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Communiqué – November 2017

2018-03-09Source: 中国会计视野Editor: 杨武

The Asian-Oceanian Standard-Setters Group(AOSSG) held its ninthannual meeting on the 29th and 30th of November 2017 at the Jinxi Hotel, Hangzhou, China. Themeeting was hosted by the China Accounting Standards Committee (CASC) andattended by 18 member standard-setters as well asrepresentatives of the International Accounting Standards Board (IASB) and theIFRS Foundation.

The participating jurisdictions were Australia, Brunei, Cambodia, China, Hong Kong, India, Indonesia, Japan, Korea, Macao, Malaysia,Nepal, New Zealand, Singapore, Sri Lanka, Syria, Thailand and Vietnam.

Mr. Eui-Hyung Kim, the outgoing AOSSG Chair,and Mr. Yibin Gao, the incoming AOSSG Chair, welcomed members to the ninthAnnual AOSSG Meeting. Mr. Gao thanked Mr. Kim and the staff of the KoreaAccounting Standards Board (KASB) for their outstanding work during theirtenure as AOSSG Chair and the Secretariat. Mr. Gao expressed his aspiration to fullycoordinate the accounting standard setters in the region, deliver their viewsto IASB and promote the development of one single set of high quality globalaccounting standards.

At the opening ceremony, Mr. Guangyao Zhu, ViceMinister of Finance of China, Trustee of IFRS Foundation attended the meeting. Mr.Mingji Zhao, Assistant Minister of Finance of China also attended the meetingand provided the keynote address. He encouraged AOSSG members to activelyparticipant in the standard setting process of IFRS. He also hoped that the AOSSGmembers could work together to identify the specific issuesin the region, therefore to better build the international financial reportingstandards.

Members then ratified the appointment of Mr.Shiwaji Bhikaji Zaware, Chairman of Accounting Standards Board, The Instituteof Chartered Accountants of India, as the AOSSG Vice-Chair for a term of twoyears.

The IASB was represented at the meeting by theChair, Hans Hoogervorst, Board members, Dr Chungwoo Suh and Dr Jianqiao Lu. Also, Ms. Michelle Sansom, Associate Director ofthe IFRS Foundation, and Mr. Mitsuhiro Takemura, the Director of the IFRS Foundation Asia-OceaniaRegional Office in Tokyo, attended the meeting. 

AOSSG-specific affairs(Members-only session)


Members wereupdated on the progress of action plans and next steps against the AOSSGStrategic Plan 2015–2019. In particular, members were informed of the following keyactivities in 2017 and plans for 2018:

l   launching new AOSSG Working Groups;

l   establishing a new process for AOSSGrepresentation at the Accounting Standards Advisory Forum (ASAF) of the IFRSFoundation;

l   meeting with the Trustees of the IFRSFoundation; and

l   revitalizing the Centres ofExcellence in Developing Countries (COEDC) Mentoring programme.

Members discussed a proposal to amend the Memorandum of Understanding on AOSSGwith respect to the withdrawal of membership. Members agreed with the proposedamendment on the condition that minor changes of wording be made.


Update anddiscussion on IASB projects

Mr. Hoogervorst, Dr Suh, Dr Lu and Ms. Sansomprovided a strategic update, 2016-2017 activities and implementing the IASB work plan for 2017-2021, includingbetter communication, activeprojects (e.g. conceptualframework, rate-regulated activities), research programme (e.g. active research projects,research pipeline, post-implementation reviews, wider corporate reporting),upcoming consultations and supporting implementation.


The Financial Instruments and LiabilitiesWorking Group leader presented an education session on the IASB’s FinancialInstruments with Characteristics with Equity (FICE) research project.  The presentation contrastedexisting equity/liability classification requirements in IAS 32 Financial Instruments: Presentation,with the proposed “Gamma” approach under the FICE project. The IASB is expectedto release a Discussion Paper on this during Q1 2018. The aim of the Gammaapproach is to improve consistency in practice by replacing IAS 32’srules-based and complex requirements with a more intuitive, principles-basedapproach. AOSSG members deliberated whether the Gamma approach would achieveconsistent classification outcomes for similar instruments and if it would besimpler to apply than IAS 32.



The Cross Cutting Working Grouppresented the background and overall status of the ConceptualFramework project and invited Dr Chungwoo Suh,an IASB member, to introduce the main contents of the revised ConceptualFramework, including the recognition criteria of assets and liabilities, the selectionof measurement basis, the principle of classification into profit or loss andother comprehensive income, etc. AOSSG members generally supportedthe forthcoming Conceptual Framework. Some members queried the concept ofcontrol, the definition of assets, and the principle of classification intoprofit or loss or other comprehensive income. The IASBmember provided clarificationand answered the questions.

PrimaryFinancial Statements


AOSSG members discussed the IASB’s project onPrimary Financial Statements. AOSSG members generally agreed with defining the EarningsBefore Interest and Tax (EBIT) subtotal, and investing and financing categorieson the face of the statement of financial performance using a principles-basedapproach. Some members were concerned about the alignment of the terms in astatement of financial performance and the statement of cash flows, defininginvesting activities, usefulness of the EBIT subtotal, and similarity of the ‘PrimaryFinancial Statements’ project to the IASB/FASB staff draft of an Exposure Drafton ‘Financial Statements Presentation’ published in July 2010.


