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Basel Committee release on IFRSs

21 Dec 2004

The Basel Committee on Banking Supervision has published a press release on the treatment of certain items reported under IFRSs for bank regulatory capital purposes.

This is the third in a series of press releases on this subject. Click to Download the Release (PDF 86k). The PDF file includes clickable links to the earlier press releases.
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S&P proposes IFRS transition disclosures

21 Dec 2004

The rating agency Standard & Poor's has published Transition without Tears: A Five Point Plan for IFRS Disclosure (copyright 2005 Standard & Poor's, posted on IASPlus with permission).

The report sets out five specific disclosure practices for industrial and financial services groups that would provide a high level of transparency to the market regarding transition to IFRSs:

  • Providing comprehensive reconciliations of restated balance sheets and income statements in a tabular format;
  • Providing a transition date balance sheet;
  • Reconciling restated cash flow statements;
  • Detailing accounting policies and their effect on reported amounts and future trends; and
  • Maintaining relevant disclosures, even if not required by IFRS.
The report includes practical examples of how these disclosure practices address related analytical concerns. It also provides an update on S&P;'s process for evaluating any potential effect of the transition to IFRS on credit ratings. Click to Download the S&P; Report (PDF 862k).
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Europe adopts final transparency directive

21 Dec 2004

The European Council and Parliament have approved a new Directive on minimum transparency requirements for listed companies.

The Directive must be implemented by EU Member States within two years of its publication in the EU's Official Journal, which should take place in the next few weeks. The Directive completes a package of Financial Services Action Plan measures adopted over the last two years – including the IAS Regulation, the Market Abuse Directive, and the Prospectus Directive – to establish a common financial disclosure regime across the EU for issuers of listed securities. Under the Directive, all securities issuers will have to provide annual financial reports within four months after the end of the financial year. Investors in shares will receive more complete half-yearly financial reports. Those issuers who do not publish quarterly reports will need to provide quarterly management statements. Bond issuers will also be required to publish half-yearly reports. Click for:
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FASB issues share-based payment standard

20 Dec 2004

The US FASB has published FASB Statement 123 (revised 2004) Share-Based Payment.

Statement 123(R) requires that the compensation cost relating to share-based payment transactions be recognised in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. The Statement is the result of a two-year effort to respond to requests from investors and many others that the FASB improve the accounting for share-based payment arrangements with employees – the previous standard had permitted note disclosure in lieu of expense recognition. Click for (PDF 17k). Deloitte (USA) has published a special issue of its Heads Up newsletter summarising the key concepts of FASB Statement No. 123(R). Click to download the (PDF 292k). While Statement 123(R) is largely consistent with IFRS 2 Share-based Payment, some differences remain, as described in a Q&A; document FASB issued along with the new Statement:

Q22. Is the Statement convergent with International Financial Reporting Standards? The Statement is largely convergent with International Financial Reporting Standard (IFRS) 2, Share-based Payment. The Statement and IFRS 2 have the potential to differ in only a few areas. The more significant areas are briefly described below.

  • IFRS 2 requires the use of the modified grant-date method for share-based payment arrangements with non-employees. In contrast, Issue 96-18 requires that grants of share options and other equity instruments to non-employees be measured at the earlier of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached or (2) the date at which the counterparty's performance is complete.
  • IFRS 2 contains more stringent criteria for determining whether an employee share purchase plan is compensatory or not. As a result, some employee share purchase plans for which IFRS 2 requires recognition of compensation cost will not be considered to give rise to compensation cost under the Statement.
  • IFRS 2 applies the same measurement requirements to employee share options regardless of whether the issuer is a public or a nonpublic entity. The Statement requires that a nonpublic entity account for its options and similar equity instruments based on their fair value unless it is not practicable to estimate the expected volatility of the entity's share price. In that situation, the entity is required to measure its equity share options and similar instruments at a value using the historical volatility of an appropriate industry sector index.
  • In tax jurisdictions such as the United States, where the time value of share options generally is not deductible for tax purposes, IFRS 2 requires that no deferred tax asset be recognized for the compensation cost related to the time value component of the fair value of an award. A deferred tax asset is recognized only if and when the share options have intrinsic value that could be deductible for tax purposes. Therefore, an entity that grants an at-the-money share option to an employee in exchange for services will not recognize tax effects until that award is in-the-money. In contrast, the Statement requires recognition of a deferred tax asset based on the grant-date fair value of the award. The effects of subsequent decreases in the share price (or lack of an increase) are not reflected in accounting for the deferred tax asset until the related compensation cost is recognized for tax purposes. The effects of subsequent increases that generate excess tax benefits are recognized when they affect taxes payable.
  • The Statement requires a portfolio approach in determining excess tax benefits of equity awards in paid-in capital available to offset write-offs of deferred tax assets, whereas IFRS 2 requires an individual instrument approach. Thus, some write-offs of deferred tax assets that will be recognized in paid-in capital under the Statement will be recognized in determining net income under IFRS 2.
Differences between the Statement and IFRS 2 may be further reduced in the future when the IASB and FASB consider whether to undertake additional work to further converge their respective accounting standards on share-based payment.
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Guide to changes in Singapore GAAP

20 Dec 2004

Deloitte & Touche (Singapore) has published an update of Changes to The Financial Reporting Framework in Singapore.

