November

Additional notes from the November IASB meeting

16 Nov 2011

The IASB's regular monthly meeting was held on 15-16 November 2011 in London, part of it a joint meeting with the FASB. We have posted Deloitte observer notes from the insurance session held on the first day of the meeting, along with most of the sessions from the second day.

Click through for direct access to the notes:

Tuesday, 15 November 2011 (other sessions)

Wednesday, 16 November 2011

Notes from Wednesday's joint session on Insurance Contracts will be posted soon.

Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers for the entire meeting.

FAF comments on SEC 'condorsement' paper

16 Nov 2011

The Board of Trustees of the United States Financial Accounting Foundation (FAF), the oversight body for the Financial Accounting Standards Board (FASB), has written to the United States Securities and Exchange Commission (SEC) in relation to the SEC's May 2011 paper on the possible incorporation of International Financial Reporting Standards (IFRS) into U.S. GAAP (the 'condorsement' approach).

The FAF Board of Trustees recommend an IFRS incorporation approach that embraces the concepts of the 'condorsement' framework whilst also addressing concerns raised by various U.S. stakeholders. The submission notes:

The recommended approach is premised on the belief that although the pursuit of a single set of global accounting standards is a worthy objective, a more practical goal for the foreseeable future is to achieve highly comparable (but not necessarily identical) financial reporting standards among the most developed capital markets that are based on a common set of international standards.

The FAF Trustees offer many recommendations to 'refine' the condorsement approach, including:

  • Active U.S. involvement in and support of international standard setting. This would include FASB (and other standard setters) having 'nonvoting observer rights' on the IASB, regular meetings between the IASB and FASB, and the FASB being responsible for IASB due process, outreach and other activities in the United States
  • Evaluation criteria. The FASB would develop criteria for the possible endorsement of IASB standards into U.S. GAAP, including such aspects as investor primacy, independent standard setting, due process and benefits exceeding costs
  • Role of FASB. The FASB would agree not to undertake separate projects on topics on the IASB's technical agenda, but would retain authority to set its own technical agenda. After completion of the existing convergence projects, the FASB would consider remaining major differences between US GAAP and IFRS and conduct thorough due process for potential incorporation of the IFRS requirements into U.S. GAAP.

The letter also discusses other topics such as funding of the IASB and further periodic reviews of the approach.

Click for full text of the FAF Trustees letter to the SEC (link to FAF website).

Also see our previous story for more information on 'condorsement'.

Notes from the November IASB meeting

15 Nov 2011

The IASB's regular monthly meeting was held on 15-16 November 2011 in in London, part of it a joint meeting with the FASB. We have posted Deloitte observer notes from most of the sessions held on on the first day of the meeting, covering the following topics: annual improvements, operating segments, IFRS 10 — transitional requirements, IFRS 9 — targeted improvements, offsetting — effective dates, and leases.

Click through for direct access to the notes:

Tuesday, 15 November 2011 (other sessions)

Notes from the session on Insurance contracts will be posted soon.

Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers for the entire meeting.

IIRC restructures

15 Nov 2011

The International Integrated Reporting Committee (IIRC) has announced a number of changes to its organisational structure.

The changes include:

  • The IIRC will now be known as the International Integrated Reporting Council, rather than the International Integrated Reporting Committee
  • The IIRC will be supported by a strengthened secretariat operating through a not-for-profit company established for the purpose under the same name. The company's board will comprise Mervyn King as Chairman, Leslie Ferrar (Treasurer, Household of the Prince of Wales and the Duchess of Cornwall) and Christy Wood (Chairman of the Board of Governors, International Corporate Governance Network) as Deputy Chairs, together with Ian Ball (Chief Executive, International Federation of Accountants), Ernst Ligteringen (Chief Executive, Global Reporting Initiative), Jessica Fries (Director, The Prince's Accounting for Sustainability Project) and the IIRC's Chief Executive, Paul Druckman
  • An IIRC Governance Committee will also be established, with responsibilities relating to audit, nominations and executive remuneration for the company.

Click for press release (link to IIRC website).

The Bruce Column – The Brazilian benefits of IFRS in full

15 Nov 2011

IASB Chairman, Hans Hoogervorst, has been praising the Brazilian IFRS effort. Robert Bruce, our regular resident columnist, looks at how the enthusiastic use of IFRS is transforming and boosting a whole region.

