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IAS Plus Newsletters for July 2005 are posted

04 Aug 2005

The July 2005 IAS Plus newsletter has been published.

The newsletter reports on the 2nd quarter 2005 activities of the IASB, the IFRIC, and the IASC Foundation, and also on worldwide issues and events relating to international financial reporting. The Asia-Pacific edition has the same 32-page news content as the Global Edition plus seven pages of accounting standards updates for Asia-Pacific countries. You will find all Past IAS Plus Issues Here.
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SEC seeks input on issues relating to smaller companies

04 Aug 2005

The SEC Advisory Committee on Smaller Public Companies is soliciting public input on issues related to the current securities regulatory system for smaller companies, including the impact of the Sarbanes-Oxley Act of 2002 on the system.

The Advisory Committee is doing this by publishing a series of questions and asking interested parties to respond to the questions. Responses are requested by 31 August 2005. Several of the questions are similar to those recently asked by the IASB in its Staff Questionnaire on Possible Recognition and Measurement Modifications for Small and Medium-sized Entities (SMEs). For example, the SEC Advisory Committee asks:

  • Are the current accounting standards applied to all U.S. companies appropriate for smaller companies? If not, please explain what revisions to existing standards might be appropriate.
  • Should accounting standards provide smaller companies with different alternatives for measuring accounting events that would reduce the amount of time that would otherwise be spent by smaller companies to comply with those accounting standards? If these alternatives were available to smaller companies, would smaller companies take advantage of them even if the results of the measurements obtained from the alternatives were less favorable to them in the short term? Why or why not?
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New SEC Chairman takes office

04 Aug 2005

Christopher Cox has been sworn in as Chairman of the US Securities and Exchange Commission.

Click for (PDF 32k).
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EFRAG comment letters to IASB/IFRIC

03 Aug 2005

EFRAG has submitted its letters of comment to the IASB and IFRIC on the following draft documents IASB Draft Memorandum of Understanding on the Role of Accounting Standard-setters and the IFRIC Review of Operations.

In relation to the IASB Draft Memorandum of Understanding on the Role of Accounting Standard-setters, EFRAG comments as follows:


"Preparing the draft Memorandum of Understanding (MoU) has been a useful exercise.

We are not sure though that there are any significant benefits to be gained by developing the draft into a final document that is then signed by all the parties."


Click for:

  • EFRAG letter: IASB Due Process Handbook (PDF 22k) "Although the IASB is, in our opinion, one of the most transparent accounting standard-setters in the world, there is always room for improvement. In general, we support the proposals in the draft Handbook."
  • EFRAG letter: IFRIC Review of Operations (PDF 21k) "A number of European commentators are very concerned about the IFRIC's ability to cope with the demands that they believe will be placed on it in the coming months with large numbers of European companies applying IFRS for the first time." "We have had a number of concerns about the IFRIC agenda process."


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iGAAP newsletter on business combinations phase II

03 Aug 2005

The IASB has proposed major changes to accounting for business combinations, including grossing up of goodwill and new rules on contingent consideration, acquisition costs, transactions with noncontrolling interests, stepped acquisitions, contingent assets and liabilities, and restructuring costs.

Deloitte (United Kingdom) have published a special edition of their iGAAP Newsletter with details of the proposals and their implications. Click to download the (PDF 68k). We have created a Section on our UK Page where we will maintain links to all iGAAP Newsletters and Alerts.
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New Accounting Roundup is available

03 Aug 2005

We have posted (PDF 220k).

This newsletter, published by Deloitte & Touche LLP (United States), summarises recent accounting and financial reporting developments and provides Internet links to related content. This edition includes:
  • FASB developments, including ED on uncertain tax positions; final FSPs on equity method when significant influence is lost and on control of limited partnerships; proposed FSPs on leveraged leases, capitalisation of rental costs during a construction period, and qualified SPEs; and a 'Milestone Draft' of decisions to date in the Liabilities and Equity project.
  • EITF developments, including draft abstracts on controlling interests and purchases and sales of inventory with the same counterparty.
  • SEC developments, including amendments of 'penny stock' rules and delisting rules and changes to EDGAR requirements for investment companies.
  • PCAOB developments, including an auditing standard elimination of a material weakness and new ethics and independence rules. International developments, including withdrawal of IFRIC 3 on emission rights.
You will find links to all past issues Here.
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Report from the IFRIC meeting 2 August 2005

03 Aug 2005

The International Financial Reporting Interpretations Committee (IFRIC) met at the IASB's offices in London on Monday and Tuesday, 1-2 August 2005. Presented below are the preliminary and unofficial notes taken by Deloitte observers at the second and final day of the meeting.Notes from the IFRIC Meeting2 August 2005 Draft of IFRIC D18 Distinction between defined benefit and defined contribution plans and allocation of future salary increases In June 2005, the IFRIC had considered a proposal for distinguishing between defined benefit and defined contribution plans.

The IFRIC had asked that the staff provide further information by way of example as to how the proposals would apply in the context of current salary plans and career average salary plans. At this meeting the staff provided examples, and a draft interpretation based on the three criteria they had developed. Those criteria were that the distinction should be determined with reference to whether the employer has an obligation in respect of future risks attaching to the benefits earned at the balance sheet date if an employee:

  • Stays in employment;
  • Retains plan membership; and
  • Stops accruing future service in the plan.

The IFRIC noted that being unfunded, did not, of itself, result in a plan being defined benefit, depending on the terms associated with late payment into the plan. Where a plan is unfunded and it ought to be funded, this may lead to it being defined benefit because the entity will be required to make up the returns the employee could have expected had the funds been invested on a timely basis.

