20 March 2010: Notes from IASB March 2010 meeting day 5

The IASB and FASB held a joint meeting at the IASB's offices in London on Monday-Friday 15-19 March 2010. Presented below are the preliminary and unofficial notes taken by Deloitte observers at the fifth and final day of the meeting. Notes from the IASB Board Meeting 19 March 2010 IFRIC Update Report of the March IFRIC meeting The Director of IFRIC and Implementation Activities made an oral report of the IFRIC meeting held 4-5 March 2010 (see Our Notes of that meeting). In particular the Board discussed the amount of items related to IFRS 2 and noted that elimination of potential differences with US GAAP with regards to vesting conditions was the right way to proceed. Some Board members challenged the IFRIC decision to suggest annual improvement regarding the 'Tax effect of distribution to equity holders'. Nonetheless, the Chairman stressed that this issue would be addressed separately when Annual Improvements' Cycle 2009-2011 are deliberated. Financial Instruments: Classification and Measurement – Liabilities The fair value option The Board discussed the tentative decisions reached at the February Board meeting regarding the fair value option, that is, to recognise the total fair value change in profit or loss and recognise the portion attributable to changes in own credit risk in other comprehensive income with an offsetting entry to profit or loss. The staff noted that all the decisions on various issues related to fair value option were split and therefore suggested that the Board asked in the Exposure Draft constituents questions on alternative views related to these issues. The Board agreed to describe in the Exposure Draft an alternative view that would require to recognise changes in own credit in equity. Some Board members disagreed as in their view such question would suggest that other comprehensive income and equity are interchangeable. Moreover, they questioned why such solution is proposed for financial liabilities to which fair value option was applied and not to, for example, convertible debt. The Board agreed to ask the constituents whether they preferred the two-step approach (to recognise the total fair value change in profit or loss and recognise the portion attributable to changes in own credit risk in other comprehensive income with an offsetting entry to profit or loss) or a direct entry of the credit risk element in other comprehensive income. The Board also agreed to ask constituents a question whether such tentative decision would create a mismatch in cases where an entity is matching a liability with a non-derivative asset. The Board agreed to suggest an alternative solution that would require the entity to recognise the liability's entire fair value change in profit or loss if the proposed approach created a mismatch with related assets. One Board member also suggested that the ED should seek feedback on whether the credit risk component should include both change of credit standing and price of credit. He explained that the FASB has tentatively agreed that the amount separately presented in the performance statement would reflect only the change of entity's creditworthiness and not a change in the price of credit. The Board agreed. Cost exception for some derivative contracts over unquoted equity instruments Without much discussion the Board confirmed its previous tentative decision that there should not be a cost exception for any derivatives. Other issues The Board discussed whether to allow reclassification of financial liabilities between amortised cost and fair value. The majority of Board members agreed that no reclassification should be allowed as the guidance reflects the IAS 39 requirements (where reclassifications were prohibited) and there were no requests to allow reclassification of financial liabilities. Some Board members suggested that as some of the liabilities are directly linked to financial assets, when those assets are reclassified in line with IFRS 9 (as the business model changes), this reclassification would have potential to create accounting mismatch without an equivalent guidance for financial liabilities. Other Board members disagreed. Some expressed the view that the Board is trying to address a problem that does not exist and urged the Board to address the real issues. Finally, the Board agreed not to allow reclassifications of financial liabilities and to carryforward the requirements in IAS 39. Nonetheless, given the discussion, the Board decided to include in the Basis for Conclusion a reasoning why this question was not addressed at this point (IAS 39 carryforward, limited project to address the issue of own credit). The Board also agreed to re-discuss the issue when the overall financial instruments accounting is discussed with the FASB. Without much discussion the Board agreed to carryforward the subsequent measurement requirements in IAS 39 for loan commitments and financial guarantee contracts. Transition The Board considered transition requirements for the following two items that represent changes to requirements in IAS 39 Financial Instruments: Recognition and Measurement - fair value option guidance and elimination cost exception. The Board agreed to require full retrospective application of the new approach to account for financial liabilities to which the FVO has been applied. The Board also agreed that the transition requirements for the elimination of the cost exception for financial liabilities should follow the requirements of IFRS 9:8.2.11 (for elimination of the cost exception for financial assets). That requirement would mean that any difference between fair value at the date of initial application and the previous carrying amount shall be recognised in the opening retained earnings of the reporting period that includes the date of initial application. Liabilities: Replacement of IAS 37 Exposure draft comment period The Board considered requests from constituents to extend the comment period for the exposure draft Measurement of Liabilities in IAS 37. Many Board members were supportive of such extension as they believed that would provide the Board the necessary time for outreach and explanation of misunderstanding of the recognition criteria. Other Board members disagreed. In their view, constituents just disagree with recognition guidance and no extension would help it. One Board member noted that some practitioners misapply the current IAS 37 criteria and that misapplication would not change by extension of comment period. On balance, majority of the Board agreed to extent the comment period until 19 May 2010 (three months after working draft was published) to give respondents more time to understand the recognition requirements of the IFRS before they finalise their comments on the revised measurement proposals. This summary is based on notes taken by observers at the joint IASB-FASB meeting and should not be regarded as an official or final summary.

20 March 2010: Newsletter on reporting entity exposure draft

Deloitte's IFRS Global Office has published an IAS Plus Update Newsletter – IASB publishes Exposure Draft on Conceptual Framework Description of the Reporting Entity (PDF 69k). On 11 March 2010, the IASB published for comment an exposure draft (ED) on the reporting entity concept. The proposals form part of a Joint Project to develop a common and improved conceptual framework that provides the basis for developing future accounting standards. Comment deadline is 16 July 2010. Our newsletter explains the proposals in the ED and their implications for consolidated financial statements and other types of financial statements. All of our past IAS Plus newsletters are Here.

