IASC Foundation publishes proposed IFRS Taxonomy 2010

(19 February 2010) The International Accounting Standards Committee (IASC) Foundation today published for public comment an exposure draft of the International Financial Reporting Standards (IFRSs) Taxonomy 2010. The proposed taxonomy is consistent with IFRSs and the IFRS for Small and Medium-sized Entities (SMEs).

The proposed taxonomy contains significant architectural improvements when compared with the 2009 version; in particular the proposed architecture integrates IFRSs and the IFRS for SMEs into a single taxonomy. Other proposed improvements include an extended use of axes (dimensions) in the taxonomy, reconsideration of the IASC Foundation's approach for concept naming and of its principle of deleting redundant (deprecated) concepts.

The IFRS Taxonomy 2010 is a translation of IFRSs as issued at 1 Janaury 2010 into XBRL (eXtensible Business Reporting Language). XBRL is rapidly becoming the format of choice for the electronic filing of financial information - particularly within jurisdictions reporting under IFRSs - because it facilitates simpler and faster filing and comparison of IFRS financial data by companies, regulators, investors, analysts and other users of the IFRS Taxonomy.

Interested parties are invited to comment on the exposure draft of the IFRS Taxonomy 2010 and accompanying materials by 22 April 2010. The proposed taxonomy and related material can be accessed here. The final version is expected to be released at the end of April 2010.

Kind regards,
IASC Foundation XBRL Team
www.iasb.org/xbrl

2010 IFRSs Bound Volume

Below is the e-IFRS email alerted by IASB.org :

The IASCF is pleased to announce that the "2010 International Financial Reporting Standards (IFRSs)" Bound Volume will be published soon, in March 2010.

This edition includes the latest version of International Financial Reporting Standards (IFRSs), International Accounting Standards (IASs), IFRIC and SIC Interpretations and the supporting documents - illustrative examples, implementation guidance, bases for conclusions and dissenting opinions - as issued by the IASB at 1 January 2010.

For convenience, this RED book edition is presented in two parts:

• Part A (the requirements) contains the latest version of International Financial Reporting Standards (IFRSs), International Accounting Standards (IASs), and IFRIC and SIC Interpretations.
• Part B contains the accompanying documents, such as illustrative examples, implementation guidance, bases for conclusions and dissenting opinions.

Copies are priced at £60 each, plus shipping. Discounts are available for:

• academics/students
• middle income and low income countries
• multiple orders.

The 2010 IFRSs Bound Volume (978-1-907026-60-7) (Product code 10201) is priced at £60 per copy, plus shipping. Further information can be found on our Webshop. Please register your interest in this product if you wish to be notified of its publication.

If you need any further information, please contact our customer services by email or telephone: +44 (0)20 7332 2730.

Kind regards,

IASC Foundation Publications Department
publications@iasb.org
www.iasb.org

Access to the whole content of IFRSs for free

The IASC Foundation provides access free of charge to the current year’s consolidated unaccompanied IFRSs in English as issued by the IASB and published in the Bound Volume (as of 1 January 2009).

Access to the accompanying documents, illustrative examples, implementation guidance, and bases for conclusions is available through subscription-based services or by purchasing print versions of IFRSs via our store.

All rights, including copyright, in the content of these web pages are owned or controlled by the IASC Foundation.

To access the unaccompanied IFRSs you need to be a registered user.  Registration is free and takes only a few minutes.  It allows you to access the unaccompanied IFRSs, the IFRS for SMEs, to register for email alerts, submit comment letters or register as an observer.

Here is the link to the source : http://www.iasb.org/IFRSs/IFRs.htm

Asset Exchange Transactions

Businesses sometimes engage in nonmonetary exchange transactions, where tangible or intangible assets are exchanged for other assets, without a cash transaction or with only a small amount of cash “settle up”. These exchanges can involve productive assets such as machinery and equipment, which are not held for sale under normal circumstances, or inventory items, which are intended for sale to customers.

