April

Upcoming meeting of the FASB/IASB joint working group on lease accounting

08 Apr 2011

The next meeting of the Leases Working Group will be held in London on Monday 11 April 2011. At this meeting, the IASB and FASB representatives will meet with members of the joint working group on lease accounting to discuss issues on the 2010 exposure draft on leases.

The objectives of this meeting are:
  • Definition of a lease
  • Lessee accounting
  • Lessor accounting
  • Accounting for variable lease payments
  • Transition
  • Topic: ED Leases
  • Date and time: Monday, 11 April 2011, 10:00 - 16:00 BST
  • More information on the meeting: Click here
  • More information on IAS Plus: Our Leases project page

 

The Bruce Column — IFRS and the House of Lords

08 Apr 2011

To say that their Lordships were out of their depth when it came to IFRS would be unfair.

There is probably a convention within the UK House of Lords that such a criticism would be deemed to be un-parliamentary language and so ruled out of order. On the other hand there are distinct signs within the Lords Select Committee on Economic Affairs final published report, 'Auditors: Market Concentration and Their Role', that when they turned their attentions to IFRS they were not entirely sure about how things worked. They should have no worries about this. They would be far from being the first to realise that IFRS were just too complex for a simple understanding.

And, in any case, it was not a subject they intended to cover in the first place. As their report says, 'accounting standards were not at first within our intended scope for this inquiry'. But at the first of their hearings they ran into Professor Stella Fearnley of Bournemouth University in full flow. Lord Lawson, onetime Chancellor of the Exchequer, was bowled over. 'I have considerable sympathy with your magnificent outburst', he exclaimed. 'Sorry, sir,' responded Fearnley, 'it was a rant'. It didn't really matter. The hare was up and running.

As a result of what the report describes as these 'trenchant criticisms' the inquiry was widened and across eight months and eleven sets of hearings IFRS kept popping up as a bit of a diversion from their Lordships main concerns with audit concentration, audit committees, bank auditors and the siren songs of such possible solutions as joint audits or mandatory audit rotation.

The critics' line was that IFRS had overthrown the principle of prudence, judgement, and the idea of substance over form. As a result auditors had given up thinking and, with an IFRS rulebook in one hand, were simply ticking checklists with the other. It fell to Steve Cooper, an IASB member, to clarify the issue towards the end of the hearings. 'Prudence does permeate accounting standards, revenue recognition, and all sorts of areas', he said. 'We are careful to make sure that profits are only recognised when they really are profits'. He then suggested that prudence was not necessarily the universal panacea which the critics had described. 'Prudence acts two ways', he suggested. 'If you understate things now, it gives an opportunity for companies to report a profit later; and at the very times that things are getting worse, if you are living off past fat and past unrealised profits, you can conceal the bad things that are coming later'. And then he came to the key point. 'We do not want to create a bias within financial reporting that has that counterintuitive effect later on. We want things to be realistic, neutral, to faithfully reflect the economics of transactions'.

He could have harked back to the great and punishingly lengthy Japanese banking crisis in the early 1990s which was exacerbated by exactly the excessive prudence which creates hidden reserves and enables a crisis to rumble on without anyone being able to work out the real depth of the disaster for years. And he could also have pointed out that the current IFRS regime, promoting realism and transparency, helped to bring the effects of the most recent financial crisis quickly out into the open, whether people liked it or not, and so it was able to be dealt with earlier than it might otherwise have been.

But their Lordships instead found that the conspiracy theories of the critics were far too enticing. To the critics the noble edifice of UK GAAP, flanked by the guardian angels of prudence, had been usurped by what Fearnley described as 'dangling regulators'. This was the IASB, 'who in fact are sitting in a hot air balloon just off the coast of the US'.

As a result the conclusions of the section of the report which deal with IFRS have a strange air to them. And one produces the bizarre conclusion that in the UK IFRS should not be extended 'beyond the larger listed companies where it is already mandatory'. This could perhaps result, for example, in UK companies which wish to use the IFRS for small and medium-sized companies, which has been lauded from Brazil to South Africa for its ability to attract inward investment to companies which hitherto had been totally ignored by the rest of the world, not being allowed to follow in their footsteps. It is, as all can see, an unintended consequence.

The House of Lords report comes up with many excellent proposals around its central remit. It is clearly thought through and precise in intention. But their Lordships should have looked with suspicion at the more outlandish ideas they were being offered on IFRS. And they should have turned down the flattering offer to grasp the wrong end of the stick.

