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28 February 2004: New Australian accounting alerts on financial instruments
We have posted two new Australian Accounting Alerts: Financial Instruments: Recognition and Measurement and Financial Instruments: Disclosure and Presentation.
28 February 2004: New international auditing standard on fraud
The International Auditing and Assurance Standards Board (IAASB) has released a revised International Standard on Auditing requiring auditors to be more proactive in considering the risk of fraud in an audit of financial statements and has issued new quality control standards addressed at both audit firms and engagement teams. The new ISA, The Auditor's Responsibility to Consider Fraud in the Audit of Financial Statements, requires the auditor to focus on areas where there is a risk of material misstatement due to fraud, including management fraud. The standard is effective for audits of financial statements for financial periods beginning on or after 15 December 2004. The two quality control standards approved by the IAASB (both effective 1 July 2005) are:
- Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information, and Other Assurance and Related Services Engagements
- Quality Control for Audits of Historical Financial Information
Click for link to IFAC Press Release which itself has links to the new standards. They may be downloaded without charge.
28 February 2004: Summaries of standards updated
We have now completed updating our Summaries of Standards to reflect all of the revised IASs published in late December 2003. These are IASs 1, 2, 8, 15, 16, 17, 21, 24, 27, 28, 31, 32, 33, 39, and 40.
27 February 2004: English Institute will offer IFRS learning and certificate
The Council of the Institute of Chartered Accountants in England and Wales has approved a proposal for the Institute to offer a training, assessment, and award programme in IAS/IFRS. The programme will be open to ICAEW members and nonmembers. Subject to member approval, a Certificate and Diploma will be available. The training and assessment will encompass the new and improved international standards currently being developed by the IASB. Click for More Information.
27 February 2004: IASC Foundation trustees will meet 9 March
The trustees of the IASC Foundation will meet in public session at the IASB's offices in London on the morning of Tuesday 9 March 2004. The agenda includes a report from the IASB Chairman, constitutional review, education programme, and IASCF publications.
27 February 2004: Foreign issuers in Canada may use IFRS without reconciliation
The provincial securities commissions in Canada have jointly adopted a regulation allowing foreign companies issuing securities in Canada to submit IFRS financial statements without reconciliation to Canadian GAAP. The regulation takes effect 30 March 2004. A foreign issuer may also use US GAAP, but a reconciliation is required unless the issuer is also a US SEC registrant. A foreign issuer may also use national accounting standards from several other designated countries without reconciliation, or still other national GAAPs with reconciliation. Currently, 39 of the 3,602 companies listed on the Toronto Stock Exchange are foreign (mostly US companies with Canadian operations). Click for Regulation (PDF 242k).
27 February 2004: 2003 Chinese language model IFRS financial statements
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 We have posted the Chinese language version of our Model IFRS Financial Statements for the year ended 31 December 2003 (PDF 534k). The model financial statements reflect the requirements of IFRSs in force for 2003. They also contain additional disclosures that, while not required in standards, are considered to be best practice, particularly where such disclosures are included in illustrative examples provided with a specific standard. The model financial statements do not reflect the changes that might be required when the IASs and IFRSs issued during 2003 take effect in 2005 (including the changes resulting from the IASB's improvements project). |
27 February 2004: Three new IFRS publications from Deloitte New Zealand
The New Zealand Financial Reporting Standards Board is working toward adopting all IFRS applicable for 2005 adopters as NZ standards – incorporating guidance for public benefit entities – by June 2004. Those standards would be mandatory in 2007 and optional starting 2005. Towards that aim six exposure drafts were released at the end of 2003, and another seven in February 2004. We have posted three new IFRS publications from Deloitte New Zealand:
- The 30 January 2004 edition of NZ Accounting Alert which summarises the six December 2003 EDs.
- A Discussion Paper on First-time Adoption of IFRS in a New Zealand context (PDF 649k).
- Healthcheck 2003 which discusses a wide range of business issues relating to the conversion to IFRS in New Zealand (PDF 608k).
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26 February 2004: PCAOB adopts its first auditing standard...
