Agenda Item 5: Update of IPSASs 6 to 8 Joanne Scott IPSASB Meeting June 24-27, 2014 Toronto, Canada Page 1 | Confidential and Proprietary Information
Agenda item 5 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 Page 2 | Confidential and Proprietary Information
Agenda item 5 Process Identify key Modify Seek public sector IFRSs feedback on issues and proposals consider GFSM IPSAS 6 IFRS 10 IFRS 11 IPSAS 7 EDs 48-52 IFRS 12 IPSAS 8 IAS 27 (revised) GFSM IAS 28 (revised) Page 3 | Confidential and Proprietary Information
Agenda item 5 Matters for Consideration 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 Page 4 | Confidential and Proprietary Information
Agenda item 5.1, page 7 of 64 General Issues 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? Page 5 | Confidential and Proprietary Information
Agenda item 5.1, page 8 of 64 ED 48 Separate Financial Statements SMC 1 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? Page 6 | Confidential and Proprietary Information
Agenda item 5.1, page 9 of 64 ED 48 Separate Financial Statements SMC 1 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. Page 7 | Confidential and Proprietary Information
Agenda item 5.1, page 11 of 64 ED 49 Consolidated Financial Statements SMC 1 Do you agree with the proposed definition of control? If not, how would you change the definition? Page 8 | Confidential and Proprietary Information
Agenda item 5.1, page 15 of 64 ED 49 Consolidated Financial Statements SMC 1 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 Page 9 | Confidential and Proprietary Information
Agenda item 5.1, page 15 of 64 ED 49 Consolidated Financial Statements SMC 1 Continued (e) PROVIDE FEEDBACK on which option it prefers for the definition of 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. Page 10 | Confidential and Proprietary Information
Agenda item 5.1, page 16 of 64 ED 49 Consolidated Financial Statements SMC 2 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. Page 11 | Confidential and Proprietary Information
Agenda item 5.1, page 18 of 64 ED 49 Consolidated Financial Statements SMC 2 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. Page 12 | Confidential and Proprietary Information
Agenda item 5.1, page 18 of 64 ED 49 Consolidated Financial Statements SMC 3 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). Page 13 | Confidential and Proprietary Information
Agenda item 5.1, page 20 of 64 ED 49 Consolidated Financial Statements SMC 3 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. Page 14 | Confidential and Proprietary Information
Agenda item 5.1, page 20 of 64 ED 49 Consolidated Financial Statements SMC 4 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? Page 15 | Confidential and Proprietary Information
Agenda item 5.1, page 22 of 64 ED 49 Consolidated Financial Statements SMC 4 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). Page 16 | Confidential and Proprietary Information
Agenda item 5.1, page 23 of 64 ED 49 Consolidated Financial Statements SMC 5 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? Page 17 | Confidential and Proprietary Information
Agenda item 5.1, page 25 of 64 ED 49 Consolidated Financial Statements SMC 5 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. Page 18 | Confidential and Proprietary Information
Agenda item 5.1, page 25 of 64 ED 49 Consolidated Financial Statements SMC 6 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? Page 19 | Confidential and Proprietary Information
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