May

Global IFRS and Offerings Services newsletter

28 May 2009

We have posted Deloitte's US Reporting Newsletter for Non-US Based Companies March-April 2009 Edition – includes news through 15 April 2009.

The newsletter is developed by Deloitte's Global IFRS and Offerings Services (GIOS) team – Deloitte practitioners assisting non-US companies and non-US practice office engagement teams in applying US GAAP and IFRSs and in complying with the SEC's financial reporting rules. The GIOS Newsletter is an update on relevant GAAP, regulatory, and other matters, webcasts, and publications, with hyperlinks to source material. Past GIOS Newsletters are Here.

In this issue of the GIOS newsletter:

IFRS Matters

  • IASB Amends Financial Instrument Disclosures
  • IASB Issues Amendments to Clarify Accounting for Embedded Derivatives
  • IASB Proposes Amendments to Derecognition Requirements for Financial Instruments
  • FASB and IASB Issue Discussion Paper on Lease Accounting
  • IASB Proposes Changes to Income Tax Accounting
  • Tips on Applying IFRS
  • IFRS Tools
US GAAP Matters
  • FASB Proposes to Improve Guidance on OTTI and Fair Value Measurements in Inactive Markets and on Distressed Transactions
  • FASB Issues FSP on Assets Acquired and Liabilities Assumed in a Business Combination That Arise From Contingencies
  • EITF Proposes Issue on Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance
  • EITF Proposes Issue 08-9 on Milestone Method of Revenue Recognition
  • FASB Proposes Statement on GAAP Hierarchy
  • FASB Proposes Technical Corrections Standard
  • Deloitte Issues Alert on Deep-Out-of-the-Money Share Option Awards
  • Deloitte Issues Alert on OTTI Analysis of Perpetual Preferred Securities
  • SEC Issues New Compliance and Disclosure Interpretations
  • SEC Staff Releases Observations from Reviews of Certain IPOs
Other Matters
  • Other SEC Rules Issued in the First Quarter of 2009
  • AICPA Proposes and Issues SASs as Part of Clarification and Convergence Project
  • IAASB Issues Final Clarified ISAs
  • PCAOB Reproposes Auditing Standard on Engagement Quality Reviews
  • SEC's Division of Corporation Finance Releases Updated Financial Reporting Manual
  • SEC Publishes 2008 Annual Report
  • SEC's Findings of Section 404(a) Deficiencies for First Time Filers

 

IASB exposure draft on fair value measurement

28 May 2009

The IASB has published an exposure draft (ED) of proposed guidance on how fair value should be measured where it is required by existing standards.

The ED does not propose to extend the use of fair value measurements in any way. It would add disclosure requirements about how fair values were determined. If adopted, the proposals would replace fair value measurement guidance contained within individual IFRSs with a single, unified definition of fair value, as well as further authoritative guidance on the application of fair value measurement in inactive markets. The IASB's starting point in developing the exposure draft was the equivalent US standard, SFAS 157 Fair Value Measurements as amended. The proposed definition of fair value (FV) is identical to the definition in SFAS 157 and the supporting guidance is also largely consistent with US GAAP. Comment deadline is 28 September 2009. Click for Press Release (PDF 101k).

Overview of the Proposals in the Fair Value Measurement ED

  • FV definition. The IASB proposes an exit price definition of FV: "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date".
  • Most advantageous market. FV measurement of an asset or liability assumes sale or transfer in the most advantageous market for the asset or liability available to the entity.
  • Measurement assumptions. FV measurement of an asset or liability should use the assumptions that market participants would use in pricing the asset or liability.
  • Highest and best use of an asset. FV measurement of an asset assumes that the asset will be sold to a market participant who will use it at its highest and best use.
  • Assume transfer of a liability. FV measurement of a liability assumes that the liability is transferred to a market participant at the measurement date.
  • Day one gains/losses. In four cases identified in the ED, FV measurement at initial recognition might differ from the transaction price. An entity would recognise any resulting gain or loss unless the relevant IFRS for the asset or liability requires otherwise.
  • Valuation techniques. The ED proposes guidance on valuation techniques, including specific guidance on markets that are no longer active. Valuation techniques must be consistent with the 'market approach', 'income approach' or 'cost approach'. An entity would choose the valuation technique most appropriate in the circumstances and for which sufficient data are available to measure fair value.
  • Hierarchy of inputs to valuation. The ED proposes a fair value hierarchy that prioritises into three levels the inputs to valuation techniques used to measure fair value:
    • Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
    • Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices).
    • Level 3 inputs are inputs for the asset or liability that are not based on observable market data (unobservable inputs).
  • Disclosures. The ED proposes various disclosures about how assets and liabilities were measured at fair value -- "information that enables users of its financial statements to assess the methods and inputs used to develop those measurements and, for fair value measurements using significant unobservable inputs (Level 3), the effect of the measurements on profit or loss or other comprehensive income for the period".