IAS 16 Property, Plant and Equipment (PPE) provides authoritative guidance to the accounting for nonmonetary exchanges of tangible assets. It states that “an entity is required to measure an item of property, plant and equipment acquired in exchange for a non-monetary asset or assets, or a combination of monetary and non-monetary assets, at fair value unless the exchange transaction lacks commercial substance”.

The concept of  a purely “book value” exchange, as formerly employed in previous version of IAS 16, is now prohibited under most circumstances.

Paragraph 22 of the previous version of IAS 16 indicated that if (a) an item of PPE is acquired in exchange for a similar asset that has a similar use in the same line of business and has a similar fair value or (b) an item of PPE is sold in exchange for an equity interest in a similar asset, then no gain or loss is recognized on the transaction. The cost of the new asset is the carrying amount of the asset given up (rather than the fair value of the purchase consideration given for the new asset).

This requirement in the previous version of IAS 16 was consistent with views that :

1. gains should not be recognized on exchange of assets unless the exchanges represent the culmination of an earning process;
2. exchanges of assets of a similar nature and value are not a substantive event warranting the recognition of gains; and
3. requiring or permitting the recognition of gains from such exchanges enables entities to ‘manufacture’ gains by attributing inflated values to the assets exchanged, if the assets do not have observable market price in active markets.

Commercial Substance

Commercial substance is a new notion under IFRS, and is defined as the event or transaction causing the cash flows of the entity to change. That is, if the expected cash flows after the exchange differ from what would have been expected without this occurring, the exchange has commercial substance and is to be accounted for at fair value. In assessing whether this has occurred, the entity has to consider if the amount, timing and uncertainty of the cash flows from the new asset are different from the one given up, or if the entity-specific portion of the company’s operations will be different. If either of these is significant, then the transaction has commercial substance.

If the transaction does not have commercial substance, or the fair value of neither the asset received nor the asset given up can be measured reliably, then the asset acquired is valued a the carrying amount of the asset given up. Such situations are expected to be rare (Hrd).

(Sources : Wiley IFRS 2008 : Interpretation and Application of International Financial Reporting Standards - Barry J. Epstein, Eva K. Jermakowicz and IAS 16 Property, Plant and Equipment)

Determining the time period for capitalization of borrowing costs

An entity should begin capitalizing borrowing costs on the commencement date.

Three conditions must be met before the capitalization period should begin :

1. Expenditures for the asset are being incurred
2. Borrowing costs are being incurred
3. Activities that are necessary to prepare the asset for its intended use are in progress

As long as these conditions continue, borrowing costs can be capitalized.

Expenditures incurred for the asset include only those that have resulted in payments of cash, transfer of other assets or the assumption of interest-bearing liabilities, and are reduced by any progress payments and grants received for that asset.

(The principle in IAS 23 par. 17(a) is that borrowing costs are capitalized only when the entity requires funding for its expenditures on the qualifying asset. IAS 23 par. 18 states that expenditures on a qualifying asset include only those expenditures that have resulted in payments of cash, transfers of other assets or the assumption of interest-bearing liabilities (reduced by progress payments and certain grants). Accordingly, capitalization of borrowing costs is deferred until this condition is met).

Necessary activities are interpreted in a very broad manner. They start with the planning process and continue until the qualifying asset is substantially complete and ready to function as intended. These activities may include technical and administrative work prior to actual commencement of physical work, such as obtaining permits and approvals, and may continue after physical work has ceased. Brief, normal interruptions do not stop the capitalization of interest cost. However, if the entity intentionally suspends or delays the activities for some reason, interest costs should not be capitalized from the point of suspension or delay until substantial activities in regard to the asset resume.

If the asset is completed in a piecemeal fashion, the capitalization of interest cost stops for each part as it becomes ready to function as intended. An asset that must be entirely complete before the parts can be used as intended can continue to capitalize interest costs until the total asset becomes ready to function (Hrd).