March

UK feedback statement on auditor scepticism

25 Mar 2011

The UK Financial Reporting Council (FRC) has published a feedback statement summarising the responses to its August 2010 Discussion Paper Auditor Scepticism: Raising the Bar.

While primarily focused on the auditing issues, the paper include observations on the interaction of the judgement required in applying IFRSs and audit scepticism. An extract:

Several of the responses from the profession noted that there was a possibility that regulators could confuse the proper application of IFRS, which contemplates a range of potential outcomes, with a lack of scepticism on the part of the auditor. In particular some drew attention to the requirement that impairment losses for financial assets need a neutral assessment of loss events incurred at the balance sheet date and not losses that are expected to occur in the future. Other responses observed that it was not unusual for auditors and management to have different views on estimates but suggested that, where both fell within a reasonable range, it was inappropriate for the auditor to try to replace management's view of what a reasonable estimate was with their own.

The feedback statement (together with the original Discussion Paper) can be accessed on the FRC's website.

GRI updates its Sustainability Reporting Guidelines

25 Mar 2011

The Global Reporting Initiative (GRI) has released its G3.1 Sustainability Reporting Guidelines ("G3.1").

The Guidelines are an essential part of GRI's Reporting Framework which provides guidance on how organisations can disclose their sustainability performance.

G3.1 is an update and completion of the third generation of GRI's Sustainability Reporting Guidelines and includes expanded guidance for reporting on human rights, local community impacts, and gender.

In conjunction with the new reporting guidelines, GRI has also released guidance to help companies determine what to measure and report on, called The Technical Protocol — Applying the Report Content Principles, designed to enable organisations to produce relevant reports more easily.

More companies are choosing to produce the GRI guidelines in producing a sustainability report. For instance, 17 out of 18 members of the International Council on Mining and Metals (ICMM), which includes many of the world's biggest resources companies, disclosed social and environmental data in line with GRI standards in 2010.

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Scottish and New Zealand accounting bodies launch project to reduce the volume of IFRS disclosure

24 Mar 2011

In response to a request from the International Accounting Standards Board (IASB), the Institute of Chartered Accountants of Scotland (ICAS) and the New Zealand Institute of Chartered Accountants (NZICA) have launched a project with the aim of reducing the volume of disclosure requirements in International Financial Reporting Standards (IFRSs).

The project will review the levels of disclosure requirements in existing IFRSs and recommending deletions and changes to those requirements. The project is being led by an oversight group of preparers, users and accountants in practice. The group is jointly chaired by Isobel Sharp, partner at Deloitte LLP and ICAS past president, and Tony Frankham, professional company director and NZICA past president.

The project will initially establish some key high-level principles for disclosure and, in doing so, will use the IASB's 2010 Conceptual Framework for Financial Reporting. It will then consider each of the existing IASB standards (with some exceptions) with the following objectives:

  • to determine the specific disclosure objectives of each standard
  • to assess the extent to which the existing disclosure requirements meet the high-level principles and the specific disclosure objective
  • to propose deletions and changes to the existing disclosure requirements based on the above assessment.

It is currently intended that the results of the project will be delivered to the IASB by the end of June 2011.

Deloitte publications update

24 Mar 2011

The following Deloitte publications are now available:

Global publications

Deloitte (New Zealand)

Deloitte (United Kingdom)

  • Six of one (PDF 1,509k) – survey of half-yearly financial reporting in 2010 by 130 listed companies in the United Kingdom
  • Insurance Accounting Newsletter – Issue 19, March 2011 (PDF 139k) – this issue is titled "Unsuccessful efforts" split the Boards and provides a summary of the recent joint FASB/IASB meetings held to discuss the Insurance Contracts project. During recent meetings, the Boards disagreed on how to account for distribution costs incurred to add new business to insurance portfolios.

 

Final notes from IASB-FASB meeting in Norwalk

24 Mar 2011

The IASB and FASB held a joint meeting in Norwalk on 21-23 March 2011. We've posted the remaining Deloitte observer notes from the meeting (click through for direct access to the notes):

Monday, 21 March 2011 (other sessions)

  • Leases
    • Initial direct costs
    • Inception vs. commencement
    • Determination of the discount rate in a lease

Tuesday, 22 March 2011 (other sessions)

Wednesday, 23 March 2011

The IASB and FASB are holding an additional joint meeting on Tuesday 29 March 2011 (this meeting was originally scheduled for 28-29 March 2011).