 

Annual reports of UK FRC, IFAC, and US SEC

28 May 2009

IAS Plus visitors may find the following recently-issued annual reports of interest (with links to source on other websites):

Annual report of the United Kingdom Financial Reporting Council for 2008-2009 (UK FRC). An excerpt:

We note with concern the recent increase in political pressure on both the IASB and FASB. Whilst we remain open to identifying improvements in how fair value accounting is applied, we are of the view that, in those limited areas to which it applies, it is more appropriate than any alternative so far identified....

We continue to have significant concerns that the EU might adopt its own version of IFRS rather than the standards as published by the IASB. In November 2008, an ASB coordinated letter, signed by UK constituents representing a range of interests, was published in the Financial Times, stressing the importance of the EU not adopting its own version of IFRS.

  • Annual report of the International Federation of Accountants (IFAC) for 2008. An excerpt:
  • A key feature of the report is its Service Delivery section, which compares IFAC's planned services with those delivered in five areas:

    • Standards and Guidance
    • Promoting Quality
    • International Collaboration Activities
    • Representation of the Accountancy Profession in the Public Interest
    • Information Services
    This section of the annual report-which comprehensively describes the services delivered by IFAC in 2008-is critical in demonstrating IFAC's accountability to its stakeholders. For this reason, we have sought and received assurance from our independent auditors about the reliability of this information.
  • Annual report of the US Securities and Exchange Commission for 2008. An excerpt:
  • In the midst of the 2008 global market crisis, the strong international partnerships the Commission has built in recent years proved invaluable. Over the past few years, the SEC has signed and implemented information sharing arrangements for enforcement and regulatory cooperation with securities regulators around the world, including supervisory arrangements in 2007 related to the oversight of NYSE-Euronext and ISE Eurex and arrangements in 2008 for sharing non-public issuer specific information relating to the application of International Financial Reporting Standards.

    Model IFRS financial statements in Polish

    27 May 2009

    Deloitte Poland has published Wzorcowe Skonsolidowane Sprawozdanie Finansowe 2009 wedlug MSSF – Model IFRS Consolidated Financial Statements for 2009 in Polish.

    These model financial statements illustrate the accounting and disclosures required by IFRSs as endorsed by the European Union for reporting periods beginning on or after 1 January 2009. Click to download Wzorcowe Skonsolidowane Sprawozdanie Finansowe 2009 według MSSF – model IFRS consolidated financial statements for year ended 31 December 2009 in the Polish language (PDF 3,697k, 120 pages). Please note that these financial statements reflect those IFRSs endorsed by the EU as of 5 March 2009. They do not reflect other IFRSs that are effective for 2009 but that were not endorsed by 5 March 2009.

     

    Plan for US capital markets reform

    27 May 2009

    The Committee on Capital Markets Regulation has published The Global Financial Crisis: A Plan for Regulatory Reform.

    The Committee is an independent and nonpartisan research organisation dedicated to improving the regulation of US capital markets. The Committee comprises 25 leaders from the investor community, business, finance, law, accounting, and academia. Two IASC Foundation Trustees (Samuel A DiPiazza, Jr and Robert R Glauber) serve on the Committee. The 25 members also include William C Freda, Vice Chairman and US Managing Partner of Deloitte, and William G Parrett, former Global CEO of Deloitte. The report is the result of a year-long examination into the global financial crisis and the key deficiencies in the regulatory system. Critical topics addressed include capital requirements, resolution procedures, the regulation of hedge fund and private equity, the securitisation process, credit default swaps and other derivatives, disclosure and accounting standards, credit rating agency practices, and the overall US regulatory architecture. The report makes 57 practical and specific recommendations for regulatory reform, several of which refer to the IASB and the FASB. Chapter 4 Enhancing Accounting Standards examines two accounting issues raised by the financial crisis: the use of fair value accounting and the requirements for consolidation. Click to download: Presented below are summaries of the four accounting-related recommendations.

