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News

EFRAG seeks nominees for Technical Expert Group

08 Nov 2004

The Supervisory Board of the European Financial Reporting Advisory Group (EFRAG) is seeking nominees for appointments to EFRAG's Technical Expert Group.

Details are on EFRAG's Website.

Accounting for securities by banks

07 Nov 2004

Speaking before the Securities Industry Association annual meeting, US Federal Reserve Board Governor Susan Schmidt Bies addressed a range of issues on accounting for securities in relation to the financial supervision of banks, including: Whether the sale of a security from the available-for-sale portfolio at a loss suggests that the remaining portfolio should be viewed as 'other than temporarily impaired', and therefore a loss should be recognised. Regulatory capital issues. Challenges in securities accounting and auditing from fair value measurements. Click to Download Governor Bies's Remarks (PDF 34k). .

Speaking before the Securities Industry Association annual meeting, US Federal Reserve Board Governor Susan Schmidt Bies addressed a range of issues on accounting for securities in relation to the financial supervision of banks, including:

  • Whether the sale of a security from the available-for-sale portfolio at a loss suggests that the remaining portfolio should be viewed as 'other than temporarily impaired', and therefore a loss should be recognised.
  • Regulatory capital issues.
  • Challenges in securities accounting and auditing from fair value measurements.
Click to Download Governor Bies's Remarks (PDF 34k).

Notes from the second day of the IFRIC meeting

07 Nov 2004

The International Financial Reporting Interpretations Committee (IFRIC) held a two-day meeting in London on 4-5 November 2004. Presented below are the preliminary and unofficial notes taken by the Deloitte observers at the second day of the meeting. .

The International Financial Reporting Interpretations Committee (IFRIC) held a two-day meeting in London on 4-5 November 2004. Presented below are the preliminary and unofficial notes taken by the Deloitte observers at the second day of the meeting.

Notes from the IFRIC Meeting5 November 2004

D8 Members' Shares in Co-operative Entities

Title

On the issue of the title of the draft Interpretation, IFRIC agreed to a title that reads: "Members Shares in Co-operative Entities and Similar Instruments" so as to allow analogous reference as well as clear functioning of the hierarchy in IAS 8 but still making it obvious that the only issue dealt with specifically by IFRIC was that of members' shares in co-operative entities.

Clarification of the application of the prohibition on redemption

Certain constituents have raised concerns that the interpretation could have the unintended consequence of classifying certain members' accounts, when members' act as customers, as equity instead of liabilities. In particular UK building societies are subject to regulations ('nature limits') that require broadly that at least 50% of a society's borrowings are in the form of member share deposits. In all other respects, member share deposits behave as chequing accounts in a bank. However, application of D8 could inadvertently lead to the classification of such members' accounts as equity.

To address this issue, IFRIC agreed with the Staff recommendation that the application of the prohibition on redemption be clarified by distinguishing between:

  • conditional restrictions that prevent redemption only if a condition is met, and even then only until the condition is not met. These do not prevent a liability coming into existence and therefore do not lead to equity classification of members' shares, and
  • unconditional restrictions that prevent redemption in all circumstances. These prevent a liability coming into existence and therefore lead to equity classification of members' shares;

Staff brought to IFRIC's attention, suggestions by certain constituents to consider a concept of restrictions or prohibitions based on their permanence. IFRIC concurred with the Staff view that this would be difficult to achieve as this concept is not dealt with in IAS 32.

Subsequent measurement of the liability for redemption of members' shares

IFRIC agreed not to deal with this issue in the D8 project.

Distinction between 'reclassification' and 'extinguishment'

IFRIC agreed with the Staff recommendation to remove BC17 but to make other drafting changes to clarify this issue.

Use of portfolio approach

IFRIC discussed the concern raised by some commentators regarding the applicability of the portfolio approach and agreed to clarify by way of example, that the portfolio approach would be applicable.

Transition

IFRIC underscored its decision to retain the proposed effective date of 1 January 2005 after discussing some suggestions from commentators which included staggered implementation and deferral. It was re-affirmed that the co-operative groups had no problems with the proposed transitional requirements of D8.

In conclusion, staff indicated that D8, subject to certain drafting changes, would be forwarded to IASB members for a final vote at the Board's December meeting.

This summary is based on notes taken by observers at the IFRIC meeting and should not be regarded as an official or final summary.

Scroll down for notes from 4 November 2004.

Kevin Stevenson will leave the IASB

05 Nov 2004

At the meeting of the International Financial Reporting Interpretations Committee yesterday, Kevin Stevenson announced that he will step down from his positions as IASB Director of Technical Activities and Chairman of IFRIC most likely by April 2005. Mr.

Stevenson has served in those capacities since the inception of the IASB in 2001 and has led the staff in a productive programme of improvements to most of the old IASs, new IFRSs, Interpretations, and a substantial agenda of projects in process. Mr. Stevenson will return to his home country of Australia. [On 18 November 2004 IASB issued a Press Release (PDF 16k).]

