29 December 2004: Two IASB working groups will meet
The following meetings of IASB working groups will be held in January:

• 11-12 January 2005 – IASB's Insurance Working Group. Agenda: The discussion is likely to focus mainly on accounting for life insurance contracts.
• 13-14 January 2005 – Joint International Group on Performance. Agenda includes required financial statements, comparative periods for financial statements, how is the statement of cash flows used, what does 'performance' mean, and recycling.

28 December 2004: Agenda project pages updated
We have updated the following agenda project pages to reflect the discussions and decisions at the Board's December 2004 meeting:

• Accounting Standards for Small and Medium-sized Entities
• Business Combinations: Purchase Method Procedures
• Financial Instruments: 2004 Amendments
• Financial Instruments: Disclosures
• Revenue Recognition
• Short-term Convergence – IFRSs and US GAAP

26 December 2004: Auditors' involvement with new EU prospectus
The Federation of European Accountants (FEE) has published a Discussion Paper on Auditors' Involvement with the New EU Prospectus Directive. The Prospectuses Directive, which comes into force on 1 July 2005, is aimed at simplifying the raising of capital in Europe – a 'single passport' to the European capital markets. The Prospectuses Directive requires involvement of the auditor to give assurance on historical and prospective information. The purpose of the FEE paper is to provide national auditing standard setters with a framework within which standards might be developed for audits related to the Prospectuses Directive. Click for FEE Press Release (PDF 29k). The discussion paper can be downloaded from FEE's Website.

26 December 2005: New Accounting Roundup newsletter
Deloitte (USA) has published the 23 December 2004 Accounting Roundup newsletter (PDF 244k). This issue covers the following accounting and financial reporting developments:

• FASB Statements 123(R) Share-Based Payment; 153 Exchanges of Nonmonetary Assets; 152 Accounting for Real Estate Time-Sharing Transactions; and 151 Inventory Costs.
• FASB proposed FSPs: FIN 46(R)-b and EITF 85-24-a.
• Developments at the GASB, AICPA, SEC, PCAOB, IASB, and IFRIC.

26 December 2004: Four new IFRS e-learning modules are released

Deloitte is pleased to make available without charge these additional IFRS e-learning modules: IAS 23 Borrowing Cost IAS 29 Financial Reporting in Hyperinflationary Economies IAS 38 Intangible Assets IFRS 3 Business Combinations These modules bring the total number of available modules to 32. Each module involves a 4mb to 6mb download of a zip file, then installation via unzipping on your computer. To access Deloitte's IFRS e-learning, just click on the light bulb icon on the IASPlus home page.

24 December 2004: CESR consults on financial information
The Committee of European Securities Regulators (CESR) has published Part II of the draft CESR advice on possible implementing measures for the new EU Transparency Directive. This paper complements Part I of the consultation paper issued in October, which covered dissemination and storage of regulated information. Part II covers three specific issues raised in relation to half yearly reporting, namely, the minimum content of half-yearly financial statements not prepared under IAS/IFRS; the meaning and scope of 'major' related party transactions that must be reported on in half-yearly reports; and, the auditor's review of the half-yearly report. It also addresses the equivalence of transparency requirements for 'third country' issuers. The CESR deadline for comment on Part II is 4 March 2005. A hearing is scheduled for 17 February 2005. Consultation on Part I closes 28 January 2005. Click to download:

• Consultation Paper Part II (PDF 444k)
• Press Release on Part II (PDF 103k)
• Consultation Paper Part I (PDF 729k)

24 December 2004: Comments of AICPA Chair on IFRSs
In his monthly column in the November 2004 issue of the AICPA members' newsletter The CPA Letter, Robert L. Bunting, Chair, AICPA Board of Directors, writes about the growing importance of IFRSs in the USA:

24 December 2004: EFRAG seeks comments on IFRIC D10 and D11
The European Financial Reporting Advisory Group has finalised its preliminary views to be submitted to IFRIC on two IFRIC draft interpretations and seeks comments on those views, as follows:

• IFRIC D10 Liabilities Arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment, comments requested by 27 January 2005
• IFRIC D11 Changes in Contributions to Employee Share Purchase Plans, comments requested by 16 February 2005.

24 December 2004: EFRAG seeks comments on IFRIC 4 and 5
The European Financial Reporting Advisory Group has finalised its preliminary views regarding whether the following should be endorsed for use in Europe of:

• IFRIC 4 Determining whether an Arrangement contains a Lease, comments requested by 11 January 2005
• IFRIC 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds, comments requested by 20 January 2005.
• Amendments to IAS 19 Employee Benefits: Actuarial Gains and Losses, Group Plans and Disclosures, comments requested by 27 January 2005.

23 December 2004: Australian Alert on extractive industries
The Australian Accounting Standards Board (AASB) has released AASB 6 Exploration for and Evaluation of Mineral Resources and associated amendments to other accounting standards. This follows the release by the IASB of IFRS 6. Deloitte (Australia) has published a new Accounting Alert (PDF 51k) that provides an overview of AASB 6. AASB 6 is not expected to cause significant changes to the accounting for capitalised exploration and evaluation expenditure in Australia. The AASB has added Australian-specific paragraphs into the standard to grandfather current accounting for exploration and evaluation expenditure, and the proposed impairment test included in the original exposure draft has been amended such that an area of interest approach to impairment will continue. However changes may arise with respect to how to account for other extractive industry related activities, such as development, construction, production and restoration. To view earlier Australian Accounting Alerts Click Here.

