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'An Accounting Revolution is Brewing in China'

10 Dec 2007

Paul Pacter, webmaster of IAS Plus, has written an article titled 'An Accounting Revolution Is Brewing in China', published in the December 2007 issue of Financial Executive, the journal of Financial Executives International.

Paul discusses the capital markets in China today, the recent history of financial reporting in China, changes caused by the new Chinese Accounting Standards (CASs) that went into effect in 2007, and remaining differences between CASs and IFRSs.

Click to download An Accounting Revolution is Brewing in China (PDF 268k), which is copyright 2007 Financial Executives International, and is posted here with FEI's kind permission.

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Major changes in German accounting law are under discussion

10 Dec 2007

On 8 November 2007, the German Ministry of Justice (MOJ) issued for public comment a staff draft of the German Accounting Law Modernisation Act (BilMoG).

The overall goals of the reform are to (1) modernise the German Accounting Law (Handelsgesetzbuch, or HGB) and (2) reduce regulatory burden on companies. The proposed changes are generally in the direction of closer conformity of the HGB with IFRSs. The bill would also make changes in the areas of auditing, supervisory boards, and audit committees. Important accounting changes include:
  • greater recognition of intangible assets (although the related increase in equity would not be available for distribution as dividends)
  • special purpose entities controlled by a parent would have to be consolidated
  • recognition of deferred tax assets (previously prohibited)
  • measurement of financial assets held for trading at fair values in excess of initially recognised costs
  • measurement of provisions at discounted amounts
  • inclusion of actuarial assumptions in the measurement of pension liabilities
  • exemption of small non-listed entities from the requirement to publish HGB-GAAP financial statements
The staff draft is currently out for comment by key interested parties until 8 January 2008. Thereafter, the draft law will be revised based on the comments received by MOJ and then submitted to both chambers of Parliament (the Deutsche Bundestag and Bundesrat) where it will be deliberated for at least several months. Many observers anticipate a heated debate. The original time frame indicated by the MOJ was for publication of the final law in the second half of 2008, with applicability as of 1 January 2009. However, observers suggest that due to significant election dates in 2008 and 2009, that date may not be feasible to uphold.
Click to view German Accounting Law Modernisation Act (BilMoG) (PDF 651k, German language).

 

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'Tone at the top' can influence audit quality

10 Dec 2007

A study by the Transnational Auditors Committee (TAC) of the Forum of Firms, a body within the International Federation of Accountants, examines how setting the right tone can positively influence audit quality.

The Forum of Firms is an association of networks of international accounting firms that perform transnational audits. The study, titled Tone at the Top and Audit Quality, explores current practices among members of the Forum of Firms. This good practice guidance paper has been prepared based on the input of ten TAC members, who represent some of the largest international networks. TAC members granted interviews and supplied background materials that have been summarised in this paper on a non-attributed basis. Click for:

 

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IFAC policy paper on regulation of the accounting profession

10 Dec 2007

International Federation of Accountants (IFAC) has released a Policy Position on professional regulation of the accountancy profession in which it states that professional accountancy bodies, acting in the public interest, must play an active role in the regulation of the profession to ensure that regulation is effective and efficient.

The paper, Regulation of the Accountancy Profession, outlines various types of regulatory models and how they can be implemented and discusses the roles of professional accountancy bodies and governments. In discussing the need for regulation, the paper points out: 'Like other professions, the sustainability of the accountancy profession depends upon the quality of services provided by its members and the profession's capacity to respond effectively and efficiently to the demands of the economy and society.' Click for:

 

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Fiji exempts some smaller entities from IFRS requirement

09 Dec 2007

In November 2007, the Council of the Fiji Institute of Accountants approved the introduction of a F$5 million (US$3.25 million) turnover threshold for three categories of entity that would otherwise be required to follow IFRSs, thereby allowing an option for smaller entities within those three categories to apply either IFRSs or the current Fiji Accounting Standards.

The Institute had introduced a requirement starting 1 January 2007 for eight categories of entity to follow IFRSs. For details please see our Fiji Page.

 

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Status of IASB's revised IFRS 3 on business combinations

08 Dec 2007

The IASB has completed the second phase of the Business Combinations Project, the main outputs of which are a revised version of IFRS 3 Business Combinations and an amended version of IAS 27 Consolidated and Separate Financial Statements.

The effective date for application of the new requirements is 1 July 2009. The Board expects to publish the documents on 10 January 2008. At that time the Board will also publish a project feedback statement, which summarises the main comments received on the related exposure drafts and explains how those comments affected the Board's thinking and the final documents.

 

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HK-PRC joint declarations on accounting and auditing standards

07 Dec 2007

The mainland Chinese and Hong Kong accounting and auditing standard setters have signed joint declarations regarding mutual recognition of their accounting and auditing standards.

Under the Joint Declaration on Accounting Standards (PDF 48k), the two parties agree:

  • That there are only two substantive differences between Hong Kong Financial Reporting Standards (HKFRSs, which are virtually identical to IFRSs) and the new Chinese Accounting Standards (CASs*) that went into effect in 2007. The differences involve related party disclosures and reversal of impairment losses.
  • That financial statements prepared using CASs, after adjustments for those two differences, 'should achieve substantially the same effect'.
  • To work to eliminate the two differences and to maintain ongoing convergence of their accounting standards.
  • To work to obtain mutual exemption from the relevant papers on the Hong Kong and Chinese CPA examinations.
  • To work obtain mutual acceptance of each other's accounting standards for purposes of securities listings. [Currently, mainland Chinese companies listed in Hong Kong must use either HKFRSs or IFRSs].

