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Agenda project pages updated

29 Oct 2005

We have updated the following agenda project pages to reflect discussions at the joint IASB-FASB meeting on 24-25 October 2005 in Norwalk, CT, USA: Conceptual Framework Financial Instruments Performance Reporting Revenue Recognition Short-term Convergence - IAS 12 Income Taxes .

We have updated the following agenda project pages to reflect discussions at the joint IASB-FASB meeting on 24-25 October 2005 in Norwalk, CT, USA:

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EU adopts amendments to IAS 39, IFRS 1, and SIC 12

29 Oct 2005

The European Union has approved (PDF 55k) amending the accounting regulation to formally adopt, for use in Europe starting 1 January 2005, recent IASB Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards, Amendments to IAS 39 Financial Instruments: Recognition and Measurement - Transition and Initial Recognition of Financial Assets and Financial Liabilities, and Amendments to SIC 12 Consolidation - Special purpose entities. .

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Deloitte comments on IAS 37 proposals

28 Oct 2005

We have posted the Deloitte Provisions, Contingent Liabilities and Contingent Assets (PDF 47k).

On 30 June 2005, the IASB proposed to amend IAS 37 (and to retitle it Non-financial Liabilities) and complementary limited amendments to IAS 19 Employee Benefits. The amendments to IAS 37 would change the conceptual approach to recognising non-financial liabilities by requiring recognition of all obligations that meet the definition of a liability in the IASB's Framework, unless they cannot be measured reliably. Uncertainty about the amount or timing of settlement would be reflected in measuring the liability instead of (as is currently required) affecting whether it is recognised. Our response states:

With the exception of the proposals for restructuring provisions, we do not support the ED, which we see as largely unnecessary. In our view, the majority of the Board's proposals are premature and pre-judge matters that should be discussed in the context of the review of the IASB Framework rather than as an amendment of IAS 37. We think that IAS 37 is operating satisfactorily within the current operating model and environment. In addition, we do not think that the Board's choice of a single measurement attribute is appropriate. As such, we find the majority of the changes proposed in the ED fail to achieve an improvement in financial reporting.

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Deloitte comments on IFRS 3 proposals

28 Oct 2005

We have posted the Deloitte Business Combinations (PDF 103k).

On 30 June 2005, the IASB and the US Financial Accounting Standards Board (FASB) jointly published exposure drafts that would amend their business combinations standards (IFRS 3 and SFAS 141) while retaining the fundamental requirement to account for all business combinations using the purchase method of accounting, by which one party is always identified as acquiring the other. Among our comments are the following:

  • We agree that recording 100% of the fair value of all assets acquired and liabilities assumed, including goodwill attributable to the noncontrolling (minority) interest, produces more meaningful and relevant information. However, we do not believe that the costs and operational difficulties associated with recording the fair value of the acquiree as a whole are justified by the benefits of providing the information at this time.
  • Additionally, significant portions of the exposure drafts are predicated on projects that have not yet been completed (eg the Conceptual Framework project, the Financial Performance Reporting project, the Fair Value Measurements project, the Liabilities and Equity project, and new basis issues). We do not believe the Exposure Drafts should be finalised until such time as the projects forming the foundation for this standard are completed.
  • We believe the IASB should retain IFRS 3 Business Combinations, with limited modifications, and that the FASB should converge with this model. Our letter cites a range of benefits of this approach.
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Notes from second day of IASB-FASB meeting

28 Oct 2005

The IASB and the US Financial Accounting Standards Board held their 7th semi-annual joint meeting in Norwalk, Connecticut, USA on 24-25 October 2005. Three IASB members were unable to be present (Hans-Georg Bruns, Gilbert Gelard, and Tatsumi Yamada).

For that reason the IASB avoided taking votes on particular matters, as the absence of three members was considered, in a number of cases, to be likely to have a substantial effect on outcomes. We have combined the preliminary and unofficial notes taken by Deloitte observers at the meeting onto a Separate Page.
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Deloitte comments on IAS 27 proposals

28 Oct 2005

We have posted the Deloitte Consolidated and Separate Financial Statements (PDF 53k).

