January

Notes from day 1 of the IASB's January meeting

20 Jan 2009

The International Accounting Standards Board is holding its January 2009 meeting at its offices in London on Monday to Friday, 19-23 January 2009.

Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the Meeting.

IFRS e-learning for directors

20 Jan 2009

Deloitte (Canada) has developed an IFRS e-learning program for directors. To effectively fulfill their oversight responsibilities throughout and after the transition from Canadian GAAP to IFRS, board and audit committee members must maintain their financial literacy.

And with IFRS conversion activities already underway, now is the time to start the IFRS education process. Deloitte's IFRS e-learning program for directors focuses on awareness-building rather than technical details. The program, which is available on CD or on-line, can be used for individual self-study or as group sessions facilitated by a Deloitte IFRS professional. The interactive material:
  • discusses the challenges that companies may face through the conversion
  • highlights difficult issues that management and boards may encounter throughout the changeover process
  • outlines differences between IFRS and Canadian GAAP for all key standards
  • provides practical examples based on Deloitte's experiences implementing IFRS around the globe
  • recommends questions that directors should consider asking management or internal and external auditors
Click for:
More Information about IFRS E-learning for Directors (PDF 155k).
More information about Transition to IFRSs in Canada.

 

G30 recommendations on fair value accounting

20 Jan 2009

On 15 January 2009, The Group of Thirty released a report Financial Reform: A Framework for Financial Stability. The report addresses flaws in the global financial system and provides 18 specific recommendations to: improve supervisory systems; enhance the role of the central banks; improve governance practices and risk management; address pro-cyclicality; enhance accounting practices; strengthen the financial infrastructure; and increase coordination internationally.

The project was led by Paul Volcker, Chairman, and Tommaso Padoa-Schioppa and Arminio Fraga Neto, Vice Chairmen. Mr Volcker and Mr Padoa-Schioppa are both former Chairmen of the IASC Foundation, under which the IASB operates. The Group of Thirty is a private, nonprofit, international body that aims to 'deepen understanding of international economic and financial issues, to explore the international repercussions of decisions taken in the public and private sectors, and to examine the choices available to market practitioners and policymakers'. Click to download List of Recommendations (PDF 288k).

Core recommendations in the Group of Thirty report: Financial Reform: A Framework for Financial Stability

Core Recommendation I Gaps and weaknesses in the coverage of prudential regulation and supervision must be eliminated. All systemically significant financial institutions, regardless of type, must be subject to an appropriate degree of prudential oversight.

Core Recommendation II The quality and effectiveness of prudential regulation and supervision must be improved. This will require better-resourced prudential regulators and central banks operating within structures that afford much higher levels of national and international policy coordination.

Core Recommendation III Institutional policies and standards must be strengthened, with particular emphasis on standards for governance, risk management, capital, and liquidity. Regulatory policies and accounting standards must also guard against procyclical effects and be consistent with maintaining prudent business practices.

Core Recommendation IV Financial markets and products must be made more transparent, with better aligned risk and prudential incentives. The infrastructure supporting such markets must be made much more robust and resistant to potential failures of even large financial institutions.

One of the specific recommendations under Core Recommendation III relates to 'Fair Value Accounting':

Fair Value Accounting – Recommendation 12:

  1. Fair value accounting principles and standards should be reevaluated with a view to developing more realistic guidelines for dealing with less liquid instruments and distressed markets.
  2. The tension between the business purpose served by regulated financial institutions that intermediate credit and liquidity risk and the interests of investors and creditors should be resolved by development of principles-based standards that better reflect the business model of these institutions, apply appropriate rigor to valuation and evaluation of intent, and require improved disclosure and transparency. These standards should also be reviewed by, and coordinated with, prudential regulators to ensure application in a fashion consistent with safe and sound operation of such institutions.
  3. Accounting principles should also be made more flexible in regard to the prudential need for regulated institutions to maintain adequate credit loss reserves sufficient to cover expected losses across their portfolios over the life of assets in those portfolios. There should be full transparency of the manner in which reserves are determined and allocated.
  4. As emphasized in the third report of the CRMPG, under any and all standards of accounting and under any and all market conditions, individual financial institutions must ensure that wholly adequate resources, insulated by fail-safe independent decision-making authority, are at the center of the valuation and price verification process.

Two IFRS-related IVSC exposure drafts

20 Jan 2009

The International Valuation Standards Council has issued two exposure drafts for public comment.

Comments are requested by 30 April 2009. Posted on IAS Plus with the kind permission of IVSC:

Addition to agenda for January 2009 IASB meeting

19 Jan 2009

A new item has been added to the IASB Agenda for Tuesday 20 January 2009 relating to IFRIC Interpretation 16 Hedges of a Net Investment in a Foreign Operation.

