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New Zealand moving away from the IFRS for SMEs

27 Oct 2010

The New Zealand Accounting Standard Review Board (ASRB) has released an updated summary of its 'Reporting by For-Profit Entities' project, which seeks to implement an updated differential reporting framework for New Zealand entities.

The New Zealand Accounting Standard Review Board (ASRB) has released an updated summary of its 'Reporting by For-Profit Entities' project, which seeks to implement an updated differential reporting framework for New Zealand entities.

At its July 2010 meeting, the ASRB agreed to establish an Working Group involving the ASRB, New Zealand Financial Reporting Standards Board (FRSB) and New Zealand Securities Commission to consider key issues.

The October 2010 ASRB meeting considered and agreed with the Working Group's recommendations, which include the need to operationalise the IASB "public accountability" definition in the New Zealand context, and the benefit of having a consistent set of recognition and measurement requirements across the 'tier' structure. Accordingly, this means New Zealand is unlikely to adopt the IFRS for SMEs but will instead require IFRS recognition and measurement requirements for all entities, with disclosure relief for particularly classes of entities.

New Zealand and Australia are working together on cross-Tasman harmonisation and this development may be a key plank in achieving consistent reporting requirements between the two countries, as the 'tiered' approach has recently been adopted in Australia. Proposals for the revised regime are expected to be issued in 2011 after further NZ-Australia discussions.

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Public consultation on country-by-country reporting

27 Oct 2010

The European Commission is conducting a public consultation in order to gather stakeholders' views on country-by-country reporting by multinational companies. Country-by-country reporting is a concept that would require multinational companies to disclose financial information on their operations in third countries in their annual financial statements.

At present, issuers of securities in regulated markets in the EU are required to make public an annual financial report comprising, inter alia, a management report and the audited financial statements. When the issuer is required to prepare consolidated accounts, the audited financial statements must comprise consolidated accounts drawn up accordance with international accounting standards (IFRS). Currently, the applicable accounting standards do not require issuers to disclose financial information on a country-by-country basis in their consolidated accounts, although the Accounting Directives do require issuers to identify subsidiaries, jointly controlled entities and associates.

The IASB is currently working on a possible country-by-country reporting requirement which could be incorporated within a replacement Standard for IFRS 6 Exploration for and Evaluation of Mineral Assets. Once finalized, this standard is likely to become mandatory in the EU through the usual endorsement process under the IFRS Regulation.

The questionnaire for the consultation includes the following questions:

  • Would it be useful to have common EU rules on the disclosure of financial information on a country-by-country basis?
  • Would the disclosure of financial information on a country-by-country basis by multinational companies be meaningful to investors of the company concerned?
  • [...]
  • Would the disclosure of financial information on a country-by-country basis by multinational companies active in the extractive sector (e.g. minerals, oil, natural gas, etc.) be useful in order to improve domestic accountability and governance in natural resource-rich third countries?
  • [...]
  • If country-by-country reporting were to be considered useful, what kind of multinational companies would usefully be targeted?
  • Please provide information on the cost that you estimate that the introduction of country-by-country disclosure requirements could entail.

The questionnaire of the European Commission can be accessed here (link to EC website). Responses must be received by 22 December 2010.

IASB webcast on leases exposure draft

27 Oct 2010

On Monday 1 November, the IASB staff will be hosting a live webcast on common questions the staff are asked about the lease accounting proposals.

There is no charge to attend the web presentation, but you need to register to participate. You can do this now or any time before the presentation. Details of the webcast are as follows:
Topic: Common questions about the lease accounting proposals
Date and time: Monday, 1 November 2010, 10:00am and repeated again 3:00pm (UK time)
More information on the webcast and registration: click here (link to IASB website)
More information on IAS Plus: For our agenda project page click here


United States publication focuses on global benefits from IFRS implementation

27 Oct 2010

Deloitte (United States) has published The IFRS Center of Excellence.

The United States Securities and Exchange Commission (SEC) is expected to decide on the adoption of IFRS in the United States in 2011, meaning U.S. companies could be required to report under IFRS in approximately 2015 or 2016. The publication discusses how a shared environment for IFRS reporting can help drive financial reporting standardisation and cost savings.

An extract:

Like any significant business change, the shift from local GAAP to IFRS reporting will involve an implementation cost. But unlike most other regulatory mandates, the move to IFRS also offers companies the chance to realize ongoing savings. Why? Because the adoption of IFRS across countries with formerly different local Generally Accepted Accounting Principles (GAAP) can ultimately eliminate the need for global companies to maintain local-country GAAP reporting capabilities in those countries — and, over time, allow them to consolidate IFRS reporting processes into a "Center of Excellence."

Click for The IFRS Center of Excellence - A shared environment for IFRS reporting can help drive financial reporting standardization and savings, too (PDF 1,486k).

Notes from special October IASB meeting

27 Oct 2010

The IASB met in London on 27 October 2010 for a special meeting.

The topics discussed were as follows:

Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers for the entire meeting. The next IASB meeting will be a three day special meeting on Financial Instruments: Impairment scheduled for 10-12 November 2010.

New issue of the IASB's Investor Perspectives

27 Oct 2010

In April 2010, the Trustees of the IFRS Foundation and the IASB launched a programme to enhance investors' participation in the development of International Financial Reporting Standards (IFRSs).

One of the enhancements is a newsletter for investors. Board members Stephen Cooper, Patrick Finnegan and Patricia McConnell publish timely updates on financial reporting matters. A new issue of the Investor Perspectives is now available:

All Investor Perspectives are archived on the IASB's website.

