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2004

JSE reports under IFRSs using XBRL

23 Dec 2004

The JSE Securities Exchange of South Africa is the first major stock exchange in the world to report its financial statements according to International Financial Reporting Standards (IFRSs) using eXtensible Business Reporting Language (XBRL).

XBRL is an electronic format or language that aims to streamline and simplify the flow, preparation, and analysis of financial reports and accounting data. The JSE's announcement said:

In an IFRS context, XBRL offers many benefits. For example, for fund managers, analysts, and retail investors, financial reporting in XBRL format will improve their ability to analyze companies, make appropriate comparisons, and thus improve their investment decision-making. Essentially, XBRL's data tagging acts like a bar code, identifying the various components making up financial statements. The tags allow the data's meaning to remain clear and contextually accurate, even when data is transferred between various parties. XBRL allows for easier adaptation of changing reporting needs, including the conversion from local GAAP to IFRS.

Click for JSE Press Release (PDF 24k).

Web-based technical update on IASs 2, 11, 18

22 Dec 2004

The Deloitte London IFRS Centre of Excellence is running a monthly series of hour-long Internet-based IFRS technical updates, focusing on the most important international accounting standards and how they will affect UK companies.

The eighth Webcast was run on 16 December 2004 and covered IAS 2 Inventories, IAS 11 Construction Contracts, and IAS 18 Revenue. To access the recording Click Here. The recording of each session will be available on this website for a period of at least 3 to 4 weeks from the date of the presentation. Links to past sessions may be found on our United Kingdom Page. The recording is no longer available online.

Japanese government submission on IFRS equivalence

22 Dec 2004

Although all European companies listed on a European securities market are required to use IFRSs starting in 2005, non-European companies listed in Europe have been given a deferral on switching to IFRSs until 2007. Meanwhile, the European Commission is studying whether, after the deferral period, foreign companies should be allowed to continue to file using certain national GAAPs that are deemed to be equivalent to IFRSs.

In particular, the Commission has asked the Committee of European Securities Regulators (CESR) to assess the equivalence of three national GAAPs – Canadian, Japanese, and US – to IFRSs. In October 2004, CESR invited comments on a (PDF 289k) on Equivalence of Certain Third Country GAAP and on Description of Certain Third Countries' Mechanisms of Enforcement of Financial Information. The Concept Paper addresses how CESR would undertake the assessment of equivalency. Click to download the (PDF 82k) to the CESR Concept Release.

ARC unanimously recommends IFRS 2 in Europe

22 Dec 2004

At its meeting in Brussels on 20 December 2004, the European Commission's Accounting Regulatory Committee (ARC) voted unanimously to recommend the adoption of IFRS 2 Share-based Payment for use in Europe.

One of ARC's 25 member countries (Hungary) abstained because of a language translation issue. IFRS 2 requires recognition of an expense based on the fair value of all share-based payments made by an entity, including employee stock options. To date, ARC has endorsed all of the 2003-2004 improved versions of IASs 1-41 (with two sections carved out of IAS 39) and IFRSs 1-5.

Is the European retail industry ready for IFRSs?

22 Dec 2004

A Deloitte European workgroup carried out a benchmarking study whose aim was to discover: How ready large European retailers are for IFRSs? The preferred accounting options retailers are contemplating to meet the challenges raised by the new standards? Whether those solutions are appropriate and workable? Whether there is consistent understanding of the application of IFRSs across the industry? The conclusions of the benchmarking are startling: The European retail industry may not yet be fully ready for IFRSs. Some retailers have underestimated the scale of the work needed to prepare for certain aspects of IFRSs. If current practices are maintained, companies may find themselves applying the standards in very different ways. IFRSs don't just pose technical challenges for the industry – they also create stakeholder communication issues. Click to download: (PDF 260k) (PDF 214k) (PDF 34k) .

A Deloitte European workgroup carried out a benchmarking study whose aim was to discover:

  • How ready large European retailers are for IFRSs?
  • The preferred accounting options retailers are contemplating to meet the challenges raised by the new standards?
  • Whether those solutions are appropriate and workable?
  • Whether there is consistent understanding of the application of IFRSs across the industry?
The conclusions of the benchmarking are startling:
  • The European retail industry may not yet be fully ready for IFRSs.
  • Some retailers have underestimated the scale of the work needed to prepare for certain aspects of IFRSs.
  • If current practices are maintained, companies may find themselves applying the standards in very different ways.
  • IFRSs don't just pose technical challenges for the industry – they also create stakeholder communication issues.
Click to download:

Special IAS Plus newsletter: IFRIC Update

21 Dec 2004

A new special edition of our IAS Plus newsletter presents an International Financial Reporting Committee Update.

The update covers IFRIC Interpretations 1 to 5 and the IFRIC amendment of SIC-12. Each Interpretation is summarised, and special first-time adoption issues are discussed. Click to download the (PDF 104k) of our IAS Plus newsletter. You will find links to all past editions of the newsletter Here. You will find links to summaries of IFRIC's current agenda projects Here.