'Gone are the days when Brazil seemed destined to always remain “the country of the future”', said Hans Hoogervorst. Speaking at the recent IFRS conference in Sao Paulo he continued: 'For Brazil, the future is now'. And international financial reporting standards, IFRS, have been a significant factor in this change. Brazil has enthusiastically embraced IFRS and has reaped the benefits.

As Hoogervorst continued: 'In many ways Brazil has offered a textbook example of how to adopt IFRSs. When Brazil adopted IFRSs it did so in full, with no carve-outs. It eliminated some options and required additional disclosure requirements', he said, 'but it resisted the temptation to tweak the standards to meet local desires. If Brazil had made such adjustments', he continued, 'Brazilian companies would have had the pain of transition to new standards without the gain of full international acceptance of those standards. Instead, by adopting IFRSs in full Brazilian companies are able to raise capital on markets across Asia, Europe and the Americas – including the United States'.

Brazil is turning into an effective case study of how to do IFRS implementation and how to reap the benefits. A recent survey carried out by Deloitte and the Brazilian Investor Relations Institute, IBRI, of 46 of the largest public companies in Brazil, produced extraordinarily mature results. Looking at the changes brought about by IFRS implementation and its impact on the business environment an overwhelming majority saw benefits flowing through from influencing investors and changing the way in which their business was being viewed by investors. But even more impressive were the figures of 65% taking the view that it was improving the efficiency of the capital markets and 64% arguing that it was benefiting companies beyond the simple accounting.

'It is bringing positive changes in management systems and internal controls', said Bruce Mescher, Deloitte Audit Partner and Leader of the Global IFRS & Offerings Services practice in Brazil. 'Improvements are really being embedded in the systems and processes of companies. It has gone well beyond simple accounting benefits'. There are still issues to overcome, but those have more to do with time and experience. 'There are challenges', said Mescher. 'The word is still out on comparability. Some have said it is easier to compare a Brazilian retail company with a Brazilian mining company than it is to compare it with a European retailer. There clearly is much more information available but now there is a drive on for quality. It's part of the maturity curve'.

But there is more to the Brazilian story than implementation of IFRS. Brazil also adopted, with the option available from 2009, the IFRS for small and medium-sized entities, (SMEs). It is estimated that more than half a million Brazilian companies use it. In Hoogervorst's words: 'That is quite a remarkable statistic'. This revolution is not only about better information and more secure companies. 'The accounting profession has seen stock rise as well', says Mescher. 'Accountants in business have traditionally held the roles of bookkeepers and tax preparers. We are increasingly seeing them become strategic advisors to the business'. And the SME revolution is also having a remarkable effect across the whole region, not just in Brazil. 'One common theme is the interest of SMEs in IFRS and specifically IFRS for SMEs. Spreading the message about IFRS for SMEs and providing training on how to apply it is a major priority for many countries in the region', said Mescher.

And this is the other effect that IFRS is having. Across Latin America moves are afoot to bring economic organisations together across borders. Next March sees the first meeting of GLASS, the Group of Latin American Accounting Standard Setters, the latest of the regional forums springing up around the world. 'GLASS will be very important', said Rogério Mota, Deloitte Audit Partner and Regional Professional Practice Director in Brazil. 'It will be representing the region and facilitating our dialogue with the IASB. It will enable us to participate in the future agenda of the IASB'.

It will also dovetail in with other efforts in the region. 'GLASS is a natural extension of collaborative forces in the region', says Mescher. There are already plans under the MILA initiative to bring the stock exchanges of Colombia, Peru and Chile together. And the BRAiN, (Brazil Investments and Business), project aims to make Brazil a regional hub for financial business. The whole region is making an effort to get its act together. 'There are more and more regional and international partnerships', says Mescher, 'and GLASS is part of that. It will be invaluable. It is an excellent opportunity to drive consistency in the region and that means consistency in interpretation and implementation'.

And as Hoogervorst pointed out in his conference speech: 'Almost all of the major Latin American economies now speak the same financial language'.