The IFRIC staff is proposing a fast-track amendment to IFRIC 16 to remove the restriction, currently in IFRIC 16, that the hedging instrument for a net investment in a foreign operation cannot be held by the foreign operation whose net investment is being hedged. Because IFRIC 16 is effective for annual periods beginning on or after 1 October 2008 with prospective application, and because hedge accounting designations cannot be retrospective, the staff believes that the amendment should be done urgently.

 

SEC Chairman-designate is cautious about IFRSs

19 Jan 2009

On 15 January 2009 the US Senate Committee on Banking, Housing, and Urban Affairs held a hearing on the nomination of Mary L Schapiro as Chairman of the Securities and Exchange Commission. Ms Schapiro indicated some concerns about the near-term adoption of IFRSs in the United States and said she would 'not necessarily feel bound by the existing roadmap that is out there for comment'.

Click here for the Webcast of the Hearing. Below is an unofficial transcript of Senator Reed's question about IFRSs and Ms Schapiro's reply.

Senator Jack Reed (D-RI): Much of what you are going to do will have complications and consequences overseas as well as here in the United States. One of the areas is the IFRS roadmap. We have repeatedly written to Chairman Cox to try to determine and develop a very deliberate roadmap, and I think there's a rush to judgment on this issue. In fact, I met with the CEO of the Honeywell Corporation who has similar concerns over disparate treatment under international rules that can be used to change income, that can be used to treat R&D expenses differently. There's a potential for arbitrage between the two systems that I think we have to avoid. Can you give us a notion of how you wish to proceed with this international accounting movement – with recognition that eventually we'll have that in a global economy and hopefully we will converge to a set of high level standards.

Mary Schapiro: Well, I would proceed with great caution so that we don't have a race to the bottom. I think we all can agree that a single set of accounting standards used around the world would be a very beneficial thing, would allow investors to compare companies around the world. With that said, I have some concerns with the roadmap that has been published by the SEC and is out for comment now. I have some concerns about the IFRS standards generally. They are not as detailed as the US standards. There's a lot left to interpretation. Even if adopted, there will still be a lack of consistency, I believe, around the world in how they are implemented and how they are enforced. The cost to switch from US GAAP to IFRS is going to be extraordinary, and I've seen some estimates that range as high as $30 million for each US company in order to do that. This is a time when I think we have to think carefully about whether imposing those sorts of costs on US industry really make sense. Perhaps my greatest concern is the independence of the International Accounting Standards Board and the ability to have oversight of their process for setting standards and the amount of rigor that exists in that process today. So, I will tell you that I will take a big deep breath and look at this entire area again carefully, and will not necessarily feel bound by the existing roadmap that is out there for comment.

 

IFRSs required for some companies in Eritrea

19 Jan 2009

We have added a new country page for Eritrea and we have updated our page on Use of IFRSs by Jurisdiction.

The accounting framework in Eritrea is as follows:
  • Listed companies: There is no stock exchange in Eritrea.
  • Unlisted companies: IFRSs are required for:
    • Government-owned enterprises,
    • newly privatised companies (large taxpayers, or 'LTOs'),
    • banks, and
    • insurance companies.

 

EITF Snapshot for January 2009

18 Jan 2009

We have posted the January 2009 edition of EITF Snapshot summarising the 15 January 2009 meeting of FASB's Emerging Issues Task Force. EITF Snapshot, published by Deloitte & Touche LLP (USA), enables readers to identify relevant topics and to understand quickly the meeting's outcome.

This EITF Snapshot covers the following issue discussed by the EITF at the meeting:
  • Issue 08-10 Selected Statement 160 Implementation Questions – Tentative conclusion reached
Initial EITF consensuses (known as 'consensuses-for-exposure') are exposed for a comment period after ratification by the FASB. At its first scheduled meeting after the comment period, the EITF considers comments received and, as warranted, affirms its consensuses-for-exposure as final consensuses. Those consensuses are then provided to the Board for final ratification.
Past issues can be downloaded Here.

 

Three upcoming comment deadlines next week

17 Jan 2009

We remind you that comments are due next week on three IASB exposure drafts, as follows:

IASB Employee Benefits Working Group meeting

17 Jan 2009

The IASB's Employee Benefits Working Group will meet at the Crowne Plaza London City Hotel, 19 New Bridge Street, London on Monday, 26 January 2009, 10:00am to 4:00pm.

The meeting is open to public observation. The agenda is below.

Working Group Agenda - Employee Benefits Working Group Meeting - 26 January 2009, London

  • Update on the project and next steps
  • Issues to be addressed in exposure draft
  • Proposed amendments to IFRIC 14
  • Possible simplification of pensions accounting for private entities
  • Financial Statement Presentation – Overview and implications for post-employment benefits
  • Feedback from working group members

 

Correction list for hyphenation

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