Robert Bruce
April 2011

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IFRS Foundation will publish additional tags for the IFRS Taxonomy

08 Apr 2011

The IFRS Foundation has announced that it will publish supplementary tags for the IFRS (International Financial Reporting Standards) Taxonomy that reflect disclosures that are commonly reported by entities in their IFRS financial statements.

In March 2011, Hans Hoogervorst, the incoming Chairman of the IASB, had responded to a warning from Mike Starr, SEC Deputy Chief Accountant, that the SEC would continue to refuse to allow company filings under IFRS to use XBRL, by saying that further proposals in April would extend the scope of the taxonomy. At their meeting on 31 March 2011, the Trustees had also concluded that the IFRS Taxonomy needs to be less focused on 'IFRSs as issued' (as now) and more on developing a taxonomy that has more extensions and can be accepted world-wide without jurisdictional amendment/ adaptation. Please click for today's press release on the IASB's website.

 

Unaccompanied IFRS 2011 now available

07 Apr 2011

In January 2009, the Trustees of the IFRS Foundation decided that the IASB's standards, but not the accompanying documents such as the basis for conclusions or implementation guidance, should become available free of charge through the IASB's website.

The Trustees have announced that the unaccompanied IFRS 2011 are now available on the IASB's website.

 

Antonio Zoido appointed Trustee of the IFRS Foundation

07 Apr 2011

The Trustees of the IFRS Foundation have announced the appointment of Antonio Zoido as a Trustee of the IFRS Foundation.

Antonio J. Zoido is Chairman of Bolsas y Mercados Españoles (BME), the operator of all stock markets and financial systems in Spain. He has been also Chairman of the World Federation of Exchanges, Chairman of FESE (Federation of European Stock Exchanges), Chairman of ECMI (European Capital Market Institute) and member of the of the Advisory Council of the International Accounting Standards Committee (IASC). His initial term begins immediately and will expire on 31 December 2013. The term is renewable once. Please click for IFRS Foundation press release (PDF 85k) and our overview of Trustees working currently for the IFRS Foundation.

 

Japan 'designates' additional IFRSs

07 Apr 2011

On 6 April 2011, the Financial Services Agency (FSA) of Japan announced additional IFRSs designated for use by companies voluntarily applying IFRSs in Japan.

On 11 December 2009, the Commissioner of the FSA designated the entire IFRSs including IFRIC Interpretations issued by the IASB on or before 30 June 2009. During 2010, the FSA updated the list of IFRSs designated for use for all IFRSs released through 30 June 2010.

This announcement adds the following IFRSs released between 1 July and 31 December 2010 to the list of 'designated IFRSs':

  • IFRS 1 First-time Adoption of International Financial Reporting Standards (amendment)
  • IFRS 7 Financial Instruments: Disclosures (amendment)
  • IFRS 9 Financial Instruments (amendment)
  • IAS 12 Income Taxes (amendment).

Click for FSA announcement (link to the FSA website, in Japanese).

Stay Tuned Online – IFRS and UK GAAP update

07 Apr 2011

The Deloitte London IFRS Centre of Excellence is running a series of hour-long Internet-based financial reporting updates, aimed at helping finance teams keep up to speed with IFRSs and other financial reporting issues.

Each update lasts no more than an hour, and sessions are normally held three times a year, approximately at the end of March, July, and November. We intend to make a recording of each session available on IAS Plus for a period of at least four months from the date of the presentation. The topics covered in the March 2011 webcast:
  • UK developments
  • Offsetting financial assets and financial liabilities
  • IAS 39 replacement
  • Hedge accounting
  • Amortised cost and impairment
  • Recent and forthcoming IFRS developments

To access the recording click here. There is a permanent link on our UK Country Page.

Canadian regulator issues guides on IFRS

06 Apr 2011

The Ontario Securities Commission (OSC) has issued two high-level guides on the impacts of IFRS:

The guides outline a number of questions for analysts and investors to consider and are available on the OSC website.

Agenda for the April IASB meeting

06 Apr 2011

The IASB's regular monthly meeting is scheduled for 12-15 April 2011 in London, much of it a joint meeting with the FASB.

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

 

Swiss and US regulators reach a statement of protocol agreement

06 Apr 2011

The Swiss Federal Audit Oversight Authority and Financial Market Supervisory Authority and the Public Company Accounting Oversight Board of the United States (PCAOB) have entered into a Statement of Protocol, establishing a cooperative framework for supervisory oversight of auditors that practice in each country.

The Statement of Protocol between the regulators allows the PCAOB to commence joint inspections of accounting firms in Switzerland that audit, or participate in audits, of companies whose securities trade on U.S. markets. Also, the agreement includes provisions governing the sharing of confidential information between both regulators.

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