September — IAS Plus

SEC may give another extension for SOX 404

Sep 20, 2005

The (PDF 65k) for the meeting of the US Securities and Exchange Commission for Wednesday, 21 September 3005, includes a proposal to give smaller public companies an additional one-year deferral for compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Section 404 requires that companies and their auditors file reports on the strength of their internal controls over financial reporting.

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Insurance Working Group Meeting

Sep 20, 2005

The IASB's Insurance Working Group will meet on Wednesday and Thursday, 28-29 September 2005, at the Crowne Plaza London City Hotel, London.

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September 2005 edition of EITF Flash

Sep 19, 2005

We have posted the (PDF 76k).

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BIS study on accounting and prudential regulation

Sep 19, 2005

The Bank for International Settlements has published a working paper on Accounting, Prudential Regulation and Financial Stability: Elements of a Synthesis (PDF 263k).

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Unlisted Belgian banks must use IFRSs

Sep 15, 2005

Under a Royal Decree dated 5 December 2004, unlisted banks and other credit institutions in Belgium will be required to use IFRSs in their consolidated financial statements starting in 2006. Listed Belgian companies, including credit institutions, must prepare their consolidated financial statements using IFRSs starting in 2005 under the EU Accounting Regulation.

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Statistics database updated

Sep 15, 2005

We have updated our Database of Statistics that, we believe, provide clear evidence of the globalisation of the world's capital markets and of the need for global financial reporting standards. .

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EFRAG seeks views on financial guarantees

Sep 14, 2005

The European Financial Reporting Advisory Group (EFRAG) has invited comments on its Draft 'Endorsement Advice' Letter (PDF 20k) to the European Commission on the IASB's August 2005 amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 4 Insurance Contracts relating to Financial Guarantee Contracts.

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Steps toward convergence: China, Japan, Korea

Sep 13, 2005

On 6 and 7 September 2005, representatives of accounting standard setters in China, Japan, and the Republic of Korea met in Xi'an, China, the fifth such meeting.

Over 40 delegates attended, including observers from HK SAR, Macau SAR, and the IASB. The delegates discussed recent developments in the three countries' accounting standards and convergence issues, including obstacles and specific measures to address some of them. The three countries' accounting standard setters reached the following consensus set out in a published (PDF 21k) posted on the websites of the three standard-setters:

Japan

Korea

First, the three parties recognise that the international convergence of accounting standards is the irreversible trend under the economic globalisation, and the three countries support the efforts by the IASB to develop a single set of high-quality and globally-acceptable accounting standards. In the meantime, the parties believe that convergence is not equal to being identical. The international convergence of accounting standards shall be a market-driven gradual process and this process shall be two-way interactions between national accounting standard setters and the IASB, giving considerations to special local environments.

Secondly, the three parties have confirmed that they shall work for the resolution of practical issues encountered in their respective accounting standard setting and international convergence efforts that should be continuously tested in their respective capital markets. That shall, on the one hand, be helpful to set the national accounting standards and on the other hand, to identify major obstacles and issues the countries encounter in the international convergence process and to communicate with the IASB to contribute to the improvements of the International Financial Reporting Standards (IFRSs).

Thirdly, the three parties have decided to set up a joint working group composed of their technical staff. The primary task of the working group is to carry out joint research on main technical issues confronted by the three countries in their standard setting and international convergence. The joint working group may meet on a non-regular basis and produce research results for the discussion at the Three Countries' Accounting Standard Setters' Meeting and as inputs to the IASB.

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EFRAG seeks views on endorsement of IFRIC 6

Sep 12, 2005

The European Financial Reporting Advisory Group (EFRAG) has invited comments on its Draft 'Endorsement Advice' Letter (PDF 23k) to the European Commission on IFRIC 6 Liabilities Arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment.

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SEC views on valuing employee stock options

Sep 10, 2005

US FASB Statement 123R, like IFRS 2, requires that share-based payments to employees be measured by estimating the grant-date fair value of the equity instruments (such as options) that an entity is obligated to issue when employees have earned the right to benefit from the instruments (that is, when the right to the option has vested).

The standards also say that the best evidence of fair value for employee stock options is observable market prices of identical or similar instruments in active markets. Some US companies have proposed to design and issue in the market financial instruments that replicate the terms and conditions of employee stock options, for the purpose of obtaining a market-based value of the employee options. At the request of the Office of the Chief Accountant of the US SEC, the SEC's Office of Economic Analysis (OEA) has prepared a report on the potential use of such instruments for valuing employee stock options as an alternative to modelling. The OEA report concludes:

The main conclusion of our analysis to date is that instruments that track the future flows of net obligations facing the company or net receipts by its employees under the option grant can yield reasonable estimates of fair value as defined in Statement 123R. Further, our analysis indicates that instruments that replicate the terms and conditions of employee stock options or other share-based compensation do not produce reasonable estimates of fair value.

Based on the OEA report, the Chief Accountant of the SEC issued a public statement that concluded:

Replicating all of the terms and conditions of employee stock options with a market instrument is difficult. I also recognize that there may be alternative ways to provide an adequate estimate of the fair value of an employee stock option. As noted in the memo from OEA, there already are several methods that have been considered. Broadly speaking, my staff and I, with help from OEA, have become comfortable that it should be possible to design instruments whose transaction prices would be a reasonable estimate of the fair value of underlying employee stock options using either of the methodologies that seek to track returns to holders of options or the obligations of the issuer of those options. Further, while I recognize alternative views and new facts are possible, at this point, we have significant doubts based on OEA's views, as to whether it would be possible to design an instrument that would achieve the measurement objective of Statement 123R by relying on similar contractual terms and conditions. That is primarily because of the difficulties inherent in replicating the employer-employee relationship in an issuer-investor arrangement.

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SEC may give another extension for SOX 404

Insurance Working Group Meeting

September 2005 edition of EITF Flash

BIS study on accounting and prudential regulation

Unlisted Belgian banks must use IFRSs

Statistics database updated

EFRAG seeks views on financial guarantees

Steps toward convergence: China, Japan, Korea

EFRAG seeks views on endorsement of IFRIC 6

SEC views on valuing employee stock options