19 March 2010: Notes from IASB March 2010 meeting day 4

The IASB and FASB are holding a joint meeting at the IASB's offices in London on Monday-Friday 15-19 March 2010. Presented below are the preliminary and unofficial notes taken by Deloitte observers at the fourth day of the meeting. Notes from the IASB Board Meeting 18 March 2010 Fair Value Measurement – Scope The Board considered whether an IFRS on fair value measurement should exclude IFRIC 13 Customer Loyalty Programmes from its scope. After the IFRIC meeting in March, After the IFRIC meeting the staff became aware of a potential conflict between IFRIC 13 and the proposed fair value measurement guidance. This issue was not raised in any of the comment letters on the exposure draft ED/2009/5 Fair Value Measurement. For various reasons, the staff had concluded that the use of the term 'fair value' in IFRIC 13 was consistent with the proposed fair value measurement guidance in the forthcoming IFRS on fair value measurement. Consequently, they recommended that the fair value measurement IFRS exclude IFRIC 13 from its scope. This approach would result in IFRIC 13 using the term 'fair value' and retaining the current definition of fair value. However, even though IFRIC 13 refers to 'fair value', transactions within the scope of IFRIC 13 would not be subject to the measurement and disclosure requirements of the IFRS on fair value measurement. The Board disagreed with the staff on a number of levels. Board members were unconvinced by the staff's analysis and the suggestion that the revenue recognition project would address the issues in IFRIC 13 satisfactorily. To exempt IFRIC 13 from the fair value measurement IFRS would send the wrong message and could lead to regressive practices. The last thing the Board needed to do when it issued the IFRS was to send incoherent signals along with it. The staff recommendation was defeated. IFRIC 13 will be within the scope of the IFRS on fair value measurement. Annual Improvements Amendments recommended for finalisation The Board ratified the IFRIC's recommendation to finalise amendments to the following IFRSs: IFRS 1 – Accounting policy changes in the year of adoption IAS 1 – Clarification of paragraph 106(d) IAS 27 – Transition requirements for amendments made to IAS 21, IAS 28 and IAS 31 as a result of IAS 27 (as amended in 2008) IFRIC 13 – Fair value of award credit Other issues IFRS 3: Un-replaced and voluntarily replaced share-based payment transactions The Board ratified the IFRIC's recommendations on finalising the proposed amendment to IFRS 3 paragraph 30, and related material in IFRS 3.B56, B62A and B62B. IFRS 3.30 will refer to 'share-based payment transactions' rather than 'share-based payment awards'. This approach was adopted to keep the alignment between IFRS and US GAAP on this issue as close as possible, while also clarifying the issue identified in the annual improvements process. The Board also noted that the IFRIC had declined to take three further issues related to modifications (rather than replacements) of share-based payment awards; subsequent accounting for un-replaced share-based payment awards; and situations in which the replacement award has a lower value than the original market-based measure allocated to the pre-combination value. The staff assured Board members that these issues would be considered in due course either for inclusion in the next cycle of annual improvements or as part of the planned post-implementation review of IFRS 2. IFRS 3: Measurement of non-controlling interests-Illustrative examples The Board declined to finalise proposed illustrative examples designed to illustrate the application of IFRS 3.19. Some Board members did not think that Board time was required to agree non-authoritative illustrations. Some also disagreed with the illustrations themselves. The staff agreed to address Board members' concerns out of session and return to the Board only if necessary. IAS 8: Change in terminology to the qualitative characteristics The Board ratified the IFRIC's recommendation to finalise the proposed changes to IAS 8 that would conform the terminology in the IFRS with that in the forthcoming final Chapters of the revised IASB Framework with respect to qualitative characteristics. This decision was subject to the caveat that the changes to IAS 8 should not be issued before the Chapters of the Framework are issued. The staff noted that the post-ballot draft of those Chapters would be circulated to the IASB later in March, suggesting that the Chapters could be issued by the end of March or very early April 2010. Items to be discontinued without finalisation IFRS 5-Loss of significant influence over an associate or loss of joint control over a joint venture The Board agreed to discontinue and to remove from the Annual Improvements project the proposed amendment to IFRS 5: Application of IFRS 5 to loss of significant influence over an associate or loss of joint control over a jointly controlled entity. The IFRIC was concerned that clarity was needed on the application of IFRS 5 in circumstances in which a highly probable sale transaction is expected to result in the loss of significant influence or loss of joint control they considered that the issue was best addressed in the forthcoming Joint Arrangements IFRS. The staff confirmed that this was in hand. Any problems encountered would be treated as a sweep issue. IAS 40: Change from fair value model to the cost model. ED 2009/11 included proposals designed to remove a potential inconsistency between IAS 40, IFRS 5, and IAS 2 when an entity determines there is a change in use of an investment property. The responses to the exposure draft demonstrated mixed views in favour of and opposed to the proposals. In addition, several respondents thought that the issue required further and more detailed analysis and/or was a more significant change than should be within the Annual Improvements project. The Board declined to discontinue the project and referred it back to the IFRIC. The Board noted that the problem was more with IFRS 5, especially with respect to entities such as real estate investment trusts, which routinely sell buildings in their portfolio. In this situation, it was 'nonsensical' to move from a fair value model to a cost model. Amendment to IFRS 1: Entities Adopting IFRSs Prior to the Issue of IFRS 1 The Board agreed to an amendment to IFRS 1.39C [the effective date of the 'deemed cost exemptions approved in February 2010] that would permit entities that had adopted IFRS in periods before the effective date of IFRS 1 to use the cost base established by an event-driven revaluation as deemed cost in the entity's 'first IFRS financial statements'. The situation arises most obviously in China, where many companies moved to IFRS/ IAS prior to the issue of IFRS 1 and consequently used SIC-8 to accomplish the move. The Board agreed that the sort of event-driven revaluations described in the amendment approved in February 2010 had occurred, but (without the amendment now under discussion) would not be within the scope of IFRS 1. The Board also clarified that the amendment only applied to establishing deemed cost in the first IAS/IFRS financial statements: it was not an invitation to revisit IFRS elections made subsequent to adoption of IFRS. Income Taxes - limited amendments to IAS 12 The Board discussed several practice issues that might be considered as part of a limited scope project to amend IAS 12 Income Taxes. Objective of such a limited scope project The Board agreed that it would undertake a limited scope project to amend IAS 12. The objective of the project would be to resolve problems in practice under IAS 12, without changing the fundamental approach under IAS 12 and preferably without increasing divergence from US GAAP. While many Board members were unhappy with adding yet another project to its already heavy workload, there was also an acknowledgement that the project would be attempting to address a market need, even if some of the likely conclusions would create further divergence from US GAAP. In particular, the accounting for uncertain tax positions was a significant issue in the assessment of IFRS for use in the US. Board members noted that a full reconsideration of income tax accounting would take years and was something that would need to be considered and prioritised after June 2011. The Board agreed to include the following topics in the project: Practice issues (these would require an exposure draft) Uncertain tax positions (awaiting the final revision of IAS 37) Deferred tax on property revaluation Distributed vs. undistributed tax rate in real estate investment trusts and similar entities Improvements proposed in ED/2009/2 Introduction of an initial step to consider whether recovery of an asset or settlement of liability will affect taxable profit Recognising a deferred tax asset in full and an offsetting valuation allowance to the extent necessary Guidance on assessing the need for a valuation allowance Guidance on substantive enactment Allocation of current and deferred taxes within a group that files a consolidated tax return In agreeing this list, several Board members were concerned that, while some of the matters could be addressed and finalised easily, others were more difficult. Board members thought that they might be able to complete the amendments proposed in ED/2009/2 quickly: the Board had invited comments on the proposals, there was a high degree of agreement on the proposals and the Board would be in a position to proceed to final amendments. The staff was split on this: one thought that the improvements exposed in ED/2009/2 could be finalised quickly; another senior member of staff did not advise that approach and thought that re-exposure would be a more cautious approach. In any event, the staff will bring proposals to the Board in the third quarter 2010. It was thought possible to discuss all the issues and issue an exposure draft containing those issues that required exposure by the end of 2010. Property revaluation The Board discussed but did not approve a proposal that would have added an exception to IAS 12 such that an entity would not recognise deferred tax on temporary differences on assets and liabilities if: the assets and liabilities were measured at fair value; and a market participant acquiring the asset or assuming the liability for its fair value would have the same temporary differences. Several Board members were highly critical of the staff proposal. The proposal addressed a problem in some, but not all, IFRS jurisdictions. If the Board proceeded with this proposal, it would unleash a torrent of comments from other jurisdictions asking for their circumstances to be addressed. In addition, the proposal sought to address the wrong issue: the real problem was the definition of 'tax basis.' In addition, the confusion created by IAS 12.51 (measurement of deferred taxes reflects the tax consequences of the expected manner of recovery [assets] or settlement [liabilities]) was as much a culprit in the IAS 40 situation. A Board member suggested an alternative approach that would restrict any exception to the requirement to recognise deferred tax on temporary differences on assets and liabilities to investment property accounted for at fair value through profit and loss under IAS 40. In addition, the rate to be applied to those temporary differences would reflect the 'least cost' approach. Such an approach would be limited to assets for which the voluntary election in IAS 40 has been made. It would not apply to the initial recognition of investment property acquired in a business combination. It was acknowledged that this approach would put significant strain on IFRS 3, but (in the absence of addressing the definition of tax basis) that could not be avoided. The staff was asked to develop this approach and return to the Board with proposals that reflected it. Derecognition (IASB) Accounting for repurchase agreements (repos) and similar transactions The staff started the discussion by pointing out that they were still analysing the effects of the 'Repo 105' issue on the proposed guidance and would present the result of this analysis to the Board at one of the following meetings. At the February meeting the Board agreed to treat repurchase agreements as secured borrowings (financing), rather than sales of the asset (as proposed in the ED/2009/3 Derecognition). This decision would present an exception from the overall derecognition model being developed. At the February meeting the Board agreed that all three following conditions must be