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International GAAP® 2016 has been fully revised and updated in order to:
The book is published in three volumes. The 54 chapters – listed on pages ix to xi – are split between the three volumes as follows:
Each chapter includes a detailed list of contents and list of illustrative examples.
Each of the three volumes contains the following indexes covering all three volumes:
The IASB reported earlier this year that 116 of the 140 jurisdictions they have researched require the use of IFRS for all or most listed companies and financial institutions, and a further 12 permit the use of IFRS. IFRS is clearly maturing and is now used in more countries than ever before. While there are some very large economies – China, India, Japan and the United States – that do not require IFRS for all or most of their listed companies, considerable progress has been made in these and other countries to move towards IFRS or to converge with IFRS. Although convergence between IFRS and US GAAP is no longer a primary objective of the IASB, there is a broad–based appreciation that companies around the world are best served by keeping the differences between IFRS and US GAAP to a minimum.
There have been a number of noteworthy developments regarding the governance of IFRS in the past year. In April 2015, the IFRS Foundation and the IASB presented their new mission statement, which is 'to develop International Financial Reporting Standards that bring transparency, accountability and efficiency to financial markets around the world. Our work serves the public interest by fostering trust, growth and long–term financial stability in the global economy.' The mission statement rightly puts accounting standard setting in its broader context of supporting the public interest and development of the global economy.
In July 2015, the trustees of the IFRS Foundation issued a request for views on the structure and effectiveness of the organisation. There have already been five reviews dealing with the constitution, strategy or governance of the IFRS Foundation. This is considerably more than for comparable international organisations and illustrates the fine balance that the IFRS Foundation needs to strike between its organisation as a private sector body and its public interest mission.
The existing three–tier model of the IASB, the Trustees and the Monitoring Board aims to achieve an appropriate balance between independence and accountability. Though it is structured as a private sector body, the IASB's increasing commitments to public authorities – for example, its membership of the Financial Stability Board, its link to the Monitoring Board, and memoranda of understanding with IOSCO and ESMA – have enhanced its legitimacy as a global standard setter. Although the three–tier structure was broadly supported in previous reviews of the IFRS Foundation, the Trustees are seeking views on the functioning of the structure and suggestions in the spirit of continuous improvement. In our view, the IFRS Foundation will need to continue to demonstrate to public authorities that it is able to operate an independent, yet responsive, standard–setting process within a framework of public accountability.
Michel Prada, Chairman of the Trustees of the IFRS Foundation, noted in a recent speech to the International Forum of Accounting Standard Setters that it is essential for the IFRS Foundation 'to foster trust and public confidence in its work' and that it needs 'to be inclusive in its activities and transparent in its decision–making and it also needs to be accountable'. In line with that sentiment, the current review focuses on the relevance of IFRS, consistent application of IFRS and the governance and financing of the IFRS Foundation. While past reviews have delivered incremental enhancements in governance, questions around sovereignty, democratic principles, funding, convergence and financial stability will undoubtedly also be raised in this review. In particular, we believe that the IFRS Foundation should use the responses to this consultation to develop a coherent strategy about how it can contribute constructively to and interact with other forms of reporting, such as corporate reporting, integrated reporting, sustainability reporting and reporting of alternative performance measures.
In August 2015, the IASB published its request for views 2015 Agenda Consultation, which seeks input on the IASB's priorities from 2016 to 2020. We support the agenda consultation process as it allows the IASB to receive views from a wide range of constituents; in addition it makes the IASB's agenda setting process more transparent.
In the past year, the IASB has spent considerable time and effort on its main projects: leases, insurance contracts and the conceptual framework. The leases project is now nearing completion and is expected to be published in late 2015.
As we noted last year, the interaction between IFRS 9 and the insurance contracts project remains challenging. However, the IASB has made progress here and is expected to publish an exposure draft to accommodate insurance companies. The IASB has also made progress on the insurance contracts project itself, especially in the context of participating contracts, but more work is still to be done.
