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Notes from day 2 of September 2008 IASB meeting

18 Sep 2008

The International Accounting Standards Board held its September 2008 meeting at the IASB's offices, 30 Cannon Street, London on Tuesday to Friday 16-19 September 2008. The meeting was open to public observation and was webcast.

Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the meeting.

 

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Challenges of adopting global standards in the US

18 Sep 2008

In a speech earlier this week before a university group, Bill Gradison, a member of the US Public Company Accounting Oversight Board (PCAOB) addressed the implications and challenges of adopting global accounting and auditing standards in the United States.

Click to Download Mr Gradison's Speech (PDF 155k). Here is an excerpt:

Tonight I want to touch on the implications of this new reality with special attention to the impact on the Public Company Accounting Oversight Board. The current state of play involves two sets of accounting standards: GAAP and IFRS (with its numerous local variations), and three sets of auditing standards, each of which is in a state of flux: the ISAs toward which many non-US jurisdictions seem to be moving, the ASB standards which apply to non-issuers in the United States (and are conceptually 'ISAs plus'), and the PCAOB standards for issuers....

Nor are regulators untouched by these challenges. Currently 873 non-US firms are registered with the PCAOB and about 250 firms in 51 countries are subject currently to periodic inspections, which is to say they audit issuers. Now that foreign private issuers no longer need to reconcile their financial statements to GAAP, PCAOB inspectors will be reviewing audits based on IFRS alone. As a result, PCAOB is developing a robust training program which eventually will involve most of its divisions. But initially we will focus on making sure that our international inspectors are conversant with IFRS.

 

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Deloitte notes from consolidation roundtable

18 Sep 2008

On 17 September 2008, the IASB conducted a public roundtable on the issues in its current project on Consolidation.

The roundtable was conducted in two sessions. The IASB made available on its website two documents – a staff draft of an exposure draft and discussion notes raising 15 questions to which roundtable participants were invited to respond. We have posted the preliminary and unofficial Notes Taken by Deloitte Observers at the Roundtable (PDF 37k). The notes include links to download the two documents from the IASB's website. The 15 questions were as follows:
  1. Do you think that the revised control definition could be applied to traditional control arrangements and those entities set up with a narrow and well-defined purpose? If not, where do you think the definition falls down?
  2. Is the general control principle likely to lead to the right entities being consolidated?
  3. Do you agree that the continuous assessment of control should not lead to entities 'flipping in and out' of consolidation?
  4. Do you agree with the presumption that the greater the variability of returns that a party exposes themselves to the greater the expected ability of that party to affect the performance of the assets of that entity? if not, why not?
  5. We envisage that there will be some circumstances when an entity is not controlled by any party. Do you agree? If not, why not?
  6. Do you agree that a party can have control over an entity even if they hold less than half the voting rights? If not, why not?
  7. Are the indicators provided in the draft ED sufficient to capture the entities that should be consolidated and to ensure consistent application?
  8. Do you agree that the existence of an option on its own is not enough to give a party control over an entity? If not, why not?
  9. Do you agree that the definition of significant involvement will capture the right entities about which you want further information or do you think it is casting too wide a net? What entities are being captured that you believe should not be, and vice versa?
  10. Do you support a requirement to disclose additional information in those circumstances in which the consolidation decision was not straight-forward?
  11. Do you support the proposal to require the disclosure of more information about the claims of non-controlling interests?
  12. Do you support the suggested disclosures in relation to significant involvement?
  13. Would you, as a preparer of financial statements, be able to produce the additional information required to be disclosed under the draft ED?
  14. Do you agree that where a fund manager has dual role – it acts in a fiduciary capacity and hold a direct investment in the investee – the fund manager should consider the two positions collectively when determining whether it has control? If not, why not? Please provide examples for which you believe that in spite of the dual role performed by the fund manager you believe it is appropriate for the fund manager not to consolidate the entity.
  15. Do you agree that investment companies should be required to consolidate any entities it controls? If not, why no

 

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SEC letter on fair value measurements

18 Sep 2008

On 28 March 2008, the US SEC's Division of Corporation Finance sent a letter to certain financial institutions concerning additional disclosure considerations in Management's Discussion and Analysis (MD&A) regarding fair value for their upcoming filings on Form 10-Q.

While the letter was sent only to financial institutions, the SEC staff indicated that the letter 'can be applicable to any company'. Details are on our Credit Crunch Page, including a link to a Deloitte Financial Reporting Alert (PDF 57k) about the letter. On 16 September 2008, the SEC issued an Addendum to the 28 March 2008 Letter (PDF 49k) identifying additional disclosure issues related to fair value measurements that companies may wish to consider in preparing their MD&A. The additional issues are the result of the SEC's reviews and the public roundtables that took place over the summer.
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IASB posts draft report of valuation experts

17 Sep 2008

The IASB has invited comment on the draft report of its expert advisory panel on valuing financial instruments when markets are no longer active.

