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September

We comment on the Reporting Entity discussion paper

30 Sep 2008

Deloitte has submitted to the IASB a Comment Letter on the IASB's Discussion Paper on the Reporting Entity: Preliminary Views on an Improved Conceptual Framework for Financial Reporting – The Reporting Entity. We agree with, and support, the majority of the proposals made by the Board in this DP.

Below is an excerpt from our letter. Our past comment letters to the IASB/IASC are Here.

We conceptually agree with the proposed definition for a reporting entity and support the proposal to keep the definition broad. However, we believe that the broadness of the definition should be supplemented by more discussion on why it is important to define the concept of what constitutes a reporting entity. Similarly, while we concur that control should be defined at the conceptual level and that the controlling model should be used to define entities to be included within consolidated financial statements, we suggest that the Board expands its discussion on the matter and clarifies certain aspects. One of the key aspects of the controlling model that needs to be clarified at the conceptual level is whether consolidation is appropriate when an entity (the investor) controls at the present time another entity (the investee) or whether it is appropriate when the investor has the ability to obtain control, at present, over the investee. The ambiguity is evidenced by the fact that, on the one hand, the DP defines control has 'having the ability to determine...' while on the other hand it indicates in paragraph 154 that 'the ability to take control' does not translate in having control at the present time.

Finally, we agree that there is a need to allow the preparation of general purpose 'group' financial statements in certain circumstances not captured by the controlling entity model. However, we believe that the common control model fails to capture all of these circumstances and we find that the restriction on the preparation of combined financial statements contradictory to the principle of allowing for a broad definition of a reporting entity.

Click to view Comment Letter on the IASB's Discussion Paper on the Reporting Entity (PDF 196k).

We comment on Conceptual Framework proposals

30 Sep 2008

Deloitte has submitted to the IASB a Comment Letter on the IASB's Conceptual Framework Exposure Draft – An Improved Conceptual Framework for Financial Reporting:

  • Chapter 1 The Objective of Financial Reporting
  • Chapter 2 Qualitative Characteristics and Constraints of Decision-useful Financial Reporting Information
In our letter we express strong support for the Conceptual Framework project and for the proposals in this exposure draft.
An excerpt is below. Our past comment letters to the IASB/IASC are Here.

We wish to acknowledge that in our opinion, the proposed Framework as expressed in the ED has been significantly improved from the Discussion Paper phase of this project. We find the proposed Framework is now well organised and we generally agree with the notions expressed therein. More specifically, we agree with the dual focus of the expressed objective of financial reporting on both cash flow generation and management stewardship and also agree that decision useful information has several qualitative characteristics of which relevance and faithful representation are the most fundamental. However, we think that comparability, verifiability, timeliness and understandability are supporting components (not 'enhancing characteristics') that need to be present to render financial information relevant and representationally faithful. In addition, there are certain aspects of the proposed Framework which we continue to believe may be enhanced. We have included our comments on these aspects in the Appendix to this letter....

We believe that the individual chapters of the conceptual framework should not be finalised (or at least not made effective) until all of the chapters are finalised to ensure that the overall Framework forms a cohesive set of principles.

Click to view Comment Letter on the IASB's Conceptual Framework Exposure Draft – An Improved Conceptual Framework for Financial Reporting (PDF 152k)

IASCF trustees will meet 9 October 2008 in Beijing

29 Sep 2008

The Trustees of the IASC Foundation, under which the IASB operates, will meet in public session at The Westin Grand Hotel, 9b Financial Street, Xicheng District, Beijing 100032, China, on 9 October 2008, 9:15am to 17:15pm.