The US Public Company Accounting Oversight Board has adopted Auditing Standard No. 1, References in Auditors' Reports to the Standards of the Public Company Accounting Oversight Board. AS 1 requires that auditors' reports on engagements conducted in accordance with the PCAOB's standards state that the engagement was performed in accordance with the standards of the PCAOB. This replaces previously required references to generally accepted auditing standards. Click to Download AS 1 (PDF 73k). Link to PCAOB Press Release.
26 February 2004: ...and is nearing completion on another
At its upcoming meeting on 9 March 2004, the PCAOB will consider adopting an auditing standard on internal control. That auditing standard, An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements, addresses both the work that is required to audit internal control over financial reporting and the relationship of that audit to the audit of the financial statements. Link to PCAOB Press Release.
26 February 2004: Joint study by IFAC and CIMA on corporate successes/failures
The International Federation of Accountants (IFAC) and The Chartered Institute of Management Accountants (CIMA) have jointly published a study on Enterprise Governance: Getting the Balance Right. The balance in question is the relationship of corporate governance (board structures and roles, internal controls, etc.) and corporate performance (strategy and value creation). The report includes analyses of corporate successes and failures in 27 case studies from 10 countries. It introduces the concept of the strategic scorecard and offers guidance on enterprise risk management, the acquisition process, and managing board performance. An appendix features a synopsis of recent international corporate governance developments. The report may be Downloaded from IFAC's Website free of charge. Click here for IFAC Press Release (PDF 54k).
26 February 2004: SEC extends deadline for internal control disclosures
The US SEC has extended the compliance dates for its new rules that require a company to include in annual reports a report by management on the company's internal control over financial reporting and the accompanying auditor's report.
Foreign private issuers that file annual reports on Form 20-F or Form 40-F, and small domestic US issuers, must now begin to comply for the first financial year ending on or after 15 July 2005 (originally 15 April 2005). Large US registrants must now begin to comply in their first financial year ending on or after 15 November 2004 (originally 15 June 2004). Link to Press Release and SEC Final Rules Release.
26 February 2004: Page created for summary of IFRS 2
We have created a new page in our Standards Section summarising the history and requirements of IFRS 2 Share-based Payment, issued by the IASB last week.
25 February 2004: Model IFRS financial statements for 2003
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Deloitte is pleased to make available, in the public interest, our Model IFRS Financial Statements and Presentation and Disclosure Checklist for the Year Ended 31 December 2003 (PDF 801k). The model financial statements are intended to address the presentation and disclosure requirements of International Financial Reporting Standards (IFRS). They also contain additional disclosures that are considered to be best practice, particularly where such disclosures are included in illustrative examples provided with a specific International Financial Reporting Standard. For the purposes of presenting the income statement, statement of changes in equity, and cash flow statement, the various alternatives allowed for under IFRS for those primary statements have been illustrated. |
22 February 2004: Agenda for Advisory Council meeting
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The IASB will meet with the Standards Advisory Council on Monday and Tuesday 23-24 February 2004 at the Renaissance London Chancery Court Hotel, 252 High Holborn, London. The agenda for the meeting is: |
Monday morning:
- Meeting with the IASCF Trustees Constitution Committee
Monday afternoon (closed to the public):
- SAC's review of own operations and effectiveness
Tuesday morning:
- Accounting and financial reporting by small and medium-sized entities
- IASB Chairman's update
Tuesday afternoon:
- IASB Agenda planning and priorities
- Review of IASB internal procedures
21 February 2004: IASB will propose further amendments to IAS 39
The IASB has agreed to propose amending IAS 39 to narrow the circumstances in which an entity will have the option to designate an individual financial asset or financial liability as one to be measured at fair value with changes in fair value recognised in profit or loss (the "fair value option"). The fair value option was added to IAS 39 by the recent Amendments to IAS 39. But after the amendments were published, some regulatory authorities in Europe questioned whether the Board intended the fair value option to be available for all financial instruments without any constraints. By vote of 11 to 3, the Board agreed in principle to propose amending IAS 39 to restrict the circumstances in which companies may choose the fair value option. The proposal will also include several other clarifications to IAS 39 for matters recently raised by the European Central Bank. Staff will develop an exposure draft for consideration by the Board at its March 2004 meeting.
