February

Summary of the January 2013 DPOC meeting

08 Feb 2013

The IASB has posted to its website a summary of the 22 January 2013 Due Process Oversight Committee (DPOC) meeting.

Topics discussed during the DPOC meeting were:

    1. Revisions of the Due Process Handbook — Consideration were made for the proposed revised version of the Due Process Handbook (DPH), a feedback statement on the results of the consultation on the draft of the DPH that had been issued for comment, and proposed revised Due Process Protocol (DPP) tables for publication on the website.
    2. IFRS Education Initiative: due process issues — An update on the planned due process that the Education Initiative staff intended to follow for each of the education products scheduled for 2013.
    3. Update on technical activities — Discussion were held on the current state of impairment, hedge accounting, insurance, and revenue recognition projects.
    4. Website project pages and DPOC web pages
    5. Small and Medium-sized Entities Implementation Group — Approval of the proposed changes to the terminology used in the Terms of Reference and Operating Procedures for the SME Implementation Group. The DPOC also supported the nomination of Darrel Scott as the new chair of the SMEIG, replacing the retiring Paul Pacter.
    6. Review of correspondence
    7. Any other business

The DPOC is responsible for approving due process and overseeing the IASB’s compliance with due process, and reviewing the Trustees’ fulfilment of their oversight function in accordance with the Constitution of the IFRS Foundation.

A summary of the meeting is available on the IASB website.

IFRS Foundation seeks to fill vacancies

07 Feb 2013

The IFRS Foundation is calling for candidates to fill vacancies in the IFRS Trustees and IFRS Interpretations Committee.

The IFRS Foundation is seeking candidates from Asia-Oceania, South America and an “At Large” position to fill IFRS Trustees vacancies that will become available in July 2013 and January 2014.   Under the IFRS Foundation Constitution, there are 22 IFRS Trustees, which are required to broadly reflect the world’s capital markets and have a diversity of geographical and professional backgrounds.  Trustees are appointed for a three year term (with one possible renewal) and oversee the IFRS Foundation and the International Accounting Standards Board (IASB).

The IFRS Trustees are also inviting applications from suitable candidates to fill up to four vacancies on the IFRS Interpretations Committee.  After the appointments, the Committee will comprise 14 members and a non-voting Chairman.

Those interested in applying for the positions are asked to respond by 8 March 2013.

Click for the following information on the IASB website:

IASB and IIRC announce cooperative agreement

07 Feb 2013

The International Accounting Standards Board (IASB) and International Integrated Reporting Council (IIRC) have announced a Memorandum of Understanding (MoU), where both organisations will strengthen their cooperation on the development of the IIRC's integrated corporate reporting framework.

The purpose of the MoU is to create the basis for cooperation, coordination, and alignment in areas the two organisations share mutual interests, in particular:

Efforts to promoting the global harmonisation and clarity of corporate reporting frameworks, standards and requirements in ways that drive coherence, consistency and comparability, leading to improved efficiency and effectiveness in corporate reporting practices;

the development of their respective reporting frameworks, guidelines and standards; and

the related transparency and sharing of relevant and significant information between them.

In October 2012, the IIRC established a similar MoU with the International Federation of Accountants (IFAC).

The IIRC expects to issue a consultation draft on the International Integrated Corporate Reporting Framework on 16 April 2013. A final version is expected in December 2013.

The press release and the MoU are both available on the IASB website.

Philippe Danjou answers ten misconceptions about IFRSs

06 Feb 2013

In an online paper, International Accounting Standards Board (IASB) member Philippe Danjou responds to ten recurring misconceptions about IFRSs that currently exist, in particular in continental Europe.

The paper examines ten misconceptions of IFRS, which are:

    1. IFRS practise a generalised "fair value"
    2. IFRS are intended to reflect the global financial value of the company
    3. IFRS deny the concept of accounting conservatism
    4. IFRS give prominence to economic reality over legal form
    5. Directors can’t make head or tail of IFRS financial statements
    6. The IFRS financial statements do not reflect the business model
    7. Financial instruments will soon be "full fair value" thereby maximising earnings volatility
    8. The "fair value" is always defined as "market value" even when markets are illiquid
    9. The treatment of business combinations is irrational
    10. IFRS create accounting volatility that does not reflect the economic reality.

The views expressed in this paper are the personal views of Mr Danjou and not the official views of the IASB. The paper is available on the IASB website, initially in French only, with the IASB indicating an English translation will be forthcoming in due course.

Update

On 21 February 2013, the IASB has made available an English translation of the paper.

