April

Roundtables on offsetting proposals – Registration for London webcast now open

20 Apr 2011

As reported earlier, the IASB and FASB are holding several public roundtable meetings in May 2011 to discuss the financial asset and financial liability offsetting project.

Registration for the webcast of the London roundtable on 3 May 2011 is now possible. Please go the IASB website for registration and further information.
Click for our Asset and Liability Offsetting page.

 

Updated Global Filing Manual for XBRL

20 Apr 2011

The Interoperable Taxonomy Architecture (ITA) Project has published an updated version of The Global Filing Manual.

The updates include new rules that relate specifically to iXBRL (Inline XBRL). iXBRL allows for presenting XBRL-based data in situations where the preparer wants to preserve a specific visual presentation of the information. Please note that the updated The Global Filing Manual is made available by the IFRS Foundation for information purposes only. The updated manual can be accessed via the corresponding press release on the IFRS Foundation's website.

 

The Bruce Column — Cluttering up the materiality arguments

19 Apr 2011

It is the glib response. The sight of a 52-page booklet arriving on your desk bearing the title 'Cutting Clutter' could result in you, with unerring aim, tossing the thing over your shoulder into the recycling bin and following that up with a triumphant shout of: 'Job Done!'

This would be a mistake. The booklet from the UK Accounting Standards Board is the latest in a series of broadsides under the aegis of the Financial Reporting Council. Previous publications have torn into the nonsense which clogs up the official channels of financial reporting. This one looks at why people find it hard to get rid of clutter and offers advice on how to change the behaviours which lead to its clogged accumulation. The obvious problem is, of course, lawyers, and others.

'Opinions provided by internal teams, (for example, in-house lawyers), and external auditors tend to focus on what to put in, not what to take out, in order to ensure that the financial statements comply with every disclosure', it warns. And this is understandable, if not excusable. No one is going to get shouted at for putting too much in. But if they leave something out, which with hindsight proves a disastrous omission later on, they could be in deep trouble.

But the FRC wants to concentrate on behaviours. This works both ways. Preparers mind their backs and put stuff in, whether it is material or not, and regulators and standard-setters come up with yards of stuff which turns into good old tick-box checklists. And, when preparers were asked why immaterial clutter finished up in their annual reports, they came up with a worrying variety of reasons.

All of these are, to a greater or lesser extent, easily avoided. And all come about because no one is trying to change the process. They are simply seeking to conform to the process. Just look through the commonest reasons given: 'Due to time pressures, preparers simply repeat disclosures made in prior years rather than considering whether they are still material'. Or: 'Lack of confidence in making the judgement between disclosures that are material and those that are not'. Or: 'Just as much work being required to conclude on materiality as to prepare the disclosure'. Or, and you can feel the depth of experience which underscores this one: 'Desire to avoid lengthy debates with the auditors'. Or: 'Following the leader: if another company makes a disclosure, it can influence others to follow'. Or: 'Fear that a missing disclosure will be challenged by regulators'.

The motives behind all of those are understandable. But almost all of them are based on some sort of stagnation in the corporate organisation. So go back to the starting point. IAS1 states that: 'An entity need not provide a specific disclosure required by an IFRS if the information is not material'. Yet everybody does. What happens in the section on share-based payments? Someone presses the 'regurgitate at great length' button and the whole lot downloads onto the pages of the financial statements. Almost no one can then see the wood for the trees. The detail drives out any possibility of understanding. And it is not just in the sections which are directly influenced by IFRS that all this happens. Sustainability reporting is notorious. And, as the report notes, 'one of the potential reasons for this is social pressure making it difficult for a company to disregard CSR areas, regardless of the importance of each area to its particular business'. Same problem, same reason. No one is thinking.

What the FRC wants the IASB to do is to clarify materiality. It wants to 'encourage the IASB to clarify what materiality means from a disclosure perspective'.

