March

New Australian Accounting Alert on IFRIC 9

22 Mar 2006

Deloitte (Australia) has published IFRIC 9 Reassessment of Embedded Derivatives (PDF 52k).

It is expected that the Australian Accounting Standards Board (AASB) will adopt this Interpretation and release UIG 9, an Australian equivalent of IFRIC 9, at the next meeting of the AASB. Links to all past Australian Accounting Alerts are Here.

FSF Asia-Pacific forum supports convergence efforts

21 Mar 2006

The Financial Stability Forum (FSF) held its fourth Asia-Pacific regional meeting on 16 March 2006 in Sydney, Australia.

Senior representatives from finance ministries, central banks, and supervisory and regulatory authorities from 10 FSF member economies and 8 regional non-member economies attended the meeting. Senior officials from international institutions represented on the FSF, as well as the Asian Development Bank, also took part. Participants exchanged views on a broad range of issues, including accounting standards.

The Report of the FSF Asia-Pacific Forum 2006 (PDF 72k) states:

Progress toward convergence and harmonisation in international accounting standards is underway, with growing participation from countries in the region. Efforts by the IASB to produce a set of standards for small and medium sized enterprises and by regulators and audit oversight authorities to promote more effective cooperation and enhancements to audit quality were welcomed.

 

Update on Bulgaria and Slovak Republic

21 Mar 2006

An accounting update for Bulgaria and Slovak Republic.

In Bulgaria, since 2003, all listed companies and financial institutions have been required to use IFRSs for their consolidated financial statements. Starting in 2005, IFRSs have been extended also to individual company financial statements and to large unlisted companies. Small companies are permitted but not required to use IFRSs.

In the Slovak Republic, listed companies must use IFRSs for their consolidated financial statements under the EU Accounting Regulation. Starting in 2006, the IFRS requirement has been extended to large unlisted companies.

India moving to align its GAAP with IFRSs

21 Mar 2006

The Prime Minister of India Manmohan Singh has announced that his government will introduce comprehensive new company legislation that will include aligning Indian accounting standards with IFRSs.

The new law the existing 50-year-old companies law with the objective of promoting greater transparency and efficient governance, the Prime Minister said.

 

Deloitte views on initial measurement paper

20 Mar 2006

On 17 November 2005, the IASB published for public comment a Discussion Paper Measurement Bases for Financial Reporting - Measurement on Initial Recognition.

The Discussion Paper, prepared by staff of the Canadian Accounting Standards Board (AcSB), analyses possible bases for measuring assets and liabilities on initial recognition. These include: historical cost, current cost, fair value, net realisable value, value in use, and deprival value. We have posted the Deloitte (PDF 30k). This project is currently on the Board's research agenda. The main points of our comments:

It is not clear to us how this discussion paper fits into the current agenda of the International Accounting Standards Board (IASB). The IASB should have indicated how it believes this discussion paper is intended to complement its work on the fair value measurement and concepts projects, if at all. It appears that the discussion paper has been overtaken by events elsewhere in the IASB's agenda. In addition, the discussion paper deals with the narrow issue of measurement on initial recognition after making the presumption that assets and liabilities should be measured as of the date they are initially recognised (paragraph 415). The issue of when initial recognition should take place is deferred to a different analysis that is yet to be undertaken. Given the interdependencies between the question of 'when' initial recognition should take place and 'what' should be recognised with the initial measurement issue discussed in the paper, we are of the view that the issues related to 'when' and 'what' should have been thoroughly researched first. The issue of 'how' to measure assets and liabilities follows from there. This approach may have highlighted issues that could have lead to less uncertainty about the discussions and proposals in the discussion paper. We imagine that when the IASB deals with the 'when' and 'what' issues, some parts of the discussion paper may become irrelevant....

We are of the view that existing measurement guidance within various International Financial Reporting Standards (IFRS) is inconsistent and that a project to address these issues is overdue in light of the developments in theory and practice. However, as the IASB is in the process of finalising an exposure draft on fair value measurement, we reserve our comments on the specific questions set out in the discussion paper.

Furthermore, we have not responded to the request for comments on the differences between the proposed measurement hierarchy in the discussion paper and the equivalent guidance in the Financial Accounting Standards Board's (FASB) exposure draft as set out in the third paragraph of the Introduction (on page 6 of the discussion paper). The discussion paper fails to identify which version of the FASB exposure draft constituents should base their comments. In addition, no effort has been made to highlight the significant areas of difference between the two documents.

All past Deloitte letters of comment to the IASC and the IASB are
Here.

Deloitte views on management commentary proposals

20 Mar 2006

On 27 October 2005, the IASB published a discussion paper on Management Commentary – information presented outside the financial statements in the form of management's explanation of the enterprise's financial condition, changes in financial condition, results of operations, and causes of changes in material line items.

SEC Commissioner discusses the 'roadmap'

19 Mar 2006

In her remarks before the Institute for International Bankers Annual Conference in Washington on 13 March 2006, US SEC Commissioner Annette L.

Nazareth discussed "the prospect of convergence of US and EU accounting standards". Her comments addressed the adoption of International Financial Reporting Standards as the single accounting standard in the EU and the principles underlying the 'roadmap' by which the Commission is considering accepting IFRS as a primary accounting system without requiring reconciliation to US GAAP. Click to download (PDF 53k). An excerpt:

How the Commission arrived at a reconciliation requirement is rooted in two fundamental policy considerations. One is consistency, that is, the investing public in the United States needs the same type of basic information disclosed for an investment decision regardless of whether the issuer is foreign or domestic. This view suggests that foreign registrants be subject to exactly the same requirements as domestic ones. The other policy consideration is that it is in the public interest to permit US investors the opportunity to invest in a broad array of securities, including foreign securities. This suggests that the Commission avoid overly burdensome requirements on foreign issuers. According to this reasoning, the public interest would be better served by encouraging foreign issuers to register their securities with the Commission.

These same considerations are at the heart of the determination of a reconciliation requirement. Thus the roadmap focuses on whether foreign private issuer financials prepared under IFRS, without reconciliation to US GAAP, will achieve the goal of opening our markets further while remaining consistent with the objective of providing disclosure of comparable quality, transparency, and usefulness.

Auditor independence reforms in the EU

18 Mar 2006

A survey by the European Federation of Accountants (FEE) has found that EU Auditor independence reforms are taking hold in EU Member States.

The FEE survey Implementation of the EU Recommendation on Independence found that the principles-based approach to auditor independence as set out in the EU Recommendation on Independence has been adopted by three-fourths of the EU member states and Norway. The EU Recommendation on Independence has recently been given legal underpinning by the new Statutory Audit Directive. In addition, European auditors, as members of IFAC, have to apply the IFAC Code of Ethics, which is currently being strengthened, and there has also been new legislation in many European countries and in the US. In announcing the survey report, FEE called for a regulatory pause to allow this new approach to auditor independence time to prove its worth to users of audit reports. Click to download the (PDF 408k).

New US-UK regulatory cooperation agreement

17 Mar 2006

The United States Securities and Exchange Commission and the United Kingdom Financial Services Authority have signed a comprehensive arrangement to increase cooperation in market oversight and supervision.

Both agencies described it as a "landmark arrangement" that will facilitate the exchange of confidential supervisory information currently collected by both regulators about regulated entities and investment banking groups that operate both in the United States and the United Kingdom. Click for (PDF 34k).

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.