February

Directors urged to go "beyond compliance" in 2011

10 Feb 2011

The need for directors to seize the opportunities in regulatory change, such as IFRS, has been highlighted as a key consideration for 2011.

A new publication, Directors' Alert: 11 Issues for 2011 – Ever-increasing demands, discusses boards' responsibilities around involvement in organisational strategy, and oversight and management of risk. Consistent with similar themes in an earlier story, in discussing regulatory change, the ever-growing reach of IFRS is identified as a key consideration and opportunity.

An extract:

...a growing number of jurisdictions are moving to International Financial Reporting Standards as standard setters such as the FASB and IASB seek to harmonize financial reporting around the globe. While compliance with these rules is obviously important, organizations will distinguish themselves by taking a "beyond compliance" approach and determine how regulatory changes can create competitive advantage. This is particularly important if changes have the potential to affect the organization's strategy, supplier relationships, customer expectations or other market behaviors that may affect the organization's growth or ability to attract investor capital.

Click for Directors' Alert: 11 Issues for 2011 – Ever-increasing demands (PDF 470k).

FASB calls for views on hedge accounting

10 Feb 2011

The United States Financial Accounting Standards Board (FASB) has issued a Discussion Paper to solicit input on how to improve, simplify, and converge the financial reporting requirements for hedging activities.

Differences exist between IFRS and U.S. GAAP relating to hedge accounting. The revisions proposed by the IASB in ED/2010/13 Hedge Accounting would result in more differences compared with the FASB's current and proposed hedge accounting guidance (as outlined in proposed Accounting Standards Update, Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging ActivitiesFinancial Instruments (Topic 825) and Derivatives and Hedging (Topic 815)). The FASB Discussion Paper asks stakeholders whether the IASB's proposals are a better starting point for any changes to U.S. GAAP as it relates to derivatives and hedging activities.

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Agenda for the February 2011 IASB meeting slightly changed

10 Feb 2011

The agenda for the IASB meeting next week has been slightly changed: The sessions on Friday have been pulled forward by half an hour.

Please click for the updated agenda.

 

Deloitte publications update

10 Feb 2011

The following Deloitte publications are now available:

Global publications

Deloitte (Colombia)

Deloitte (Korea)

Deloitte (United States)

 

FRC wants to bring audit closer to investor needs

10 Feb 2011

In a speech given at the European Commission conference on financial reporting and auditing today, Stephen Haddrill, chief executive of the UK Financial Reporting Council, said, that it is high time to close the gap between what audit does and what users expect from an audit of the financial statements.

According to Mr Haddrill investors must be given more information about the prospects of the company and a better picture of the future of the business and of the judgements made in the course of the preparation of the financial statements.

Here is an extract:

In short, we want investors to learn about the business and its future from the directors; we want the directors to say more about the things that really keep them awake at night; and we want to empower auditors to challenge management by requiring them to say whether the Board have really given a balanced and fair view on these matters as well as on the accounts.

[...]

And we need an audit profession that [...] is not afraid to challenge management. One that is sceptical of assertions made without apparent good foundation – that does not see its role as confirming management's view, but identifying the truth.

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New IFRS Foundation liaison office in Tokyo

10 Feb 2011

The IFRS Foundation, the oversight body of the International Accounting Standards Board (IASB), has announced its intention to open an office in Tokyo for enhanced liaison in the Asia-Oceania region.

While the IASB technical staff will remain based in London, the establishment of the Tokyo office will expand opportunities for direct contact between the IFRS Foundation and its stakeholders in the region.

Tsuguoki (Aki) Fujinuma, one of the vice-chairs of the IFRS Foundation Trustees stressed the importance of having a liaison office in a region with many jurisdictions moving toward IFRSs: "This important announcement reflects a strong regional commitment to international standards, and the need for the views of Asia-Oceania stakeholders to be adequately considered during the IASB's decision-making process. Adoption of IFRSs is widespread in Asia-Oceania."