Our earlier story about the outcomes from this week's meeting is available Here. Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers for the entire meeting (including the IASB meeting from the previous week).

Canadian study reveals impact of IFRS transition

23 Mar 2011

A new study by the Certified General Accountants Association of Canada (CGA-Canada), The Effects of IFRS on Financial Ratios: Early Evidence in Canada, outlines the findings from a comparison of the financial statements of Canadian companies that early adopted IFRS and statements prepared under pre-changeover Canadian GAAP.

It also examined the key differences between pre-changeover GAAP and IFRS.

The key findings of the study include:

  • IFRS presents a number of specific characteristics that differentiate it from other accounting regimes – including a 'principle-based approach' and greater reliance on fair value accounting
  • The impact of IFRS on financial ratios is driven by fundamental differences in application of fair value accounting and consolidation under IFRS and pre-changeover Canadian GAAP, and by a number of other differences
  • Most of the financial ratios under IFRS present a significantly higher volatility than those computed under pre-changeover Canadian GAAP
  • The impact of IFRS is subject to the industry effect and the time of the transition
  • Differences between IFRS and pre-changeover Canadian GAAP do not generally affect cash flows
  • The exact source of increased volatility in financial ratios under IFRS remains unclear and may represent a future area of research – increased volatility in the Canadian context may be explained by fair value accounting, impairment, revenue recognition, capitalisation, pension and scope of consolidation

Click for CGA-Canada press release (link to CGA-Canada website).

EFRAG and IASB update on progress in convergence projects published

23 Mar 2011

The International Accounting Standards Board (IASB) and the European Financial Reporting Advisory Group (EFRAG) have released details of their meeting on 18 March, which aimed to review work on convergence projects.

The meeting focused on the remaining three Memorandum of Understanding projects on financial instruments, leases and revenue recognition, as well as the project on insurance contracts. The EFRAG's recommendations on these four projects were discussed.

Click for the EFRAG summary of the meeting (link to EFRAG website).

Notes from IASB-FASB meeting in Norwalk

23 Mar 2011

The IASB and FASB are holding a joint meeting in Norwalk on 21-23 March 2011, continuing discussions held between the two boards as part of the regular IASB meeting held in London on 14-17 March.

We've posted Deloitte observer notes from some of the sessions held on the first and second days of this week's meeting (click through for direct access to the notes):

Monday, 21 March 2011 (IASB-FASB)

  • Revenue Recognition
    • Collectibility
    • Time value of money
  • Cross-cutting Issues
    • Disclosure issues in the revenue recognition, leases, and insurance contracts projects
  • Insurance Contracts
    • Unbundling: Overall considerations
    • Bifurcation of embedded derivatives
    • Objective for an explicit risk adjustment
    • Discounting for ultra long duration cash flows

Tuesday, 22 March 2011 (IASB-FASB)

  • Insurance Contracts
    • Explicit risk adjustment (education session)
    • Contract boundary
  • Leases
    • Contracts that contain a lease
    • Sale and leaseback transactions

The notes from the session on Leases held on Monday 21 March and Financial instruments impairment held on Tuesday 22 March will be posted soon. Also note the agenda for the meeting has been changed from that originally scheduled and a number of topics have been moved between days or removed from the agenda.

Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers for the entire meeting (including the IASB meeting from the previous week).

Europe and IFRSs: six years on

22 Mar 2011

The IASB has uploaded to its site an article on the history of IFRSs in Europe.

Financial journalist Robert Bruce, who is also the regular resident commentator for IAS Plus, provides a retrospective on the adoption of IFRS in Europe, discussing the successes, challenges and effects of the 'brave decision' of Europe to move to IFRSs from 2005, the resultant impacts on global standard-setting, the governance and other lessons learned from the process and what it means for the future.

Click for Robert Bruce's Europe and IFRSs: six years on (link to IASB website).

Deloitte publications update

22 Mar 2011

The following Deloitte publications are now available:

Global publications

Deloitte (Belgium)

Deloitte (Canada)

  • iGAAP: IFRS for Canada, Third edition - a comprehensive reference book on the transition of Canadian GAAP to IFRS. It includes expanded Canadian content and reflects current thinking in key industries and includes Canadian IFRS issues specific to oil and gas, mining, and rate-regulated industries. More information about the publication and ordering can be found Here.

 

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