23 December 2004: JSE reports under IFRSs using XBRL
The JSE Securities Exchange of South Africa is the first major stock exchange in the world to report its financial statements according to International Financial Reporting Standards (IFRSs) using eXtensible Business Reporting Language (XBRL). XBRL is an electronic format or language that aims to streamline and simplify the flow, preparation, and analysis of financial reports and accounting data. The JSE's announcement said:

23 December 2004: Nominations for EFRAG Technical Expert Group
The Supervisory Board of the European Financial Reporting Advisory Group (EFRAG) is seeking nominees for appointments to EFRAG's Technical Expert Group. Details are on EFRAG's Website. EFRAG was formed in 2001 by a broad group of organisations representing the European accounting profession, preparers, users, and national standard-setters with the following goals:

• to provide technical expertise to the European Commission concerning the use of IFRSs within the Europe,
• to participate in IASB's standard setting process, and
• to coordinate within the EU the development of views concerning IFRSs.

22 December 2004: ARC unanimously recommends IFRS 2 in Europe
At its meeting in Brussels on 20 December 2004, the European Commission's Accounting Regulatory Committee (ARC) voted unanimously to recommend the adoption of IFRS 2 Share-based Payment for use in Europe. One of ARC's 25 member countries (Hungary) abstained because of a language translation issue. IFRS 2 requires recognition of an expense based on the fair value of all share-based payments made by an entity, including employee stock options. To date, ARC has endorsed all of the 2003-2004 improved versions of IASs 1-41 (with two sections carved out of IAS 39) and IFRSs 1-5.

22 December 2004: Japanese government submission on IFRS equivalence
Although all European companies listed on a European securities market are required to use IFRSs starting in 2005, non-European companies listed in Europe have been given a deferral on switching to IFRSs until 2007. Meanwhile, the European Commission is studying whether, after the deferral period, foreign companies should be allowed to continue to file using certain national GAAPs that are deemed to be equivalent to IFRSs. In particular, the Commission has asked the Committee of European Securities Regulators (CESR) to assess the equivalence of three national GAAPs – Canadian, Japanese, and US – to IFRSs. In October 2004, CESR invited comments on a Draft Concept Paper (PDF 289k) on Equivalence of Certain Third Country GAAP and on Description of Certain Third Countries' Mechanisms of Enforcement of Financial Information. The Concept Paper addresses how CESR would undertake the assessment of equivalency. Click to download the Response of the Japanese Financial Services Agency (PDF 82k) to the CESR Concept Release.

22 December 2004: Is the European retail industry ready for IFRSs?

A Deloitte European workgroup carried out a benchmarking study whose aim was to discover: How ready large European retailers are for IFRSs? The preferred accounting options retailers are contemplating to meet the challenges raised by the new standards? Whether those solutions are appropriate and workable? Whether there is consistent understanding of the application of IFRSs across the industry?

The conclusions of the benchmarking are startling:

• The European retail industry may not yet be fully ready for IFRSs.
• Some retailers have underestimated the scale of the work needed to prepare for certain aspects of IFRSs.
• If current practices are maintained, companies may find themselves applying the standards in very different ways.
• IFRSs don't just pose technical challenges for the industry – they also create stakeholder communication issues.

• Study Report in English (PDF 260k)
  
• Study Report in French (PDF 214k)
  
• Press Release (PDF 34k)

22 December 2004: Web-based technical update on IASs 2, 11, 18
The Deloitte London IFRS Centre of Excellence is running a monthly series of hour-long Internet-based IFRS technical updates, focusing on the most important international accounting standards and how they will affect UK companies. The eighth Webcast was run on 16 December 2004 and covered IAS 2 Inventories, IAS 11 Construction Contracts, and IAS 18 Revenue. To access the recording Click Here. The recording of each session will be available on this website for a period of at least 3 to 4 weeks from the date of the presentation. Links to past sessions may be found on our United Kingdom Page.

21 December 2004: Special IAS Plus newsletter: IFRIC Update

A new special edition of our IAS Plus newsletter presents an International Financial Reporting Committee Update. The update covers IFRIC Interpretations 1 to 5 and the IFRIC amendment of SIC-12. Each Interpretation is summarised, and special first-time adoption issues are discussed. Click to download the Special IFRIC Update Edition (PDF 104k) of our IAS Plus newsletter. You will find links to all past editions of the newsletter Here. You will find links to summaries of IFRIC's current agenda projects Here.

21 December 2004: Europe adopts final transparency directive
The European Council and Parliament have approved a new Directive on minimum transparency requirements for listed companies. The Directive must be implemented by EU Member States within two years of its publication in the EU's Official Journal, which should take place in the next few weeks. The Directive completes a package of Financial Services Action Plan measures adopted over the last two years – including the IAS Regulation, the Market Abuse Directive, and the Prospectus Directive – to establish a common financial disclosure regime across the EU for issuers of listed securities. Under the Directive, all securities issuers will have to provide annual financial reports within four months after the end of the financial year. Investors in shares will receive more complete half-yearly financial reports. Those issuers who do not publish quarterly reports will need to provide quarterly management statements. Bond issuers will also be required to publish half-yearly reports. Click for:

• Press Release (PDF 70k).
• Directive (Unofficial Version) (PDF 242k).

21 December 2004: S&P proposes IFRS transition disclosures
The rating agency Standard & Poor's has published Transition without Tears: A Five Point Plan for IFRS Disclosure (copyright 2005 Standard & Poor's, posted on IASPlus with permission). The report sets out five specific disclosure practices for industrial and financial services groups that would provide a high level of transparency to the market regarding transition to IFRSs:

21 December 2004: Basel Committee release on IFRSs
The Basel Committee on Banking Supervision has published a press release on the treatment of certain items reported under IFRSs for bank regulatory capital purposes. This is the third in a series of press releases on this subject. Click to Download the Release (PDF 86k). The PDF file includes clickable links to the earlier press releases.