Robert Bruce
November 2011

EFRAG Update with summaries for the late October conference call and the November EFRAG TEG meeting

14 Nov 2011

The European Financial Reporting Advisory Group (EFRAG) has released the November 2011 issue of its EFRAG Update newsletter.

On 26 October 2011, EFRAG held a meeting by public conference call. The EFRAG TEG meeting was held 7 to 8 November 2011. Highlights of the meetings were an Invitation to Comment relating to the endorsement of IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine for use in the European Union and the finalised EFRAG comment letter to the IASB on the Exposure Draft ED/2011/2 Improvements to IFRSs.

Click for the EFRAG Update (PDF 349k, link to EFRAG website). 

New IVSC appointments

14 Nov 2011

The International Valuation Standards Council (IVSC) has announced a number of new appointments, following the annual general meeting of the organisation held in Hong Kong on 5 November 2011.

The new appointments include:

  • IVSC Board of Trustees - Frank Vettese (incoming Managing Partner & Chief Executive, Deloitte Canada), Akihiro Watanabe (GCA)
  • International Valuation Standards Board - Dr. Cindy Ma (Houlihan Lokey)
  • International Valuation Professional Board - Chris Mercer (Mercer Capital Management), Professor Nick French (Oxford Brookes University), Greg Forsythe (Deloitte Financial Advisory Services, moving from Vice-Chair to Chair), Roy Farthing (Ernst & Young, new Vice-Chair).

Click for press release (link to IVSC website).

Deloitte IFRS podcast on the new revenue recognition exposure draft

14 Nov 2011

Randall Sogoloff, Leader for Communications in the Deloitte IFRS Global Office, and Phil Barden, Leader for Deloitte’s Global Revenue Recognition team, discuss the new revenue recognition exposure draft Revenue from Contracts with Customers with Robert Bruce.

They discuss the key changes that are proposed and provide insights into the likely effect they will have in practice.

The podcast is available for download here (30 mins 13 mbs) or via iTunes; it is one of a series that will be posted to IAS Plus. All podcasts of the series are available on our Deloitte IFRS podcasts page.

IASB and FASB publish revised revenue recognition exposure draft

14 Nov 2011

On 14 November 2011, the IASB and FASB published for comment Exposure Draft 'Revenue from Contracts with Customers', a revised draft standard that converges the revenue recognition standard for IFRSs and US GAAP.

The goals of the exposure draft are to (1) improve financial reporting by creating a single revenue recognition standard, (2) clarify the principles for recognising revenue, and (3) create consistent principles that can be applied across various transactions, industries and capital markets.

The core principles of the 2010 exposure draft have remain largely unchanged. However, the boards have clarified and simplified the proposal in a number of areas:

  • amending the principle for identifying separate performance obligations in a contract
  • adding criteria to determine when a performance obligation is satisfied over time and, hence, when revenue is recognised over time
  • simplifying the measurement of the transaction price
  • aligning the accounting for product warranties more closely with existing requirements
  • limiting the scope of the onerous test
  • adding practical expedients for retrospective application of the proposals
  • specifying the disclosures required for interim financial reports

Comment letters on the revised exposure draft are due by 13 March 2012.

Please click for:

German Standard Setter announces new presidency and membership of new technical committees

11 Nov 2011

As reported earlier, unresolved questions of financing and membership basis had led the Accounting Standards Committee of Germany (ASCG) to terminate in June 2010, effective 31 December 2010, the standardization agreement with Germany's Ministry of Justice.

After months of debate and renewed efforts to find sustainable financing, the General Assembly of the ASCG found in May 2011 that a German Standard Setter can continue to exist. The new supervisory board held its inaugural meeting in September 2011, and today the members of the new technical committees and the new presidency were announced.

Ms. Liesel Knorr, President of the German Accounting Standards Board, will continue as new president and will head the two new technical committees – one for IFRSs and one for German GAAP. Among the members appointed to the IFRS technical committee is Dr. Andreas Barckow, head of Deloitte SE's IFRS Leadership Team, head of Deloitte's Frankfurt IFRS Centre of Excellence and member of the Global IFRS Leadership Team (GILT) of Deloitte.

More information on the new committees is available on the ASCG website (German / English). More information on the accounting framework in Germany is available on our IAS Plus country page for Germany.

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