The comment letter highlights Deloitte's views on the contribution the discussion paper has in the methodology for effects analyses development as it relates to the IFRS Foundations Trustees' Strategy Review. The following is an excerpt from the letter:

We agree with the principle that effects analysis should be an element of the standard-setting process throughout the life cycle of a standard-setting project, including post-implementation reviews. We do not think that the same level of detail is necessary at each stage of a project and think that different procedures might be employed at different stages. . . . The methodology employed must be scalable, and the extent of effects analysis must be appropriate to the project in question (i.e., effects analysis should be proportional). Furthermore, we think that the principle of subsidiarity should apply. Consequently, effects analyses should be conducted by the IASB in conjunction with national or regional agencies with an interest in financial reporting.

In addition, we think the EFRAG should 1) collect and assimilate the responses, 2) identify the key findings, and 3) make recommendations to the IFRS Foundation Trustees' Due Process Oversight Committee.

Click to Download our Comment Letter on EFRAG's Discussion Paper Considering the Effects of Accounting Standards (PDF 104k). All of our past comment letters are here.

Please click for EFRAG press release (link to EFRAG website) and our summary of the decisions to date in the IASB's project on revenue recognition.

 

The draft working paper, The international politics of IFRS harmonization, draws on field studies in Canada, China and India to derive a 'framework' to analyse how international politics can shape a specific country's strategies with IFRS adoption. Whilst international politics is not the only or even the deciding element in understanding the growth of IFRS, the author of the paper argues it is likely to be important.

The paper outlines two principal dimensions that can be used to characterise the response by a specific jurisdiction to IFRS:

• proximity to existing political powers at the IASB
• the jurisdiction's own potential political power at the IASB.

Jurisdictions are classified as either 'high' or 'low' in each dimension, which then produces a matrix of predicted responses to IFRS. The table below summarises these outcomes, along with cited examples of countries falling in each category:

The paper explores the major political challenges for the IASB, the way forward for the IASB and the theoretical implications of the international political dynamics of IFRS harmonisation. In particular, the paper explores the interplay between the current debates around 'convergence versus adoption' and the IASB's expanding geographical diversity away from its traditional European power base to include emerging powers such as China. In addition, the paper argues restructuring the IASB's structure to include fewer Americans may temper enthusiasm for IFRS in the United States, which ironically may make IFRS less attractive worldwide.

Click to access the draft working paper (link to SSRN). We have posted this article with the kind permission of the author, Karthik Ramanna.

The proposals arise from the consultation process around the issue of IFRS 10, where many respondents questioned the usefulness of the financial statements of investment entities if IFRSs continued to require the consolidation of entities that an investment entity controls.

In summary terms, the exposure draft proposes:

• criteria for an entity to qualify as an 'investment entity' (see below)
• an investment entity to measure its investments in controlled entities at fair value through profit or loss in accordance with IFRS 9 Financial Instruments (exceptions would apply to investees providing services that relate only to the entity's own investment activities, and investment entities that take control of collateral as a result of defaults related to its investments)
• additional disclosures to enable users to evaluate the nature and financial effects of its investment activities
• not to permit a parent of an investment entity to retain fair value accounting applied by its subsidiary, unless the parent itself qualifies as an investment entity, i.e. the parent would consolidate all entities in the group
• amendments to IAS 28 Investments in Associates and Joint Ventures to require an investment entity to measure its investments in associates and joint ventures at fair value through profit or loss in accordance with IFRS 9 (replacing the concept of 'venture capital organisation, mutual fund, unit trust and similar entities' with 'investment entity')
• entities which apply the investment entity guidance early would also be required to apply all aspects of IFRS 10, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities and IAS 28 (as amended in 2011).

Proposed 'investment entity' criteria Under the proposals in ED/2011/4, an investment entity is an entity that meets all of the following criteria: Nature of the investment activity. The entity's only substantive activities are investing in multiple investments for capital appreciation, investment income (such as dividends or interest), or both Business purpose. The entity makes an explicit commitment to its investors that the purpose of the entity is investing to earn capital appreciation, investment income (such as dividends or interest), or both Unit ownership. Ownership in the entity is represented by units of investments, such as shares or partnership interests, to which proportionate shares of net assets are attributed Pooling of funds. The funds of the entity's investors are pooled so that the investors can benefit from professional investment management. The entity has investors that are unrelated to the parent (if any), and in aggregate hold a significant ownership interest in the entity Fair value measurement. Substantially all of the investments of the entity are managed, and their performance is evaluated, on a fair value basis Disclosures. The entity provides financial information about its investment activities to its investors. The entity can be, but does not need to be, a legal entity.