In May 2015, the IASB published its exposure draft Conceptual Framework for Financial Reporting. The exposure draft is more complete than the existing Conceptual Framework, as it covers in greater detail topics such as measurement, financial performance, derecognition and the reporting entity. Notably, the exposure draft also discusses the role of stewardship and prudence in financial reporting. However, important conceptual issues such as the distinction between debt and equity, the role of profit and loss versus other comprehensive income, the unit of account, non–exchange transactions and risk–sharing arrangements, may need to be further addressed. We understand the IASB will be deciding the direction of the project during the first half of 2016.
The IFRS Foundation Trustees have identified, in the 2015 review of the organisation, the consistency of application and implementation as one of the IFRS Foundation's primary strategic goals. They correctly see this in a holistic manner as requiring: clear drafting of standards, guidance that is consistent with a principle-based approach to standard setting, a responsive approach towards requests for interpretations, close co–operation with enforcers and educational efforts.
In that context, we note that the joint IASB/FASB transition resource group for revenue recognition and the IASB's transition resource group for impairment of financial instruments have provided valuable forums for identifying interpretation questions. Furthermore, the memoranda of understanding with IOSCO and ESMA, the involvement of enforcers in the IASB's processes and attendance of IASB members and staff in IFRS enforcers' discussion sessions play an important role in promoting consistency and coherence in enforcement.
Drafting accounting standards for a worldwide audience involves a particular level of complexity because constituents interpret the wording in the context of their own experience and background. Therefore we believe that a rigorous, transparent and broad–based review of standards, before they are issued, is essential in ensuring that they are clear, understandable and enforceable in practice. Such a robust review should reduce the need for transition resource groups and technical amendments shortly after issuing new standards.
The consistent application of IFRS remains essential to its credibility. We believe that International GAAP, now in its eleventh edition, plays an important role in ensuring consistent application. Our team of authors and reviewers hails from all parts of the world, and includes not only our global technical experts but also senior client–facing staff. This gives us an in–depth knowledge of practice in many different countries and industry sectors, enabling us to go beyond mere recitation of the requirements of standards to explaining their application in many varied situations.
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We are deeply indebted to many of our colleagues within the global organisation of EY for their selfless assistance and support in the publication of this book. It has been a truly international effort, with valuable contributions from EY people around the globe.
Our thanks go particularly to those who reviewed, edited and assisted in the preparation of drafts, most notably: Justine Belton, Glenn Brady, Larissa Clark, Muriel Courel, Tai Danmola, Jackson Day, Gary Donald, Charles Feeney, Josh Forgione, Peter Gittens, Laure Guegan, Paul Hebditch, Guy Jones, Steve Kane, Dan Knightly, Akashi Kohno, Steinar Kvifte, Vincent de La Bachelerie, Twan van Limpt, Michiel van der Lof, James Luke, Robert McCracken, Joseph McGrath, Kerri Madden, Mark Mahar, John O'Grady, Eric Ohlund, Danita Ostling, Hedy Richards, Gerard van Santen, Tom Sciametta, Khilan Shah, Rachel Simons, Alison Spivey, Paul Sutcliffe, Leo van der Tas, Danny Trotman, Hans van der Veen, Arne Weber, Matthew Williams, Mark Woodward and Luci Wright.
Our thanks also go to everyone who directly or indirectly contributed to the book's creation, including the following members of the Financial Reporting Group in the UK: Denise Brand, Rob Carrington, Larissa Connor, Ann Gillan, Rabindra Jogarajan, Andrea Maylor, Bunmi Oluitan and Claire Taylor.
We also thank Jeremy Gugenheim for his assistance with the production technology throughout the period of writing.