The new booklet summarises the adoption by the Council on Corporate Disclosure and Governance (CCDG) – Singapore's accounting standard setter – of the standards resulting from the IASB's Improvements Project and new IFRSs up to October 2004. As a result, CCDG has now issued a set of accounting standards and interpretations that are almost identical to the current set of International Financial Reporting Standards, with a few differences such as the effective dates, the inclusion of Singapore Financial Reporting Standard 25 Accounting for Investments, and the absence of equivalents to IAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions and IAS 40 Investment Property. A detailed comparison of Singapore GAAP and IFRSs is included in the booklet. Click to:
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New Zealand Accounting Alert published

19 Dec 2004

Deloitte (New Zealand) has published New Zealand Accounting Alert 25 (PDF 136k) titled A Christmas present from the ASRB!- Release of NZ IFRS.

The Alert details the adoption by The Accounting Standards Review Board (ASRB) and the Financial Reporting Standards Board (FRSB) of 36 new accounting standards and 12 interpretations. These are the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS). Application of NZ IFRS is mandatory for periods beginning on or after 1 January 2007. Entities wishing to early adopt NZ IFRS may do so for periods beginning on or after 1 January 2005. The Alert includes a list of the approved standards and details of where to find them. The ASRB has also issued an exposure draft, ED-96 Disclosing the Impact of Adopting New Zealand Equivalents to International Financial Reporting Standards that would require entities to disclose in their annual and interim financial reports information about the expected impacts of adopting the New Zealand equivalents to IFRS. This will include:
  • information regarding planning for the transition to NZ IFRS;
  • key differences in accounting policies expected to arise on adoption of NZ IFRS, or if the key differences are not known, a statement to that effect; and
  • known or reliably estimable information about the impacts on the financial reports under NZ IFRS, or if the impacts are not known, a statement to that effect.
Click here for Links to Past NZ Accounting Alerts.
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US SEC forms 'SOX' SME advisory committee

19 Dec 2004

The US Securities and Exchange Commission has established an advisory committee to assist the Commission in examining the impact of the Sarbanes-Oxley Act and other aspects of the federal securities laws on smaller public companies.

Click for SEC Press Release.
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Philippines adopts new and revised IASs/IFRSs

19 Dec 2004

The Philippines Securities and Exchange Commission (SEC) has approved the adoption of all of the revised IASs issued by the IASB in 2003 and 2004 as well as IFRSs 1-5, effective for financial reports submitted by companies for annual reporting periods beginning 1 January 2005 and for quarterly periods beginning 1 January 2006. -->"The adoption of IAS will harmonise the country's financial reporting requirements with international standards, consequently the understandability and reliability of financial statements in the country," --> the SEC said.

The standards had earlier been endorsed by the Philippines Accounting Standards Council. Formal adoption is set out in SEC Memorandum Circular 19 on the Philippine Financial Reporting Standards. The circular covers 26 accounting standards, including 17 revised IASs, five IFRSs, and four interpretations. The SEC said companies required to submit quarterly reports in 2005 need not present certain comparative figures for IAS 39. However, quarterly reports must discuss the status of conversion plans. The banking industry (led by the Bankers Association of the Philippines), along with mutual funds and insurance companies, had sought to defer IAS 39. A key bankers' concern was that IAS 39 requires that loan loss provisions reflect only incurred losses while the current provisioning practice is to base the allowance on a percentage of outstanding balances (that is, expected losses). In Asia, Philippines joins Australia, Bangladesh, Hong Kong, New Zealand, and Singapore in adopting the entire suite of IFRSs as national GAAP. Australia and New Zealand have made some changes to recognition and measurement principles by eliminating some accounting policy choices permitted by IFRSs, and Singapore has modified some of the recognition and measurement principles in IFRSs. Click for Philippines SEC Announcement (PDF 102k).

IASB amends IAS 39 transition

18 Dec 2004

The International Accounting Standards Board has issued limited amendments to IAS 39 'Financial Instruments: Recognition and Measurement' on the initial recognition of financial assets and financial liabilities.

The amendments provide transitional relief from retrospective application of the 'day 1' gain and loss recognition requirements. They allow, but do not require, entities to adopt an approach to transition that is easier to implement than that in the previous version of IAS 39, and will enable entities to eliminate differences between the IASB's Standards and US requirements.

Specifically, the amendments give entities a choice of applying the 'day 1' gain or loss recognition requirements in IAS 39:

  • retrospectively (as previously required by IAS 39)
  • prospectively to transactions entered into after 25 October 2002 (the effective date of similar requirements in US GAAP)
  • prospectively to transactions entered into after 1 January 2004 (the date of transition to IFRSs for many entities).

Click for IASB Press Release (PDF 73k).


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Notes from IASB meeting 17 December 2004

18 Dec 2004

We have combined all of our notes from the IASB meeting on 15-17 December 2004 onto a Separate Page. .

We have combined all of our notes from the IASB meeting on 15-17 December 2004 onto a Separate Page.

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