The agenda for the public session is as follows:

Beijing, China, 9 October 2008 (Public Session)

  • Opening of Meeting
    • Report of Chairman of the Trustees
    • Approval of the July Minutes
  • Constitution Review 2008 – First and Second Parts
    • Consideration of comments received to the Part I consultation document with final recommendations
    • Consideration of Part II of the Constitution Review consultation document and approval of approach
  • Report of the Due Process Oversight Committee
    • Report of joint IASB-Due Process Oversight Committee meeting - 15 September 2008
    • Update on progress of the review of IASB working groups.
    • Update to the IASB Due Process Handbook
  • Report on XBRL
  • Report of the IASB Chairman
    • Report on progress of the Memorandum of Understanding and IASB Work Programme
    • Response to the credit crisis and the Financial Stability Forum report
    • Report on IFRS for Private Entities (SMEs)
    • Relationship with the International Valuation Standards Committee (IVSC)
  • Report of the SAC Chairman
  • Report on Publications and Educational Activities
    • Education plan
    • Publications and translations strategy
  • Update on long term funding

 

We comment on EFRAG enhancement proposals

29 Sep 2008

On 22 July 2008, the Supervisory Board of the European Financial Reporting Advisory Group (EFRAG) invited public comment on Proposals for Enhancing EFRAG as a way to strengthen the European contribution to the work of IASB.

The proposals envision a new structure, a budget of €3 million in 2009 doubling to €6 million in 2010, and an EFRAG technical staff of 20. Deloitte has submitted a Letter of Comment on the Proposals (PDF 18k). While we support EFRAG's proposals to improve its ability to be a strong and coordinated European voice for high quality accounting standards for users in Europe, we caution that EFRAG's constitution should be clear that EFRAG is neither a standard-setter nor a replacement for the existing EU national standard-setters.

 

Accounting provisions of US financial institutions 'bailout bill'

29 Sep 2008

The Emergency Economic Stabilization Act of 2008 that is being considered by the United States Congress (the so-called financial institutions bailout bill) has as its objective: "To provide authority for the Federal Government to purchase and insure certain types of troubled assets for the purposes of providing stability to and preventing disruption in the economy and financial system and protecting taxpayers, and for other purposes".

Two sections of the Draft Bill (PDF 193k) relate to fair value measurement accounting issues:

Sec. 132. Authority to suspend mark-to-market accounting.

"The Securities and Exchange Commission shall have the authority under the securities laws 12 (as such term is defined in section 3(a)(47) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47)) to suspend, by rule, regulation, or order, the application of Statement Number 157 of the Financial Accounting Standards Board for any issuer (as such term is defined in section 3(a)(8) of such Act) or with respect to any class or category of transaction if the Commission determines that is necessary or appropriate in the public interest and is consistent with the protection of investors."

Sec. 133. Study on mark-to-market accounting.

"The Securities and Exchange Commission, in consultation with the Board [of Governors of the Federal Reserve System] and the Secretary [of the Treasury], shall conduct a study on mark-to-market accounting standards as provided in Statement Number 157 of the Financial Accounting Standards Board, as such standards are applicable to financial institutions, including depository institutions. Such a study shall consider at a minimum —

  • (1) the effects of such accounting standards on a financial institution's balance sheet;
  • (2) the impacts of such accounting on bank failures in 2008;
  • (3) the impact of such standards on the quality of financial information available to investors;
  • (4) the process used by the Financial Accounting Standards Board in developing accounting standards;
  • (5) the advisability and feasibility of modifications to such standards; and
  • (6) alternative accounting standards to those provided in such Statement Number 157."
The SEC must submit the report to Congress within 90 days after enactment of the bill.

 

IFRS and the insurance industry

29 Sep 2008

Publicly accountable entities in Canada are required to switch to IFRSs starting in 2011 (with an option to adopt IFRSs earlier, even in 2008, with approval of the Provincial securities regulator).

The transition from Canadian GAAP will be different for every company. However, particular industries will experience common themes and issues. Deloitte (Canada) has published On the Road Ahead: IFRS Top Ten Accounting Issues in Insurance Industry (PDF 437k). For the insurance industry overall, the following are likely to be the top ten recurring areas of particular significance, and likely differences from Canadian GAAP:
  1. Insurance contracts – measurement principles
  2. Product classification
  3. Insurance contracts – financial statement presentation and disclosures
  4. Insurance contracts – embedded derivatives and unbundling
  5. Insurance contracts – changes in accounting policies
  6. Impairment
  7. Financial instruments
  8. Real estate
  9. First-time adoption of IFRS
  10. Other areas including business combinations, leases, share-based payments/related parties, and employee benefits

 

Changes to accounting practices in Brazil

28 Sep 2008

Recent amendments to the Brazilian Corporate Law (Law No. 11,638) have introduced changes to accounting practices generally accepted in Brazil, effective for fiscal years beginning on or after 1 January 2008.