Basel Committee release on IFRSs

21 Dec 2004

The Basel Committee on Banking Supervision has published a press release on the treatment of certain items reported under IFRSs for bank regulatory capital purposes.

This is the third in a series of press releases on this subject. Click to Download the Release (PDF 86k). The PDF file includes clickable links to the earlier press releases.

S&P proposes IFRS transition disclosures

21 Dec 2004

The rating agency Standard & Poor's has published Transition without Tears: A Five Point Plan for IFRS Disclosure (copyright 2005 Standard & Poor's, posted on IASPlus with permission).

The report sets out five specific disclosure practices for industrial and financial services groups that would provide a high level of transparency to the market regarding transition to IFRSs:

  • Providing comprehensive reconciliations of restated balance sheets and income statements in a tabular format;
  • Providing a transition date balance sheet;
  • Reconciling restated cash flow statements;
  • Detailing accounting policies and their effect on reported amounts and future trends; and
  • Maintaining relevant disclosures, even if not required by IFRS.
The report includes practical examples of how these disclosure practices address related analytical concerns. It also provides an update on S&P;'s process for evaluating any potential effect of the transition to IFRS on credit ratings. Click to Download the S&P; Report (PDF 862k).

Europe adopts final transparency directive

21 Dec 2004

The European Council and Parliament have approved a new Directive on minimum transparency requirements for listed companies.

The Directive must be implemented by EU Member States within two years of its publication in the EU's Official Journal, which should take place in the next few weeks. The Directive completes a package of Financial Services Action Plan measures adopted over the last two years – including the IAS Regulation, the Market Abuse Directive, and the Prospectus Directive – to establish a common financial disclosure regime across the EU for issuers of listed securities. Under the Directive, all securities issuers will have to provide annual financial reports within four months after the end of the financial year. Investors in shares will receive more complete half-yearly financial reports. Those issuers who do not publish quarterly reports will need to provide quarterly management statements. Bond issuers will also be required to publish half-yearly reports. Click for:

FASB issues share-based payment standard

20 Dec 2004

The US FASB has published FASB Statement 123 (revised 2004) Share-Based Payment.

Statement 123(R) requires that the compensation cost relating to share-based payment transactions be recognised in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. The Statement is the result of a two-year effort to respond to requests from investors and many others that the FASB improve the accounting for share-based payment arrangements with employees – the previous standard had permitted note disclosure in lieu of expense recognition. Click for (PDF 17k). Deloitte (USA) has published a special issue of its Heads Up newsletter summarising the key concepts of FASB Statement No. 123(R). Click to download the (PDF 292k). While Statement 123(R) is largely consistent with IFRS 2 Share-based Payment, some differences remain, as described in a Q&A; document FASB issued along with the new Statement:

Q22. Is the Statement convergent with International Financial Reporting Standards? The Statement is largely convergent with International Financial Reporting Standard (IFRS) 2, Share-based Payment. The Statement and IFRS 2 have the potential to differ in only a few areas. The more significant areas are briefly described below.

  • IFRS 2 requires the use of the modified grant-date method for share-based payment arrangements with non-employees. In contrast, Issue 96-18 requires that grants of share options and other equity instruments to non-employees be measured at the earlier of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached or (2) the date at which the counterparty's performance is complete.
  • IFRS 2 contains more stringent criteria for determining whether an employee share purchase plan is compensatory or not. As a result, some employee share purchase plans for which IFRS 2 requires recognition of compensation cost will not be considered to give rise to compensation cost under the Statement.
  • IFRS 2 applies the same measurement requirements to employee share options regardless of whether the issuer is a public or a nonpublic entity. The Statement requires that a nonpublic entity account for its options and similar equity instruments based on their fair value unless it is not practicable to estimate the expected volatility of the entity's share price. In that situation, the entity is required to measure its equity share options and similar instruments at a value using the historical volatility of an appropriate industry sector index.
  • In tax jurisdictions such as the United States, where the time value of share options generally is not deductible for tax purposes, IFRS 2 requires that no deferred tax asset be recognized for the compensation cost related to the time value component of the fair value of an award. A deferred tax asset is recognized only if and when the share options have intrinsic value that could be deductible for tax purposes. Therefore, an entity that grants an at-the-money share option to an employee in exchange for services will not recognize tax effects until that award is in-the-money. In contrast, the Statement requires recognition of a deferred tax asset based on the grant-date fair value of the award. The effects of subsequent decreases in the share price (or lack of an increase) are not reflected in accounting for the deferred tax asset until the related compensation cost is recognized for tax purposes. The effects of subsequent increases that generate excess tax benefits are recognized when they affect taxes payable.
  • The Statement requires a portfolio approach in determining excess tax benefits of equity awards in paid-in capital available to offset write-offs of deferred tax assets, whereas IFRS 2 requires an individual instrument approach. Thus, some write-offs of deferred tax assets that will be recognized in paid-in capital under the Statement will be recognized in determining net income under IFRS 2.
Differences between the Statement and IFRS 2 may be further reduced in the future when the IASB and FASB consider whether to undertake additional work to further converge their respective accounting standards on share-based payment.

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