    Recommendation 43. Study How FVA Can Be Improved. The Committee believes 'fair value' accounting is a problematic standard in inactive or distressed markets because it conflates the concepts of market value and credit model value and may confuse investors. We do not believe the problem has been solved by FASB's latest guidance. We recommend continuing to study how 'fair value' accounting can be improved. We further recommend that this be done on a joint basis by FASB and IASB, so the two major accounting standard setters are consistent in their approach.

    Recommendation 44. Supplement FVA with Dual Presentation of Market and Credit Values. To supplement fair value reporting, the Committee proposes that FASB require an additional dual presentation of the balance sheet for Level 2 and Level 3 assets using credit value and market value independently of each other. Accompanying this dual presentation, firms should also disclose their underlying valuation methodologies. In the case of credit value, this includes sharing modeling techniques, estimates, assumptions, and risk factors. In the case of market value, the disclosures should reveal what market prices were actually relied on.

    Recommendation 45. Allow The Fed to Use a Non-GAAP Methodology. As for regulatory accounting, the Committee believes the Fed should not be limited to following US GAAP and should instead be free to choose another method (credit value, market value, or some combination of both) it deems appropriate.

    Recommendation 46. Implement FIN46R. As for consolidation, we agree with the FIN 46R approach because it focuses on the issue of control. [FIN 46R is FASB's revised standard on consolidation of special purpose vehicles.]

    IFRS e-Learning en Español

    26 May 2009

    The Spanish version of Deloitte's IFRS e-Learning Site is now live.

    Currently, 20 of the 37 English modules are available in Spanish without charge. They are:
    • Conceptual Framework (Marco Conceptual para la Preparación y Presentación de Estados Financieros)
    • IAS (NIC) 1, 2, 7, 8, 10, 16, 17, 18, 19, 21, 23, 24, 28, 31, 38, 40, 41
    • IFRS (NIIF) 1, 5
    Further Spanish language modules are in development and will be released to the site over forthcoming months. Click to view Spanish version of Deloitte's IFRS e-Learning Site. IAS Plus has many resources in Spanish Here.

     

    Updated summary of IFRIC agenda rejections

    26 May 2009

    We have updated our Summary of Issues Not Added to IFRIC's Agenda to reflect the IFRIC's final decisions at its May 2009 meeting not to add the following topics to its agenda.

    Our summary now includes over 150 issues:
    • IAS 12: Classification of tonnage taxes by shipping companies
    • IAS 16: Disclosure of idle assets and idle construction in progress
    • IAS 38: Accounting by a real estate developer for sales costs during construction
    • IAS 39: Participation rights and calculation of the effective interest rate
    • IAS 39: Classification of failed loan syndications
    • IAS 41: Discount rate used in fair value calculations
    • IFRIC 14: Voluntary prepayments
    Click to view our Summary of Issues Not Added to IFRIC's Agenda page.

     

    Appointments to EC Standards Advice Review Group

    26 May 2009

    The European Commission has appointed three new members to the Standards Advice Review Group (SARG).

    The role of the SARG is to advise the Commission in the endorsement process of International Financial Reporting Standards and International Financial Reporting Committee Interpretations. SARG assesses whether EFRAG's opinions on endorsement of IFRSs and IFRICs are well-balanced and objective. Click for EC Announcement of Appointments to SARG (PDF 17k). You can find Minutes of SARG Meetings here on the EC website.

     

    SEC seminar on XBRL filings

    23 May 2009

    The US Securities and Exchange Commission will conduct a public seminar on 10 June 2009 from 12:00 noon to 15:00 to help companies comply with new XBRL filing requirements.

    SEC staff will present information about the technology requirements for complying with the rules and will also provide an overview of the tools and information provided by the Commission to assist with compliance. The seminar will be held at the SEC's Washington DC headquarters and will also be available via webcast on the SEC website. Click for SEC Announcement (PDF 29k).

     

    Correction list for hyphenation

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