What the FRC wants from preparers stems from feedback suggesting that 'preparers simply provide all the prescribed disclosures about every single share scheme whatever the scheme's size and impact'. As an example of tick-box behaviour the FRC wants changed, it has singled out disclosures about share-based payments for particular criticism. They have gone so far as to creating a disclosure aid for companies. This aims to encourage preparers to 'disaggregate the cost of share-based payment schemes; make full disclosure only about those schemes that are material; and provide only brief details of immaterial schemes'. And the template they provide for how this would work in the notes to the accounts shows how it could be put into practice. The end result would become clearer and it would help companies limit their reputational risk in the coming arguments brewing up over the scale of executive remuneration.

Ultimately, it all comes down to one issue. Producing financial information is seen as a grinding process-driven exercise rather than an opportunity to illuminate the thoughts and decision-making of investors. The FRC understands this and the clutter-cutting effort deserves thought rather than offhand dismissal. Changing behaviours needs a change in motivation. It is no surprise that the best sections of 'Cutting Clutter' are all about how to insert steps into the process which would put an anti-clutter detection and elimination mechanism into all planning stages of the financial reporting process.

Robert Bruce
April 2011

Related links

 

 

IFRS implemented with all Romanian banks as of next year

19 Apr 2011

Following a letter of intent signed by the Romanian authorities on 5 February 2010 and approved by the International Monetary Fund on 19 February 2010, the National Bank of Romania issued on 16 July 2010 Order No. 9 requiring all credit institutions in Romania to prepare all accounting records in accordance with International Financial Reporting Standards (IFRSs) starting 1 January 2012.

Romanian banks (listed and unlisted) were already required to prepare IFRS financial statements in parallel with Romanian GAAP. From 2012 onward, IFRSs will substitute local GAAP for banks completely and will become the sole base for accounting.

Please click for Order No. 9 on the National Bank of Romania's website (in Romanian) and our country page for Romania.

IAESB issues draft revised standard on professional values, ethics and attitudes

18 Apr 2011

The International Accounting Education Standards Board (IAESB) released for public exposure a proposed revision of International Education Standard (IES) 4 'Professional Values, Ethics, and Attitudes'.

The revised standard, part of the IAESB's project to improve the clarity of its standards, proposes that the development of professional values, ethics, and attitudes be addressed by learning and development activities that occur throughout the career of the professional accountant.

Comments on the proposals are requested by 15 July 2011. Click for the IAESB announcement (link to IFAC website).

Agenda for April IASB-FASB special meeting on 27 April 2011

18 Apr 2011

The IASB and FASB are holding a special joint meeting in London on 27 April 2011.

You can access the agenda on our 27 April 2011 special joint meeting page.  We will also post Deloitte observer notes on this page as they are available.

Journal of Accountancy interview with FASB Chairman Leslie Seidman

18 Apr 2011

The Journal of Accountancy (JoA) has published a five-part series of articles discussing an interview with FASB Chairman Leslie Seidman.

The topics covered include:

In relation to convergence, Sir David Tweedie and Leslie Seidman have recently conceded that they need to extend the timetable for several of their projects with an intention to finish the convergence programme by end of 2011. See our previous article for more details.

Click for Part 5 of the JoA article (link to the JoA website). Links to the other articles in the series are available at the bottom of Part 5.

Canadian securities regulators provide guidance on IFRS transition disclosures

18 Apr 2011

The Canadian Securities Administrators (CSA) have published CSA Staff Notice 52-328, Disclosures About Accounting Policies in the Year of Changeover to International Financial Reporting Standards.

This notice responds to specific questions CSA staff have received on disclosure about accounting policies in an issuer's interim and annual Management's Discussion and Analysis (MD&A) in the year of changeover to International Financial Reporting Standards (IFRS).

Click for CSA Staff Notice 52-328 Disclosures About Accounting Policies in the Year of Changeover to International Financial Reporting Standards (link to CSA website).

Effective Dates user survey

16 Apr 2011

In October 2010 the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) published 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.

Since only a limited number of responses was received, the boards directed the staff to undertake further outreach activities. The staff have now prepared a short survey that should take no longer than ten minutes to complete. This survey requests feedback from investors regarding questions on the potential effective dates and transition methods of the following projects: Accounting for Financial Instruments, Leases, Revenue Recognition, and Accounting for Insurance Contracts. Please go to the IASB's website for further information and access to the survey.

 

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.