He also discussed the challenges of ensuring 'consistent and faithful application of IFRSs throughout global capital markets'. Chairman Cox said that later this year, the Commission's staff will formally propose to the Commission an updated 'Roadmap' that lays out a schedule and milestones for further progress toward US acceptance of IFRSs. Click to Download Chairman Cox's Remarks (PDF 59k). Here is an excerpt:

 

As even individual investors in the United States become globally active, our nation has a good deal at stake in seeing IFRS fulfill its promise. The United States has witnessed a remarkable growth in our own investors' interest in foreign securities. I came to Washington with President Reagan. When he was first elected, US gross trading activity in foreign securities was $53 billion. Today it's over $11 trillion. That's more than the GDP of Japan and China combined. And this isn't just institutional trading: roughly two-thirds of American investors own securities of non-US companies. The same is true for foreign trading activity in US securities – that has exploded during this period as well. Today, it's over $33 trillion. That's more than twice the GDP of the European Union. It's for these reasons that our work on converging to a single global accounting standard is so important.

Click to go to the preliminary and tentative Notes taken by Deloitte Observers at the Meeting.

 

• Communication with Audit Committees. This rule will require a registered public accounting firm, before accepting an initial engagement pursuant to the standards of the PCAOB and annually thereafter, to describe in writing to the audit committee all relationships between the firm or any of its affiliates and the issuer or persons in a financial reporting oversight role at the issuer that may reasonably be thought to bear on the firm's independence. Registered firms will also be required to discuss with the audit committee the potential effects of any such relationships on the firm's independence.

These rules must be approved by the SEC. Click for PCAOB Press Release (PDF 20k). As of 4 April 2008, 1,850 public accounting firms have registered with the PCAOB to be allowed to audit the financial statements of US public companies. Of those, approximately 850 (over 45%) are non-US audit firms from more than 86 jurisdictions.

 

• Japan, United States, China, Canada, Korea: The report concludes that Japanese GAAP and United States GAAP both meet the criteria of equivalence to IFRSs. Chinese GAAP will continue to be accepted, but since it moved to IFRS equivalents for the first time in 2007, more information on its implementation is needed. The EC intends to review Chinese implementation in the future. The report also concludes that an exemption until 2011 should be granted to Canada and South Korea in view of their ongoing efforts to move to IFRSs in the near future. The Commission will soon present legislative proposals to reflect the foregoing conclusions.
• United States acceptance of IFRSs as adopted by the EU: For the few EU companies using the EU's IAS 39 carve-out, the US is requiring a reconciliation to IFRSs. The EC seeks removal of the US reconciliation requirement for all European issuers using IFRSs as adopted by the EU. "Efforts need to continue to resolve the issue of the carve-out of IAS 39. In this context the paper calls on the IASB to play a full role."
• Australia, Hong Kong, New Zealand, Singapore, South Africa, Israel: Australia, Hong Kong, New Zealand, Singapore, and South Africa are already applying IFRS equivalents. Israel has made IFRSs mandatory for all listed companies except banks and dual listed companies starting January 2008. In these cases the paper calls for an explicit and unreserved statement of such a compliance with IFRSs to be included in the audited financial statements.

Click for:

• Press Release (PDF 69k)
• Equivalence Report (PDF 38k)
• Equivalence Report Annex (PDF 1,174k)

Click to go to the preliminary and tentative Notes taken by Deloitte Observers at the Meeting.

 

Click to download the Endorsement Status Report as of 20 April 2008 (PDF 33k). Currently, the following IASB pronouncements have not yet been endorsed for use in Europe:

• IFRS 2 Share-based Payment: Vesting Conditions and Cancellations
• IFRS 3 Business Combinations (2008)
• IAS 1 Presentation of Financial Statements (revised September 2007)
• IAS 23 Borrowing Costs (revised March 2007)
• IAS 27 Consolidated and Separate Financial Statements (2008)
• IAS 32 and IAS 1 Amendments for Puttable Instruments and Obligations Arising on Liquidation
• IFRIC 12 Service Concession Arrangements
• IFRIC 13 Customer Loyalty Programmes
• IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements, and their Interaction

 

He suggests that the choice between US GAAP and IFRSs should be left to market participants, not regulators:

A second step that the SEC took to address concerns about the capital markets was the elimination, last December and effective immediately, of the reconciliation requirement for foreign companies that file using International Financial Reporting Standards (IFRS), as promulgated by the International Accounting Standards Board. Previously, companies had to restate their financial statements according to US generally accepted accounting principles (US GAAP). This action comes in response to a move by much of the rest of the world to shift to IFRS. Brazilian companies, which are scheduled to adopt IFRS by 2010, will be able to benefit from this change. This change also should benefit US investors who seek to invest in non-US companies. The rationale is that US investors are already investing directly abroad in IFRS-reporting companies and have become accustomed to relying on it. At any rate, reconciliations to US GAAP are published only months after the companies' financial statements are released. Thus, performing reconciliations is costly for companies, and reconciliations appear to be of limited use to those who look at financial statements. Meanwhile, the SEC is considering whether to permit US companies to file using IFRS. If IFRS is good enough for non-US companies, then why not for American companies as well? Making this change would leave the choice between US GAAP and IFRS to the markets. If investors prefer one set of accounting standards over another, they may well reward with premium pricing those issuers who use the preferred set. You can easily see the utility of IFRS for multi-national U.S. companies that access international capital markets and have non-U.S.-based competitors. IFRS, of course, is still a work in progress, and there are areas in which IFRS has no applicable standards. The US Financial Accounting Standards Board (FASB) and the IASB have much still to do in converging US GAAP and IFRS, but both are committed to this work. Other issues that remain concern the funding and governance of the IASB, supporting the further development and consistent implementation of IFRS, encouraging education of accountants in IFRS, and working towards continued convergence.

Click to view Remarks before the American Chamber of Commerce in Brazil (PDF 66k).

Global Offerings Services is a global team of Deloitte practitioners assisting non-US companies and non-US practice office engagement teams in applying US and International accounting standards (that is, US GAAP and IFRSs) and in complying with the SEC's financial reporting rules. The GOs Newsletter is an update on relevant GAAP, regulatory, and other matters, webcasts, and publications, with hyperlinks to source material.

Click to view March 2008 Edition of the Deloitte Global Offerings Services Newsletter (PDF 211k).

 

This 112-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 IFRS 3 and the amendment to IAS 27) and Interpretation (through IFRIC 14), as well as the Framework and the Preface to IFRSs.
• Background and current status of all current IASB projects.
• IASC and IASB chronology.
• Update on IFRS-US GAAP convergence.
• Other useful IASB-related information.

 

We previously posted the agenda, which includes discussion of updates to the Memorandum of Understanding between the IASB and FASB and standard setters' responses to credit crisis. The meeting will be webcast.