In conjunction with their 30 June 2005 proposals to amend IFRS 3 and SFAS 141 (see story above), the IASB and the FASB also published exposure drafts proposing that non-controlling interests should be classified as equity within the consolidated financial statements and that the acquisition of non-controlling interests should be accounted for as an equity transaction. The IASB's proposals are presented as amendments to IAS 27. Our response states:

  • Our comment letter on the IASB's June 2005 proposed amendments to IFRS 3 does not support the adoption of the proposed amendments. Consequently, we do not support the majority of this Exposure Draft's proposed changes to the accounting and reporting of non-controlling interests.
  • The Board's conclusion that transactions between controlling and non-controlling shareholders should be accounted for as equity transactions is premature and should be deferred until completion of the IASB's and FASB's joint Conceptual Framework project. We are not yet convinced that the single economic entity view of consolidated financial statements provides the most relevant information to financial statement users.
  • Neither IAS 27 as currently adopted nor as proposed to be amended provides guidance on accounting for changes in a parent's ownership that do not result in loss of control. As a result, preparers of financial statements apply differing accounting treatments as accounting policy elections, reducing comparability. Indeed, in practice, we have seen the application of at least five different methods of accounting for increases in ownership interest after control has been obtained.
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Comment deadline on DTC 1

28 Oct 2005

We remind you that the deadline is 31 October 2005 for commenting on Draft Technical Correction (DTC) 1 Proposed Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates – Net Investment in a Foreign Operation. .

We remind you that the deadline is 31 October 2005 for commenting on Draft Technical Correction (DTC) 1 Proposed Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates – Net Investment in a Foreign Operation.

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SEC Commissioner comments on reconciliation

28 Oct 2005

In (PDF 76k) on 26 October 2005, US SEC Commissioner Paul S.

Atkins addressed the prospects for eliminating the SEC's requirement that IFRS filers provide reconciliations to US GAAP amounts and the prospects for a 'reverse reconciliation requirement' arising from CESR's recommendations for additional disclosures by companies using US GAAP to list in Europe. An excerpt:

I understand that European companies are concerned about continuing to bear the costs of reconciliation to U.S. GAAP on top of switching to IFRS. But, I am optimistic that Europeans and Americans can work together to eliminate this long-standing requirement in accordance with the 'roadmap' laid out earlier this year, contemplating a 2007-2009 timeframe of mutual recognition. I am confident that the need for reconciliation will disappear as all of us gain experience with IFRS in practice.

We in the U.S. are keenly aware that unnecessary reconciliation only imposes costs on investors on both sides of the Atlantic. For this reason, I am baffled at the suggestion by some that Europeans should begin to require U.S. companies to reconcile their U.S. GAAP financial statements to IFRS. This runs against the direction that we are taking in the United States and undermines our efforts towards mutual recognition. Some may assert that this is a useful bargaining chip to ensure that we Americans will recognize IFRS. But, I believe that it is counter-productive, ignores historical precedent and market practice, and diverts attention and energy from solving the real challenges before us. IFRS will stand or fall on its own merits. Our efforts should be focused on making sure that it succeeds.

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IASB discussion paper on 'management commentary'

27 Oct 2005

The IASB has published a discussion paper on Management Commentary that assesses the role the IASB could play in improving the quality of the management commentary that accompanies financial statements.

Management commentary is sometimes called 'management discussion and analysis' or 'operating and financial review'.

The discussion paper was prepared for the IASB by staff of its partner standard-setters from Canada, Germany, New Zealand, and the United Kingdom. The paper reviews existing national requirements or principles on management commentary and offers recommendations on how the IASB might promote the wider adoption of best practice in the interests of investors and others who use financial reports.

While the IASB has discussed the paper, it has not yet developed tentative views on the authors' recommendations. The IASB invites comments on the discussion paper by 28 April 2006. IASB subscribers can access the discussion paper now on the IASB's Website. It will be available to all without charge starting 7 November. Click for IASB Press Release (PDF 61k).


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Asia-Oceania Regional Forum on IFRSs

27 Oct 2005

On 24 October 2005, Australia and New Zealand co-hosted an Asia-Oceania Regional Forum on IFRSs in Sydney, Australia.

Participating jurisdictions were China, Hong Kong SAR, Indonesia, Japan, the Republic of Korea, Malaysia, the Philippines, Singapore, Thailand, and the two host countries. The delegates included senior representatives of accounting standard setting and oversight bodies, professional accounting bodies, central banks, and government officials. The goal of the forum is to enhance regional cooperation and coordination in implementing IFRSs. Among the issues discussed:
  • the benefits of further dialogue in the Asia-Oceania region;
  • the differences between adoption, convergence, and harmonisation with IFRSs and the benefits and disadvantages of each;
  • the importance, and implications, of the IASB's Small and Medium-sized Entities project for the region. In this context it was noted that in some jurisdictions a very large number of small and medium entities are required to comply with IFRSs;
  • the delays in implementing the standards arising from translation of the international standards into local languages and/or the incorporation of the international standards into domestic legal frameworks; this raised some issues regarding when the domestic systems and related financial reports can be regarded as 'IFRS compliant'.
  • interaction between IFRS and prudential and tax frameworks.
Click to download the Communiqué (PDF 13k) released after the forum. A similar forum is planned for 2006.

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