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

EFRAG recommends that the EC not endorse IFRIC 3

07 May 2005

The European Financial Reporting Advisory Group (EFRAG) has submitted its advice to the European Commission on IFRIC Interpretation 3 'Emission Rights' recommending that the Commission not endorse IFRIC 3 for use in Europe.

EFRAG's primary reason is that:


[IFRIC 3] creates a measurement mismatch (whereby some items are measured at cost (IAS 38 and IAS 20) and others at fair value (IAS 37)) and a reporting mismatch (whereby some gains and losses are reported in profit and loss (IAS 37 and IAS 20) and others in equity (IAS 38)) ....

EFRAG believes that application of IFRIC 3 will not always result in relevant financial information because in certain cases it does not faithfully represent the economic reality. EFRAG also believes that the disadvantages that would arise from endorsing the interpretation outweigh the advantages of guidance on the accounting of emission rights schemes. EFRAG has therefore concluded that IFRIC 3 does not meet all of the requirements of the Regulation EC No. 1606/2002 of the European Parliament and of the Council on the application of International Accounting Standards....

For the reasons given above we believe that it is not in the European interest to adopt IFRIC 3 in its present form. EFRAG therefore recommends that the EU Commission should not endorse IFRIC 3 Emission Rights.

Click to Download EFRAG's Letter (PDF 303k). EFRAG has also posted on its Website its draft comment letter on IFRIC D15 Reassessment of Embedded Derivatives.


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Deloitte comment letter on service concessions

07 May 2005

We have submitted our comment letter on IFRIC's suite of three Draft Interpretations on Service Concession Arrangements.

Service concessions are arrangements whereby a government or other body grants contracts for the supply of public services, such as roads, energy distribution, prisons, or hospitals, to private operators. The draft interpretations establish two accounting models – the financial asset model and the intangible asset model. The appropriate model depends on whether the grantor or the users have the primary responsibility to pay the operator for the concession services. Click to download the (PDF 135k). Here is an excerpt:

With the benefit of hindsight, we believe that if this project were started from the beginning, it might be better suited to a Board project to develop an accounting standard. However, given the advanced stage of the project and the desperate need in the market place for these interpretations we believe the IFRIC should complete this project with all due haste.... We do have a number of pervasive concerns, which we believe are fundamental flaws in the accounting models proposed by the IFRIC.

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May Board meeting agenda is announced

06 May 2005

The IASB will hold its monthly Board meeting on Monday to Wednesday, 16 to 18 May 2005 at its offices in London.

The agenda for the meeting is presented below.


16-18 May 2005, London

Monday 16 May 2005 (afternoon only)

Tuesday 17 May 2005

Wednesday 18 May 2005 (morning only)

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Agenda project pages updated

06 May 2005

We have updated the following agenda project pages to reflect discussions at the Board's April 2005 meeting: Conceptual Framework, Extractive Industries, Financial Instruments – Comprehensive Project, IAS 39 Fair Value Option, IAS 39 Financial Guarantees and Credit Insurance, IFRS 6 – Small Amendment, Insurance Contracts, Performance Reporting, and Short-term Convergence – IAS 12. .

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Problem with IAS 27 for UK companies

06 May 2005

The Institute of Chartered Accountants in England and Wales (ICAEW) has submitted to the IASB and others a briefing paper on a problem in applying IAS 27 Consolidated and Separate Financial Statements by companies in the United Kingdom (and, most likely, elsewhere).

