February

Updated IASB-FASB convergence agreement

27 Feb 2006

The US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have published a Memorandum of Understanding (MOU) that reaffirms the boards' shared objective of developing high quality, common accounting standards for use in the world's capital markets.

The MOU is a further elaboration of the objectives and principles first described in an MOU published in October 2002. While the new document does not represent a change in the boards' convergence work programme, it does reflect the context of the US SEC's 'roadmap' for the removal of the reconciliation requirement for non-US companies that use IFRSs and are registered in the United States. It also reflects the work undertaken by the Committee of European Securities Regulators (CESR) to identify areas for improvement of accounting standards.

Both the FASB and the IASB note that removing the current reconciliation requirements will require continued progress on the boards' convergence programme. Accordingly, the MOU sets out milestones that the FASB and the IASB believe are achievable...

The boards agreed that trying to eliminate differences between standards that are both in need of significant improvement is not the best use of resources. Instead, new common standards should be developed. Consistent with that principle, convergence work will continue to proceed on the following two tracks:

  • First, the boards will reach a conclusion about whether major differences in focused areas should be eliminated through one or more short-term standard-setting projects, and, if so, the goal is to complete or substantially complete work in those areas by 2008.
  • Second, the FASB and the IASB will seek to make continued progress in other areas identified by both boards where accounting practices under US GAAP and IFRSs are regarded as candidates for improvement.

 

The goal by 2008 is to reach a conclusion about whether major differences in the following few focused areas should be eliminated through one or more short-term standard-setting projects and, if so, to complete or substantially complete work in those areas.

Topics for short-term convergence include:

To be examined by the FASB

To be examined by the IASB

Fair value option*

Borrowing costs

Impairment (jointly with the IASB)

Impairment (jointly with the FASB)

Income tax (jointly with the IASB)

Income tax (jointly with the FASB)

Investment properties**

Government grants

Research and development

Joint ventures

Subsequent events

Segment reporting

FASB Note: *Already on FASB's active agenda ** To be considered by the FASB as part of the fair value option project

IASB Note: Topics are part of the IASB's existing short-term convergence project except for impairment, which will be added to that project

The two boards will meet on 27 and 28 April 2006 in London, when they will discuss topics described in the MOU. Click for:

 

Agenda project pages updated for February meeting

27 Feb 2006

We have updated the following agenda project pages to reflect discussions and decisions at the International Accounting Standards Board's meeting on 21-24 February 2006: Accounting Standards for Small and Medium-sized Entities Amendments to IAS 37 Non-financial Liabilities Amendments to IAS 19 Employee Benefits Conceptual Framework Fair Value Measurement Financial Instruments Puttable at Fair Value Government Grants Insurance Contracts Phase II Revenue Recognition Short-term Convergence: Income Taxes .

Notes from the fourth day of the IASB meeting

26 Feb 2006

We have combined all of the notes taken by Deloitte observers at the International Accounting Standards Board's meeting on 21-24 February 2006 onto a Separate Agenda Page. .

We have combined all of the notes taken by Deloitte observers at the International Accounting Standards Board's meeting on 21-24 February 2006 onto a Separate Agenda Page.

Agenda for IFRIC meeting 2-3 March 2006

24 Feb 2006

The International Financial Reporting Interpretations Committee (IFRIC) will meet at the IASB's offices in London on Thursday 2 March and Friday 3 March 2006. The agenda for the meeting is below: Thursday 2 March 2006 Introduction - Opening remarks; administrative matters; minutes of the January 2006 IFRIC meeting Service Concession Arrangements: Determining the accounting model - The dividing line between the financial (D13) and the intangible asset (D14) models Interaction of D12-14 with IFRIC 4 Determining Whether an Arrangement contains a Lease Analysis of remaining comments received on the draft Interpretations D12-14 IAS 18 Revenue Recognition - Sales of real estate IAS 19 Post-employment Benefits - The effect of a minimum funding requirement on the asset ceiling IAS 32 Financial Instruments: Disclosure and Presentation - Classification of a financial instrument as liability or equity IFRS 1 First-time Adoption of International Accounting Standards - Cost of a subsidiary in the separate financial statements of a parent Friday 3 March 2006 IFRIC Relationship with National Standard-Setters and National Interpretive Groups Customer Loyalty Programmes Review of Tentative agenda decisions published in December 2005 IFRIC Update IFRS 3 Business Combinations - Whether a new entity that pays cash can be identified as the acquirer IFRS 3 Business Combinations - 'Transitory' common control IAS 17 Leases - Leases of land that do not transfer title to the lessee IAS 12 Income Taxes - Scope IAS 18 Revenue - Subscriber acquisition costs in the telecommunications industry Review of Tentative agenda decisions published in January 2006 IFRIC Update IAS 27 Consolidated and Separate Financial Statements - Separate financial statements issued before consolidated financial statements Recommendations by Agenda Committee regarding requests for IFRIC agenda items IFRS 2 Share-based Payment - Share plans with cash alternatives at the discretion of the entity IFRS 2 Share-based Payment - Share plans with cash alternatives (grant date and vesting period) IFRS 2 Share-based Payment - Fair value measurement of postvesting transfer restrictions IAS 39 Financial Instruments: Recognition and Measurement - Aspects of derecognition in the context of securitisation IAS 39 Financial Instruments: Recognition and Measurement - Hedging inflation risk - whether inflation risk qualifies as a separable component for hedging purposes .

