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Changes to IASB February meeting agenda

17 Feb 2006

The IASB has made two changes to the agenda for its meeting next week, which we had announced in our News Story of 3 February 2006, which we have revised.

Fair Value Measurement has been moved to Thursday afternoon, and Government Grants has been added to the Tuesday afternoon agenda.

The government grants project had started as part of the IASB's short-term convergence project with FASB. However, it has evolved into a stand-alone (non-convergence) IASB project to reconsider IAS 20 Accounting for Government Grants and Disclosure of Government Assistance. The stated objective of the project is to amend IAS 20 by applying the accounting model for government grants contained in IAS 41 Agriculture to all government grants. The IAS 41 model establishes the following principles for recognising grants related to assets measured at fair value through profit and loss:

  • If the grant is unconditional, recognise income when the grant becomes receivable.
  • If conditional, recognise income when conditions attached to the grant have been met.
Also, in June 2005, the Board withdrew IFRIC Interpretation 3 Emission Rights. At that time, it indicated that it intended to address emission rights in a separate exposure draft early in 2006. Subsequently, the Board has determined that since emission rights are a form of government grant, they should be addressed in the project to reconsider IAS 20.
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China adopts 38 new accounting standards

16 Feb 2006

The Ministry of Finance (MOF) of the People's Republic of China has announced that it has adopted a new basic standard and 38 new Chinese Accounting Standards that are substantially in line with IFRSs, though a few exceptions are acknowledged.

The basic standard is akin to a conceptual framework, and the 38 standards address nearly all over the issues covered in IFRSs. The MOF has also adopted 48 new Chinese Auditing Standards that are similar to International Standards on Auditing issued by the International Auditing and Assurance Standards Board. Click for a (PDF 123k English and Chinese). The new accounting and auditing standards will become effective for listed enterprises from 1 January 2007. Other enterprises are encouraged to adopt them. Deloitte Touche Tohmatsu (China) has served as consultants to the MOF in developing Chinese Accounting Standards since 1993. The MOF announced the new standards in a ceremony in the Great Hall of the People, in Beijing. IASB Chairman David Tweedie participated, saying that he expected China's speedy move toward international standards is likely to spur some other countries in the Asia-Pacific region to do the same.
European Union (old) Image

CESR studies public access to IFRS reports

16 Feb 2006

The Committee of European Securities Regulators (CESR) is studying the appropriate mechanism for making the financial reports of European listed companies available electronically throughout the European Union.

Such reports would include annual, semi-annual, and other interim reports (which include IFRS financial statements), as well as reports of major holdings and insider information. Adoption of such a pan-European storage and retrieval mechanism is part of the process for implementing the 'Transparency Directive'. CESR will make a recommendation to the European Commission, with a goal of having an interim system in place by January 2007. CESR has issued: Responses to the Consultation Document are due by 31 March 2006 via CESR's Website. CESR will hold an open hearing on the issues on 2 March 2006 at CESR's office in Paris.
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Review of UK interim reporting

15 Feb 2006

The United Kingdom Financial Reporting Review Panel has reviewed the interim accounts of 70 UK listed companies for 2005, including 35 FTSE 350 companies.

"The Panel found the level of disclosure and compliance in the first reports prepared under IFRSs to be good". The Panel's report noted that:

In the interim reports reviewed, most issues arose on matters where there had been changes as a result of the implementation of IFRS. These largely related to the presentation of items within the primary financial statements and to narrative descriptions of new or revised accounting policies.

Click to download:
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EU will require foreign audit firms to register

15 Feb 2006

In a (PDF 93k) to the US Chamber of Commerce in Washington last week, EU Internal Market Commissioner Charlie McCreevy cited eliminating the SEC's accounting reconciliation requirement between IFRSs and US GAAP as one of the four most pressing Transatlantic regulatory matters.

He also outlined the progress that has been made in capital market reforms in the EU. He indicated that the EU shortly will adopt regulations requiring registration of foreign audit firms that perform audits in the EU. An excerpt:

Take auditing for example. The EU has just put the finishing touches to its new directive on Statutory Audit (the 8th Directive). During its implementation one of the key challenges will be the question of registration of third country audit firms in the EU by 2008. All third country audit firms, including US ones, auditing foreign companies listed in the EU will have to be registered with EU oversight bodies - unless their home country oversight bodies can be considered as equivalent.

