Heritage Assets
The comment period for the ASB's Discussion Paper Heritage Assets: can accounting do better? closed on 31 May with almost 70 responses received. The aim of the proposals is to improve the consistency and transparency of the financial reporting of heritage assets - principally the collections held by museums and galleries.
The Committee on Accounting for Public-benefit Entities (CAPE) and the Board considered the responses in July and noted widespread discontent amongst respondents with the current accounting requirements. They also noted a high level of support for the proposals in the Discussion Paper which include significant new disclosure requirements.
The Board is therefore exploring the possibility of issuing an accounting standard based on its proposals. It is hoped that an exposure draft will be issued in the autumn and that the new standard will be available for adoption in financial statements for years ending 31 March 2007.
The Board will also continue to work closely with the International Public Sector Accounting Standards Board (IPSASB), whose Consultation Paper on heritage assets included, in full, the ASB Discussion Paper. The comment period for the IPSASB Paper closed on 30 June.
Interpretation of the Statement of Principles for Public Benefit Entities
As reported previously in Inside Track, ASB staff are taking forward further work on the proposed Interpretation. To help with this work a sub-group of the CAPE has been established to consider further capital grants and liabilities. These are recognised to be the two most difficult issues.
CAPE and the Board were provided at their July meetings with an update of the sub-group's work. The aim is for further work to be carried out during the summer with a final draft of the Interpretation available in the autumn. On the international front, IPSASB has decided to take forward a collaborative project with National Standard-Setters (including the ASB) and other bodies to develop a conceptual framework for public sector entities. The ASB's work on the Interpretation should provide a useful input to the project, which will take some years to complete.
Borrowing costs
The IASB recently issued a proposed amendment to IAS 23 Borrowing Costs that would remove the option for expensing all borrowing costs and require the capitalisation of those costs that related to the period of production of an asset. The ASB does not intend to amend the UK standard, FRS 15 Tangible fixed Assets as this is not a converged standard; FRS 15 will therefore continue to permit entities to choose between capitalisation and expense of borrowing costs.
Leases
The IASB has recently decided to add a project on lease accounting to its main agenda. This project will cover both lessee and lessor accounting, and will affect property leases as well as equipment leases. This project will be a joint project with the FASB. Proposals will be issued in a discussion paper, planned for 2008, and are likely to build on the proposals developed in the recent joint IASB/ASB research project, for a single model for all leases that recognised as asset the lessee's right of use of the physical asset over the period of the lease. These proposals were themselves developed from earlier discussion papers prepared by the G4+1 group in 1996 and 1999.
Insurance contracts
The IASB is continuing to develop proposals for insurance accounting, to be set out in a discussion paper later this year. It has tentatively decided to propose a current measurement of insurance liabilities, and is considering how this measurement should take into account forecast cash flows, risk margins, and discretionary payments under with-profits and similar types of contract.
Share-based payment
The IASB is commencing consideration of the responses to the recent exposure draft proposing amendments to IFRS 2 Share-based Payment dealing with vesting conditions and cancellations by the counterparty. As reported in Inside Track 47, the ASB issued the proposals as a UK exposure draft and will be considering the need to keep FRS 20 converged with IFRS 2 if the IASB proceeds with its amendment.
Earnings per share
The IASB is expected to issue shortly an exposure draft of a limited amendment of IAS 33 Earnings per Share proposing modifications to the treasury stock method of calculating diluted earnings per share, to include in the assumed proceeds resulting from the exercise of options and warrants the carrying amount of the instrument in liabilities. The ASB will consider proposing a similar amendment to FRS 22 so that the standard remains converged with the international standard.
IFRIC Draft Due Process Handbook
In May, the International Accounting Standards Committee Foundation (IASCF) issued a draft IFRIC Handbook, which sets out the responsibilities of the IFRIC and the scope of its work. It also sets out in detail IFRIC's due process, the authority of IFRIC Interpretations and communication issues, including relationships with national standardsetters and national interpretative groups (NSS and NIGs). The ASB has responded to the IASCF and a copy of the response can be accessed from the website at www.frc.org.uk/asb.