20 February 2004: Notes from the third day of the February IASB meeting
To allow this home page to open more quickly, we have moved our observers' preliminary and unofficial notes from the February 2004 IASB meeting to a Separate Page.
20 February 2004: Special IASPlus newsletter on share-based payment
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We have posted a special global edition of our IASPlus Newsletter on IFRS 2 (PDF 49k), Share-based Payment. The newsletter highlights some of the more significant requirements of the IFRS, including scope; recognition and measurement; modifications, cancellations, and settlements; and transition requirements. |
20 February 2004: New Accounting Roundup newsletter
We have posted the 19 February 2004 edition of Accounting Roundup (PDF 304k) from Deloitte (United States). This newsletter briefly describes key regulatory and professional developments that have recently occurred and provides links to locations where additional information can be found on each topic. This issue includes updates on activities of FASB, GASB, AICPA, SEC, and IASB. You will find past issues Here.
20 February 2004: Notes from the second day of the February IASB meeting
To allow this home page to open more quickly, we have moved our observers' preliminary and unofficial notes from the February 2004 IASB meeting to a Separate Page.
19 February 2004: Deloitte Denmark newsletter on IFRS 2
Deloitte (Denmark) has published a Newsletter on IFRS 2 in Danish (PDF 53k).
19 February 2004: UK will adopt IFRS 2 as national standard
The United Kingdom Accounting Standards Board has issued a press release announcing its intention to issue an accounting standard on share option schemes and other share-based payments identical to IFRS 2 effective for accounting periods beginning on or after 1
January 2005 for listed entities and 1 January 2006 for all other entities.
19 February 2004: IASB issues standard on share-based payment
The IASB has issued IFRS 2 Share-based Payment. Click for Press Release (PDF 36k). The main requirements of IFRS 2 are:
MAIN REQUIREMENTS OF IFRS 2
- Recognition and measurement. All share-based payment transactions must be recognised in the financial statements, using a fair value measurement basis. An expense is recognised when the goods or services received are consumed. The same recognition and measurement standards apply to both public and non-public companies.
- Fair value measurement principle. In principle, transactions in which goods or services are received as consideration for equity instruments of the entity should be measured at the fair value of the goods or services received. Only if the fair value of the goods or services cannot be measured reliably would the fair value of the equity instruments granted be used.
- Measuring employee share options. For transactions with employees and others providing similar services, the entity is required to measure the fair value of the equity instruments granted, because it is typically not possible to estimate reliably the fair value of employee services received.
- When to measure fair value - options. For transactions measured at the fair value of the equity instruments granted (such as transactions with employees), fair value should be estimated at grant date.
- When to measure fair value - goods and services. For transactions measured at the fair value of the goods or services received, fair value should be estimated at the date of receipt of those goods or services.
- Measurement guidance. For goods or services measured by reference to the fair value of the equity
instruments granted, IFRS 2 specifies that, in general, vesting conditions are not taken into account when estimating the fair value of the shares or options at the relevant measurement date (as specified above). Instead, vesting conditions are taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount so that, ultimately, the amount recognised for goods or services received as consideration for the equity instruments granted is based on the number of equity instruments that eventually vest.
- More measurement guidance. IFRS 2 requires the fair value of equity instruments granted to be based on market prices, if available, and to take into account the terms and conditions upon which those equity instruments were granted. In the absence of market prices, fair value is estimated using a valuation technique to estimate what the price of those equity instruments would have been on the measurement date in an arm's length transaction between knowledgeable, willing parties. The standard does not specify which particular model should be used.
- Disclosure. Disclosures include:
- the nature and extent of share-based payment arrangements that existed during
the period;
- how the fair value of the goods or services received, or the fair value of the
equity instruments granted, during the period was determined; and
- the effect of share-based payment transactions on the entity's profit or loss for
the period and on its financial position.
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19 February 2004: Notes from the first day of the February IASB meeting
To allow this home page to open more quickly, we have moved our observers' preliminary and unofficial notes from the February 2004 IASB meeting to a Separate Page.