IAS 27 requires investors to recognise income from a subsidiary "only to the extent that the investor receives distributions from accumulated profits of the investee arising after the date of acquisition". Any distributions received out of preacquisition profits are treated as a recovery of part of the cost of the investment. Because of the retrospective transition requirements of IFRS 1 for first-time adopters of IFRSs, "a parent company must examine all past distributions made by each of its subsidiaries to determine whether they were paid from pre-acquisition profits. Some parent companies have a substantial number of subsidiaries and will need to locate and examine data – which in some cases may no longer be available or obscured by intra-group reorganisations – from the date of the initial acquisition of the investment. In many cases this is likely to prove a highly onerous task." The ICAEW urges an early amendment to IFRS 1 to ease the burden. Click to (PDF 29k).
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Comparison of Canadian GAAP and IFRSs

06 May 2005

In April 2005, the Accounting Standards Board (AcSB) of Canada invited comments on its draft strategic plan, Accounting Standards in Canada: Future Directions.

The draft plan includes the AcSB's proposal that public companies in Canada should follow IFRSs rather than Canadian GAAP, with a five-year transition period. To give commentators on the plan a better basis for understanding the extent of change that the proposed convergence to IFRSs might entail, the AcSB staff have prepared a high-level comparison of Canadian standards and IFRSs as of 31 March 2005. AcSB staff are also developing a more detailed comparison for those interested in comparison at a technical level. That comparison is expected to be available before 31 July 2005. Click:
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EC seeks 'political accountability' for IASB

06 May 2005

In a Green Paper on Financial Services Policy (2005-2010), the European Commission sets out its financial services policy priorities for the next five years, with the goal of fostering an integrated, open, and competitive financial market "where financial services and capital can circulate freely at the lowest possible cost throughout the EU – with adequate and effective levels of prudential control, financial stability and a high level of consumer protection." The regulation requiring IFRSs for European listed companies and permitting member states to extend IFRSs to unlisted companies is part of that policy.

The Green Paper suggests that the oversight and accountability of the IASB need to be strengthened:

The debate about the future governance, funding and political accountability of global standard-setting bodies, such as the International Accounting Standards Board, are of growing political importance. The Commission considers that public oversight of these structures must be strengthened, to ensure appropriate reflection of stakeholders, satisfactory transparency, due process and sustainable financing.

Annex 1 to the paper discusses the EU-US regulatory dialogue. A key goal of the Commission is to "work towards equivalence/convergence between IAS and US-GAAP – agreeing a roadmap and timetable are now urgent." The paper notes that the Commission will wait until the end of 2006 or early 2007 before making a decision on the IFRS-equivalence of the major third-country accounting systems (Canadian, Japanese, and US). Click to download: The Commission has invited comments on its policies by 1 August 2005.
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SEC will report on off-balance-sheet items

05 May 2005

In remarks at the Spring Forum of the American Academy of Actuaries in Washington on 3 May 2005, US SEC Chief Accountant Donald T. Nicolaisen said that later this month the SEC will be releasing a report on special purpose entities, off-balance-sheet liabilities, and related matters including leases and pensions.

Section 401 of the Sarbanes-Oxley Act requires the SEC to study the filings by issuers and their disclosures to determine the extent of off-balance sheet transactions (including assets, liabilities, leases, losses, and the use of special purpose entities) and whether generally accepted accounting rules result in financial statements of issuers reflecting the economics of such off-balance sheet transactions to investors in a transparent fashion.


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Deadline for replies to SME questionnaire is extended

05 May 2005

In response to requests from constituents, the IASB has extended until 30 June 2005 the deadline for replies to the staff questionnaire on accounting standards for small and medium-sized entities (SMEs).

The questionnaire seeks views on whether any of the accounting recognition and measurement principles in International Financial Reporting Standards should be modified for SMEs. Click to Download the IASB Press Release (PDF 42k). Click here for More Information about the Questionnaire.
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SEHK adopts IFRS transition disclosures

04 May 2005

The Stock Exchange of Hong Kong has adopted IFRS Transition Disclosure Requirements for initial listing documents and circulars.

These disclosures relate to the impact of the transition in Hong Kong, as of 1 January 2005, to accounting standards that (except for effective dates) are word-for-word equivalents of IFRSs.

Click to view IFRS Transition Disclosure Requirements (PDF 49k).

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