Notes from the first day of the IFRIC meeting

05 Nov 2004

The International Financial Reporting Interpretations Committee (IFRIC) is holding a two-day meeting in London on 4-5 November 2004. Presented below are the preliminary and unofficial notes taken by the Deloitte observers at the first day of the meeting. .

The International Financial Reporting Interpretations Committee (IFRIC) is holding a two-day meeting in London on 4-5 November 2004. Presented below are the preliminary and unofficial notes taken by the Deloitte observers at the first day of the meeting.

Notes from the IFRIC Meeting4 November 2004

Administrative Matters

The Chairman announced that Junichi Akiyama would resign his membership of IFRIC as soon as a suitable replacement could be found. It was noted that in terms of vacancies on IFRIC the Trustees had made two offers of IFRIC positions and hoped to be able to announce new IFRIC members in December.

The Chairman also referred to his own impending return to Australia, and indicated that he currently expects this to occur in April 2005. He noted that plans for a replacement chair are well advanced and a smooth transition in the new year is expected.

Report of the Agenda Committee: Scope of IFRS 2

The Board discussed whether to develop an interpretation regarding the scope of IFRS 2, particularly whether or not where a share issue has taken place and the goods or services received in return are not immediately obvious, would such a transaction be considered within IFRS 2. It was noted that where special condition attach to the shares this would affect their fair value. The IFRIC agreed that prima facie, where no cash, or less cash than the fair value of the instruments is received the entity will have received other assets (whether recognisable under IFRS or not) equivalent in value to the cash shortfall. It was agreed that unless the other assets received are financial assets within the scope of IAS 32 and IAS 39, or arise from a business combination in accordance with IFRS 3, the transaction would be within the scope of IFRS 2. However, there was some unresolved debate, particularly around issues such as where shares are issued at a discount due to an urgent cash need. It was agreed that the distinction of when items should be accounted for in accordance with IFRS 2 is not immediately obvious in all cases and that IFRIC should issue an interpretation on this matter.

The IFRIC agreed to discuss this matter in more detail at a future meeting.

IFRS 2: Changes in Employee Contributions to ESPP's

The IFRIC considered a draft interpretation on accounting for employee contributions to employee share purchase plans (such as the save-as-you-earn plans in the United Kingdom).

The IFRIC agreed that where an employee ceases to participate in the savings plan and therefore loses the right to exercise options, there are two viable alternative treatments. The first is to treat this as a cancellation and to recognise the remaining expense to be recognised immediately, or the second to continue to recognise the expense over the previously determined vesting period. Two further alternatives of treating this as a vesting condition and therefore reversing all of the related expense, or to simply stop expensing without any reversal were discounted as being inconsistent with IFRS 2.

The IFRIC agreed that as the entity is no longer receiving future service in respect of the employee's right to participate in the option scheme (which they have forfeited by lapsing their savings, and therefore are not taking this benefit into account in determining whether to provide future service) the cessation of saving should be treated as a cancellation under IFRS 2. The IFRIC agreed to proceed with a draft interpretation on this basis providing that a balanced view of alternative treatments was provided in the Basis for Conclusions.

IFRS 2: Treasury Shares and Group Transactions

The IFRIC considered a paper that contained a range of examples concerning the issues that arise when a subsidiary gives its employee benefits in the form of rights to purchase shares in its parent, and when an entity must purchase its own shares to satisfy IFRS 2 obligations. The IFRIC agreed that this issue should be taken onto its agenda, and that at this time the following issues should be considered:

  • A single entity that voluntarily purchases its own shares to satisfy an obligation to issue shares
  • A single entity that mandatorily purchases its own shares to satisfy an obligation to issue shares
  • A group where the subsidiary grants share options over shares in the parent
  • A group where the subsidiary grants share options over shares in the parent and the parent levies an inter-company charge
  • A group where the subsidiary grants share options over shares in the parent which it buys shares on market to satisfy
  • A group where the subsidiary grants share options over shares in the parent which it purchases shares from the parent to satisfy
  • A group where the subsidiary grants cash benefits based on the market price of the parent company shares
  • A group where employees are moved from entity to entity

It was noted that the existence of minority interests would further complicate many of these issues. The IFRIC decided to consider all of these issues for interpretation, as many of the simpler issues must be concluded on as a building block to those requiring more in depth interpretation. However the IFRIC noted that in terms of final published interpretations it was possible some of these issues might be excluded and passed to the IASB education section.

IAS 37: Waste Electrical and Electronic Equipment

The IFRIC considered some editorial changes to this draft, and recommended that others be made. The staff undertook to complete these changes during the course of the meeting so that the draft could be formally voted on day two of the meeting.

Activities of Other Interpretation Bodies

The IFRIC heard a report of activities undertaken by other interpretation bodies in Australia, Canada, France and the United States. The IFRIC considered a number of the items under discussion by other bodies but did not wish to add any of them to its agenda at this time.