20 December 2004: Guide to changes in Singapore GAAP

Deloitte & Touche (Singapore) has published an update of Changes to The Financial Reporting Framework in Singapore. The new booklet summarises the adoption by the Council on Corporate Disclosure and Governance (CCDG) – Singapore's accounting standard setter – of the standards resulting from the IASB's Improvements Project and new IFRSs up to October 2004. As a result, CCDG has now issued a set of accounting standards and interpretations that are almost identical to the current set of International Financial Reporting Standards, with a few differences such as the effective dates, the inclusion of Singapore Financial Reporting Standard 25 Accounting for Investments, and the absence of equivalents to IAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions and IAS 40 Investment Property. A detailed comparison of Singapore GAAP and IFRSs is included in the booklet. Click to: Download the Booklet (PDF 267k). Go to the CCDG Website.

20 December 2004: FASB issues share-based payment standard
The US FASB has published FASB Statement 123 (revised 2004) Share-Based Payment. Statement 123(R) requires that the compensation cost relating to share-based payment transactions be recognised in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. The Statement is the result of a two-year effort to respond to requests from investors and many others that the FASB improve the accounting for share-based payment arrangements with employees – the previous standard had permitted note disclosure in lieu of expense recognition. Click for FASB Press Release (PDF 17k). Deloitte (USA) has published a special issue of its Heads Up newsletter summarising the key concepts of FASB Statement No. 123(R). Click to download the Download the Heads Up Newsletter (PDF 292k). While Statement 123(R) is largely consistent with IFRS 2 Share-based Payment, some differences remain, as described in a Q&A document FASB issued along with the new Statement:

19 December 2004: Philippines adopts new and revised IASs/IFRSs
The Philippines Securities and Exchange Commission (SEC) has approved the adoption of all of the revised IASs issued by the IASB in 2003 and 2004 as well as IFRSs 1-5, effective for financial reports submitted by companies for annual reporting periods beginning 1 January 2005 and for quarterly periods beginning 1 January 2006. "The adoption of IAS will harmonise the country's financial reporting requirements with international standards, consequently the understandability and reliability of financial statements in the country," the SEC said. The standards had earlier been endorsed by the Philippines Accounting Standards Council. Formal adoption is set out in SEC Memorandum Circular 19 on the Philippine Financial Reporting Standards. The circular covers 26 accounting standards, including 17 revised IASs, five IFRSs, and four interpretations. The SEC said companies required to submit quarterly reports in 2005 need not present certain comparative figures for IAS 39. However, quarterly reports must discuss the status of conversion plans. The banking industry (led by the Bankers Association of the Philippines), along with mutual funds and insurance companies, had sought to defer IAS 39. A key bankers' concern was that IAS 39 requires that loan loss provisions reflect only incurred losses while the current provisioning practice is to base the allowance on a percentage of outstanding balances (that is, expected losses). In Asia, Philippines joins Australia, Bangladesh, Hong Kong, New Zealand, and Singapore in adopting the entire suite of IFRSs as national GAAP. Australia and New Zealand have made some changes to recognition and measurement principles by eliminating some accounting policy choices permitted by IFRSs, and Singapore has modified some of the recognition and measurement principles in IFRSs. Click for Philippines SEC Announcement (PDF 102k).

19 December 2004: US SEC forms 'SOX' SME advisory committee
The US Securities and Exchange Commission has established an advisory committee to assist the Commission in examining the impact of the Sarbanes-Oxley Act and other aspects of the federal securities laws on smaller public companies. Click for SEC Press Release.

19 December 2004: New Zealand Accounting Alert published
Deloitte (New Zealand) has published New Zealand Accounting Alert 25 (PDF 136k) titled A Christmas present from the ASRB!- Release of NZ IFRS. The Alert details the adoption by The Accounting Standards Review Board (ASRB) and the Financial Reporting Standards Board (FRSB) of 36 new accounting standards and 12 interpretations. These are the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS). Application of NZ IFRS is mandatory for periods beginning on or after 1 January 2007. Entities wishing to early adopt NZ IFRS may do so for periods beginning on or after 1 January 2005. The Alert includes a list of the approved standards and details of where to find them. The ASRB has also issued an exposure draft, ED-96 Disclosing the Impact of Adopting New Zealand Equivalents to International Financial Reporting Standards that would require entities to disclose in their annual and interim financial reports information about the expected impacts of adopting the New Zealand equivalents to IFRS. This will include:

• information regarding planning for the transition to NZ IFRS;
• key differences in accounting policies expected to arise on adoption of NZ IFRS, or if the key differences are not known, a statement to that effect; and
• known or reliably estimable information about the impacts on the financial reports under NZ IFRS, or if the impacts are not known, a statement to that effect.

