should clarify principles, not introduce complexity and rules Avoid too many narrow-scope amendments Standard issued Effective date Postimplementation Review Support implementation of new IFRS Standards Education, online tools Maintain existing IFRS Standards Ongoing dialogue and collaboration Copyright IFRS Foundation. All rights reserved

11 4. More focused research programme Key messages received: Research is an essential part of the standard-setting process Clarify how research fits into the Board s other activities Standard-setting is undertaken when the answer to each of the following questions is yes : Does a problem exist? Does the problem warrant standard-setting? Can a feasible solution be found? 11 Research is not lower priority than standard-setting projects High-priority projects also start with research Copyright IFRS Foundation. All rights reserved

12 The refocused research programme Projects Primary financial statements Principles of disclosure Business combinations under common control Dynamic risk management 12 Financial instruments with characteristics of equity Goodwill and impairment Share-based payment Discount rates Nearly finished Copyright IFRS Foundation. All rights reserved

13 Research pipeline 13 Projects Equity method (for associates and joint ventures) Extractive activities Pollutant pricing mechanisms Provisions Variable and contingent consideration Narrow focus High inflation: Scope of IAS 29 Pension benefits that depend on asset returns SMEs that are subsidiaries Copyright IFRS Foundation. All rights reserved

14 14 Emissions trading Research pipeline project Pollutant Pricing Mechanisms Copyright IFRS Foundation. All rights reserved

15 Pollutant Pricing Mechanisms 15 Formerly called Emissions Trading Schemes Was assessing whether the Board should consider addressing any diversity that may exist in accounting for pollutant pricing mechanisms Moved from the active work plan to the research pipeline The Board plans no further work on this project until the revised Conceptual Framework is closer to finalisation IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

16 1. The asset-type issue 16 Allocated Allowances* Purchased Allowances Should allowances be recognised as assets: intangible? financial? inventory? other? How do you measure the assets recognised? *received from the government/ scheme administrator for nil consideration Any difference between purchased vs allocated? IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

17 2. The day 1 liability issue Cap-and-trade ETS Remittance of allowances equal to emissions If entity receives allocated allowances: Basic case, ie no allocated (free) allowances are received; and no allowances are held as an economic hedge Recognise liability as emissions are made through the period? Measure the liability using current value? 17 Recognise an asset? Recognise a gain or a liability? IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

18 3. The threshold issue Baseline-and-credit ETS Remittance of allowances equal to emissions in excess of the baseline Cap-and-trade ETS When do you recognise a liability for the emissions obligation? How is the liability measured: gross or net (ie offset against allowances held)? 18 Recognise only after the baseline is exceeded, based on actual emissions? Recognise throughout the period, based on expected excess emissions? IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

19 19 Rate-regulated Activities Standard-setting project Copyright IFRS Foundation. All rights reserved

20 Concerns raised by ASAF 20 Scope Enforceable rights and obligations that are created by the rate regulation Interaction with other Standards and the Conceptual Framework A supplementary approach Customer-base Performance obligations Definitions of, and criteria for recognising, assets and liabilities Caution in recognising long-term regulatory assets How to account for funds received in advance of construction Segregating identifiable rate adjustments from the overall changes in value of the regulatory licence/ agreement (ie an intangible asset) IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

21 Scope and enforceability 21 Specified regulatory adjustments that arise from: identifiable timing differences between performance of the entity vs performance of the customer-base; and/or specified price/volume variances Enforceability of the regulatory agreement is necessary to support the existence of the rights and obligations contained in it Recognise only those specified regulatory adjustment that result in regulatory balances that are included, or expected to be included, by the rate regulator in establishing the rate(s) that can be charged to customers Other features of defined rate regulation (eg monopoly, essential goods) are factors to consider when assessing enforceability IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

22 A supplementary approach 22 Supplements the requirements of existing IFRS Standards; ie: an entity applies the requirements of other IFRS Standards before reflecting the effects of the new model Note: This includes recognising revenue in accordance with IFRS 15 to reflect the consideration expected in exchange for the goods or services transferred in the period to individual customers using the regulated rate, ie P x Q, where: P = price per unit to be billed to customers (ie the regulated rate); and Q = quantity of goods/service transferred IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

23 Customer-base Price = P IFRS 15 focuses on individual customer P is fixed 23 Rate regulation focuses on customer-base P is variable and may not be directly related to Q transferred in the period Quantity = Q Q is actual goods/services transferred Q is goods/ services/ other economic benefits transferred IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

24 Executory contract and performance 24 On day 1, the regulatory agreement is executory; ie an exchange of economic resources is equally unperformed by: the entity; and the rate regulator / customer-base Regulatory balances reflect the excess of the one party s performance over the performance of the other party The new model proposes to recognise regulatory balances for identifiable timing differences between: performance of the entity (by transferring goods or services to customers or other parties) vs performance of the customer-base (by consuming goods or services or making payments) IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

25 Next steps 25 ASAF discussion December 2016 (Agenda Paper 3) Responding to ASAF concerns An overview of core principles and features A reminder of the key features of defined rate regulation Board deliberations to begin with an education session December 2016 A Discussion Paper in 2017 Consultation and testing the model IFRS Foundation. 30 Cannon Street London EC4M 6XH UK.

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27 10 TH European IFRS power and utilities roundtable 29 November 2016