Service Concession Arrangements

The IFRIC considered issues raised by the financial instruments staff of the IASB in respect of the proposed draft interpretations. The IFRIC considered what situations across the following range of situations should be considered within the financial assets model

  • Grantor pays - fixed payments
  • Grantor pays - payments vary with demand
  • Grantor retains demand risk - users pay but grantor guarantees amounts
  • Grantor retains demand risk - operator collects revenues from users until it achieves a specified return
  • Grantor regulates prices - designed to ensure operator receives specified return from users

The proposal from the staff was that only the first two of these items should fall within the financial instruments model. The IFRIC agreed to expose this, but to include in the basis for conclusions a discussion of the possible merits of including the other items, and requesting comments on whether the IFRIC had drawn the distinction between the intangible asset model and the financial asset model in the correct manner. It was noted that a majority of IFRIC members supported exposing this proposal, but a majority do not necessarily agree that this is the most appropriate answer.

The IFRIC also considered the limitation in IAS 39 that an item cannot be classified as a loan or receivable unless the entity is expected to recover substantially all of the amount , subject to any credit deterioration risk. It was noted that many service concessions arrangements would not meet this criteria and therefore could not be accounted for as a receivable. It was agreed that a discussion of this in the basis for conclusions was required (as the IFRIC had previously determined that an item could still be accounted for as a receivable if the only risk of non-recovery was related to future service issues - such as penalty clauses for non-availability of the asset), and that further consideration should be given to whether this highlights an inconsistency between IAS 11 and IAS 39.

The IFRIC will consider a worked example of the service concessions models at a future meeting, but decided not to delay exposure of the proposals until this had been done. Accordingly this topic will be discussed at the December meeting with a view to issuing the draft interpretations for exposure.

Publication of reasons for rejecting IFRIC agenda proposals

The IFRIC considered the advantages and disadvantages of publishing the reasons why proposals put to the agenda committee were not accepted onto the agenda. Broadly, proposals are not accepted for one or more of three possible reasons:

  • Inappropriate level (too narrow an issue)
  • IFRS is considered by IFRIC to be clear
  • Included within an existing Board or IFRIC project.

The IFRIC considered the risk issues of such a list forming another part of GAAP, and the positive outcomes such as discouraging repeat requests to IFRIC and ease of dissemination. The IFRIC will further discuss this proposal at their closed session on day two of the meeting when the review of IFRIC operations is discussed.

[Note: We maintain a List of Issues Not Added to IFRIC's Agenda.]

This summary is based on notes taken by observers at the IFRIC meeting and should not be regarded as an official or final summary.

Statistics database updated

04 Nov 2004

We have updated our Database of Statistics about the globalisation of the world's capital markets.

That globalisation is an important reason why global financial reporting standards are needed.

Agenda for November 2004 IASB meeting

04 Nov 2004

The IASB will meet at its offices in London on Tuesday and Wednesday 16-17 November 2004. The Board will not meet on Monday 15 November.

The Board will also meet with the Standards Advisory Council at the Renaissance London Chancery Court Hotel on Thursday and Friday 18-19 November 2004. The agendas for the two meetings are below. You will find details of the IASB agenda Here.

Agenda, IASB Meeting 16-17 November 2004, London

Agenda, Standards Advisory Council Meeting18-19 November 2004, London

  • Conceptual Framework
  • Changes to IASB Due Process
  • Consolidation
  • Financial Instruments - EU Amendments to IAS 39
  • IASB Chairman's Report
  • IASB Project Planning
  • IFRIC Matters
  • IASC Foundation Constitution Review
  • Project Working Groups
  • Revenue Recognition
  • Roles of National Standard-setters

World Bank book on IFRSs

04 Nov 2004

The World Bank has published International Financial Reporting Standards: A Practical Guide (Third Edition).

Each chapter summarises an IFRS including problems addressed, scope, key concepts and definitions, accounting treatment, presentation and disclosure, and financial analysis and interpretation. Click for More Information.

Four new IFRS e-learning modules now available

03 Nov 2004

We are pleased to make available without charge four new modules in Deloitte's IFRS e-learning series: IAS 23 Borrowing Costs IAS 29 Financial Reporting in Hyperinflationary Economies IAS 38 Intangible Assets IFRS 3 Business Combinations This brings the number of available modules to 28. All of the remaining modules (namely IASs 24, 32/39 Parts 2 and 3, and 36, and IFRSs 2 and 5) are scheduled for release before the end of the year.

You can always access Deloitte's IFRS e-learning by clicking on the light bulb icon on the IASPlus home page.

Asia-Pacific jurisdiction pages updated

03 Nov 2004

We have updated the following pages to reflect standard setting activity during the third quarter of 2004: Australia China Hong Kong Indonesia Malaysia Singapore Taiwan .

We have updated the following pages to reflect standard setting activity during the third quarter of 2004:

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.