fulfilled for repurchase transactions to be treated as financing: The financial assets to be repurchased or redeemed are the same or substantially the same as those transferred The agreement is to repurchase or redeem them before maturity, at a fixed or determinable price The agreement is entered into contemporaneously with, or in contemplation of, the transfer The Board started the discussion with assessment whether the proposed guidance (similar to that which exist under U.S. GAAP) should be provided specifying what constitutes 'substantially the same'. After a brief discussion the Board agreed to incorporate the basic characteristics of the assets specified in the U.S. guidance related to 'substantially the same', namely: The same primary obligor Identical form and type so as to provide the same risks and rights The same maturity Identical contractual interest rates Similar assets as collateral The same aggregate unpaid principal amount or principal amounts within accepted 'good delivery' standards for the type of security involved The Board also agreed to provide application guidance for some of these characteristics (inspired by the guidance in the US GAAP). One Board member suggested that the wording of some of the guidance should be clarified and definition tightened, for example, to reflect credit risk and position in the waterfall structure in determination of substantially the same. In his view, the US guidance was useful but since its publication substantial development in the securitisation market made some amendments and clarifications necessary. The staff agreed to incorporate these suggestions and discuss them with the FASB (the FASB will held an educational session on derecognition the following week). The Board continued its discussion by assessing the need for an additional 'collateral maintenance' criterion to be required for classification of a repo as secured borrowing (as required by the U.S. GAAP). One Board member suggested introducing such a provision into the proposed guidance. In their opinion the argument that collateral maintenance criterion is closely related to the legal isolation test was not a strong one, as default could happen not only as a result of bankruptcy but, for instance, illiquidity of the market. In the view of this Board member there should be an additional criterion that would distinguish between repos classified as financing and those derecognised as sales. Other Board members did not believe that such additional criterion was operational. Some Board members suggested that the issue of collateral in repo transactions is dependent on jurisdiction and is not accounting but predominantly a regulatory issue. Finally, the Board agreed not to add the collateral maintenance criterion to the proposed guidance on repos. Pass-through arrangements, nonrecourse loans and accounting for assets and liabilities of SPEs The Board continued its discussion whether the pass through criteria in IAS 39.19 were still relevant for the determining whether an asset should be derecognised. The Board discussed the first condition (no obligation to pay amounts to the eventual recipients unless equivalent amounts were collected from the original assets). The staff noted that the real issue was not whether payments would have to be made but rather whether the transferor has passed or agreed to pass the cash flows to the other party. The staff thus proposed that if the transferor agreed to pass some or all of the economic benefits of the asset to the transferee, irrespective of any explicit or implicit guarantee, the asset should be derecognised. One Board member noted that even though application of the model was theoretically sound, he felt uncomfortable with the outcome as such guidance might perpetuate perverse incentives for earnings management. This Board member was particularly concerned with the recognition of the gain on derecognition of financial assets measured at amortised cost. As such, he suggested that this pursued approach is suitable only to financial asset measured at fair value and not for those measured at amortised cost. In response, another Board member stated that this is the natural consequence of the mixed measurement model that results from the guidance in IFRS 9 Financial Instruments. Another Board member suggested that comprehensive set of disclosures might alleviate some of these concerns. Another Board member was concerned with application of such guidance to structured entities and expressed his doubts, whether this guidance would not lead to structuring opportunities. The staff responded that the guidance takes a symmetrical view on recognition and derecognition of financial assets (that is, no stickiness). The Board briefly discussed the remaining two criteria of the IAS 39 pass-through test (prohibition of selling or pledging the original asset, obligation to remit any cash flows without material delay). One Board member noted that the last condition is closely related to the overall agent principal issue that the Board is addressing in several projects. As such he suggested that the Board revisits this issue once the guidance on agent/principal relationship is finalised in other projects. Finally, the Board agreed that the pass through test in IAS 39 does not need to be included in the proposed derecognition requirements as the proposed guidance addresses the issues that were intended to be captured by the pass through test. Nonetheless, the Board agreed to provide illustration of these conditions in the application guidance. The Board continued with the discussion of 'empty SPEs'. Some Board members expressed their concerns that the proposed derecognition approach would lead to almost all SPEs to be empty. Most of the Board members did not share these concerns. In their opinion, even though the proposed guidance would increase the prevalence of 'empty SPEs', the application of the derecognition principle would depend on the nature of the beneficial interest issued. Moreover, some of the 'empty SPEs' would be treated in the same way under IAS 39 requirements. For these Board members this was not an issue and conceptual derecognition principle would bring more clarity and transparency in the conditions. Finally, the Board agreed not to introduce any additional criteria that would address the issue of 'empty SPEs'. The Board discussed the nonrecourse loans issue. In the discussion the Board tried to clarify the difference between overcollateralization and nonrecourse provisions. After a considerable discussion, the Board agreed that the proposed treatment of recourse and nonrecourse transactions should not differ. Some Board members were concerned with potential valuation of the continuing involvement. Nonetheless, it they agreed that it was more a recognition rather than a derecognition issue. Disclosures The Board continued its discussion by considering the feedback from constituents on disclosure requirements related to derecognition. Based on the analysis of comment letters constituents generally supported the proposed disclosures objectives, but expressed some concerns related to specific disclosures proposed. The Board reaffirmed the derecognition objectives as proposed in the ED/2009/3. With regards to the specific disclosures, the Board agreed with the disclosures related to transactions that do not result in derecognition of financial assets. Nonetheless, as one Board member pointed out, the wording of the guidance have to be tightened to avoid disclosure of non-relevant information. The Board agreed with the proposed disclosures on transactions that result in derecognition of financial assets. The Board asked the staff to consider whether the disclosure of fair value of derecognised financial assets in which an entity has continuing involvement is always necessary and can be ascertained (for example, fair value of guaranteed receivables, when the entity guarantees nominal amount, that is, guarantees credit risk but not market risk). The Board also agreed to aggregate disclosure when an entity has more than one category of continuing involvement with the same derecognised financial asset. The Board decided not to provide further guidance around the aggregation of gains and losses resulting from derecognition and from continuing involvement. In the light of the 'Repo 105' controversy the Board decided to retain the requirement to disclose the level of transfer activity not evenly distributed throughout the reporting period. With regards to the disclosures regarding modification to liabilities that does not result in extinguishment and modification the terms of a financial asset for a borrower in financial difficulties, the Board asked the staff to determine a suitable threshold for disclosures. Many Board members expressed their concerns that without such threshold trivial disclosures would be provided. Moreover, some Board members expressed their concerns that collection of data in the circumstances would be difficult what would make these disclosures non-operational. Support for the package of decisions The Chairman noted that the majority of the derecognition approach has been deliberated and therefore asked Board members to indicate their dissent. Mr. Smith indicated he would dissent to the publication of the guidance as he does not consider it to be improvement over the current guidance in IAS 39. He expressed his concerns that the proposed guidance would lead to free choice on derecognition of financial assets with no discipline with regards to cash flow remittance. Therefore, in his view this guidance would be more appropriate for a fair value model of financial instruments rather than mixed-measurement model. Mr. Finnegan indicated he might dissent on the same basis. Financial Instruments: Outreach Activities Update (IASB) Hedge accounting The staff provided a summary of user outreach feedback with regards to the hedge accounting guidance. Based on this outreach most users exclude the fair value changes arising from derivatives used for hedging when analysing the entity's performance. Rather the effects of forecasted transactions are reflected in adjustments to hedged items based on the contractual terms of the derivatives. In addition, users have indicated that ineffectiveness is not perceived as problem that should constitute a hurdle in applying hedge accounting. The majority of users consider the hedge accounting guidance as overly complicated. The staff also noted that users rely on management risk reports rather than on GAAP measures that are audited as they perceived that the risk reports are more aligned to the risk management strategy of the entity. Moreover, the risk reports address the issue based on the risk facing the entity (FX risk, interest rate risk, etc.) rather than using the accounting jargon that many analysts do not understand (cash-flow hedges, fair value hedges). Based on the outreach activities, most users support retaining hedge accounting. Moreover, most of the users would prefer a more fundamental revisiting of hedge accounting rather than minor tweaks, even if that would mean delay of the publication of the hedge accounting guidance. Amortised cost and Impairment The staff provided a brief overview of the Expert Advisory Panel on impairment (EAP) discussions. The EAP discussed possible simplifications of the allocation of the initial expected losses and decided to explore several of the approaches (e.g. based on adjustment of the contractual interest revenue in the accounting system using an allocation profile for expected credit losses derived from expected loss data in risk systems). The EAP also discussed possible usage of Basel II expected losses data and required adjustments to these data in order for them to be used for the proposed expected loss model. The staff clarified that the EAP would discuss 3 additional models; FASB model, the Basel Committee model and the model proposed by the European Banking Federation. The staff summarised that even though preparers continue to be concerned by operational concerns and implementation costs, there seems to be overall broad agreement that any model should address frontloading of the interest revenue by the incurred loss model. The staff also noted that some constituents perceive the overall amortised cost model as complicated as it includes the present value calculation and is based on discounted cash flows. Nonetheless, these are the features of the current Amortised cost model as well. This summary is based on notes taken by observers at the joint IASB-FASB meeting and should not be regarded as an official or final summary.