The report explores the practices that the experts use for measuring and disclosing such financial instruments. The IASB has invited comment on the draft report by 3 October 2008. When this document is finalised, the IASB intends to publish it as helpful guidance in making fair value estimates under the requirements of IFRSs. 

Two excerpts from the draft report:

Measurement: In inactive markets, entities measure the fair value of financial instruments by considering all relevant market information that is available. A thorough understanding of the instrument subject to valuation is necessary in order to identify relevant available information. Information to be considered includes prices from recent transactions in the same or similar instruments, quotes from brokers and pricing services, indices and other inputs to model-based valuation techniques. Entities use this information to measure fair value by assessing the available information and applying it as appropriate.

Disclosure: It is important that entities help users of financial statements understand the techniques used and the judgements made in measuring fair value (although it is not the purpose of the disclosure to allow recalculation of fair values). Providing enhanced and detailed disclosures about the fair value of instruments that are of particular interest to users helps entities meet that objective. The instruments of particular interest will change over time as market conditions change and are likely to include those that are the focus of internal management reporting and are receiving external market interest.

 

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Notes from day 1 of September 2008 IASB meeting

17 Sep 2008

The International Accounting Standards Board held its September 2008 meeting at the IASB's offices, 30 Cannon Street, London on Tuesday to Friday 16-19 September 2008. The meeting was open to public observation and was webcast.

Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the meeting.

 

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IFRSs in your Pocket 2008 in German

16 Sep 2008

Deloitte (Germany) has published IFRS im Überblick 2008, the German language version of IFRSs in Your Pocket 2008.

This 134-page guide includes information about:
  • IASB structure and contact details.
  • IASB due process.
  • Use of IFRSs around the world, including updates on Europe, Asia, USA, and Canada.
  • Summaries of each IASB Standard (through 31 July 2008).
  • Background and current status of all current IASB projects.
  • IASC and IASB chronology.
  • Update on IFRS-US GAAP convergence.
  • Other useful IASB-related information.
Click to view IFRS im Überblick 2008 (PDF 1,795k). You will find Links to our Many Other IFRS Publications here.

 

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Three FASB derecognition exposure drafts

16 Sep 2008

As part of its response to the 'credit crunch', the US Financial Accounting Standards Board has issued three separate but related exposure drafts (EDs) for public comment.

The proposed FASB Statements Accounting for Transfers of Financial Assets and Amendments to FASB Interpretation No. 46(R) address amendments to FASB Statement No. 140 Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, and to FASB Interpretation No. 46 (revised December 2003) Consolidation of Variable Interest Entities. Proposed FASB Staff Position FAS 140-e and FIN 46 (R)-e Disclosures about Transfers of Financial Assets and Interests in Variable Interest Entities addresses related disclosure requirements for public entities. Click for press release (PDF 16k). The proposals are available on FASB's Website.
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Heads Up on updated FASB-IASB MoU

16 Sep 2008

On 11 September 2008, the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) jointly published an update of their 2006 Memorandum of Understanding (MoU).

The MoU describes the priorities and milestones related to the two boards' completion of major joint projects by 2011. Deloitte & Touche LLP (United States) has published the 16 September 2008 edition of the Heads Up newsletter (PDF 158k) discussing the updated MoU.

An excerpt:

There are two reasons why it is important to complete the projects by 2011. First, a number of countries, such as Canada, India, Japan, and Korea, have announced plans to adopt or converge with IFRSs beginning in 2011. If the projects are completed by 2011, those countries will avoid having to adopt new standards shortly after making the transition to IFRSs. Second, in accordance with its proposed IFRS Roadmap, the SEC will determine in 2011 whether to require mandatory adoption of IFRSs for all US issuers starting in 2014. In doing so, it will evaluate the progress of the various milestones included in that roadmap, one of which is improvements to IFRSs.

 

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Deloitte's 7th annual fair value pricing survey

15 Sep 2008

Deloitte LLP United States's 7th Annual Fair Value Pricing Survey has found that mutual funds are converging around certain universal fair value measurement practices.

More than 50 fund managers representing more than 2,700 funds with assets under management exceeding $3.5 trillion participated in the survey. This is Deloitte's seventh survey on the valuation practices and industry policies and procedures used by asset managers. We have seen valuation practices evolve into a mature set of practices, policies, and procedures that continue to be refined as the range and complexity of investment types expand and the investment valuation tools improve. Specific 2008 findings include:
  • Seventy-four percent of those surveyed indicated that they have made changes to their valuation policies and procedures.
  • Sixty-three percent reported that FAS 157 has impacted their valuation policies and procedures.
  • Thirty-seven percent have added internal controls over valuation as a result of the credit crisis.
  • When obtaining broker quotes, more than 50 percent of participants seek more than one quote for fixed-income securities.
  • Greater than 75 percent noted that they are asking pricing services and brokers specific questions designed to understand the inputs and processes behind daily prices provided to mutual funds.

Click to view 7th Annual Fair Value Pricing Survey (PDF 439k).

 

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