18 December 2004: IASB amends IAS 39 transition
The International Accounting Standards Board has issued limited amendments to IAS 39 Financial Instruments: Recognition and Measurement on the initial recognition of financial assets and financial liabilities. The amendments provide transitional relief from retrospective application of the 'day 1' gain and loss recognition requirements. They allow, but do not require, entities to adopt an approach to transition that is easier to implement than that in the previous version of IAS 39, and will enable entities to eliminate differences between the IASB's Standards and US requirements. Specifically, the amendments give entities a choice of applying the 'day 1' gain or loss recognition requirements in IAS 39:

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

18 December 2004: Notes from IASB meeting 17 December 2004

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

17 December 2004: IFRIC Draft Interpretation D11
The International Financial Reporting Interpretations Committee has issued for comment Draft Interpretation D11 Changes in Contributions to Employee Share Purchase Plans (ESPPs). D11 proposes that:

• If an employee stops contributing to an ESPP while remaining in the entity's employment, and, as a consequence, is no longer able to buy shares under the plan, the entity shall account for this event as a cancellation. Therefore, in accordance with paragraph 28(a) of IFRS 2, the entity shall recognise immediately as expense the amount that otherwise would have been recognised for services received over the remainder of the vesting period.
• If an employee changes from one ESPP to another, and the entity identifies the equity instruments granted to the employee under the new ESPP as replacements for the equity instruments granted to that employee under the original ESPP, the entity shall account for this event as a modification of the original grant. If the entity does not identify the new equity instruments granted under the new ESPP as replacements for the equity instruments granted under the original ESPP, the entity shall account for:
  • (a) the employee's cessation of participation in the original ESPP as a cancellation.
  • (b) the employee's commencement of participation in the new ESPP as a new grant of equity instruments.

17 December 2004: Notes from IASB meeting 16 December 2004

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

16 December 2004: Notes from IASB meeting 15 December 2004

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

16 December 2004: IASB amends IAS 19
The IASB has finalised an amendment to IAS 19 Employee Benefits to allow the option of recognising actuarial gains and losses in full in the period in which they occur, outside profit or loss, in a statement of recognised income and expense. This option is similar to the requirements of the UK standard, FRS 17 Retirement Benefits. The Board concluded that, pending further work on post-employment benefits and on reporting comprehensive income, the approach in FRS 17 should be available as an option to preparers of financial statements using IFRSs. The amendment also provides guidance on allocating the cost of a group defined benefit plan to the entities in the group. Click for IASB Press Release (PDF 56k).

16 December 2004: IFRIC Interpretation 5 is released
The International Financial Reporting Interpretations Committee (IFRIC) has published IFRIC Interpretation 5 Rights to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds. IFRIC 5 explains how to treat expected reimbursements from funds set up to meet the costs of decommissioning plant (such as nuclear plant) or equipment (such as cars) or in undertaking environmental restoration or rehabilitation (such as rectifying pollution of water or restoring mined land). Click for IASB Press Release (PDF 65k). The main requirements of the Interpretation are:

• If a contributor recognises a decommissioning obligation under IFRSs and contributes to a fund to segregate assets to pay for the obligation, it should apply IAS 27, SIC-12, IAS 31, and IAS 28 to determine whether decommissioning funds should be consolidated, proportionately consolidated, or accounted for under the equity method.
• When a fund is not consolidated, proportionately consolidated, or accounted for under the equity method, the contributor should recognise its obligation to pay decommissioning costs as a liability and recognise its interest in the fund separately unless the contributor is not liable to pay decommissioning costs.
• A right to reimbursement should be measured at the lower of (a) the amount of the decommissioning obligation recognised and (b) the contributor's share of the fair value of the net assets of the fund adjusted for actual or expected factors that affect the entity's ability to access these assets. Changes in the carrying amount of this right (other than contributions to and payments from the funds) should be recognised in profit or loss.
• A residual interest in a fund that extends beyond a right to reimbursement, such as a contractual right to distributions once all the decommissioning has been completed or on winding up the fund may be an equity instrument within the scope of IAS 39.

15 December 2004: Public Sector Accounting Standards Board update

The International Public Sector Accounting Standards Board – formerly known as the Public Sector Committee – has published its PSC Update November 2004 (PDF 237k). You can find more information about the IPSASB Here.

15 December 2004: "Heads Up" on SEC/PCAOB conference
Annually, the American Institute of Certified Public Accountants hosts a conference featuring speeches by, and question and answer sessions with, members and staff of the SEC, the Public Company Accounting Oversight Board, and other standard-setters. Deloitte (USA) has published a 26-page issue of its Heads Up Newsletter (PDF 328k) that summarises all of the presentations. Several of them address international issues and convergence of US GAAP and IFRSs. In our news story of 12 December 2004, we have links to two speeches that most directly focus on IFRSs.

15 December 2004: EFRAG may not support IFRIC 3
At its meeting on 8-10 December 2004, the European Financial Reporting Advisory Group (EFRAG) agreed to recommend that the European Commission endorse the following pronouncements for use in Europe: IFRS 6; the IAS 39 amendment for transition; the amendments to IAS 19 Employee Benefits; and IFRIC Interpretations 2, 4, and 5. However, with regard to IFRIC 3 Emission Rights, a majority of EFRAG members have "serious concerns about the information resulting from application of this IFRIC". EFRAG's Meeting Notes indicate that those concerns "could result in a negative advice" to the Commission. The draft endorsement advice letter will be discussed again at EFRAG's January meeting.

15 December 2004: Deloitte partner is new ISAR chair
Abbas Ali Mirza, a partner in the Dubai office of Deloitte & Touche (Middle East), has been elected as the chair of the United Nations' Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) for a one-year term that continues until November 2005. For more information about ISAR Click Here. Abbas has also been appointed to the Developing Nations Permanent Task Force (DNPTF) of the International Federation of Accountants (IFAC).