19 March 2010: IFRS insurance accounting newsletter

Deloitte (United Kingdom) has published the March 2010 issue of Insurance Accounting Newsletter. This issue is titled Insurance Accounting Taking Shape and focusses on the discussions the joint IASB-FASB meetings of 10 February and 18 February. The expected publication date of the Exposure Draft is May 2010. Click to download Issue 12 of the Insurance Accounting Newsletter (PDF 130k). There are permanent links all issues of the newsletter on IAS Plus Insurance Project Page.

19 March 2010: Costa Rica adopts the IFRS for SMEs

The Costa Rican Institute of Certified Public Accountants is, by law, the accounting standard-setter in Costa Rica. Currently, all companies follow IFRSs with the exception of some regulated entities (banks and finance entities, stockbrokers, and pension funds) which follow accounting policies adopted by the regulators. The Institute has adopted the IFRS for SMEs, to be effective for financial years beginning 1 January 2010. However, the Institute is still deliberating which entities will qualify as SMEs, and therefore are eligible to use the IFRS for SMEs. We have created a new Country Page for Costa Rica on IAS Plus.

18 March 2010: Nominations invited for new SME Implementation Group

The Trustees of the IASC Foundation have invited nominations for membership of the new SME Implementation Group (SMEIG). The Terms of Reference and Operating Procedures of the SMEIG have also been released (available on the IASB's website www.iasb.org/IFRS+for+SMEs/SME+Implementation+Group. The mission of the SMEIG is to support the international adoption of the IFRS for SMEs and to monitor its implementation. The SMEIG will have two principal responsibilities: to develop non-mandatory guidance for implementing the IFRS for SMEs in the form of questions and answers (Q&As) that will be made publicly available to interested parties on a timely basis, and to make recommendations to the International Accounting Standards Board (IASB) if and when needed regarding the need to amend the IFRS for SMEs. The SMEIG will be chaired by Paul Pacter, the IASB’s Director of Standards for SMEs. All members of the SMEIG will serve on a voluntary basis. The SMEIG may also include appointed observers who have the right to participate in SMEIG deliberations, but not to vote. Nominations and applications are invited by 30 April 2010. Click for Press Release (PDF 100k).