The Law designed primarily to update accounting practices under Brazilian Corporate Law 'to enable the convergence of Brazilian accounting practices with accounting standards generally accepted in the international capital markets'. Deloitte (Brazil) has published bulletins in English and Portuguese explaining the changes:

IFRS in your Pocket in Portuguese

28 Sep 2008

Deloitte (Brazil) has published IFRS ao seu Alcance – IFRS in your Pocket 2007 in Portuguese.

This publication is a translation of the English edition with a preface added relating to the Brazilian environment. Click here for our Brazil Page. This and many other Deloitte IFRS publications can always be found Here.

IFRS ao seu Alcance:Um guia de bolso para aproximar sua empresa do novo padrão contábil global

Em outras regiões do mundo, como o Brasil, a Deloitte tem procurado apoiar, das mais diversas maneiras, as organizações sujeitas às regulamentações relacionadas ao IFRS.

Com esse objetivo, a Deloitte elaborou, no Brasil e no mundo, uma série de conteúdos técnicos sobre o IFRS. Entre esses conteúdos, está esta publicaçăo, 'IFRS ao seu alcance', cujo formato visa facilitar a consulta de profissionais e tomadores de decisão em suas jornadas rumo à adoção do padrão contábil internacional.

Click to view IFRS ao seu Alcance – IFRS in your Pocket 2007 in Portuguese (PDF 341k).

Our views on IASB's employee benefits discussion paper

27 Sep 2008

Deloitte has submitted a Letter of Comment on the IASB Discussion Paper Preliminary Views on Amendments to IAS 19 Employee Benefits. In general, we express serious concerns that the proposals go beyond the changes that should be introduced via a short-term project.

An excerpt from our letter is presented below. Past comment letters are Here.

We recognise that accounting for employee benefits has been the subject of criticism for failing to provide a clear indication of the obligation of sponsoring entities towards their employees under long-term defined benefits plans and for the failure of IAS 19 to provide a proper model to account for certain types of plan (mainly certain cash balance plans). We share many of these concerns. However, while we appreciate the desire of the IASB to address the most pressing of these issues, we are concerned that the DP's proposals go beyond the changes that should be introduced via a short-term project. In particular, we strongly discourage the Board from proceeding with its proposal to redefine employee benefit schemes into defined benefits promises and contribution-based promises. As we explain in our detailed comments, the changes proposed would have far reaching consequences and would introduce inconsistencies in accounting for plans that are similar in substance. Further we note that contribution-based promises are not clearly defined and we are not sure we understand exactly what the measurement approach is for contribution-based promises as proposed in the DP and how it differs from other measurement approaches currently used in IFRS.

Finally, while we generally support the Board's proposal to eliminate the option to defer recognition of changes in defined benefit assets and obligation, the elimination of this approach cannot be addressed without proper resolution of the issues linked to the presentation of these changes. Accordingly, we believe that the implementation of this proposal should be timed to coincide with the revised Standard dealing with the presentation of financial performance.

Click to view the Comment letter (PDF 174k).

Report of Advisory Committee on the Auditing Profession

27 Sep 2008

At its meeting yesterday, the US Treasury Department's Advisory Committee on the Auditing Profession voted to adopt its final report containing more than 30 recommendations to improve the sustainability of the public company auditing profession.

Recommendations focused on three specific areas:
  • improving accounting education and strengthening human capital;
  • enhancing auditing firm governance, transparency, responsibility, communications, and audit quality; and
  • increasing audit market competition and auditor choice.
Several of the recommendations relate to the increasing use of IFRSs in the United States. The committee was created in May 2007 to examine key issues facing the auditing profession to encourage greater investor confidence. It was co-chaired by former US SEC Chairman Levitt and former SEC Chief Accountant Nicolaisen. Formation of the committee followed a March 2007 public conference organised by US Treasury Secretary Henry M Paulson, Jr to examine ways to improve the competitiveness of US capital markets. Conference participants identified financial reporting and investor confidence as major factor in US domestic markets' competitiveness. Click to download:

 

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.