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EFRAG (European Financial Reporting Advisory Group) (dk green) Image

EFRAG suggests public review of the forthcoming standard on leases

16 Jun 2015

European Financial Reporting Advisory Group (EFRAG) has sent a letter to the IASB requesting a public fatal flaw review of the forthcoming leases standard to ensure that constituents understand the requirements and how to apply them.

In September 2014, EFRAG had called for amending the IASB’s consultation process by adding a public fatal flaw review prior to finalisation of a standard or a major amendment to a standard. This time EFRAG is solely suggesting to have this public fatal flaw for the leases standard. The IASB at times uses the tool of fatal flaw reviews, and EFRAG feels such a review is warranted this time as “ the IASB has put significant redrafting effort into the final standard, especially with respect to the definition, since the last public consultation”. As a consequence of the substantial changes to the definition, EFRAG fears that preparers may be confused and not necessarily understand the scope of the new requirements. EFRAG argues:

[U]nless entities are able to properly understand and apply the definition of a lease and the other requirements in the standard, there will be a significant and wasteful use of time debating possible interpretations, which will lead to a real risk of divergent application.

Please click to access the letter on the EFRAG website.

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ESMA publishes its 2014 annual report and new strategy

15 Jun 2015

The European Securities and Markets Authority (ESMA) has published its Annual Report for 2014, which describes key accomplishments by the ESMA in 2014. In addition, it has published its strategy for 2016-2020.

The most noted actions of the ESMA in 2014 were:

  • Financial reporting and con­ver­gence of IFRS en­force­ment ac­tiv­i­ties.
  • Review of accounting practices related to business combinations.
  • Contribution to the development of IFRS.

In its strategy for 2016-2020, the ESMA will focus on three key objectives:

  • Investor protection.
  • Orderly markets.
  • Financial stability.

To achieve these objectives, ESMA intends to increase resources to strengthen (1) its capabilities of identifying and assessing risks to investors and (2) the financial stability in the EU. ESMA will also commit more resources to promote supervisory convergence and target a number of specific areas where convergence is to be promoted. Finally, ESMA aims to continue to strengthen its role as a direct supervisor, whilst intensifying its risk-based approach in order to achieve lasting impact. Overall, the enforcement process is to become more effective and efficient.

For more information, see the 2014 Annual Report and the strategy for 2016-2020 on the ESMA’s website.

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June 2015 IASB meeting agenda posted

12 Jun 2015

The IASB will meet at its offices in London on 22-25 June 2015. Part of the meeting will be held jointly with the Financial Accounting Standards Board (FASB) to discuss revenue recognition. Additionally, the IASB will discuss insurance contracts; IFRS implementation issues; financial instruments with characteristics of equity; the disclosure initiative; equity method; dynamic risk management; provisions and contingent liabilities (IAS 37); pollutant pricing mechanisms; and revenue.

The full agenda for the meeting can be found here. We will post any updates to the agenda, as well as our De­loitte ob­server notes from the meeting, on this page as they become avail­able.

Update (16 June): The IASB has amended its agenda to remove the discussions on dynamic risk management and provisions and contingent liabilities research project. These projects have been deferred to the July meeting.

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Agenda published for the June 2015 IFRS Foundation Trustees meeting

12 Jun 2015

The agenda for the public session of the upcoming meeting of the IFRS Foundation Trustees is now available. The Trustees will meet on 18 and 19 June 2015 in London, however, only the meeting on 19 June is open to the public.

The agenda for the public session of the meeting is summarised below:

Friday, 19 June 2015

IFRS Foundation Trustees meeting (15:15–16:15 BST)

  • Report of the Chair of the IFRS Foundation Trustees
  • Report of the IASB Chair
    • Technical work plan overview
    • Agenda Consultation
    • Engagement strategy
    • Use of IFRS globally
    • Consistency in the application of IFRS globally
    • Education Initiative
  • Report of the Due Process Oversight Committee
    • Technical Activities
    • IFRS Taxonomy
    • Annual review of consultative groups
    • Reporting Protocol
    • Correspondence

Agenda papers for the meeting are available on the IASB's website.

IASB (International Accounting Standards Board) (blue) Image

IASB issues 'Investor Perspectives' on prudence

11 Jun 2015

The International Accounting Standards Board (IASB) has released a new edition in its 'Investor Perspectives' series. In this edition, IASB member Steve Cooper discusses the concept of prudence.

On 28 May 2015, the IASB issued an exposure draft on the conceptual framework, which reintroduced an explicit reference to prudence and states that the exercise of prudence supports neutrality. Mr Cooper discussed how issues with the pre-2010 definition of prudence was created uncertainty in practice and noted that the proposed definition provides more clarity into the approach intended by the IASB.

For more in­for­ma­tion, see the June 2015 edition of the Investor Per­spec­tives newslet­ter on the IASB’s website.

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European Commission releases responses to the Green Paper 'Building a Capital Markets Union'

11 Jun 2015

In February 2015 the European Commission (EC) launched a public consultation as part of its project to boost growth in the EU with the creation of a single market for capital and break down the barriers that are blocking cross-border investments in the EU and preventing businesses from getting access to finance.

One of the questions (Question eight) had been whether there is value in developing a common EU level accounting standard for small and medium-sized entities (SMEs). From the responses made available, three options seem to emerge:

  • an IFRS-based solution, perhaps with simplification in presentation and disclosure;
  • using the IFRS for SMEs as a basis for an EU solution;
  • not making any changes as member states already have the option to permit the use of IFRSs for their SMEs.