18 March 2010: Notes from IASB March 2010 meeting day 3

The IASB and FASB are holding a joint meeting at the IASB's offices in London on Monday-Friday 15-19 March 2010. Presented below are the preliminary and unofficial notes taken by Deloitte observers at the third day of the meeting. Notes from the IASB Board Meeting 17 March 2010 Meeting with Representatives of EFRAG on Convergence-related Issues Representatives of the IASB met with an EFRAG delegation to discuss the convergence-related issues. The IASB Chairman started the meeting by discussing the convergence with the FASB. He noted that the update of the Memorandum of Understanding with the FASB in November 2009 was an important milestone in the convergence process as it stated a deadline for the convergence for the first time and established the process of assessing the progress on the quarterly basis. He stressed that the new format of monthly joint meetings is working well and, in his opinion, helps to overcome or narrow differences between the Boards on a timely basis. The EFRAG Chairman also welcomed the new arrangement as a positive development that brought more transparency to the convergence process. Nonetheless, he raised the issue of European involvement in these new arrangements. Both parties agreed with the suggestion of having a longer meeting in September that would discuss technical aspects of the major projects and activities. The EFRAG Chairman also welcomed the increased level of outreach but noted that an increased level of transparency of the outreach activities would be welcomed. The IASB Chairman responded that the result of the outreach was always a public document discussed by the Board that summarised the result of the outreach (a document similar to a 'feedback statement' that is published after a new Standard is published reflecting the comments from comment letters). The EFRAG raised some concerns about the implications of the 2011 deadline on the quality of the accounting standards and stressed the need to maintain quality before convergence and the fulfilling any deadline. The EFRAG also expressed concerns about the likely revisions to the IASB workplan that would lead to moving of expected comment periods and renders the planning difficult. In addition, the EFRAG noted that the IASB has, in some cases, cut down the comment period and scoped out several issues from the proposed guidance in order to meet the deadline. The EFRAG representatives expressed concerns that little time, combined with heavy workload and scoping changes, may lead to misunderstandings. The discussion continued with financial crisis-related issues. The EFRAG expressed some concerns about the proposed guidance on financial liabilities and noted that bifurcation of financial liabilities when assets were not bifurcated might lead to creation of additional accounting mismatches. The EFRAG representatives expressed their broad support for the expected loss impairment model. Nonetheless, some EFRAG representatives advocated a scope exception for non-financial institutions (rather than a practical expedient). The EFRAG representatives also provided broad support for the idea of a statement of regulatory income and encouraged the IASB to discuss it with the regulators and the Basel Committee as it is more a public policy issue rather than an accounting issue. The IASB Chairman clarified that the IASB would create the statement of regulatory income as a vehicle for providing information but the calculation and enforcement would be responsibility of the regulators. The EFRAG supported the IASB approach on a comprehensive hedge accounting overhaul but encouraged the Board to gain more insights and input from European companies. Some EFRAG representatives expressed their concerns about the consolidation project as they believed that the current IFRS guidance worked well in the financial crisis and it might be dangerous to change it. The EFRAG representatives expressed their grave concerns about the IAS 37 proposals. The EFRAG noted that there is lots of uncertainty about the probability-of-outflow recognition criterion and urged the IASB to expose the whole Standard for a new comment period. The IASB Chairman noted that the IASB has become aware that recognition rather than measurement is of most concern for constituents and would deliberate the following week how to address those concerns. On measurement, the EFRAG representatives expressed their concerns on the margin used in calculation of fulfilment value. The EFRAG representatives also expressed some concerns on the proposals of the IASB to require a single statement of comprehensive income and suggested prioritisation of the workload. In the opinion of the EFRAG representatives, this project should not be prioritised. The EFRAG representatives urged the IASB to undertake more outreach in respect of the Revenue Recognition Standard as many constituents are of the view that the new guidance would not change the practice, which might not be necessarily the case. Regarding the leases project, the IASB Chairman noted that the IASB would need to consider whether to publish lessee and lessor guidance together, as the FASB plans. The IASB Chairman noted that lessor accounting was not in the original MoU agreement and, thus, guidance for lessees and lessors could be decoupled. Nonetheless, he noted that in any case the IASB would try to speed up lessor accounting guidance, even if it would mean that it would be published three to four months after the lessee guidance. The IASB Chairman also discussed the question of alignment of effective dates of the new major proposals. The EFRAG noted that sufficient lead time should be provided to facilitate the endorsement process. Finally, the EFRAG provided some update on the pan-European proactive work on Asset Definition, Common Control Transactions, Income Taxes, Disclosure Framework, Implication of Business Model on Financial Reporting, and Assessing of Effects of Accounting Standards. Fair Value Measurement (IASB) Scope considerations regarding IFRS 2 Share-based Payment The Board decided to exclude IFRS 2 from the measurement and disclosure requirements in the final Standard on Fair Value Measurement. The Board also agreed to provide a note to IFRS 2 that would clarify that requirements of the Fair Value Measurement Standard do not apply to IFRS 2. As one of the Board members noted in some instances the fair value reference in IFRS 2 relates to fair value as proposed in the Standard (such as fair value of goods and services), whereas in other instances (such as equity settled share based payments), fair value is assessed from a different perspective that is inconsistent with the fair value measurement Standard. Scope considerations regarding IAS 17 Leases The Board discussed a possible scope exemption for IAS 17 in the context of using the exit price notion or highest and best use (especially in the context of classification of leases and the timing of recognising gains or losses for sale and leaseback transactions). Some Board members were uncomfortable with a blanket scope exemption in this case and would prefer clarification of the fair value measurement standard to ensure that this is a particular application of fair value for non-financial items (that is, using an entry rather than exit price). The Board agreed that the staff should try to clarify the text of the Standard if possible. If such clarification is impractical, leases should be excluded from the scope of the Fair Value Measurement Standard. The Board also noted that amending IAS 17 would be impractical as new guidance for leases is planned to be finalised by June 2011. Other scoping considerations Without much discussion the Board agreed not to replace the term 'fair value' in IFRS 3 Business Combinations when referring to the measure for reacquired rights (as an exception to the measurement principle in IFRS 3). The Board also decided not describe the measurement of the reimbursement rights in IAS 19 Employee Benefits as the present value of the related obligation as a practical expedient for determining fair value. The Board discussed the potential scope exemption in IAS 39 for measuring financial liabilities with a demand feature (IAS 39.49). Most Board members agreed that the conclusion from IAS 39 should be confirmed and guidance in IAS 39.49 is 'deemed to be fair value for the purposes of liabilities with demand features'. One Board member asked the staff how this would influence the convergence with the FASB. The staff responded that FASB is considering to change the guidance for liabilities with demand feature (to remove the demand deposit floor and measure the intangible), in which case there would be differences between IASB and the FASB guidance. Most IASB members noted that the final guidance should precisely describe what the measurement is and what attributes it includes. The Board agreed to retain the term 'fair value' for measuring financial liabilities with a demand feature. The Board decided that each of the IFRSs that are excluded from the scope of the Fair Value Measurement Standard should state the reasons for that decision and why the term 'fair value' was nevertheless retained in that Standard. Standards Advisory Council Update The Chairman of the Advisory Council provided a brief oral update of discussions at the February 2010 Advisory Council meeting. Insurance Contracts Educational session: measuring the risk margin At the request of a FASB member, the FASB staff had prepared a paper that examined and explained the role that risk adjustments play in standard option pricing techniques. The FASB member wished to explore whether the Boards' challenge in attempting to adjust for the risk margins could be accommodated more efficiently using option pricing models as opposed to the alternatives being considered. The FASB staff also presented a selection of current (and significant historical) academic research on the use of option pricing models in the measurement of liabilities. It was unclear how many of these studies were based on data not based in the United States or on US GAAP (nor was this question asked by any Board members). The principal paper was being discussed in 'education session' format, and Board decisions were not requested. However, it was apparent that both Boards were split, with some preferring using option-pricing models to measure insurance contracts and others preferring the current staff position. Members of both Boards expressed concern that using option pricing models to price the risk margin was essentially inviting preparers to use a 'pick a number' approach to measurement. There was no apparent means to limit approaches to measurement or to inputs, so it was difficult to see how using option pricing models would be better than the model currently being developed. In defence, the chief advocate of the FASB model noted that, in some cases, there was less subjectivity in the option pricing model-approach than, for example, value-at-risk approaches. A FASB member was concerned that the Boards were suggesting a greater rigor for insurance contracts than they require for other [fair value] measurements: was this because the Boards had abandoned the exit price as the measurement objective and had yet to articulate clearly a replacement? The lack of a clear measurement objective was at the root of the Boards' problem. An IASB member concurred, suggesting that the Boards were trying to achieve an 'exit price', or something very close to it, without using that phrase or 'fair value'. The exit price was, for him, the right answer and the Boards should be honest about using it as the measurement objective. Exit price is well understood by both users and the measurement professionals and would have well-established measurement methods already embedded in IFRSs and US GAAP. The discussions did not suggest broad support for using option pricing techniques in determining inputs to the measurement of insurance contracts. However, that may change as Board members reflect on the discussions between today and when they debate the paper in technical session in the week of 22 March. Leases Disclosure for lessees The Boards were presented with the proposed package of disclosures to be provided by lessees. The staff explained that the overarching principle on disclosures is to ensure that the information in the notes complements the information presented in the financial statements, so as to provide decision-useful information for users. The Boards were asked to consider the proposed disclosure package in terms of the grouping of disclosures based on the disclosure objective, amounts related to leases, and the assumptions and estimates. Disclosure objective The proposed disclosure objective broadly requires the disclosure of quantitative and qualitative information that identifies and explains the amounts recognised in the financial statements and enables users to evaluate the nature and extent of risks to which the leasing activities have exposed the entity. Some Board members were concerned that the term 'risks' is too vague in the context of leasing activities and that they were expecting disclosure around the uncertainty of future cash flows and the flexibility involved in the management of those risks. Although the Boards agreed in principle with the proposed disclosure objective, it was not considered to be explicit enough and the staff was requested to revise and expand the objective to incorporate Board members' concerns raised during the meeting. Amounts related to leases The discussion of proposed disclosures pertaining to the amounts related to leasing activities centred around the general description of leasing activities and the proposed reconciliation between the opening and closing balances for the right-of-use assets and obligations to pay rentals. One Board member was concerned that the level at which a description of leasing activities are required was too general and will result in boilerplate disclosures. It was suggested that that description should be broken down into certain classes of leases. When questioned how these classes would/should be determined, the Board member responded that it could possibly be linked to the disclosure objective. Another Board member suggested a grouping based on the nature of the underlying assets, for example, real estate, machinery, office equipment. Other Board members agreed that disaggregated information will be more useful to users. On the requirement to present a reconciliation between the opening and closing balances of the right of use assets and lease obligations, one Board member was opposed to including a roll-forward in the leasing standard when the Financial Statement Presentation (FSP) Standard contain a general principle on when roll-forwards need to be presented. Another Board member remarked that requested the wording of the requirement to be aligned to the wording used in the FSP Standard. The staff commented that they are committed to follow the development of the FSP Standard very closely and ensure that there is alignment in the wording. Other Board members questioned how leases accounted for using the simplified accounting model will be included in the roll-forward. The Boards concluded that they agree in principle with the proposed disclosures and that comments from individual Board members should be dealt with off-line. Assumptions and estimates The Boards mainly discussed whether a lessee should disclose the fair value of lease obligations and a sensitivity analysis to changes in market risks in the notes. One Board member questioned where else the Boards have required a sensitivity analysis to changes in market risks for liabilities measured on a cost-basis. The Boards entered into a long discussion on whether it would be possible to determine compile a sensitivity analysis for changes in market risks and whether entities would be able to determine the fair value of lease obligations reliably. One Board member asked the staff to clarify that the changes in market risks are only required to assess the impact on future cash flows and not the impact on fair values. Staff confirmed that the intention was to show the sensitivity of future cash flows to changes in market risks. Following this clarification, Board members were more willing to support the proposed disclosure. Several Board members raised concerns about the practicability to determine the fair value of lease obligations and reminded the Board that the reason why a fair value measurement model was not adopted for lease accounting was the difficulty in determining a reliable measurement. Other Board members responded that the disclosure of the fair values of other financial liabilities is already required in accordance with IFRS 7 and there is no specific reason why lease obligations should be treated differently. One Board member reminded the Boards that a number of new standards will be published within the next 15 months and that, in each project, new disclosure requirements have been added. This Board member warned that the Boards will be losing their audience if the disclosure burden becomes onerous. Another Board member remarked that the Boards should guard against the perception that a vast volume of disclosures for leases have been added, whereas some of the disclosures are already required under the existing lease accounting models. The chairman responded that it is important to identify which disclosures are already required under existing guidance which requirements are new as a result of the new accounting model. The Boards concluded the discussion by tentatively agreeing that the fair value of lease obligations should be disclosed and that the sensitivity of market risks should be limited to the impact on future cash flows. Lessor accounting – Transition The Boards were presented with the following four alternatives for transitional provisions for lessors: A. Full retrospective application as if the new accounting requirements had always been applied; B. Modified retrospective application where the new accounting requirements are only applied to arrangements outstanding at the effective date and those entered into after the effective date; C. Simplified retrospective application which is applied to all outstanding leases at the effective date, but simplified so that lease receivable is measured using the interest rate implicit in the lease at the effective date; or D. Prospective application to new leases entered into after the effective date. None of the Board members supported alternatives A or D. The FASB supported alternative B as they considered using the interest rate implicit at the effective date may result in the misrepresentation of revenue. The majority of the IASB members initially supported alternative C (which is consistent with the approach proposed for lessees), however after further consideration, some Board members agreed with the FASB view on the implicit interest rate and indicated that they wanted to switch their vote to alternative B. The staff reminded the Boards that alternative B is not consistent with the approached adopted for lessees. After a short deliberation, the Boards asked the staff whether alternative C could be applied with the implicit interest rate at the date the lease was entered into. Staff confirmed that this could be done. The Boards tentatively agreed to this alternative subject to using the original interest rate implicit in the lease. The Boards then considered how leased assets capitalised under existing finance leases should be reinstated on the lessor's statement of financial position. It was noted that under US GAAP an option to remeasure at fair value does not exist and therefore the reinstated asset would be recognised at depreciated cost. The IASB agreed with the reinstatement at depreciated cost adjusted for impairment and revaluation in accordance with IAS 16. Measurement at initial recognition At the October 2009 meeting, the Board tentatively decided that lease assets and liabilities arise when the lease contract is signed (inception of the lease) and that the net contract position between the signing and delivering should be measured on a cost basis. The Boards were then asked to consider whether initial measurement of the assets and liabilities should be determined at the inception date or at the commencement date. Without any discussion, the Boards tentatively agreed that an entity should recognise the gross value of assets and liabilities at the commencement of the lease term, and that those assets and liabilities should be measured at the inception of the lease and that the discount rate to be used will be fixed at lease inception. Lessor accounting – Residual value guarantees The Boards considered how residual value guarantees (RVG) held by lessors should be accounted for. The majority of Board members were supportive of the staff's proposal to account for amounts to be paid by a lessee under an RVG consistent with the accounting for contingent rentals. As a result any change in the receivable arising from a change in the amounts payable under an RVG would be treated as an adjustment to the lessor's receivable and performance obligation. One Board member questioned why a lessor needs to recognise an increase in the performance obligation when the amount to be paid by a lessee increases. The Board member was of the opinion that such an adjustment should be recognised as a gain. The staff responded by clarifying that the accounting by the lessee has been mirrored by the lessor's accounting. It was further pointed out that the definitions of residual value under IFRSs and US GAAP are different, and the impact on the accounting treatment has not yet been explored in the context of lessor accounting. The Boards agreed to explore the differences further and consider aligning the definitions. This summary is based on notes taken by observers at the joint IASB-FASB meeting and should not be regarded as an official or final summary.