14 December 2004: PCAOB proposes ethics and independence rules
The US Public Company Accounting Oversight Board (PCAOB) has proposed certain ethics and independence rules for public comment. The rules, which relate to tax services provided to audit clients and contingent fees, would apply to audits of all listed companies, including foreign SEC registrants. Click for link to Press Release on PCAOB Website. The PCAOB's proposal is supported by SEC Chief Accountant Donald T. Nicolaisen. The SEC's Announcement said: "Although the Commission historically has adopted its own rules and interpretations regarding auditor independence issues - and will continue to provide companies and audit committees with guidance on independence issues - Nicolaisen stated that he looks forward to the PCAOB fulfilling its role and becoming the primary standard-setter and source of guidance to auditors on these issues."

13 December 2004: ARC will consider endorsement of IFRS 2
The Accounting Regulatory Committee of the European Commission will meet on 20 December 2004 in Brussels to consider whether to recommend endorsement of IFRS 2 Share-based Payment for use in Europe. Click here to download the Draft Regulation to be considered by the ARC, which recommends endorsement of IFRS 2 (PDF 22k). The text of IFRS 2 is available for download in 19 European languages Here.

12 December 2004: Comments on IFRSs at annual AICPA SEC conference
A number of SEC speakers at the 32nd Annual AICPA National Conference on Current SEC and PCAOB Developments addressed international financial reporting issues. Links to the presentations of SEC Chief Accountant Donald T. Nicolaisen and SEC Deputy Chief Accountant Julie A. Erhardt whose area of responsibility is international financial reporting are below. Here is an excerpt from Mr. Nicolaisen's remarks:

• Remarks of Mr. Nicolaisen (PDF 99k)
• Remarks of Ms. Erhardt (PDF 52k)

10 December 2004: Standard on extractive industries is issued
The International Accounting Standards Board has issued IFRS 6 Exploration for and Evaluation of Mineral Resources. The standard provides guidance on accounting for exploration and evaluation costs incurred by entities in the mining and oil and gas exploration industries. IFRS 6 permits an entity to continue using, under IFRSs, the accounting policies applied in its most recent annual financial statements for exploration and evaluation expenditures, including the recognition and measurement of exploration and evaluation assets. The standard requires an impairment test for such assets, but it varies the recognition of impairment from that in IAS 36 Impairment of Assets. However, if impairment is identified, measurement of impairment must be in accordance with IAS 36. IFRS 6 is effective for annual periods beginning on or after 1 January 2006. However, earlier application is encouraged, and if an entity adopts IFRS 6 before 1 January 2006, transitional relief is available for some comparative disclosures. Click for IASB Press Release (PDF 28k).

8 December 2004: Agenda for IASB meeting December 2004
The IASB has posted the agenda for its December 2004 Board meeting, which will be held at the IASB's offices in London on 15 to 17 December 2004. The agenda is as follows:
 

7 December 2004: EC Commissioner speaks about IFRSs
Charlie McCreevy, the new European Commissioner for Internal Market and Services, offered his assessment of the integration of the single European market for financial services at a conference sponsored by the Committee of European Securities Regulators in Paris yesterday. He noted the importance of IFRSs for the single market. Click to Download the Speech (PDF 86k).

7 December 2004: Possible new approach to IAS 39 fair value option
The IASB has Posted on its Website a preliminary draft of a possible new approach to the fair value option under IAS 39. The fair value option allows an entity to designate, at acquisition or issuance, most individual financial assets and financial liabilities to be measured at fair value with value changes recognised in profit or loss. A proposed amendment to IAS 39 currently outstanding would restrict the use of the fair value option somewhat. In endorsing IAS 39 for use in Europe, the European Commission has prohibited the use of the fair value option for liabilities.

5 December 2004: Notes from IFRIC Meeting of December 2004
The International Financial Reporting Interpretations Committee met at the IASB's offices in London on Thursday, 2 December 2004. Presented below are the Deloitte observers' preliminary and unofficial notes from that meeting:

