Current Development in Accounting

Current Development in Accounting
Thoughts
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Table of Contents
Answer to Question No.1............................................................................................ 3
Introduction............................................................................................................. 3
Agenda decisions.................................................................................................... 3
Issue 1-Accounting for deposits relating to taxes other than income taxes............3
Issue 2-Recognition of Revenue by any stock exchange for service of admission as
well as listing related to IFRS 15- Revenue from contracts with customers
(Kalavacherla & O’Donovan, 2018).........................................................................5
Issue 3-Partial disposal of any investment in subsidiary entity accounted for on
the basis of cost related to IAS 27- Separate financial statements.........................6
Issue 4-Step acquisition of the investment in any subsidiary considered for at cost
related to IAS 27 –Separate financial statements....................................................7
Answer to Question.2................................................................................................. 9
Outline of the major issues in Exposure Draft.........................................................9
Basic Standard IAS 16........................................................................................ 10
Proposed Amendment........................................................................................ 10
Update from IASB- November 2018...................................................................10
Public Interest Theory........................................................................................... 11
Comment Letters................................................................................................... 11
Letter of Grant Thornton International Limited (Appendix 1).............................12
Letter of RSM International Limited (Appendix 2)..............................................12
Letter of Accounting and Tax Committee of Japan Foreign Trade Council Inc.
(Appendix 3)....................................................................................................... 13
Letter from International Affairs of COMITE DE PRONUNCIAMENTOS CONTABEIS
of Brasilia (Appendix 4)...................................................................................... 14
Role of the Regulation theory................................................................................14
Bibliography............................................................................................................. 15
Appendices:.............................................................................................................. 17
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Answer to Question No.1
Introduction
This article will emphasize on current accounting issues, as published in the BDO Accounting
News, February 2019 edition. (BDONEWS, 2019) Basic objective of this article is to enhance
understanding of contemporary issues in accounting in perspective of Australian and global
context, with changes coming for application with interpretation. This article will concentrate on
the Recent Agenda Decisions of the IFRS Interpretations Committee published in BDO News
February 2019 edition in the pages from 10 to 13.
This journal will cover respective areas of the issues on measurement in accounting; the
standard setting process; and critical perspective of accounting.
Agenda decisions
IFRS Interpretation Committee had issued agenda decisions in its January 2019 meeting to
clarify four issues. They are discussed below as per the guideline of the respective news article
with specific design of fact pattern, rationales, questions related to those issues and respective
conclusions.
Issue 1-Accounting for deposits relating to taxes other than income taxes
Fact pattern-This issue is to determine the treatment of tax liability (IAS 37) (IFRS, 1998)
other than income tax (IAS 12), (Deloitte, 1996) by booking in contingent liability and not
in liability.
Question 1:
If the tax deposit is returned to the payer, will that amount give rise to asset, contingent asset
or none in the financial statement?
Rationale
The committee defined the assets as per IAS 8, (IAS, 2005) paragraph 10-11 in pursuance
with Conceptual Framework for Financial Reporting of March 2018 and earlier conceptual
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framework that if the tax deposits are to be treated as assets, it may not fall within the
specified standard with IFRS not dealing with same issues.
Conclusion
 It is concluded that tax deposit is an asset as per the definition of the framework to
give the payer the benefit of future tax benefit through receipt of cash refund or
adjustment for payment of coming tax liability.
 Nature of the tax deposit has no impact on this assessment and the right is not a
contingent asset as per IAS 37, as it is an asset of the payer when it is paid to the tax
authority.
Question 2:
How to recognize, measure, present and disclose the tax deposit in financial statements of the
payer?
Rationale
In absence of standard for application of the tax deposit, IAS 8 Paragraph 10-11 is to be applied
for developing proper accounting policy by the payer with the policy development criteria for
recognition, measure, presentation and disclosure of financial assets in the reports by referring
IFRS 9 and IFRS 7. (Pwc, 2017)
Conclusion
In case of application of IAS 8 Paragraph 10-11, the applicant should consider developing a
policy by recognizing, measuring, presenting and disclosing the monetary assets referred to IFRS
9 and IFRS 7.
Inference
This issue of Accounting for deposits relating to taxes other than income taxes is to enhance to
scope of measurement in accounting with standard setting process for financial reporting with
suggestion to apply IFRS 9 and 7.
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Issue 2-Recognition of Revenue by any stock exchange for service of admission as well as
listing related to IFRS 15- Revenue from contracts with customers (Kalavacherla &
O’Donovan, 2018)
Question
Is the promise of stock exchange to transfer the admission service from continuing listing service
justifiable?
Rationale
IFRS 15 paragraph 22 needs Stock Exchange to assess the service or good as per promise to any
customer of any contract though identification of obligation of a different performance with each
promise to transfer specific service or goods to the customers.
IFRS 15 Paragraph BC7 denotes that Stock Exchange has to identify first promised service or
good in the agreement to determine the number of obligatory performance it has with the
customer.
IFRS 15 paragraph 25 mentions that performance bindings include no activities, which any entity
must undertake for fulfilling the agreement, if not the customer got those service or good
transferred.
IFRS 15 paragraph B4 denotes that to identify action obligations during the receipt of non-
refundable, upfront fee, the entity has to assess the nature of the fee relating to promised service
or good to the customer. The first fee may be for advance for upcoming good or service.
Conclusion
The actions performed by stock exchange for execution of agreement are needed for transferring
the committed service or good to the customers. But the activities of Stock Exchange do not
transmit committed service or good to the customer except specified listing services for specific
customer. Conclusion made that Stock Exchange promises no transferable service or good for the
customer except listing services. In specific case of admittance of the customer of not getting any
service or good from Stock Exchange other than listing services, the same would be treated as
set-up costs or mobilization fees.
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Inference
This issue of Recognition of Revenue by any stock exchange for service of admission as well as
listing related to IFRS 15- Revenue from contracts with customers is highlighting the domain of
measurement in accounting with value addition to standard setting process by guiding required
treatment for the financial transaction.
Issue 3-Partial disposal of any investment in subsidiary entity accounted for on the basis of
cost related to IAS 27- Separate financial statements
Fact Pattern
An entity invests in its subsidiary measured at cost in other financial statement as per IAS 27
(ICAEW, 2014) paragraph 10a with the nature of investment as equity defined by IAS 32-
Financial Instruments: Presentation. (BDO, 2016) With subsequent disposal of investment, the
entity loses control over investee. The entity has to apply all IFRS standards as per IAS 27
paragraph 9, which is not applicable for investment specified in Paragraph 10. Post disposal, the
investee is not to be considered as subsidy, associate or joint venture. Hence, the entity applies
IFRS 9 first time to account for the remaining part of interest in the investee.
Question 1:
Confirm the eligibility of the retained investment for the presentation election under IFRS 9
(ACCAGlobal, nd) paragraph 4.1.4 related to fair value changing pattern in OCI (other
comprehensive income).
Rationale
The presentation election of OCI in IFRS 9, paragraph 4.1.4 is applicable to initial recognition
of any investment through equity instrument not held for trading. The assumption of entity’s
remaining investment not holding for trading endorses the eligibility of investment for OCI
presentation election with the first application of IFRS 9 to the retained interest or the date of
losing control by the entity.
Conclusion
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