The International Financial Reporting Interpretations Committee (IFRIC) will meet at the IASB's offices in London on Thursday 2 March and Friday 3 March 2006. The agenda for the meeting is below:

Thursday 2 March 2006

  • Introduction - Opening remarks; administrative matters; minutes of the January 2006 IFRIC meeting
  • Service Concession Arrangements:
    • Determining the accounting model - The dividing line between the financial (D13) and the intangible asset (D14) models
    • Interaction of D12-14 with IFRIC 4 Determining Whether an Arrangement contains a Lease
    • Analysis of remaining comments received on the draft Interpretations D12-14
  • IAS 18 Revenue Recognition - Sales of real estate
  • IAS 19 Post-employment Benefits - The effect of a minimum funding requirement on the asset ceiling
  • IAS 32 Financial Instruments: Disclosure and Presentation - Classification of a financial instrument as liability or equity
  • IFRS 1 First-time Adoption of International Accounting Standards - Cost of a subsidiary in the separate financial statements of a parent

Friday 3 March 2006

  • IFRIC Relationship with National Standard-Setters and National Interpretive Groups
  • Customer Loyalty Programmes
  • Review of Tentative agenda decisions published in December 2005 IFRIC Update
    • IFRS 3 Business Combinations - Whether a new entity that pays cash can be identified as the acquirer
    • IFRS 3 Business Combinations - 'Transitory' common control
    • IAS 17 Leases - Leases of land that do not transfer title to the lessee
    • IAS 12 Income Taxes - Scope
    • IAS 18 Revenue - Subscriber acquisition costs in the telecommunications industry
  • Review of Tentative agenda decisions published in January 2006 IFRIC Update
    • IAS 27 Consolidated and Separate Financial Statements - Separate financial statements issued before consolidated financial statements
  • Recommendations by Agenda Committee regarding requests for IFRIC agenda items
    • IFRS 2 Share-based Payment - Share plans with cash alternatives at the discretion of the entity
    • IFRS 2 Share-based Payment - Share plans with cash alternatives (grant date and vesting period)
    • IFRS 2 Share-based Payment - Fair value measurement of postvesting transfer restrictions
  • IAS 39 Financial Instruments: Recognition and Measurement - Aspects of derecognition in the context of securitisation
  • IAS 39 Financial Instruments: Recognition and Measurement - Hedging inflation risk - whether inflation risk qualifies as a separable component for hedging purposes

Notes from the third day of the IASB meeting

24 Feb 2006

We have combined all of the notes taken by Deloitte observers at the International Accounting Standards Board's meeting on 21-24 February 2006 onto a Separate Agenda Page. .

We have combined all of the notes taken by Deloitte observers at the International Accounting Standards Board's meeting on 21-24 February 2006 onto a Separate Agenda Page.

More on convergence on embedded derivatives

24 Feb 2006

As noted in our news story of 21 February 2006, FASB has issued Statement of Financial Accounting Standard No.

155 Accounting for Certain Hybrid Instruments that allows financial instruments with embedded derivatives to be accounted for as a whole at fair value through profit and loss. This option eliminates the need to separate the derivative from its host contract. A similar accounting option was added to IAS 39 as part of the Fair Value Option Amendments to IAS 39 in June 2005. Deloitte (United States) has published a special edition of the (PDF 113k) to explain the key concepts in Statement 155. Additional information, in question and answer format, is included in an Appendix to the newsletter.

Donaldson, Levitt diverge on convergence

23 Feb 2006

During a panel discussion on 22 February 2006, two former chairmen of the US Securities and Exchange Commission, William Donaldson and Arthur Levitt, offered differing opinions on the benefits and likelihood of international convergence of accounting standards.

Two other former SEC chairmen, Harvey Pitt and Richard Breeden, also participated in the panel discussion, which was held at the Council on Foreign Relations in New York and sponsored by McKinsey & Co. Here is the Link to the www.cfo.com Report of the panel discussion.

EFRAG urges comprehensive measurement debate

23 Feb 2006

The Technical Expert Group of the European Financial Reporting Advisory Group (EFRAG) has written to IASB Chairman Sir David Tweedie recommending that the IASB organise a comprehensive global debate on measurement.

An excerpt from the letter:

Measurement issues are at the core of many of the longer-duration projects on which the IASB is now working (including, for example, the projects considering revisions to IFRS 3 and IAS 37, and the fair value measurement guidance project). Many of these projects will determine the direction in which accounting will develop. We think it would be inappropriate for the IASB to publish any major new proposals or standards on measurement before the comprehensive measurement debate has taken place. Although we have argued before that the IASB should resolve framework issues before bringing forward proposals for standards that make assumptions about how those framework issues will be resolved, we understand that the IASB does not agree with this point of view. However, on measurement the issues involved are so fundamental and the concerns, misunderstandings, etc so great that we suspect that it would not be possible for the IASB to win acceptance for any such proposals or standards until the underlying fundamental issues have been resolved.

Click to Download EFRAG's Letter (PDF 94k).

Notes from the second day of the Board meeting

23 Feb 2006

We have combined all of the notes taken by Deloitte observers at the International Accounting Standards Board's meeting on 21-24 February 2006 onto a Separate Agenda Page. .

We have combined all of the notes taken by Deloitte observers at the International Accounting Standards Board's meeting on 21-24 February 2006 onto a Separate Agenda Page.

IFRIC will meet next week

22 Feb 2006

The International Financial Reporting Interpretations Committee (IFRIC) will meet at the IASB's offices in London on Thursday 2 March 2006 (10.00am - 17.30pm) Friday 3 March 2006 (9.00am - 15.00pm).

The agenda will be announced shortly.

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