17 March 2010: Notes from IASB March 2010 meeting day 2

The IASB and FASB are holding a joint meeting at the IASB's offices in London on Monday-Friday 15-19 March 2010. Click to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the meeting.

17 March 2010: New IFRS for SMEs Update newsletter

The IASB has published the first issue of the IFRS for SMEs Update newsletter – a regular staff summary of news relating to the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs). Contents of the first issue of IFRS for SMEs Update: Trustees approve SMEIG terms of reference and operating procedures First two IFRS for SMEs 'train the trainers' workshops held IASC Foundation IFRS for SMEs training material Translations of the IFRS for SMEs Recent adoptions of the IFRS for SMEs Where to obtain IFRS for SMEs materials Click here to View the IFRS for SMEs Update on IASB's Website in HTML or PDF format Click here to register to Subscribe to IFRS for SMEs Email Alerts which will keep you informed of future editions of the IFRS for SMEs Update and other news relating to the IFRS for SMEs.

16 March 2010: IASB Chairman addresses EU finance ministers

On 16 March 2010, IASB Chairman Sir David Tweedie addressed a meeting of the Finance and Economic Ministers of the European Union member states. He reported on the progress that the IASB has made in achieving the 2011 convergence target set out by the G20, and issues related to the financial crisis raised by the G20 and the European Union. Click to download Sir David's Prepared Statement (PDF 26k).