London, October 2015 | Martin Beyersdorff | Praveen Jindal | Christoph Piesbergen |
Mike Bonham | Ted Jones | Alexandra Poddubnaya | |
Linzi Carr | Bernd Kremp | Michael Pratt | |
Wei Li Chan | Dean Lockhart | Inayatullah Qureshi | |
Tony Clifford | Thomas Luescher | Tim Rogerson | |
Angela Covic | Sharon MacIntyre | Seren e Seah –Tan | |
Mike Davies | Amanda Marrion | Anna Sirocka | |
Pieter Dekker | Steve Martin | Charlene Teo | |
Julie Dempers | Emily Moll | Michael Varila | |
Tim Denton | Richard Moore | Tracey Waring | |
Marianne Dudareva | Victoria O'Leary | Jane Watson | |
Jane Hurworth | Margaret Pankhurst |
The following abbreviations are used in this book:
Professional and regulatory bodies:
AASB | Australian Accounting Standards Board |
AcSB | Accounting Standards Board of Canada |
AICPA | American Institute of Certified Public Accountants |
AOSSG | Asian-Oceanian Standard-Setters Group |
APB | Accounting Principles Board (of the AICPA, predecessor of the FASB) |
ARC | Accounting Regulatory Committee of representatives of EU Member States |
ASAF | Accounting Standards Advisory Forum |
ASB | Accounting Standards Board in the UK |
ASBJ | Accounting Standards Board of Japan |
ASU | Accounting Standards Update |
CASC | China Accounting Standards Committee |
CESR | Committee of European Securities Regulators, an independent committee whose members comprised senior representatives from EU securities regulators (replaced by ESMA) |
CICA | Canadian Institute of Chartered Accountants |
EC | European Commission |
ECB | European Central Bank |
ECOFIN | The Economic and Financial Affairs Council |
EDTF | Enhanced Disclosure Task Force of the (FSB) |
EFRAG | European Financial Reporting Advisory Group |
EITF | Emerging Issues Task Force in the US |
EPRA | European Public Real Estate Association |
ESMA | European Securities and Markets Authority (see CESR) |
EU | European Union |
FAF | Financial Accounting Foundation |
FASB | Financial Accounting Standards Board in the US |
FCAG | Financial Crisis Advisory Group |
FEE | Federation of European Accountants |
FSB | Financial Stability Board (successor to the FSF) |
FSF | Financial Stability Forum |
G4+1 | The (now disbanded) group of four plus 1, actually with six members, that comprised an informal 'think tank' of staff from the standard setters from Australia, Canada, New Zealand, UK, and USA, plus the IASC |
G7 | The Group of Seven Finance Ministers (successor to G8) |
G8 | The Group of Eight Finance Ministers |
G20 | The Group of Twenty Finance Ministers and Central Bank Governors |
GPPC | Global Public Policy Committee of the six largest accounting networks |
HKICPA | Hong Kong Institute of Certified Public Accountants |
ICAI | Institute of Chartered Accountants of India |
IASB | International Accounting Standards Board |
IASC | International Accounting Standards Committee. The former Board of the IASC was the predecessor of the IASB |
IASCF | International Accounting Standards Committee Foundation (predecessor of the IFRS Foundation) |
ICAEW | Institute of Chartered Accountants in England and Wales |
ICAS | Institute of Chartered Accountants of Scotland |
IFAC | International Federation of Accountants |
IFASS | International Forum of Accounting Standard Setters |
IFRIC | The IFRS Interpretations Committee (formerly the International Financial Reporting Interpretations Committee) of the IASB |
IGC | Implementation Guidance Committee on IAS 39 (now disbanded) |
IOSCO | International Organisation of Securities Commissions |
IPSASB | International Public Sector Accounting Standards Board |
IPTF | International Practices Task Force (a task force of the SEC Regulations Committee) |
ISDA | International Swaps and Derivatives Association |
IVSC | International Valuation Standards Council |
KASB | Korea Accounting Standards Board |
RICS | Royal Institution of Chartered Surveyors |