*CASs are also sometimes referred to as Accounting Standards for Business Enterprises or ASBEs
Under the Joint Declaration on Auditing Standards (PDF 44k), the two parties agree:

  • That a CPA applying either Chinese or Hong Kong auditing standards will be complying with the same requirements and, therefore, should reach the same conclusions for assurance or other related services engagements, including audits of financial statements.
  • To maintain ongoing convergence of their auditing standards.
  • To work to obtain mutual exemption from the accounting papers on the Hong Kong and Chinese CPA examinations.
  • To work obtain mutual acceptance of each other's auditing standards for purposes of securities listings.
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IFRS Compliance Questionnaire for 2007

07 Dec 2007

We have posted Deloitte's IFRS Compliance Questionnaire for 2007.

This questionnaire summarises the recognition and measurement requirements in IFRSs including Interpretations. The questionnaire may be used to assist in considering compliance with those pronouncements. It is not a substitute for your understanding of such pronouncements and the exercise of your judgment. Users are presumed to have a thorough understanding of the pronouncements and should refer to the text of the pronouncements, as necessary, in considering particular items in the questionnaire. The items in this questionnaire are referenced to the applicable sections of the IFRSs. The questionnaire addresses the measurement and recognition requirements of IFRSs issued on or before 31 August 2007. It does not address presentation and disclosure requirements (for which we have published a Separate Checklist). Note, however, that IAS 8.30 requires disclosures regarding Standards and Interpretations issued but not yet effective at the date of issue of the financial statements. Therefore, in addition to the contents of the compliance questionnaire, preparers will need to consider any Standards and Interpretations issued between 1 September 2007 and the date of issue of their 2007 financial statements. The questionnaire is 282 pages long. Click below to download it in either MS Word (Zipped) or PDF format: There are permanent links on our Model Financial Statements Page.

 

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Stay Tuned Online – IFRS and UK GAAP updates

07 Dec 2007

The Deloitte London IFRS Centre of Excellence is running a series of hour-long Internet-based financial reporting updates, aimed at helping finance teams keep up to speed with IFRS and other financial reporting issues.

Each update lasts no more than an hour, and sessions are held three times a year, at the end of March, July and November. We intend to make a recording of each session available on IAS Plus for a period of at least four months from the date of the presentation. The first in the series was held on 29 November 2007. Topics included in the 29 November 2007 Stay Tuned Online IFRS and UK GAAP Update included:
  • an overview of recent and expected IASB activity
  • a UK GAAP update
  • IFRS 8 Operating Segments
  • recent IFRIC Interpretations (including IFRICs 11 and 13)
The recording is no longer available online.
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Accounting Roundup – November 2007

07 Dec 2007

We have posted the November 2007 Edition of Accounting Roundup published by Deloitte & Touche LLP (USA).

Topics covered in this issue include:

FASB Developments

  • FASB Revises Business Combination and Noncontrolling Interests Accounting
  • FASB, FAF, and AICPA Support Transition of U.S. Public Companies to Accounting Standards Set by One Global Standard Setter
  • FASB Proposes to Delay Effective Date of Interpretation 48, Uncertain Tax Positions, for Private Entities
  • FASB Proposes to Partially Defer Fair Value Statement 157, Considers Implementation Issues
  • FASB Proposes FSP to Exclude Leases From Scope of Fair Value Statement 157 and Revises Lease Accounting's Fair Value Definition
  • FASB Proposes FSP for Indefinite Deferral of SOP 07-1 Affecting Investment Company Accounting
  • FASB Proposes FSP Amending the Factors Considered in Determining an Intangible Asset's Useful Life
  • FASB Issues Proposal to Simplify and Improve Reporting for Financial Instruments With Characteristics of Equity
EITF Developments
  • EITF Issue No. 07-1 Accounting for Collaborative Arrangements
  • EITF Issue No. 07-4 Application of the Two-Class Method Under FASB Statement No. 128, Earnings per Share, to Master Limited Partnerships
  • EITF Issue No. 07-5 Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity's Own Stock
  • EITF Issue No. 07-6 Accounting for the Sale of Real Estate Subject to the Requirements of FASB Statement No. 66, Accounting for Sales of Real Estate, When the Agreement Includes a Buy-Sell Clause
  • EITF Discusses FASB's Approach for Updating Issue No. 98-5, Accounting for Convertible Securities With Beneficial Conversion Features or Contingently Adjustable Conversion Ratios
SEC Developments
  • SEC Removes Reconciliation Requirement, Approves Rules for Smaller Public Companies
  • SEC Issues SAB Providing Views About Written Loan Commitments Accounted for at Fair Value
  • SEC Proposes Mandatory Electronic Submission of Certain Investment Company Applications and Filings
  • SEC Approves Amendments to PCAOB Rules Governing Inspection Frequency
  • SEC Seeks Feedback Regarding Web-Based Tools Used to Access Public-Company Disclosures About Business Activities in or With Countries Identified as State Sponsors of Terrorism
  • SEC Appoints Wayne Carnall as Chief Accountant of the Division of Corporation Finance
GASB Developments
  • GASB Issues Statement No. 52 Land and Other Real Estate Held as Investments by Endowments
International Developments
  • IASC Announces Governance Proposals to Enhance Its Public Accountability
Click to view November 2007 Edition of Accounting Roundup (PDF 283k). You will find past issues of Accounting Roundup Here.

 

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