BCUCC-TheEvolution of Predecessor Accounting


Staff of the Hong Kong Institute ofCertified Public Accountants (HKICPA) presented its literature review on thedevelopment of the predecessor methods of accounting issued and applied in theUnited States, the United Kingdom and by the International Accounting StandardsCommittee (now known as IASB).  Theobjective of the session was to understand the rationale for developing thepredecessor method, and whether and how it evolved in concept and inapplication, so that we can incorporate lessons learnt from the past whenconsidering a way forward for accounting for BCUCC.

Key staff research findings include:

The predecessor method was intended for mergers of affiliated companies,but was also applied to mergers of unrelated companies; The criteria for applying the predecessor method proliferated and becamecomplex to prevent misuse of the predecessor method, however, that led to casesof structured transactions; and Little literature was found that explains the rationale for scoping outBCUCC from the definition of ‘business combination’.

HKICPA staff also led a discussion on thepossible broad approaches for developing the accounting for BCUCC:

1. Keep the status quo, that is BCUCCcontinues to be scoped out of IFRS 3 and allow practice to form its ownjudgement;

2. Develop specific accounting for BCUCC;

3. Apply acquisition method to all businesscombinations (including BCUCC); and

4. Do more research or studies on areas suchas mergers and acquisitions and goodwill.

Most members agreed with Approach 2. Theysupported applying the Conceptual Framework in developing the principles for aspecific accounting method (if there is a need for one).  Other comments include:

To be open minded about which method (including a completely new method)should be used to account for BCUCC; Consider a holistic review of accounting for business combinationsincluding BCUCC, focusing on the characteristics of three broad types oftransactions (mergers of true equals, group restructurings that do not meet thedefinition of business combinations, and true acquisitions) and develop therationale for when the predecessor method (or a new method) could be moreappropriate compared to the acquisition method.

One member agreed with Approach 3, which isto apply the acquisition method to all business combinations as it would resultin more comparable and useful information. In applying this approach, entities should assess how much goodwill isgenerated from synergies arising from the transaction, versus how much isrelated to transactions with owners in their capacity as owners.

One member agreed with Approach 4 andrecommended conducting more studies on understanding the characteristics ofdifferent BCUCC transactions and their related accounting issues; as well ashow to account for BCUCC in separate financial statements.

Some members expressed concerns with andchallenges of the accounting for goodwill and determining the fair value of abusiness under the acquisition method. One other member noted that grouprestructures, performed for the purpose of meeting some jurisdiction's listingrequirements, are often accounted for by the predecessor method. In light of this,this member suggested to consider whether and how other ways of accounting forBCUCC would impact such activities.




The Working Group on IFRS for SMEs presented:

(a)   an Analysis of ‘Application of IFRS for SMEs Standard in AOSSG 26 member jurisdictions’; and

(b)   a Survey on ‘Application of IFRS for SMEsStandard in the Asia-Oceania Region’.

On the Analysis, nearly half of the 26-member jurisdictions either permit orrequire the application of IFRS for SMEs Standard in their respective jurisdictionand another 3-member jurisdictions are considering the Standard.

On the Survey, the working group has decided to extend the response due date andthe results of the Survey will be finalized early 2018.

The Survey seeks feedback (i) on what is working and what is not working inrelation to IFRS for SMEs in the AOSSG region; and (ii) whether the IASB should incorporatechanges in the major new IFRSs and specific IFRSs into the IFRS for SMEsStandard and any modifications, required.

Islamic Finance


The Islamic Finance Working Group presented anupdate on Financial Reporting Issues relating to Islamic Finance. The update ismade based on an original research paper which was done in 2010. There were 15issues which had been identified within topics such as recognition of afinancing effect, profit-sharing contracts, Sukuk, Takaful and Ijarah.

The objective of the update is mainly tounderstand member’s current positions on those issues. Additionally, it isaimed to understand the development in IFRS and their potential implications tothose issues.

The update suggests that although those issuesare unique to Islamic finance, they can be addressed within IFRS. The WG plansto continuously discuss the application of IFRS to Islamic financial transactionsand align its work to support the agenda of the IASB Islamic FinanceConsultative Group.

Jurisdiction-specificIFRS 15 implementation issues


The ASBJ described its project to develop acomprehensive revenue recognition standard under Japanese GAAP.  The new standard will be based on IFRS 15and, during its deliberations, the ASBJ has identified some implementationissues.  At this meeting, the ASBJintroduced two such issues, namely subcontracting transactions and customerloyalty programs. AOSSG members spent more time discussing subcontractingtransactions, and the main discussion points included whether control of theparts is transferred to the subcontractor and whether the transaction is afinancing arrangement.

Update onplans/issues relating to IFRS application/implementation

AOSSG members from India, Japan, Sri Lanka andThailand provided updates on the progress of IFRS application in theirrespective jurisdictions.

China provided implementation issues on fairvalue measurement and goodwill, and highlighted its training experiences for highlevel financial accounting talents.

Closing remarks

Mr. Hans Hoogervorst, IASB Chair, noted thatthe Annual AOSSG Meeting was always enjoyable, especially the energy of thismeeting and the diversity of the level of the participating jurisdictions. He emphasisedthat it is very good for the IASB to hear in detail the specific challengesfrom AOSSG members directly.

Mr. Kevin Kwok, Chairman of SingaporeAccounting Standards Council expressed gratitude for allowing Singapore to hostthe 2018 Annual AOSSG Meeting.

Mr. Yibin Gao expressed gratitude to all ofthe attendees and their participation. He noted that the discussion of the technicaltopics and presentation of the IFRS updates, as well as implementation issuesin this year’s meeting were substantial and efficient. He said this is thefirst meeting after China becomes the Chair of AOSSG. He believed that theAOSSG members will work closely together in a leading role of the developmentof IFRS in the future.