18 February 2004: UK IFRS newsletter is published
The February 2004 edition of the United Kingdom's IASPlus Newsletter (PDF 132k) has been published. This issue includes news about IFRS in Europe, project updates, and an IFRIC update. You can find all past newsletters Here.
18 February 2004: Impact of IFRS on European banks – ECB views
The February 2004 edition of the Monthly Bulletin of the European Central Bank (ECB) includes a 13-page article on The Impact of Fair Value Accounting on the European Banking Sector. The article presents "an overview of the current debate" and expresses ECB's views about "how exogenous shocks to the banking sector are likely to manifest themselves in banks' financial statements under the new rules." Click to Download (PDF 1,475k – see pages 70-83). Also, in an address to a plenary session of the European Parliament on 16 February 2004, Jean-Claude Trichet, president of the ECB, spoke about what he views as significant negative consequences of recognising financial instruments at fair values.
14 February 2004: Coming – new European rules on auditing and SPE disclosures
In a Speech (PDF 64k) before a plenary session of the European Parliament, Frits Bolkestein, European Commissioner for Internal Market, Taxation and Customs, announced that, in March, he will be proposing to the Commission a revised Company Law Directive on the Statutory Audit function. "It will strengthen controls over the audit profession in the EU. With independent oversight; strengthened inspection; stronger ethical and educational principles; high quality audit standards." It is likely also to include:
- Full group auditor responsibility for consolidated accounts of a group of companies.
- Obligatory independent audit committees for listed companies.
- Stricter auditor rotation requirements.
- Strengthened sanctions.
Mr. Bolkestein also said the Commission is developing proposals to require "full disclosure in the company accounts of offshore Special Purpose Vehicles, including why the company uses these offshore structures and much stricter verification by the group auditor of their content".
13 February 2004: New Zealand Accounting Alert
Apologies for being a bit late in posting the latest (15 December 2003) Deloitte New Zealand Accounting Alert (PDF 145k). This issue discusses the major changes to existing practice that would result from three convergence exposure drafts issued by the Financial Reporting Standards Board (those for IAS 11, IAS 16, and IAS 19) and summarises recent guidance on accounting by trusts. Past Alerts can be downloaded Here.
12 February 2004: IFRIC project pages updated to reflect recent meeting
We have updated the following project pages to reflect the deliberations at IFRIC's meeting on 3-4 February 2004:
12 February 2004: USA accounting – year 2003 in review
We have posted Accounting Roundup–The Year In Review 2003 (PDF 1,108k) from Deloitte (United States of America). The articles in this newsletter were drawn from issues of the Accounting Roundup newsletter dated 20 January through 16 December 2003, and have been updated where appropriate. Links are provided to locations where additional information can be found on each topic. Sections of this newsletter cover developments at FASB, EITF, GASB, AICPA, SEC, PCAOB, and IASB.
11 February 2004: China accounting - year 2003 in review
We have posted both the English (PDF 35k) and Chinese (PDF 217k) versions of our China Financial Reporting Update - 2003 Year-End Review. The newsletter covers activities of the Ministry of Finance, the China Securities Regulatory Commission, and the Chinese Institute of Certified Public Accountants.
11 February 2004: IASCF Trustees propose a European consultative group
The IASC Foundation Trustees have invited senior officials from European banking, securities, and insurance regulators and from the accounting, banking, and insurance industries to form a high level European consultative group to advise the IASB. The group will focus specifically on application of accounting standards to financial institutions. In announcing formation of the group, the Trustees said: "The concept of such a group has grown out of discussions with the European Commission, which is invited to participate in the consultative group's discussions as an observer. While deliberations on the international standards on financial instruments (IASs 32 and 39) must come to a close by the end of March 2004, the extended debate surrounding the IASB's proposed improvements to these two standards has demonstrated that long-standing and basic issues of accounting and regulatory philosophy and approach will remain. The IASB will need in the future to address these longer-term issues, which centre importantly on the application and extent of fair value accounting appropriate for regulated financial institutions in the banking and insurance industries." Click for Press Release (PDF 18k).
11 February 2004: IOSCO task force will address financial fraud
The International Organization of Securities Commissions has appointed a special Chairmen's Task Force,
composed of chairmen of a number of member commissions, to organise and coordinate IOSCO's response to recent high profile incidents of securities fraud and market abuse.