16 March 2010: Special joint IASB-FASB meeting 8 April

The IASB has announced that a special joint IASB-FASB meeting has been scheduled at the IASB's offices in London on Thursday 8 April 2010. The Boards will also hold their regular April monthly meeting in London on 19-23 April 2010.

16 March 2010: IASB webcast on financial liabilities

On Monday, 22 March 2010, the IASB will host live one-hour webcasts on the status of the Board's discussions about the classification and measurement of financial liabilities and the next steps in the project. There is no charge to participate, but registration is required. Participants will have an opportunity to submit written questions during the webcast. Webcast Topic: Classification and Measurement of Financial Liabilities Date and Time: Monday 22 March 2010 10:30 to 11:30am and again 3:00 to 4:00pm London time More Information and Registration on IASB Website: Register for 10:30am Session Register for 3:00pm Session IAS Plus Project Page: Classification and Measurement of Financial Assets and Liabilities.

16 March 2010: Notes from IASB March 2010 meeting day 1

The IASB and FASB are holding a joint meeting at the IASB's offices in London on Monday-Friday 15-19 March 2010. Click to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the meeting.

15 March 2010: UK FSA warns of an 'accounting mismatch'

The United Kingdom's Financial Services Authority (FSA, the banking and securities regulator) has published a report Financal Risk Outlook 2010 (PDF 3,113k). The report cautions financial institutions that 'accounting mismatches' have the potential to report profits in a deteriorating economy – which the FSA is predicting. This could happen because accounting allows asset-backed securities to be measured at amortised cost while related credit default swaps are measured at fair value through profit or loss. FSA reminds financial institutions to be clear in their disclosures about this. The future evolution of risks may be misinterpreted due to accounting mismatches. Accounting mismatches created by the different treatment of trading books and banking books create the danger that the future evolution of risks will not be clearly understood and communicated. Prior to the crisis, many banks and investment banks executed negative basis trades, holding asset-backed securities (ABS) and buying CDS [credit default swap] protection against them. Both parts of the trade were initially held in the trading book. Subsequently, some banks have – under permitted accounting treatment – transferred the ABS to the banking book, while leaving the CDS in the trading book. Under this treatment, any future deterioration in the economy, with a resulting widening of credit spreads, will deliver an immediate profit in trading books, with ABS values unchanged in the banking books, until actual default leads to impairment of assets.

15 March 2010: IOSCO principles of data collection for hedge funds

The International Organization of Securities Commissions' (IOSCO) Technical Committee has published details of an agreed template for the global collection of hedge fund information. The template is intended to enable the collection and exchange of consistent and comparable data amongst regulators and other competent authorities to facilitate international supervisory cooperation in identifying possible systemic risks in this sector. IOSCO believes that participants are best monitored through their trading activities, the markets they operate in, funding and counterparty information, amongst others. There are 11 proposed categories of information which incorporate both supervisory and systemic data and build on the data collection recommendations set out in its final report on Hedge Fund Oversight (June 2009). Those categories are: General manager and adviser information Performance and investor information related to covered funds Assets under management Gross and net product exposure and asset class concentration Gross and net geographic exposure Trading and turnover issues Asset/liability issues Borrowing Risk issues Credit counterparty exposure Other issues IOSCO recommends that the first data gathering exercise should be carried out on a best efforts basis (given pending legislation in many jurisdictions) in September 2010. Click for: Hedge Fund Data Template (PDF 168k) Hedge Fund Oversight Report June 2009 (PDF 277k)

13 March 2010: DTT members respond to EC IFRS for SMEs consultation

The member firms of Deloitte Touche Tohmatsu (DTT) located in the European Economic Area (EEA) have submitted a joint response to the European Commission's consultation on the IFRS for Small and Medium-sized Entities. The Commission launched the consultation in November 2009 to gain an understanding of EU stakeholders' views on the IFRS for SMEs. The Commission said that the responses will assist the Commission in its ongoing review of the Accounting Directives. The DTT European member firms' overall view: We believe that the IFRS for SMEs is suitable for widespread use within Europe and for companies of any type and size, providing such entities are preparing general purpose financial statements. IFRS for SMEs is a high quality, global, principles-based standard that has been developed by specialists from around the world through an extensive consultative process and we believe its adoption would benefit users (by increased comparability of financial statements) and preparers (through reduced costs for groups of companies and economies of scale generally) and would serve to facilitate cross-border trade, services, including accounting and audit, and movement of capital. In the European context, we believe this can contribute to making the internal market a reality for smaller businesses as well as benefit the many companies not listed on a regulated market that do operate across borders in the EU. There may also be reduced costs for Member State standard setters. Click to download: Response of DTT EEA Member Firms to the Consultation (PDF 39k) Consultation Paper (PDF 58k)

13 March 2010: Updated summary of IFRIC agenda rejections

We have updated our Summary of Issues Not Added to IFRIC's Agenda to reflect the IFRIC's final decisions at its March 2010 meeting not to add the following topics to its agenda. Our summary now includes 180 issues: IAS 21 The Effects of Changes in Foreign Exchange Rates – Determination of functional currency of an investment holding company IAS 32 Financial Instruments: Presentation – Shareholder discretion IAS 36 Impairment of Assets – Interaction with transition requirements of IFRS 8 IAS 39 Financial Instruments: Recognition and Measurement – Unit of account for forward contracts with volumetric optionality

12 March 2010: Notes from Special 11 March Joint IASB-FASB meeting

The IASB and FASB held a special joint meeting at the IASB's offices in London on Thursday, 11 March 2010. Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the meeting.

11 March 2010: Conceptual Framework ED on reporting entity

The IASB and the US Financial Accounting Standards Board (FASB) have published for public comment an exposure draft (ED) on the reporting entity concept. The proposals form part of a Joint Project to develop a common and improved conceptual framework that provides the basis for developing future accounting standards. The boards published a discussion paper on the Reporting Entity Concept in May 2008. Respondents broadly supported the boards' preliminary views. In response to those comments the ED proposes what a reporting entity is and when an entity controls another entity. A summary is below: What is a reporting entity? A reporting entity is a circumscribed area of economic activities whose financial information has the potential to be useful to existing and potential equity investors, lenders and other creditors who cannot directly obtain the information they need in making decisions about providing resources to the entity and in assessing whether the management and the governing board of that entity have made efficient and effective use of the resources provided. When does one entity control another entity (resulting in a combined reporting entity)? An entity controls another entity when it has the power to direct the activities of that other entity to generate benefits for (or limit losses to) itself. If an entity that controls one or more entities prepares financial reports, it should present consolidated financial statements. Can a portion of an entity be a reporting entity? A portion of an entity could qualify as a reporting entity if the economic activities of that portion can be distinguished objectively from the rest of the entity and financial information about that portion of the entity has the potential to be useful in making decisions about providing resources to that portion of the entity. Comments on the ED are invited by 16 July 2010. Click for Press Release (PDF 166k). The ED itself may be downloaded from the IASB's Website.

