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New Accounting Roundup second quarter review posted

13 Jul 2004

We have posted (PDF 865k), a quarterly edition of the US Accounting Roundup newsletter that summarises selected recent accounting and financial reporting developments and provides Internet links to related content.

The articles included in this edition were drawn primarily from issues of Accounting Roundup published in the second quarter of 2004, and have been updated where appropriate. Accounting Roundup is published periodically as developments warrant by Deloitte (USA). Past issues are Here.

Deloitte comment letter on IFRIC D6

12 Jul 2004

Deloitte has submitted to the IASB our Multi-employer Plans PDF 56k).

Click here for a Summary of IFRIC D6.

We believe that the current requirements in IAS 19.29-35 are appropriate in accounting for multi-employer plans. Whilst implementation of these requirements often involves judgement, such requirements are sufficiently clear. As a result, we question the need for the draft Interpretation and suggest that IFRIC reconsider the status of any final document that may be issued. In addition, we have concerns about certain aspects of the guidance provided in D6. In particular, we believe that whilst some of the guidance provided may be useful, other guidance proposed may bring more confusion than clarity.

New EITF Roundup posted

12 Jul 2004

We have posted the June/July 2004 edition of EITF Roundup, a newsletter published by the National Office Accounting Standards and Communications Group of Deloitte & Touche LLP (USA).

EITF Roundup provides an overview of the issues discussed, consensuses reached, and administrative matters at the 30 June /1 July 2004 meeting of FASB's Emerging Issues Task Force. Click to (PDF 111k).

EFRAG letter on IAS 39

11 Jul 2004

At its meeting in Brussels on 8 July 2004 the Technical Expert Group of the European Financial Reporting Advisory Group agreed to recommend that the European Commission endorse IAS 32 Financial Instruments: Presentation and Disclosure for use in Europe.

However, EFRAG concluded not to make any recommendation on endorsement of IAS 39 Financial Instruments: Recognition and Measurement. We had previously posted the EFRAG letter on IAS 32 (news story of 9 July). Click here to Download EFRAG's IAS 39 Letter (PDF 133k). An Excerpt:

Five members support endorsement of IAS 39 in its present form, but six members oppose endorsement. EFRAG cannot recommend non-endorsement of a standard unless there is a two-thirds majority vote against the standard, and EFRAG does not support endorsement unless there is majority in favour. Therefore, EFRAG does not issue any advice whether to endorse IAS 39 or not.

New accounting standard setting body in Mexico

09 Jul 2004

As of 1 June 2004, the Council for Research and Development of Financial Information Standards (Consejo Mexicano para la Investigacion y Desarrollo de Normas de Informacion Financiera, CINIF) took over the responsibility for setting accounting standards in Mexico from the Mexican Institute of Public Accountants (IMCP).

The IMCP's Accounting Principles Commission had been the standard setter since 1968. CINIF is an independent public-private sector partnership. All companies listed on the Mexican Stock Exchange (Bolsa Mexicana de Valores) are required to follow CINIF standards. Link to CINIF Website.


EFRAG endorses IAS 32 but not IAS 39

09 Jul 2004

At its meeting yesterday in Brussels, the Technical Expert Group of the European Financial Reporting Advisory Group (EFRAG) agreed to recommend that the European Commission endorse IAS 32 'Financial Instruments: Presentation and Disclosure' for use in Europe.

However, EFRAG concluded not to make any recommendation on endorsement of IAS 39 Financial Instruments: Recognition and Measurement because only 5 members were in favour of endorsement while 6 were against. The EC's Accounting Regulatory Committee (ARC) meets today to consider, as EFRAG did, whether to recommend that the Commission adopt IAS 39 for use in Europe. Like EFRAG's, the ARC's recommendation is non-binding. Click to download EFRAG's Letter on IAS 32 (PDF 38k).


IFRIC publishes draft interpretation on cash balance benefit plans

08 Jul 2004

The International Financial Reporting Interpretations Committee (IFRIC) has published for comment a draft interpretation D9 'Employee Benefit Plans with a Promised Return on Contributions or Notional Contributions' giving guidance on the accounting for cash balance plans.