Generally, a freestanding EU solution found little support.

In its response to the consultation, the IFRS Foundation had emphasised its willingness to work with the EC in considering the financial reporting implications of the CMU.

Please click to access all responses on the EC website (scroll to the right for responses to question eight). A summary of responses will be published at a later stage along with an action plan in September 2015.

FASB (US Financial Accounting Standards Board) (lt blue) Image
ASBJ (Accounting Standards Board of Japan) Image

FASB and ASBJ hold biannual meeting

10 Jun 2015

On June 8–9, 2015, the FASB met with the Accounting Standards Board of Japan (ASBJ) in Norwalk, Connecticut. The meeting is the 18th in a series of biannual meetings the two standard setters hold to further their “cooperative efforts to develop high-quality global accounting standards.”

In addition to giving updates on their re­spec­tive stan­dard-set­ting ac­tiv­i­ties at the meeting, the two boards exchanged views on tech­ni­cal topics in which they both have an interest, including the conceptual framework, the disclosure framework, and revenue recognition.

The next meeting between the FASB and ASBJ is expected to be held in the first half of 2016 in Tokyo, Japan. For more information about the June meeting, see the press release on the FASB’s Web site.

Deloitte comment letter on IASB ED/2015/1 'Classification of Liabilities'  Image

We comment on the proposed amendments to IAS 1

10 Jun 2015

We have published our comment letter on the International Accounting Standards Board's (IASB) Exposure Draft ED/2015/1 'Classification of Liabilities'.

The proposed amendments aim at a more general approach to the classification of liabilities under IAS 1 based on the contractual arrangements in place at the reporting date. In our comment letter, we welcome the Board's initiative in addressing an area of accounting that often presents issues in practice. However, we believe that the amendments only address a limited number of issues that arise in this context. Therefore, we believe that the Board should consider this issue more fully as part of the Disclosure initiative.

Click to access the full comment letter.

IFRS Foundation (blue) Image

IFRS Foundation publishes updated progress report on global use of IFRSs

09 Jun 2015

The IFRS Foundation has issued an updated version of “Financial Reporting Standards for the World Economy,” which details the progress made toward global use of IFRSs, including IFRS profiles for 140 jurisdictions around the world (i.e., analyses related to whether IFRSs are required or permitted in those jurisdictions).

The publication’s observations regarding use of IFRSs in those jurisdictions include the following:

  • There is general support for global accounting standards as well as for the use of IFRSs as the global standard.
  • IFRSs are required for domestic listed companies in 116 jurisdictions, with 60 percent of those jurisdictions requiring IFRSs for unlisted financial institutions and 90 percent permitting IFRSs for unlisted companies.
  • Most of the 24 remaining jurisdictions do not require IFRSs but do permit their use to some degree.
  • Modifications to IFRSs are rare.
  • The auditor’s report refers to compliance with IFRSs in most jurisdictions.
  • An endorsement process is not performed for 67 percent of 107 jurisdictions (excluding the 33 countries of the EU, the EEA, and EU candidates).
  • Adoption of the IFRS for SMEs is permitted or required in 73 of the 140 jurisdictions.

For more information, see the progress report on the IASB’s Web site.

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Chief Accountant of the SEC believes former SEC Chairman's call for burying IFRS was 'premature'

08 Jun 2015

At a financial reporting conference in California, Jim Schnurr, Chief Accountant of the US Securities and Exchange Commission (SEC) confirmed that the SEC does not intend to bury the objective of a single set of high-quality, globally accepted accounting standards.

As in a speech given last month at Baruch college, Mr Schnurr stated that his research to date has revealed that there is virtually no support to have the SEC mandate IFRS for all registrants, that there is little support for the SEC to provide an option allowing domestic companies to prepare their financial statements under IFRS, but that there is continued support for the objective of a single set of high-quality, globally accepted accounting standards. He therefore questioned former SEC Chairman Christopher Cox' comments at the same conference last year who had stated: "I come to bury IFRS, not to praise them". Given the continued support for convergence, Mr Schnurr commented that the real questions are: what is the path to achieve that objective and how do we get there? He opined:

In my opinion, in the near term, FASB and IASB should continue to focus on converging the standards. The boards should renew their commitment to cooperate and develop standards that eliminate differences between IFRS and U.S. GAAP whenever it meets the needs of its constituents and improves the quality of financial reporting. I recognize the boards will not always be able to eliminate differences during the standard-setting process, primarily because they serve different constituents that have different needs. However, when differences in standards arise, the boards should monitor the implementation of those standards with the objective of learning from the implementation and re-engaging with each other with the goal of converging to the standard with the highest quality financial reporting outcome.

Mr Schnurr also commented on revenue recognition and the new converged standards published in May 2014 and the work of the joint revenue transition resource group (TRG) which has led to proposed amendments to the FASB guidance in May and will see proposed IASB amendments in the third quarter of 2015.

The boards should apply the lessons learned from the recent revenue recognition standard and realize that even though the words may be the same, to achieve convergence, cooperation is needed after the standard-setting process is complete and during the implementation stage of the standards. [...] While the FASB and IASB approach to clarifying the guidance differs slightly, both boards, as evidenced by their discussions during their joint meeting, continue to believe they have a converged approach.

Please click to access the full text of Mr Schnurr's speech on the SEC website. All conference materials are available on the conference website.

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