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News

Steps toward convergence on income taxes

28 Jan 2005

The US Financial Accounting Standards Board has posted its Action Alert Newsletter summarising FASB's recent decisions about convergence of FASB and IASB income tax standards with respect to which tax rate to use in measuring deferred taxes: While FAS 109 requires the 'enacted' rate and IAS 12 requires the 'substantively enacted' rate, FASB would amend FAS 109 to clarify that a rate is regarded as enacted if only perfunctory actions are required for a measure to become law. If corporate income is taxed at different rates depending on whether that income is distributed to shareholders, FASB would continue to require measurement of deferred tax assets and liabilities using the distributed rate, while IASB agreed at its January meeting to stick with the IAS 12 requirement to use the undistributed rate.

However, FASB agreed to require disclosure of the difference in the tax expense (or benefit) for the period that would result from the use of the undistributed rate.

EU emissions trading - accounting and auditing issues

27 Jan 2005

The European Federation of Accountants (FEE) has published an Alert on financial reporting and auditing issues arising from the European Union's Greenhouse Gas Emissions Trading Scheme, which went into effect on 1 January 2005. The International Financial Reporting Interpretations Committee (IFRIC) recently issued IFRIC 3 Emission Rights, which is discussed in the FEE report.

The FEE Alert may be downloaded without charge from the FEE Website (click 'Fee Publications' then 'Sustainability').

SEC may ease reconciliation for IFRS filers

27 Jan 2005

In a speech at the London School of Economics earlier this week, US SEC Chairman William H.

Donaldson said that the Commission is considering easing certain of its rules for non-US companies listed in the United States. He indicated that European companies using IFRSs might be allowed to reconcile only two years of financial statements to US GAAP instead of three:

The Commission recognizes the seismic change that conversion to IFRS represents for many European countries. We appreciate the European Union's efforts in this area because we value the EU's willingness to require the use of a single set of high quality accounting standards. This approach enhances investor understanding. We also understand that conversion to IFRS, while undoubtedly beneficial in the long run, could be difficult and expensive for some to implement in the immediate term. Consequently, the Commission has proposed amendments to our reporting requirements that would facilitate foreign private issuers' conversion to IFRS. For those foreign issuers also listed on U.S. exchanges, the SEC has long allowed these companies to use IFRS, provided the financial figures were reconciled to U.S. Generally Accepted Accounting Principles over a three-year period. Within the next few months, I fully expect the Commission will consider adopting a proposal to allow first-time users of IFRS to reconcile their financial statements to U.S. GAAP for only two years, and I am of the firm view that this would be a step in the right direction.

Other changes under consideration include:
  • Easier rules for foreign registrants to deregister their securities if they do not wish to continue to meet the US requirements.
  • A possible delay, for non-US registrants, of the effective date of the requirements to include in their annual reports a report of management on the company's internal control over financial reporting. Currently, a foreign private issuer that files its annual report on Form 20F or Form 40F must begin to comply in its first financial year ending on or after 15 July 2005.
Click to download Mr. Donaldson's Speech (PDF 65k).

Canada adopts financial instruments standards

26 Jan 2005

The Canadian Accounting Standards Board (AcSB) has adopted a new standard on financial instruments that is a hybrid of IAS 39 and US GAAP.

The new standard – Financial Instruments: Recognition and Measurement, Hedges, and Comprehensive Income:
  • does not adopt either of the 'carve outs' from IAS 39 that were adopted by the European Commission (thus Canadian companies can use the full fair value option and cannot apply hedge accounting to bank core deposits),
  • does not include the macro hedging provisions of IAS 39,
  • takes the US position (SFAS 115) for available-for-sale financial assets that non-quoted equities are at cost, rather than the IAS 39 position that only those for which fair value cannot be determined are at cost,
  • does not address derecognition because the AcSB has previously adopted a derecognition standard that is in line with the US model (SFAS 140),
  • is effective for annual and interim periods beginning on or after 1 October 2006 (for most companies this means initial application in calendar years beginning on 1 January 2007), with early adoption permitted.
Click for AcSB Press Release (PDF 62k).