2 December 2004 Administrative matters The Chairman welcomed Mike Bradbury, Professor of Accounting at Unitec in New Zealand, to his first meeting as an IFRIC member. A second new IFRIC member, Jean-Louis Lebrun, Partner and Chairman of the Supervisory Board of Mazars, France, has been appointed but was unable to attend the December meeting. IAS 1 Presentation of Financial Statements The IASB considered at its November meeting whether it would be beyond the IFRIC's remit to develop a Draft Interpretation that would prohibit particular opportunistic practices regarding the presentation of expenses in income statements. The IASB agreed that the development of an interpretation prohibiting the exclusion of certain 'unusual' expenses from the classifications to which they relate would not be appropriate. The IASB believed that this matter should not be considered outside of its own project on reporting comprehensive income. However, the IASB did support the development of an interpretation prohibiting the inappropriate presentation of particular expenses below the results of operating activities (when an entity elects to disclose such a sub-total). The IASB specifically supported the IFRIC developing an interpretation which would draw out the principles contained in BC 13 of IAS 1. The IFRIC discussed whether the latter item should be taken on to its agenda. The difficulties of providing an interpretation about 'operating activities' (a term deliberately removed from IAS 1), which is not a defined term, were discussed. The IFRIC concluded that a meaningful interpretation could not be developed within the framework of the existing IAS 1. The IFRIC noted that it was not that BC 13 is 'only' part of the Basis for Conclusions that was causing the problem, it was that there is really an open forum for entities to define 'operating activities' as they see fit if they wish to disclose such a total. The staff will revert to the Board with the IFRIC's conclusion. IFRIC Interpretation 5 Rights to Interests Arising from Decommissioning, Restoration and Environmental Funds In November the IASB voted to issue IFRIC Interpretation 5 and the consequential amendments to IAS 39 arising. However, concern was expressed about the intended effective date (three months after the date of issue). Board members requested that the effective date be amended to 1 January 2006 in order to avoid the issuance of any amendments to IAS 39 that would be effective for the year beginning 1 January 2005. The IFRIC agreed to this amendment. The expected publication date of IFRS 5 is 16 December 2005. Service Concessions The IFRIC considered a number of amendments to the draft interpretations on service concessions. D11 Determining the Accounting Model The IFRIC considered the drafting of the Basis for Conclusions which details the alternative methods by which the line between the financial asset model and the intangible asset model could be drawn. The IFRIC agreed, subject to some minor amendments, that the drafting captured adequately the debates held and the range of views expressed by IFRIC members on this topic. The IFRIC considered the drafting of the Basis for Conclusions in relation to sale of infrastructure by the grantor to the operator. The IFRIC had noted in the May 2004 meeting that there were some difficulties in reconciling the revenue recognition criteria for a sale in IAS 18 with those for a sale and lease back in IAS 17. The IFRIC agreed that the Basis for Conclusions should simply note that the IAS 18 criteria are used because the interpretations deal with the right of the access rather than the right of use, and that new derecognition criteria are not being developed in the interpretation. The IFRIC agreed that the issues of reconciling the requirements of IAS 17 and IAS 18 have broader application than to service concessions alone, and therefore this issue should be considered by IFRIC as a separate project. The IFRIC considered the comments in the Basis for Conclusions regarding situations where infrastructure is used for both regulated and unregulated purposes. It was agreed that the Basis for Conclusions should not go into this in great detail as, per previous IFRIC discussions; it is not possible for the interpretation to address every possible scenario, a fact which has been stated in the draft interpretation. The IFRIC agreed to the inclusion of drafting which would be interpreted that an arrangement could be accounted for using a different model simply by undertaking some 'cheque-passing' activities. The IFRIC agreed that subject to the edits requested, the draft interpretation should be issued. D12: The Financial Asset Model The IFRIC agreed with the staff's analysis that the interpretation effectively prevented financial assets arising from concession arrangements from being classified as held to maturity investments, and agreed to include an explanation of the reasons for this in the basis for conclusions. The IFRIC noted that the transitional provisions contained in the draft interpretation would not be available to first-time adopters, and accordingly an amendment to IFRS 1 would be required. The IFRIC agreed that, similar to the proposals for existing IFRS users, the IFRS 1 requirement ought to be that existing service concession assets should be reclassified as they would be under the interpretations but need not be remeasured in accordance with the interpretations. Therefore, depending on previous accounting treatment, it is possible that assets and liabilities may be entirely derecognised on transition because they do not meet the recognition criteria. However, the first step would be to reclassify those amounts which do meet the recognition criteria. The IFRIC noted that the effect of caps and floors on service concession arrangements was discussed in D13 but not D12. Previously the IFRIC had decided that while D11 would direct you to the treatment required either by D12 and D13, the two would not be stand alone documents, that is, irrespective of which model you were using, there would be relevant information in both interpretations. The IFRIC reversed this decision and agreed to amend interpretations D12 and D13 should be stand alone documents and should be made to be as consistent as possible with one another. The IFRIC noted that the discussion explaining that financial assets are not qualifying assets (and therefore borrowing costs cannot be capitalised on those assets) had wider application than to service concessions. The IFRIC agreed that the media release accompanying the release of the draft interpretations should highlight to interested parties the range of issues covered and that many of them have broader application to companies not involved in service concessions. The IFRIC agreed, subject to the amendments, that the draft interpretation should be issued. D13: Intangible Asset Model The IFRIC agreed to some wording in the basis for conclusion explaining why interest rate methods of depreciation are considered inappropriate. The IFRIC also agreed to some wording explaining the measurement of revenue on the exchange of assets. They discussed the interaction of IAS 18 and IAS 38, and possible inconsistencies between the two, but agreed to remain silent on this matter. Some wording from IAS 38 will be included in the basis to explain the measurement, and it will be clarified that when the intangible asset is ready for use borrowing costs should cease being capitalised. The IFRIC noted that accounting for hand-over obligations had a broader application than simply to service concessions, and agreed that rather than being addressed in this project it should be addressed as part of a separate project in the future. The IFRIC agreed, subject to the amendments, that the draft interpretation should be issued. The IFRIC agreed that worked examples should be developed and made publicly available during the exposure period. They agreed to consider the worked examples at the February 2005 meeting, but that the publication of the text of the draft interpretations should not be delayed by the development of the worked examples. Accordingly, amendments to the draft interpretations will be made and they will be circulated for out of session approval (unless the resolution of any issues raised by IFRIC members proves to need in session discussion) and made available. The 90-day comment period will be counted as starting from the date the worked examples are made available. IAS 39 Financial Instruments: Recognition and Measurement - Reassessment of Embedded Derivatives The IFRIC discussed whether the requirement in IAS 39 to assess whether there is an embedded derivative which must be separated is required to be reassessed, and if so how often. The IFRIC agreed that an interpretation should be developed prohibiting the reassessment. In coming to this conclusion the IFRIC noted that the intention of the Board in requiring the separation of embedded derivatives was to prevent entities from deliberately including in a single instrument items which should rightly be accounted for separately. The IFRIC agreed that matters which would result in such a reassessment requiring an existing