The IASB is undertaking this project jointly with the FASB with the objective of improving existing US GAAP requirements and achieving convergence in the accounting for these types of entities. The FASB is expected to issue equivalent proposals shortly.

Comments on the exposure draft are due by 5 January 2012. Click for:

• Press release (link to IASB website)
• Exposure Draft ED/2011/4 (link to IASB website)
• Our Consolidation project page

 

One of the enhancements is a newsletter for investors entitled Investor Perspectives. A new edition is now available. Patricia McConnell, an IASB Board member, writes about the changes to pension accounting:

• 24 August 2011 — Patricia McConnell: Benefits of the IASB's recent revisions to pension accounting

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

Agenda for the Interpretations Committee Meeting Thursday and Friday, 8 and 9 September 2011

Thursday 8 September (10:00h-16:45h) Introduction Active Committee Project: IAS 37 Provisions, Contingent Liabilities and Contingent Assets and IFRIC 6 Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment – Use of IFRIC 6 by analogy Review of tentative agenda decisions from the July meeting IFRS 3 Business Combinations – Business combinations involving newly formed entities: factors affecting identification of the acquirer IFRS 3 Business Combinations – Business combinations under common control IFRS 3 Business Combinations – Acquirer in a reverse acquisition IAS 27 Consolidated and Separate Financial Statements – Group reorganisations in separate financial statements Items for continuing consideration IFRS 3 Business Combinations – Definition of a business IFRS 11 Joint Arrangements – Acquisition of an interest in a joint operation New items for initial consideration IFRS 1 First-time Adoption of IFRSs – Transition requirements relating to government loans Administrative session Committee work in progress Friday 9 September (09:00h-13:00h) New items for initial consideration IAS 12 Income Taxes – Clarification of circumstances in which presumption of manner of recovery of investment property can be rebutted IAS 7 Statement of Cash Flows – Classification of cash payments for deferred and contingent consideration IAS 16 Property, Plant and Equipment - Recognition of insurance recoveries IFRS 10 Consolidated Financial Statements - Transitional requirements IAS 12 Income Taxes - Recognition of deferred tax for single assets in a corporate entity

• Sustainability reporting — This webcast will discuss the significant progress being made in global efforts to develop integrated sustainability reporting guidelines, covering the work of the International Integrated Reporting Committee (IIRC), the Global Reporting Initiative (GRI), Carbon Disclosure Project, and other topics
• Leases project — This webcast will discuss recent deliberations and tentative decisions of the IASB and FASB in the leases project, how the boards' decision to re-expose their proposals will impact the timeline to finalise the project, and the boards' next steps.

Full details of the webcasts are provided below:

Topic: Sustainability Reporting Update: One Big Global Family? Date and time: Wednesday, 7 September 2011 at 2:00pm-3:00pm United States Eastern Daylight Time (GMT-05:00) Host: Eric Hespenheide, Partner – Deloitte & Touche LLP More information: Click Here Registration: Click Here

 

Leases: A Comprehensive Update on the Joint Project Date and time: Thursday, 8 September 2011 at 2:00pm-3:30pm United States Eastern Daylight Time (GMT-05:00) Host: Bob Uhl, Partner – Deloitte & Touche LLP More information: Click Here Registration: Click Here

• Hebrew translations of the 2010 IFRSs, the Amendments to IAS 12 Deferred Tax: Recovery of Underlying Assets, the Amendments to IFRS 1 Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters, the Amendments to IFRS 7 IFRS Disclosures – Transfers of Financial Assets and the Improvements to IFRSs published by the IASB in May 2010.
• French translations of the the Amendments to IAS 12 Deferred Tax: Recovery of Underlying Assets, the Amendments to IFRS 1 Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters, the Amendments to IFRS 7 IFRS Disclosures – Transfers of Financial Assets, IFRS 9 (2010) Financial Instruments and the Conceptual Framework (as of September 2010).
• Spanish translations of the June 2011 Amendments to IAS 1 Presentation of Financial Statements and of IFRS 10 Consolidated Financial Statements.

All translations are available on the IASB's New and revised standards webpage (eIFRS subscribers only).

Click for more details (link to IASB website). Our dedicated XBRL page is Here.