The IFRIC agreed that the three criteria stated above do work in assisting entities to classify their employee benefit plans. Accordingly the IFRIC should proceed with finalising the draft interpretation, including a lot of the supplementary guidance which had been included in the meeting papers to assist respondents in understanding the principles.

The IFRIC agreed that the discussion of materiality within the draft interpretation was troublesome. It was noted that it is not always possible to separate two elements of a plan and account for them differently because the elements may be interactive, for example a contribution plan may be waived if a death in service benefit is paid out prior to the completion of a minimum service period. If there is some interaction between the elements, the entire plan would have to be accounted for on a defined benefit basis. It was agreed that rather than discussing materiality (which should be considered by professionals in applying the interpretation) the discussion should focus on units of measure - that is does one legal plan constitute one or more than one plan for the purposes of applying IAS 19.

A revised draft interpretation will be considered by the IFRIC at a future meeting.

Publication of reasons for not taking items onto the IFRIC's agenda

The second part of this agenda item was considered on the second day, and consisted of consideration of items that had been tabled at the June 2005 meeting and published in the June 2005 IFRIC Update.

Classification of Contract Assets Arising under IAS 11

The objective of this item was to draw constituents attention to the fact that an entity should not capitalise interest for construction contracts, but rather accrue interest on the financial asset arising from these construction contracts. Some constituents had noted that they are not convinced that a financial asset does arise out of these contracts. The IFRIC agreed to publish a reason for not taking this onto the agenda at this time, that this item may need to be contemplated in the future but would not be further considered at this time because the development of the service concessions project may affect the outcome.

Obligations to Repair/Maintain Another Entity's Equipment

The IFRIC agreed that they were largely supportive of the proposed reasons for rejecting this item published in the June 2005 IFRIC Update. The IFRIC requested that the wording be amended to reflect that the obligation arises through usage (rather than through damage alone) and that a provision should be recognised when that usage or damage has occurred together with a present obligation to make good that asset. The IFRIC noted that this could not be used to analogise to warranties, because IAS 37 contains specific discussion of accounting for warranties, and that this wording is intended to clarify the position for an entity's obligation to repair or maintain another entity's equipment which the reporting entity is itself using.

Recognition of Regulatory Assets

The IFRIC confirmed its decision to reject this item for its agenda, and requested that the wording published in the IFRIC Update June 2005 be amended to more clearly state that the requirements of FAS 71 are inconsistent with IFRSs and cannot be applied by following the hierarchy in IAS 8. It was noted that the requirements of FAS 71 are inconsistent because they require the recognition of assets under US GAAP which cannot be recognised under IFRSs.

Meaning of 'Delivery'

The IFRIC confirmed its decision to reject this item (consideration of what 'delivery' might mean in the context of the gold market and the electricity market) for its agenda. It was noted that contracts for differences do not fall within the exemption in IAS 39, and this has been well documented in a number of jurisdictions. Furthermore, to address this issue IAS 39 would need to be amended, and it is not appropriate for constituents to address requests for amendments to standards to the IFRIC.

Activities of Other Interpretive Groups

The IFRIC considered a paper detailing the activities of other national interpretive groups, and was asked whether any member wished for matters being considered by other interpretive groups to be considered for inclusion on the IFRIC agenda. No matters were identified which the IFRIC believed it ought to consider taking onto its agenda.

Waste Electrical and Electronic Equipment

The IFRIC considered an amended interpretation based on the comments the IASB had made when considering this interpretation. The IFRIC had included in its basis for conclusions the reasons for not addressing other issues related to waste electrical and electronic equipment on the basis that the accounting for those items was clear under existing GAAP. The Board had identified this as an inappropriate inclusion in the basis for conclusions - either the clear accounting requirement should be stipulated in the interpretation or the information should be deleted. It was agreed that the information should be deleted, and that a formal rejection of the additional issues from the IFRIC agenda was unnecessary, this matter should just be reported in the August 2005 IFRIC Update.

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 1 August 2005.

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Part two of IFRIC meeting report 1 August 2005

03 Aug 2005

In our news story of 2 August we had posted our observers' preliminary and unofficial notes on the first two items discussed – service concession arrangements and interaction of IAS 34 with IAS 36 and IAS 39. We had noted that "several additional matters were discussed.

Notes about these items will be added shortly." These have now been appended to the meeting notes in the news story of 2 August. These additional items are IFRIC D9 and publication of reasons for not taking items onto the IFRIC's agenda.
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Implications of IFRSs on dividends in the UK

02 Aug 2005

An implication of adopting IFRSs or equivalent national standards in some countries is the extent to which IFRS measurements apply to the determination of realised profits and losses out of which dividends may be paid under the law.

Deloitte (United Kingdom) have addressed this issue in the context of distributions under the UK Companies Act 1985 in an alert titled (PDF 64k).
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IFAC board approves several new initiatives

02 Aug 2005

At its meeting in New York last week, the board of the International Federation of Accountants (IFAC) approved a number of new IFAC initiatives, including several directly relevant to international financial reporting: A global study on how to enhance the quality of the financial reporting, considering such issues as corporate management and governance, regulatory developments, auditor independence and rotation, and the expectations around the auditor's responsibility for fraud detection.

An independent chair will be appointed to lead the study.
  • Publication of a new International Guidance Document on Environmental Accounting. The document was developed jointly by IFAC and environmental agencies from the United Nations, United States, and United Kingdom
  • A project by IFAC's Small and Medium Practice Permanent Task Force to develop guidance materials on International Standards of Auditing (ISAs) for use in SME audit engagements.
  • Support for the implementation of Part 2 of the IFAC Member Body Compliance Program, which will provide a picture of the stage of incorporation of standards issued by IFAC and the International Accounting Standards Board into the national standards used by member bodies.
  • Click for Press Release (PDF 80k).

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