10 March 2010: Possible exemption of EU micros from financial reporting

The European Parliament has voted to exempt very small companies ('micro-entities') from the existing EU-wide laws that require them to prepare annual financial statements. The Parliament's action still must be approved by the EU Council before it becomes law. If approved, it would then be up to each EU Member State to grant such exemptions. Parliament's resolution also calls for a general revision of the 4th and 7th Company Law Directives in 2010. Currently, about 7.2 million EU companies are subject to reporting rules under EU accounting directives. Of those, 5.4 million (around 75%) are 'micro-entities' primarily engaged in business at local or regional level, with little or no cross-border activity. Click for EU Parliament Press Release (PDF 109k). The European Commission is currently Consulting on the use of the IFRS for SMEs in Europe.

10 March 2010: New IAS Plus country page for Kuwait

We have created a new Country Page for Kuwait on IAS Plus. Kuwait has long been an IFRS country. Since 1990, the Kuwait Ministry of Commerce has required companies and institutions of all legal types, listed and unlisted, to prepare their financial statements in accordance with IFRSs. Possible adoption of the IFRS for SMEs is under study.

10 March 2010: IASB webcast on presenting comprehensive income

On 15 March and again on 19 March 2010, the IASB will host live webcasts on the Board's deliberations about the presentation of items in Other Comprehensive Income. The two webcasts are identical. The second one will be held on a different day to fit around the Board meeting schedule that week. There is no charge to participate, but registration is required. Participants will have an opportunity to submit written questions during the webcast. Webcast Topic: Presentation of items in Other Comprehensive Income Date and Time: Monday, 15 March 2010, 10:00-11:00am London time, and again on Friday, 19 March 2010 15:30-16:30pm London time More Information and Registration on IASB Website: Register for 15 March Session Register for 19 March Session IAS Plus Project Page: Comprehensive Income

9 March 2010: Updated EFRAG 'endorsement status report'

At its meeting on 4 March 2010 the European Commission's Accounting Regulatory Committee (ARC) voted to recommend endorsement of four IFRSs: the revised IAS 24, amendments to IFRIC 14 on prepayments of a minimum funding requirement, IFRIC 19, and the amendment to IFRS 1 on a limited IFRS 7 disclosure exemption. Consequently the European Financial Reporting Advisory Group (EFRAG) has updated its report showing the status of endorsement, under the EU Accounting Regulation, of each IFRS, including standards, interpretations, and amendments. Click to download the Endorsement Status Report as of 9 March 2010 (PDF 120k). Currently, eight IASB pronouncements await endorsement action. You can always find the endorsement status report Here.

9 March 2010: Deloitte Canada IFRS update webcast in French

Cette webémission traitera des secteurs importants sur lesquels vous devrez porter votre attention, au fil des quatre volets suivants: Un examen du plan de projet de l'IASB et de l'état d'avancement de projets d'importance et d'intérêt pour les sociétés canadiennes, notamment en ce qui concerne les activités à tarifs réglementés, la consolidation, les instruments financiers, les coentreprises et les provisions, entre autres enjeux Le point sur l'état d'avancement des exposés-sondages des ACVM et sur les commentaires récemment formulés au sujet des informations relatives au passage aux IFRS à communiquer dans le rapport de gestion Un aperçu des sujets débattus par le Groupe de discussions sur les IFRS du CNC Quelques suggestions qui vous permettront de perfectionner les activités de conversion que vous mènerez au cours de 2010 Webémission: Mise à jour technique sur les IFRS – T1 2010 Date et heure: Le mercredi 7 avril 2010 de 14 h à 15 h 30 (HE) Présentateurs: Robert Lefrançois, Nick Capanna Inscription: Inscrivez-vous

9 March 2010: Deloitte study of half-yearly reporting in the UK

Deloitte (United Kingdom) has published Measuring by Halves (PDF 1,121k), a survey of half-yearly financial reporting in 2009 by 130 listed companies in the United Kingdom. The survey focuses on compliance with the requirements of IAS 34 Interim Financial Reporting and with the half-yearly reporting requirements in the Disclosure and Transparency Rules (DTR) contained in the Financial Services Authority Handbook.

8 March 2010: The Hundred Group and IASB debate IAS 37

On 5 March 2010 Deloitte hosted a live webcast between The Hundred Group of Finance Directors in the United Kingdom and the IASB on the future of accounting for liabilities under IFRSs. The IASB is in the final stages of a project to revise IAS 37. The original exposure draft (ED) was published for comment in July 2005. In January 2010, the IASB published another ED limited to the proposed revisions on measurement of liabilities, but on 22 February 2010 also put up on its website a 'working draft' of the revised IAS 37 standard in its entirety to enable interested parties to see the revised measurement guidance in the context of the proposed new IFRS. The comment period is until the 12th April. As part of its outreach activities, in this webcast with The Hundred Group, the IASB discusses all aspects of the proposed new IFRS. The Hundred Group has written to the IASB to request full re-exposure and, failing that, an extension of the comment period on the current proposals since it is nearly five years since the original ED was published. Like many commentators the Hundred Group was critical of both the recognition and the measurement aspects of the proposals. Asking questions on behalf of The Hundred Group was representatives of three companies: Severn Trent, Tate & Lyle, and Tomkins plc. From the IASB, IASB member Bob Garnett responded to the questions and was joined by Joan Brown, the Project Manager for this project. The webcast was hosted by Veronica Poole, Deloitte Global IFRS Leader–Technical and Mark Smith, Vice-Chair of the Financial Reporting Committee of The Hundred Group. A recording of the webcast is available Here. If you are prompted, the Passcode is 831344.

8 March 2010: Agenda for March 2010 IASB meeting

The IASB will hold its March 2010 regular monthly meeting at its offices in London on Monday to Friday, 15 to 19 March 2010. Portions of the meeting are joint meetings with FASB. The two Boards will also have a long-planned joint meeting, at the IASB's offices in London, on Monday to Wednesday, 22 to 24 March 2010. The meetings will be open to public observation and will be webcast. Presented below is the agenda for both weeks. IASB Board Meeting Agenda 15-19 March 2010, London Monday 15 March 2010 IASB-FASB Joint Meeting (16:30-18:00pm London Time) Insurance Contracts Tuesday 16 March 2010 IASB Meeting (09:15-11:45 London Time) Joint Arrangements – Disclosures and transition IASB-FASB Joint Meeting (12:15-18:15pm London Time) Revenue Recognition - Disclosures Cross-cutting issues – relating to the following projects Insurance Contracts Revenue Recognition Leases Consolidation Wednesday 17 March 2010 Meeting of Representatives of the IASB with EFRAG (09:00-11:00am) IASB Meeting (11:45am-12:30pm London Time) Fair Value Measurement - scope of the standard Standards Advisory Council Update IASB-FASB Joint Meeting (13:00-17:15pm London Time) Insurance Contracts Leases Thursday 18 March 2010 IASB Meeting (09:00am-16:45pm London Time) Annual Improvements Income Taxes - limited amendments to IAS 12 Derecognition Financial Instruments: Hedge Accounting Friday 19 March 2010 IASB Meeting (09:00am-12:30pm London Time) IFRIC Update Financial Instruments: Classification and Measurement – Financial Liabilities Monday 22 March 2010 IASB-FASB Joint Meeting (13:00-18:15pm London Time) Cross-cutting issues – relating to the following projects Insurance Contracts Revenue Recognition Leases Insurance Contracts Derecognition of Financial Instruments – Education Session Tuesday 23 March 2010 IASB-FASB Joint Meeting (09:00am-17:45pm London Time) Consolidation Leases Insurance Contracts Wednesday 24 March 2010 IASB-FASB Joint Meeting (09:00am-12:15pm London Time) Insurance Contracts Fair Value Measurement

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