In his speech given in Brussels yesterday, Hans Hoogervorst, future chairman of the IASB, also stressed the need to strengthen the IASB's outreach activities: "Still, we need to build on existing outreach efforts to ensure that participants around the world are heard and their views given due consideration by the Board. The opening of a regional office in Japan is an important step in that direction."

Please click for IFRS Foundation press release (PDF 35k).

Dick Sluimers appointed IFRS Foundation Trustee

09 Feb 2011

The IFRS Foundation, the oversight body of the International Accounting Standards Board (IASB), has announced the appointment of Dick Sluimers as a Trustee of the IFRS Foundation.

His term begins immediately and expires on 31 December 2013. Mr Sluimers is Chief Executive Officer of APG Group, a Dutch-based provider of asset management, administration and communication services for pension funds. Please click for IFRS Foundation press release (35k).

 

Hans Hoogervorst discusses the objectives of financial reporting

09 Feb 2011

Hans Hoogervorst, Chairman of the Board of the Netherlands Authorities for the Financial Markets (AFM), and future chairman of the IASB, spoke in Brussels today on the objectives of financial reporting.

In his speech, Mr Hoogervorst discussed "to which audience financial reporting should primarily be directed" and whether accounting standards should only serve the goal of transparency, or should they have a "financial stability objective". During his discussion on the role of accounting standard setters in creating transparency and stability, he stated:

So accounting standards can make a very important contribution to stability by providing maximum transparency, and by avoiding artificial noise.

However it is important to keep this in perspective. Stability should be a consequence of greater transparency, rather than a primary goal of accounting standard-setters. For this, accounting standard setters simply lack the tools. For example, they cannot set capital requirements for the banking industry. This instrument belongs to the prudential regulators who do have stability as their main mission.

What accounting standard setters can also not do is to pretend that things are stable which are not. And, quite frankly, this is where their relationship with prudential regulators sometimes becomes testy. Accounting standard setters are sometimes suspicious that they are being asked to put a veneer of stability on instruments which are inherently volatile in value.

Click for text of speech (link to IASB website).

GRI responds to EC consultation on disclosure of non-financial information

09 Feb 2011

The Global Reporting Initiative (GRI) has submitted a reply to the public consultation of the Services of the Internal Market and Services Directorate General of the European Commission on stakeholders' views on ways to improve the disclosure by enterprises of non-financial information (e.g. social and environmental).

In line with other responses GRI states that companies' stakeholders, including directly affected communities and the public at large, need comprehensive and credible information on corporate social and environmental impacts to identify problems with and monitor progress of the companies they deal with. GRI observes that the current system does not create a level playing field among business, as in most EU countries reporting by companies on their non-financial impacts is voluntary. Yet GRI also warns that the European Commission need not "reinvent the wheel" since there already are "guidelines that enable all companies and other organizations to produce comparable reports on their sustainability performance". According to GRI what is needed is mandatory application, not new standards.

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World Economic Forum discusses integrated reporting

08 Feb 2011

The 2011 Annual Meeting of the World Economic Forum (WEF), recently held in Davos-Klosters, included a session entitled 'Accounting for New Realities: Redesigning Corporate Reporting'.

Participants debated the merits and challenges of adopting a new framework for an integrated corporate reporting system for the 21st century. Coming out of the global financial crisis, there is an ongoing debate on the relevance of corporate reporting and whether it should include such externalities as environmental, social and governance performance. Increasingly, companies are producing, mostly on a voluntary basis, corporate social responsibility or sustainability reports, but these can vary widely in relevance and quality, largely because there is no global standard.

A summary of the outcomes from the session is reproduced below (with the kind permission of the WEF):

Key points

  • There is a certain degree of deficiency in today's corporate reporting models
  • Any new accounting format should focus on internalising externalities, such as environmental and social impacts
  • Good thought leadership is needed to further the debate on developing a concise, comprehensive and comparable integrated reporting framework.

Source: World Economic Forum Annual Meeting 2011

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