instrument to be separated are things such as fluctuations in currency which are outside the control of the entity, and therefore a requirement to reassess would be inconsistent with the Board's objective. In addition it was noted the practical difficulties of reassessing all of the entities instruments on a regular basis are significant. The IFRIC then discussed whether first-time adopters should be required to reassess whether embedded derivatives that ought to be separated exist as at the date of transition, or at the inception of the instrument. The IFRIC agreed that, despite the difficulties of hindsight, the assessment must be made as at the date of inception of the instrument. Staff will bring a draft interpretation to a future meeting based on these decisions. Activities of Other Interpretation Bodies/ Report of Agenda Committee It was noted that as the IFRIC Agenda Committee did not meet in November there were no matters to be brought to the attention of the full IFRIC. IFRS 2 - Changes in Contributions to Employee Share Purchase Plans The IFRIC considered a draft interpretation based on the decisions made at the November meeting that when an employee ceases to contribute to an Employee Share Purchase Plan and is therefore not able to buy shares under the plan, this is accounted for as a cancellation, and immediate recognition of the expense that otherwise would have been recognised during the vesting period is required. Where an employee changes from one plan to another the entity should determine whether the new plan is considered to be a replacement for the old plan. If it is, this is considered a modification. If it is not, the cessation of contributions to the old plan must be treated as a cancellation and the admission to the new plan as a new grant. The IFRIC agreed that this interpretation should apply retrospectively, subject to the requirements of IFRS 2, and where relevant IFRS 1. The staff agreed to consider whether an amendment to IFRS 1 is required to reflect this. The IFRIC agreed to include in the basis for conclusions some of their discussions around the importance (or lack thereof) of who is considered to be cancelling the employee's involvement in the plan. They also agreed to clarify that there is no accounting impact on the IFRS 2 expense if the employee goes the whole way through the savings plan but then elects not to buy the shares. In addition the interpretation would note that where an employee leaves this is considered to be forfeiture - the interpretations will only apply when the employee continues to be employed. The IFRIC agreed, subject to the resolution of the issue as to whether IFRS 1 requires consequential amendment and editorial amendments that the draft interpretation should be issued with a 75-day comment period. IFRS 2: Scope The IFRIC discussed a draft interpretation which included a rebuttable presumption that where en entity issues equity instruments for less than their fair value, additional goods or services are received as well as the cash or other consideration. It was noted that the interpretation as currently drafted would require an entity to determine the fair value of equity instruments issued as consideration for goods or services, in order to determine whether they were within the scope of IFRS 2. However having determined they were within the scope, the expense should be measured at the fair value of goods or services received and therefore the determination of the fair value of the equity instruments would not be needed to complete the accounting. Therefore the interpretation as drafted would require entities that would otherwise not be required to determine the fair value of the equity instruments issued to do so. The IFRIC agreed to proceed with a draft interpretation which contained a presumption that when you are dealing with non-employees you are able to identify goods and services received. Where the fair value of those goods and services appears consistent with the fair value of the equity instruments issued, the share-based payment is measured at the fair value of the goods and services received. However, if goods or services are not readily identifiable, or their value does not seem consistent with the fair value of the equity instruments issued an entity must consider what other goods or services they received in exchange for the instruments. The use of the term 'consistent' is designed to ensure entities that appear to be making a simple transaction of goods for equity instruments worth more or less the same amount are not forced into an exercise of fair valuing the equity instruments issued. The IFRIC discussed briefly whether there was any inconsistency between this conclusion and paragraph 31 of IAS 32 in respect of compound financial instruments. After a brief discussion it was determined that no inconsistency existed. The IFRIC discussed whether there were any implications of its decisions for group transactions. It was agreed that IFRS 2 could only be relevant in a situation where there is a transaction in which the fair value of the investment acquired is less than the fair value of shares issued, and the company whose shares are being exchanged is not an associate, joint venture or subsidiary of the company receiving its shares. Even in this scenario this would be a transaction within equity amongst the group companies. The IFRIC will consider a re-drafted interpretation at its February meeting. IFRS 2: Treasury Shares and Group Transactions The IFRIC considered a number of examples of cases where an entity provides its employees with share-based payments where the shares are those of its parent rather than itself, or acquires treasury shares in order to satisfy share-based payment obligations. The first example is a single entity which voluntarily purchases its own shares on the market to satisfy share based payment obligations - it was agreed that such a transaction should be treated as an equity settled share based payment in accordance with IFRS 2. The second example is where a single entity must mandatorily purchase its own shares to satisfy a share based payment obligation. It was agreed that this is an equity settled transaction, and the question of whether a liability should be raised for the obligation to purchase own shares is a question of interpretation of IAS 32 rather than IFRS 2 and should not be addressed in this project. The third example is where a subsidiary grants share options over shares in the parent. A majority of IFRIC members agreed that this should be treated as equity settled, and that this was consistent with paragraphs BC19-BC22 of IFRS 2, and the reference to issuance of shares from other group entities in paragraph 11 of IFRS 2. It was agreed that IFRIC should expose only this view, although a minority of IFRIC members expressed the view that this conclusion results in very different accounting depending on how the intra-group expense allocation is handled, and particularly whether payments are required from the subsidiary to the parent (as noted in examples 5 and 6). The fourth example is where the subsidiary grants share options over shares in the parent and the parent levies an inter-company charge. The IFRIC agreed this should be treated as an equity settled transaction. In the fifth example the subsidiary grants share options over shares in the parent which it buys in the market. It was agreed this must be treated as cash settled because the subsidiary is giving up another asset (its shares in the parent rather than its own equity) to settle the share based payment obligation. Similarly in the sixth example where the subsidiary grants share options over shares in the parent which it buys from the parent this should be treated as a cash settled payment of the subsidiary. In example seven, where there is a group transfer of employee from one member of a group to another. Any difference between the total of amounts recognised in subsidiary's accounts and the amount determined at the group level should be treated as a consolidation adjustment. The IFRIC noted that the accounting would vary depending on the form and structure of the group scheme, which are often structured in a manner designed to be tax effective. The IFRIC noted that there were future issues to be considered in terms of inter-company transactions including those related to transfer pricing and related parties, which are wider reaching than IFRS 2 issues alone and should be addressed separately. The IFRIC considered briefly a situation where the subsidiary grants a cash-settled share appreciation right based on the parent's share price and agreed that this is outside of the scope of IFRS 2 and within the scope of IAS 19. The IFRIC agreed that the key example was example three and that this should be converted into text for an interpretation, including the journal entries. The flow of logic used in getting to this conclusion (example 1, 2 and 4-6) should be explained in the basis for conclusions. The IFRIC will consider a draft interpretation at a future meeting. This summary is based on notes taken by observers at the IASB meeting and should not be regarded as an official or final summary.