EFRAG and European National Standard Setters publish their strategy regarding the IFRS Conceptual Framework

06 Feb 2013

The European Financial Reporting Advisory Group (EFRAG) has posted to its website a strategy document entitled 'Getting a Better Framework – Our Strategy' that was developed in cooperation with the French Autorité des Normes Comptables (ANC), the Accounting Standards Committee of Germany (ASCG), the Organismo Italiano di Contabilità (OIC) and the UK Financial Reporting Council (FRC). The aim of the document is to ensure ultimately that the IASB's Conceptual Framework for Financial Reporting reflects an underlying accounting model that European stakeholders believe is conducive to robust and effective financial reporting standards.

After publishing the Conceptual Framework for Financial Reporting 2010 on 28 September 2010, incorporating Chapter 1 and Chapter 3 of the planned new Conceptual Framework, the IASB effectively deferred further work on the joint project with the FASB in late 2010 until after other more urgent convergence projects were finalised. As a result of the IASB's Agenda Consultation project, the IASB decided in September 2012 to reactivate the Conceptual Framework project as an IASB-only comprehensive project.

Because of the paramount importance of the new Framework for the development of new standards and the revision of existing standards and the fact that it will have to be considered when dealing with issues that are not addressed in the standards, the new Framework will have long lasting and substantial influence. Therefore, EFRAG, ANC, ASCG, OIC and FRC want to make sure the European views are among those considered in the development. The strategy document published today aims at

    1. illustrating some of the major issues that will arise in the process of developing the new Framework,
    2. explaining the standard-setters' strategy for engaging with the IASB in its development of the new Framework, and
    3. encouraging others within Europe to engage in the development of the new Framework.

    In order to illustrate some of the issues the framework needs to deal with the strategy document asks several questions:

    • Should stewardship (or accountability) be considered when developing accounting standards?
    • Is there adequate emphasis on the importance of prudence and reliability?
    • Will it be required to recognise all assets and liabilities?
    • Will the Framework lead to appropriate selection of measurement bases, or will it specify an ‘ideal’ measurement basis such as fair value?
    • How should performance be defined?

    At least some of these issues EFRAG feels will provoked some controversy, yet at the same time EFRAG believes the IASB will welcome positive suggestions made in a constructive spirit. According to EFRAG, restarting work on the Conceptual Framework might also be seen as an opportunity to review the 2010 Chapters, especially since the project has now moved from a joint project to an IASB only project.

    As for the way forward, EFRAG has announced a new way of informing and engaging its constituents:

    We intend to publish Bulletins, available through the websites of organisations in the partnership, which will discuss the issues that arise in the course of the project, explain their importance and seek constituents’ feedback. This will provide an update on the work of the partnership and of the IASB. We expect Bulletins will be relatively short, and confine themselves to the key messages. Concise, well-argued papers are likely to be both more influential and accessible than extensive treatises.

    Bulletins will provide a discussion of issues in order to stimulate debate. The comments received on the Bulletins will be considered in developing our views. We shall also ensure that all comments are drawn to the attention of the IASB.

    EFRAG will of course also rely on outreach events at which views can be exchanged and debated in person. Furthermore, a specific newsletter will be developed, to keep European constituents informed of how the debate with the IASB and other stakeholders worldwide progresses.

    Please click for the following information on the EFRAG website:

    Final notes from the January 2013 IASB meeting

    05 Feb 2013

    The IASB's January meeting was held in London on 29-31 January 2013, some of it a joint meeting with the FASB. We have posted Deloitte observer notes from the insurance sessions on Wednesday and Thursday.

    Click through for direct access to the notes:

    Wednesday, 30 January 2013

    Thursday, 31 January 2013

    You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

    IASB work plan updated

    05 Feb 2013

    The International Accounting Standards Board (IASB) has updated its work plan. A number of due process milestones have been deferred, including the finalisation of the hedge accounting section of IFRS 9 and the re-exposure of the lease proposals. A number of other expected dates have been clarified, a new project added, and some new expected dates introduced.

    Details of the changes are:

    Click for IASB work plan as of 4 February 2013 (link to IASB website). We have updated our project pages to reflect the updated work plan and other known developments.

    French and US regulators enter into cooperative agreement

    04 Feb 2013

    The French High Council for Statutory Auditors (H3C) and the US Public Company Accounting Oversight Board (PCAOB) have announced a cooperative agreement on the oversight of audit firms subject to the regulatory jurisdictions of both regulators.

    The agreement allows for the exchange of confidential information of firms performing in both jurisdictions and is effective immediately. The two regulators have also reached a data protection agreement.

    The PCAOB currently has similar agreements with seven additional European nations (Germany, the Netherlands, Norway, Spain, Switzerland, the United Kingdom, and most recently Finland) as well as several non-European regulators.

    The press release is available on the PCAOB website.

    IVSC consults on improvements to valuation standards and the valuation of financial liabilities

    04 Feb 2013

    The International Valuations Standards Council (IVSC) has released two due process documents: an exposure draft of numerous proposed amendments to International Valuation Standards (IVS), and a discussion paper on the valuation of financial liabilities.