FASB webcast on effective dates and transition consultation

27 Oct 2010

The FASB has released a podcast on the IASB and FASB's recent documents seeking views on when new financial reporting standards resulting primarily from their work to improve and achieve convergence of International Financial Reporting Standards (IFRSs) and US generally accepted accounting principles (GAAP) should become effective.

The questions in the FASB and IASB documents are largely consistent, although there are some differences.

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The Bruce Column — Around the table: the arguments over leasing

26 Oct 2010

There are several schools of thought evolving around the proposed leasing standard but the overwhelming one evokes the old joke about the farmer, leaning on a gate in the depths of the countryside, who is approached by a driver who wants to know how to get to his destination.

"If I were you", says the farmer, "I wouldn't start from here".

And that was where a recent debate between members of the UK Hundred Group of Finance Directors and members of the IASB began. There was a simple question about the standard: "Why now?" There were other arguments about the sheer scale of change which will be involved, the expensive and cumbersome changes to systems, and technical arguments. But it was timing which was uppermost in people's minds. No one really was arguing that change was not necessary. What they were arguing about was that in the midst of a precarious economic period replete with all the rethinking, restructuring, and uncertainty, they really didn't want to be introducing and implementing something which, while necessary, they saw as being a long way off urgent. People were supportive of the theory but felt that cost/benefit considerations and the practicalities involved ought, at this time, to outweigh the gain of attaining purity of theory.

There speak the preparers of accounts, always looking to the practicalities of implementation. But standard-setters have a different remit and know that with a controversial issue like leasing there will never be a good time to broach the subject. And that is what they argued. The process of trying to get to grips with leasing predated the founding of the IASB. It was a process of evolution. The informal G4+1 group of standard-setters had started work on this in 2000. "So", as Board member Stephen Cooper made clear, "this has been thought about for a long time". And the point in time when the thinking comes to fruition is not determined by a particular point in the economic cycle. "We can't make our judgements depending on the economic cycle", said Cooper, though he did suggest that they could take that into account when deciding on the date when the eventual standard takes effect.

The other argument is over whether you could achieve the desired transparency for users and investors by simply improving disclosure requirements and so saving preparers from the upheaval of change. This too failed to convince the IASB. Disclosure was not going to be a substitute for providing primary information in the financial statements. The topic of the recognition of assets and liabilities was not going to be fudged. As Board member Patrick Finnegan put it: "The Board doesn't agree with just increasing disclosure in the notes. That is not the way to improve the accounting", he said.

A straw poll of the audience showed that the majority there agreed that in theory all leases should be on the balance sheet. But the doubt over whether this was the appropriate time to be doing it lingered. One heartfelt intervention pointed out that preparers had suffered the impacts of changes involving pensions, healthcare plans and share-based payments and why did leases have to come into the same timeframe. Stephen Cooper was not giving any ground on this one. "We are not unaware of the social consequences of our work", he said. "But ultimately our mandate is to improve financial reporting and reflect the economics as fairly as we can".

Again he emphasised that the effective date would be at least 18 months after publication of the standard. There was then a riposte from the audience. The cat was already out of the bag they argued. Just having the proposals out in the public domain meant that analysts were already asking questions about the likely effects on their figures.

After this the questioning turned to short-term leases and the practical issues involved. And this was when photo-copiers started to bulk large in the arguments. When it comes to dealing with lease and other components in service contracts should you split out the photo-copier, the paper and the toner, one CFO asked. The answer from the IASB was that surely materiality would come into this. To which the response was that this was all very well with fixed assets. Fixed assets were tracked through systems. But, suggested a preparer, you don't do that for small items. Fixed assets went through a procurement process. Smaller items did not and so you were more prone to errors on low ticket items. And as someone else pointed out you could easily risk spending 50% of your time on 1% of the balance sheet.

Through all the arguments in the session the same central theme held sway. The theory was fine but the practicalities could prove impossible. When the discussion moved to considering options to extend or terminate a lease one exasperated finance director wanted to know if the several million company cars in existence would all need their lease terms to be continually reassessed. And when the concept of contingent rentals came to be discussed the same question of the enormity and reliability of the task involved came to the fore. One finance director argued that not everyone is a technical accountant. The people involved in this process of preparing and gathering the mass of data would tend to be operational people rather than technical accountants and that, for him, created a concern about getting high quality information.

These are early days in the debate. But time is short. And Stephen Cooper acknowledged this. He asked the audience to get their opinions in well before the official deadline of mid-December. His message was that leasing was an extremely challenging topic but the key now was for everyone out there to think about the issues and, if they had serious points to make, to get on the phone or send an email. The IASB is obviously expecting a difficult ride on this topic and are making real efforts to hear about solutions, or the existence of further unseen problems, early in the process. It is all going to be complex, and it is going to be hard work.

Robert Bruce
October 2010

Related links



CESR sees improvements in financial instruments disclosures

26 Oct 2010

In October 2009, the Committee of European Securities Regulators (CESR) analysed the 2008 financial statements of 96 European listed banks and insurers to assess compliance with the disclosure requirements of IFRS 7 Financial Instruments: Disclosures.

The results of the study highlighted that compliance could be improved in certain areas to enhance the transparency of financial communication to the market.

CESR has continued to monitor closely developments in relation to the reporting of financial instruments, including actions taken by different EU enforcers in respect of the accounts that were reviewed last year. In a follow-up report published today, CESR reports improvement in all monitored areas. The most significant increase in the level of compliance relate to: valuation techniques, own credit risk, credit risk, day one profit or losses and special purpose entities. A high level of compliance is also reported in respect of the new requirements relating to fair value hierarchy, mandatory for the first time in the December 2009 accounts.

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Spanish Heads Up on insurance contracts

26 Oct 2010

We have posted the following Spanish language Heads Up publication from Deloitte (Colombia).

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.