5 December 2004: Directors' guide to transition to IFRSs

Deloitte's London IFRS Centre of Excellence has developed a 16-page Director's Guide to IFRSs as an insert in the December Edition of PLC Director Magazine. Titled Preparing for IFRS - A Director's Guide: Countdown to Transition, the guide includes suggestions for explaining the IFRS change to investors and strategies for smoothing the changeover. You can Download the Guide (PDF 4,926k). Because of the size of the file, you may see a white screen while the download is taking place.

4 December 2004: New Zealand adopts equivalents to IFRSs
On 24 November 2004, the New Zealand Accounting Standards Review Board approved the "stable platform" of New Zealand Equivalents to International Financial Reporting Standards (NZ IFRSs). All reporting entities in New Zealand must comply with the NZ IFRSs for reporting periods beginning on or after 1 January 2007. Entities may early adopt from 1 January 2005. Click here to go to NZ ASRB Website where the standards can be viewed.

4 December 2004: UK ASB moves to new offices
On 6 December 2004, the United Kingdom Accounting Standards Board is moving from 100 Gray's Inn Road in London to:

3 December 2004: All listed companies in Uruguay will use IFRSs

In Uruguay, pursuant to Decree 162/04 of 12 May 2004, all listed companies must use IFRSs for all periods beginning 1 June 2004. Click for Decree 162/04 in Spanish (PDF 17k). However, the Decree does not cover the revised versions of IASs and IFRSs approved by the IASB in 2003-2004. Also IAS 7 on the cash flow statement is optional. Our up-to-date list of use of IFRSs country by country is Here.

3 December 2004: Business combinations ED now planned for 1Q 2005
The FASB Website notes that the joint IASB-FASB exposure draft on Business Combinations–Purchase Method Procedures is now scheduled to be issued in the first quarter of 2005 rather than the fourth quarter of 2004.

3 December 2004: ARC postpones advisory vote on IFRS 2
The European Commission's Accounting Regulatory Committee (ARC), which advises the Commission regarding endorsement of IFRSs for use in Europe, voted on 30 November to endorse the improved versions of IASs that were adopted by the IASB in December 2003 and later, as well as IFRSs 3, 4, and 5. But the ARC postponed to its next meeting on 20 December 2004 a vote on whether to recommend IFRS 2 Share-based Payment. IFRS 2 requires that companies recognise as compensation expense the fair value of share options given to employees. The EU Accounting Regulation requires European listed companies to begin preparing their consolidated financial statements using IFRSs in 2005 but only after each individual IAS, IFRS, and Interpretation has been endorsed for use in Europe by the European Commission. In making its endorsement decision, the Commission considers the advice from the ARC as well as from the European Financial Reporting Advisory Group (EFRAG).

3 December 2004: UK ASB adopts IAS 39 in full (no "carve-outs")
The United Kingdom Accounting Standards Board (ASB) has issued six standards that represent a major step towards aligning UK GAAP and IFRSs. The six standards are UK equivalents of IASs 21, 29, 32, 33, and 39 plus an amendment to the existing UK FRS 2. The UK's new equivalent of IAS 39 implements in full the measurement and hedge accounting provisions of IAS 39 without amendment, rather than the amended version of IAS 39 adopted by the European Commission that restricts the use of the full fair value option and permits hedge accounting for bank core deposits. Link to ASB Press Release.

2 December 2004: IFRIC publishes two final interpretations
The International Financial Reporting Interpretations Committee (IFRIC) has released two final Interpretations:

2 December 2004: Australian accounting alert on hedge documentation
We have posted a Australian Accounting Alert No. 18, which is reminder to clients about the requirement to have hedge documentation in place at transition date on first time adoption of AASB 139 (PDF 41k). Because AASB 139 is similar to IAS 39, the reminder is equally applicable to companies around the world that are adopting IAS 39 for the first time in 2005. Click for links to all Past Australian Accounting Alerts.

2 December 2004: EFRAG invites comments on IFRIC 2
The European Financial Reporting Advisory Group (EFRAG) has Invited Comments on its draft letter proposing to advise the European Commission to endorse IFRIC 2 Members' Shares in Co-operative Entities and Similar Instruments for use in Europe. Comments are due by 6 January 2005.

1 December 2004: November 2004 EITF Roundup posted
We have posted the November 2004 edition of EITF Roundup, a newsletter published by the National Office Accounting Standards and Communications Group of Deloitte & Touche LLP (USA). This edition of EITF Roundup provides an overview of the issues discussed, consensuses reached, and administrative matters at the 17-18 November 2004 meeting of FASB's Emerging Issues Task Force. Click to Download (PDF 476k). Links to all past issues are Here.