    Proposed amendments to valuation standards

    The IVSC issued a number of revised International Valuation Standards in July 2011.  The IVSC's exposure draft Amendments to the International Valuation Standards, proposes numerous amendments to these standards to make minor changes to reflect subsequent IVS publications and to make minor alterations to remove ambiguity or better illustrate a principle.  As such, in some respects, the IVSC exposure draft mirrors the annual improvements process of the IASB.  However, the exposure draft is broader and also incorporates the proposals from the IVSC's projects on valuation reviews and the valuer's reliance on information.

    The proposed amendments include:

    • A number of changes across the IVS to clarify the applicability of the IVSs to 'valuation reviews' which would be defined as "the act or process of developing and reporting an opinion about a valuation undertaken by another party"
    • Changes to incorporate reference to the Code of Ethical Principles for Professional Valuers issued in December 2011
    • The introduction of a "unit of valuation" concept, which would be defined as "the asset or group of associated assets that is the subject of the valuation" and be distinct  from the "unit of account" concept under IFRS
    • Clarifications designed to address concern that some valuers put too much weight on a single valuation method ("in other words if the maths used in the model is right then it follows that the valuation must be") by amending the Framework to indicate multiple models provide a cross check and state this is "especially recommended where the inputs to the primary method are limited or inconclusive"
    • Proposals to impose a duty on the valuer to consider the credibility or reliability of information in the context of the valuation task
    • Clarifications on the valuation of property under construction
    • Removal of specific annexes from the IVS on historical property and property, plant and equipment in the public sector
    • Various other editorial, clarifying and consequential amendments.

    Comments on the exposure draft close on 30 April 2013.  The IVSC intends to publish that the revised Standards in July 2013, with an effective date of 1 January 2014.

    Click for access to the exposure draft (link to IVSC website).

    Valuation of financial liabilities

    The IVSC's discussion paper Valuation of Liabilities is the first stage in the IVSC's project to determine appropriate valuation practice for liabilities (other than those arising from financial instruments) and to develop as necessary a dedicated standard and supporting technical guidance.

    The background to the discussion paper notes the following regarding the interaction with IFRS:

    Within the field of financial reporting, the IASB’s IFRS 13 Fair Value Measurement specifically includes liabilities within its scope, but stipulates that specific assumptions be made that are directed at achieving a consistent accounting measurement of liabilities. Some of these assumptions, e.g. that a transfer has to be assumed even where fulfilment or cancellation are more likely or that in the absence of quoted prices a liability is to be valued from the perspective of the counterparty holding the corresponding asset, may or may not be appropriate when establishing the value of a liability for purposes other than financial reporting. The Board therefore considers that there is a need for standards or guidance on the valuation of liabilities in a wider context.

    The background also mentions the IASB's previous project on amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets (which is now a research project on non-financial liabilities), and some of the topics discussed in the discussion paper correlate with topics considered by the IASB in that project.  The discussion paper notes "Although at first sight the scope of IAS 37 and the proposed IVSC project are similar, the IVSC project is addressing the valuation of liabilities for any purpose and is not addressing only the requirements in the IFRSs".

    The discussion paper is structured as follows:

    • Key definitions and concepts - proposes a definition of 'liability' for valuation purposes, which would be different to that used under IFRS
    • Project scope - proposes to exclude the valuation of obligations to pay defined sums, financial instruments,pension liabilities, deferred taxes and insurance liabilities, and instead focus on the valuation of liabilities where the cost of the obligation is not defined, e.g. asset restoration obligations, warranties.  The paper also requests feedback on whether the project should also consider litigation liabilities
    • Basis of value - a statement of the fundamental measurement assumptions of a valuation, across three principal categories (hypothetical exchange price, value or benefit from ownership and reasonable exchange price between two parties) and four bases (market value, investment value, special value and fair value)
    • General valuation methods - the need to use more than one method, a presumption that the market approach may not often be relevant to the measurement of financial liabilities, an information request on using the discounted cash flow and other 'income approaches', and methods used under the 'cost approach'
    • Valuations for financial reporting - the paper notes the IVSC "does not consider that its project should address the valuation of liabilities specifically for financial reporting... [but] that this is the most common purpose for which liabilities are required to be valued and therefore it is proposed that future guidance should summarise the requirements under the IFRS and relate them to the general valuation guidance proposed by the IVSC".

    Comments on the discussion paper close on 30 April 2013.  Click for access to the discussion paper (link to IVSC website).

    Further notes from the January 2013 IASB meeting

    01 Feb 2013

    The IASB's January meeting was held in London on 29-31 January 2013, some of it a joint meeting with the FASB. We have posted Deloitte observer notes from Thursday's sessions on conceptual framework and rate-regulated activities.

    Click through for direct access to the notes:

    Thursday, 31 January 2013

    You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

    Correction list for hyphenation

    These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.