US restatements continue to rise

24 Jan 2005

A new study by Huron Consulting Group has found that, after a slight drop in 2003, the number of restatements due to errors in the annual and interim financial statements of public companies filed with the US Securities and Exchange Commission rose to a record 414 in 2004, up from 323 in 2002 and 330 in 2002. The most common errors in 2004 related to: Revenue recognition (16% of 2004 errors). Equity, including EPS and stock options (16%). Provisions (accruals for liabilities of uncertain amount or timing) and contingencies (14%). Improper capitalisation of assets (8%). Inventories (4%). Click for Press Release (PDF 20k). .

A new study by Huron Consulting Group has found that, after a slight drop in 2003, the number of restatements due to errors in the annual and interim financial statements of public companies filed with the US Securities and Exchange Commission rose to a record 414 in 2004, up from 323 in 2002 and 330 in 2002.

The most common errors in 2004 related to:

  • Revenue recognition (16% of 2004 errors).
  • Equity, including EPS and stock options (16%).
  • Provisions (accruals for liabilities of uncertain amount or timing) and contingencies (14%).
  • Improper capitalisation of assets (8%).
  • Inventories (4%).

Click for Press Release (PDF 20k).

Notes from third day of the IASB's January 2005 meeting

23 Jan 2005

We have combined on a Single Page our notes from the IASB's regular monthly meeting in London on 19-21 January 2005. .

We have combined on a Single Page our notes from the IASB's regular monthly meeting in London on 19-21 January 2005.

Agenda for February 2005 IFRIC meeting announced

22 Jan 2005

The International Financial Reporting Interpretations Committee (IFRIC) will meet at the IASB's offices in London on Thursday and Friday 3-4 February 2005. The agenda for the meeting is set out below.Agenda - IFRIC Meeting 3-4 February 2005 Thursday 3 February 2005 IFRS 2 Treasury Share Transactions and Group Transactions Scope of IFRS 2 Service Concession Arrangements - Consideration of examples and any sweep issues arising from editorial reviews. Emission Rights - Consideration of possible approaches for revision of IAS 38. Friday 4 February 2005 (morning only) IFRIC D5 Applying IAS 29 Financial Reporting and Hyperinflationary Economies for the First Time IAS 11 Construction Contracts - Combining and Segmenting Contracts Scope of IFRS 2 Reassessment of Embedded Derivatives .

The International Financial Reporting Interpretations Committee (IFRIC) will meet at the IASB's offices in London on Thursday and Friday 3-4 February 2005. The agenda for the meeting is set out below.

Agenda - IFRIC Meeting 3-4 February 2005

Thursday 3 February 2005

Friday 4 February 2005 (morning only)

IASB and Japan agree on convergence project

21 Jan 2005

The IASB and the Accounting Standards Board of Japan (ASBJ) will launch a joint project to reduce differences between IFRSs and Japanese accounting standards.

Specific elements of the agreement, as noted in the Press Release (PDF 17k) include:

  • Identify and assess differences in existing standards on the basis of the boards' respective conceptual frameworks or basic philosophies with the aim of reducing those differences where economic substance or market environments such as legal systems are equivalent.
  • Address the differences in their respective conceptual frameworks at a future time to be agreed by the boards.
  • The boards will consider their respective due process requirements in arriving at agreement.
  • The ASBJ will undertake a study to get an overall picture of major differences between Japanese accounting standards and IFRSs and will identify topics to be discussed.
  • Adopt a phased approach to the comparative reviews of differences in individual standards.
  • The scope of the first phase is standards in place as of 31 March 2004, excluding the following topics, which will be addressed in subsequent phases:
    • standards under review or intended to be reviewed in the joint projects between the IASB and the US Financial Accounting Standards Board (FASB).
    • standards that are divergent owing to differences in the respective conceptual frameworks or basic philosophies.
    • standards recently developed.
    • standards whose requirements are subject to legal restrictions or those currently considered inapplicable in Japan.

Notes from day two of the IASB's January 2005 meeting

21 Jan 2005

We have combined on a Single Page our notes from the IASB's regular monthly meeting in London on 19-21 January 2005. .

We have combined on a Single Page our notes from the IASB's regular monthly meeting in London on 19-21 January 2005.

US Senate will monitor IASB-FASB convergence

20 Jan 2005

The Chairman of the US Senate Committee on Banking, Housing, and Urban Affairs, which has responsibility for oversight of the SEC and US financial institutions, has announced that the Committee's tentative agenda for 2005 will include " -->harmonisation of accounting standards between the FASB and IASB -->".

Click for (PDF 26k).

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.