SAC | Standards Advisory Council, predecessor of the IFRS Advisory Council which provides advice to the IASB on a wide range of issues |
SEC | Securities and Exchange Commission (the US securities regulator) |
SIC | Standing Interpretations Committee of the IASC (replaced by IFRIC) |
TEG | Technical Expert Group, an advisor to the European Commission |
TRG | Joint Transition Resource Group for Revenue Recognition |
Accounting related terms:
ADS | American Depositary Shares |
AFS | Available-for-sale investment |
ARB | Accounting Research Bulletins (issued by the AICPA) |
ARS | Accounting Research Studies (issued by the APB) |
ASC | Accounting Standards Codification®. The single source of authoritative US GAAP recognised by the FASB, to be applied to non-governmental entities for interim and accounting periods ending after 15 September 2009 |
ASU | Accounting Standards Update |
CCIRS | Cross Currency Interest Rate Swap |
CDO | Collateralised Debt Obligation |
CGU | Cash-generating Unit |
CU | Currency Unit |
DD&A | Depreciation, Depletion and Amortisation |
DPF | Discretionary Participation Feature |
E&E | Exploration and Evaluation |
EBIT | Earnings Before Interest and Taxes |
EBITDA | Earnings Before Interest, Taxes, Depreciation and Amortisation |
EIR | Effective Interest Rate |
EPS | Earnings per Share |
FAS | Financial Accounting Standards (issued by the FASB). Superseded by Accounting Standards Codification® (ASC) |
FC | Foreign currency |
FIFO | First-In, First-Out basis of valuation |
FRS | Financial Reporting Standard (issued by the ASB) |
FTA | First-time Adoption |
FVLCD | Fair value less costs of disposal |
FVLCS | Fair value less costs to sell (following the issue of IFRS 13, generally replaced by FVLCD) |
GAAP | Generally accepted accounting practice (as it applies under IFRS), or generally accepted accounting principles (as it applies to the US) |
HTM | Held-to-maturity investment |
IAS | International Accounting Standard (issued by the former board of the IASC) |
IBNR | Incurred but not reported claims |
IFRS | International Financial Reporting Standard (issued by the IASB) |
IGC Q&A | Implementation guidance to the original version of IAS 39 (issued by the IGC) |
IPO | Initial Public Offering |
IPR&D | In-process Research and Development |
IPSAS | International Public Sector Accounting Standard |
IRR | Internal Rate of Return |
IRS | Interest Rate Swap |
JA | Joint Arrangement |
JCA | Jointly Controlled Asset |
JCE | Jointly Controlled Entity |
JCO | Jointly Controlled Operation |
JO | Joint Operation |
JV | Joint Venture |
LAT | Liability Adequacy Test |
LC | Local Currency |
LIBOR | London Inter Bank Offered Rate |
LIFO | Last-In, First-Out basis of valuation |
NCI | Non-controlling Interest |
NBV | Net Book Value |
NPV | Net Present Value |
NRV | Net Realisable Value |
OCI | Other Comprehensive Income |
PP&E | Property, Plant and Equipment |
R&D | Research and Development |
SCA | Service Concession Arrangement |
SE | Structured Entity |
SFAC | Statement of Financial Accounting Concepts (issued by the FASB as part of its conceptual framework project) |
SFAS | Statement of Financial Accounting Standards (issued by the FASB). Superseded by Accounting Standards Codification® (ASC) |
SME | Small or medium-sized entity |
SPE | Special Purpose Entity |
SV | Separate Vehicle |
TSR | Total Shareholder Return |
VIU | Value In Use |
WACC | Weighted Average Cost of Capital |
References to IFRSs, IASs, Interpretations and supporting documentation:
AG | Application Guidance |
AV | Alternative View |
B, BCZ | Basis for Conclusions on IASs |
BC | Basis for Conclusions on IFRSs and IASs |
DI | Draft Interpretation |
DO | Dissenting Opinion |
DP | Discussion Paper |
ED | Exposure Draft |
IE | Illustrative Examples on IFRSs and IASs |
IG | Implementation Guidance |
IN | Introduction to IFRSs and IASs |