These are employee benefit plans with benefits that depend on future returns on assets. Comments are due 21 September 2004.

Click for:


IASB proposes three amendments to IAS 39

08 Jul 2004

The IASB has published three short exposure drafts proposing limited amendments to IAS 39 'Financial Instruments: Recognition and Measurement'.

Comment deadline on all is 8 October 2004. The EDs will be available on the IASB's website starting 19 July. Click for Press Release (PDF 41k).

First-time adoption of IAS 39

The ED Transition and Initial Recognition of Financial Assets and Financial Liabilities proposes an amendment that would apply when entities first adopt IAS 39. It would give an entity a choice of applying the "day one gain and loss" recognition requirements either prospectively to transactions entered into after 25 October 2002 or retrospectively under IAS 39.104.

"Day one gains and losses" arise when the transaction price differs from fair values calculated by using, for example, a valuation model. These gains and losses can only be recognised in certain circumstances – when variables in the valuation model include only data from observable markets. This change would allow entities conform their treatment under IAS 39 to US GAAP.

Proposed effective date: Annual periods beginning on or after 1 January 2005.

Cash flow hedging of forecast intragroup transactions

The ED Cash Flow Hedge Accounting of Forecast Intragroup Transactions addresses whether forecast intragroup transactions can be considered hedged items.

Under IAS 39 prior to the December 2003 revisions, forecast intragroup transactions could be designated as a hedged item if the criteria in IGC 137-14 were met. That approach was consistent with US GAAP. However, IAS 39 as revised in December 2003 removed IGC 137-14 without including its guidance in the standard. As a result, it was unclear whether forecast intragroup transactions could still be considered hedged items.

The Exposure Draft confirms that the forecast intragroup transactions can not be considered hedged items. However, the ED provides guidance that in the consolidated accounts, a highly probable forecasted external transaction that gives rise to an exposure that will have an effect on consolidated profit or loss can be designated as the hedged item.

Proposed effective date: Annual periods beginning on or after 1 January 2006.

Financial guarantee contracts

The ED Financial Guarantee Contracts and Credit Insurance proposes that the issuer of a financial guarantee contract should measure the contract initially at fair value. If the financial guarantee contract was issued in a stand-alone arm's length transaction to an unrelated party, its fair value at inception is likely to equal the premium received.

The ED also addresses the subsequent measurement of those guarantees:

  • A guarantee that meets the IFRS 4 definition of an insurance contract (guarantee against failure of a specific debtor to pay) would initially be measured at fair value and subsequently at the higher of (a) the amount initially recognised minus amortisation under IAS 18 and (b) IAS 37.
  • A guarantee arising on derecognition would be accounted for under IAS 39 (mark to market through profit or loss) even if it is like an insurance contract.
  • A guarantee that is indexed based on a credit index or other variable would be treated as a derivative under IAS 39 (mark to market through profit or loss).
Proposed effective date: Annual periods beginning on or after 1 January 2006.


Adoption of IFRSs delayed in Venezuela

06 Jul 2004

IFRS will be delayed in Venezuela to 2006 for listed companies and to 2007 for all other companies.

Venezuela will be adopting all current IFRSs in full, not the old IASs and SICs.

Also, a special commission was formed to define the implementation process. A recent announcement by the presidents of two key Venezuelan professional bodies suggested that implementation will be delayed.

English Institute urges immediate endorsement of IAS 39

06 Jul 2004

The chief executive of the Institute of Chartered Accountants in England and Wales has written to the United Kingdom Minister of State for Industry, expressing the Institute's "serious concern" over the uncertainty regarding the endorsement of the international financial instruments standard IAS 39. -->"We urge the UK Government to continue to seek early endorsement of the latest version of IAS 39, unamended and unabridged.

Anything less is likely to lead to long-term damage to the credibility and quality of European financial reporting." Click to the ICAEW letter (PDF 340k).

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