Similarly, EU firms auditing SEC registrants will face inspections from the PCAOB in 2006 and 2007. The new EU directive provides for cooperation with the PCAOB on access to audit working papers. These are tricky issues where the EU and the US must have close and pragmatic cooperation or willingness to 'agree to agree' as Bill McDonough, former chairman of the PCAOB, put it. Both sides have to deliver. And both sides must be willing to respect each other's rules and limitations. Deepening cooperation is the name of the game.

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

EFRAG recommends IAS 21 amendments

14 Feb 2006

EFRAG has recommended that the European Commission endorse, for use in Europe, the recent Amendments to IAS 21 The Effect Of Changes in Foreign Exchange Rates - Net Investment in a Foreign Operation.

Click for EFRAG Letter (PDF 18k).
EFRAG (European Financial Reporting Advisory Group) (dk green) Image

EFRAG letter to IASB on SME project

14 Feb 2006

The European Financial Reporting Advisory Group (EFRAG) has written to IASB Board Vice Chairman Tom Jones, who chairs the Board's SME Working Group, recommending that the Board change its approach to developing an exposure draft of an IFRS for Small and Medium-sized Entities (SMEs).

Here is an excerpt from EFRAG's Letter (PDF 33k):

EFRAG wants to express its full support for the comments you made in your introduction to the Board's deliberations at the January meeting where you indicated that:

  • (a) the direction in which the project is presently heading under Board members' guidance is leading to a standard which appears far too lengthy and complex; and
  • (b) more simplifications are needed than decided up to date in order to meet constituents' expectations.

We agree with this view. We think it is important that the IFRS for SMEs is easy to understand and comprehensive on a stand-alone basis.

European Union (old) Image

EU regulators will study reporting requirements

12 Feb 2006

The three main committees of European Union financial regulators – the Committee of European Securities Regulators (CESR), the Committee of European Banking Supervisors (CEBS), and the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) – have published a common cross-sector work programme for 2006. The main goal of this supervisory cooperation is to enhance consistency in implementing EU legislation across financial sectors.

The work programme includes an examination of reporting requirements, including IFRSs:

The Committees will request input from relevant market participants to take stock of potential inconsistencies in reporting requirements stemming from sectoral EU directives applying to European supervised entities and market participants, taking into account IFRS. The Committees aim at presenting a first result of this inventory within the second half of 2006. Based on this inventory, future work may be proposed.

Click for (PDF 33k) and related (PDF 108k). CESR, CEBS, and CEIOPS are sometimes referred to as the '3 Level 3' regulators or '3L3'.
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IFAC paper on auditing sustainability reports

11 Feb 2006

The International Federation of Accountants (IFAC) has issued a consultation paper that explores the assurance aspects of the Global Reporting Initiative's (GRI's) proposed new Sustainability Reporting Guidelines (G3).

The GRI, which develops global reporting guidelines on the economic, environmental, and social performance of organisations, has released draft guidelines designed to enhance the comparability, clarity, ease of use, and assurability of sustainability reports. IFAC's consultation paper, Assurance Aspects of G3 - The Global Reporting Initiative's 2006 Draft Sustainability Reporting Guidelines, explores issues in the proposed G3 Guidelines that specifically relate to assurance reporting. The paper is aimed primarily at professional accountants with some familiarity with sustainability assurance. IFAC requests comments by 31 March 2006. Click to download:
EFRAG (European Financial Reporting Advisory Group) (dk green) Image

EFRAG concerns on IASB measurement paper

11 Feb 2006

The European Financial Reporting Advisory Group (EFRAG) has invited comments on its draft response to the IASB Discussion Paper Measurement Bases for Financial Accounting - Measurement on Initial Recognition.

In its draft response, EFRAG expresses "a number of fundamental concerns regarding the reasoning and conclusions reached in the paper", including the following:
  • The paper's exclusive focus on initial measurement in isolation from subsequent measurement.
  • The "basic assumption... that perfect markets (or at the very least active and liquid markets that involve low transaction costs) exist for every asset and liability". In EFRAG's view this is the exception rather than the norm.
  • The necessity to decide on financial statement concepts of financial performance and financial position before addressing measurement issues.
  • Lack of evidence for the superiority of market value measurement objectives over entity-specific measurement objectives. "If the arguments in the paper are the only arguments in favour that exist and have been expressed in the paper in the best way possible, we do not understand how the paper could have reached the conclusions it has."
Click to download EFRAG's Draft Letter (PDF 100k). EFRAG requests comments by 1 May 2006.

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