"As a priority, the Task Force will:
identify potential new issues arising from recent cases, including concerns about transparency in the bond markets, the role of unregulated entities, the role of complex group structures, and appropriate levels of sanctions;
review implementation of existing standards, including current mechanisms for international cooperation; and
suggest responses aimed at producing appropriate regulatory incentives, such as improving risk identification and assessment by regulators and giving attention to uncooperative and under-regulated jurisdictions.
The recent revelations of accounting and auditing irregularities serve to emphasize the critical importance of the initiatives that IOSCO and its national securities commission members have taken relating to corporate disclosures and the quality of audits of public companies. High quality accounting principles and the availability of high quality audits of public companies is critical to the proper functioning of securities markets and the protection of investors."
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Click for IOSCO Press Release (PDF 236k).
11 February 2004: Comments on IASCF constitution review issues are posted
As part of their constitution review, the IASC Foundation Trustees invited commentators to identify issues to be addressed in the review. Those comment letters have been posted on the IASB Website.
10 February 2004: Review of Deloitte's IFRS e-learning
Needless to say, we are delighted at what AccountingWeb had to say about Deloitte's IFRS e-learning. Incidentally, in the first ten days over 5,000 modules were downloaded.
Excerpts from AccountingWeb 6 Feb 2004
"Review: Deloitte IAS Plus - e-learning for free
Training consultant Viv Cole test drives the IFRS e-learning service from Deloitte
and discovers a powerful performer that can be yours - for no cost."
"Deloitte must have spent the cost of a F1 Ferrari on developing IFRS e-learning and now they are giving it all away for free....
On www.iasplus.com you can follow the Deloitte IFRS e-learning logo to find modules that are designed to give you a good basic grounding in each IFRS. Once you have waded through the disclaimers, it is straightforward to download zip files of each module (the files are approximately 3Mb each, so having a broadband connection does help).
Some of the features to highlight are:
- a clearly presented and easy to navigate user interface
- good use of questions and feedback to develop your understanding
- a strong practical feel, with several scenarios where you need to think of how to apply the standard in order to provide advice, for example to a client
- the variety created by use of audio and graphics to represent incoming phone calls, e-mails and faxes
- a Coach button to help you go into more depth if you choose."
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10 February 2004: Comment letters on restructuring of EFRAG are posted
The European Financial Reporting Advisory Group has posted on its Website the letters of comment it has received on its December 2003 Proposals to enhance its role and working process.
9 February 2004: Newsletter summarising the revised IAS 32 and IAS 39
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We have posted a 14-page Special Global Edition (PDF 158k) of our IASPlus newsletter summarising the IASB's two recently revised financial instruments standards – IAS 32 Financial Instruments: Disclosure and Presentation, and IAS 39 Financial Instruments: Recognition and Measurement. Both standards are effective for annual periods beginning on or after 1 January 2005. Earlier application of the revised standards together, but not individually, is permitted. |
9 February 2004: Colombia is considering a switch to IFRS
The government of Colombia has invited comment on a draft law that would adopt International Financial Reporting Standards as Colombian national standards. Currently, Colombian Accounting Standards are established by the government, and they differ significantly from IFRS. The draft law is a joint effort of various government ministries and departments, including finance, public credit, industry and commerce, accountancy, banking, companies, securities markets, planning, taxes, and customs – all of the key bodies that would need to agree to such a fundamental change in Columbian accounting practice. Click for More Information ("Proyecto de Ley: Por el cual se adoptan en Colombia los estándares internacionales de contabilidad, auditoría y contaduría").
8 February 2004: Agenda for February Standards Advisory Council meeting
The IASB will meet with the Standards Advisory Council (SAC) at the Renaissance London Chancery Court Hotel, 252 High Holborn, London, on Monday and Tuesday, 23-24 February 2004. The agenda for the meeting is set out below.
AGENDA FOR STANDARDS ADVISORY COUNCIL MEETING
23-24 FEBRUARY 2004
- Agenda Planning and Priorities
- IASCF Constitution Review (IASCF issue)
- Insurance
- Review of IASB Internal Procedures
- Review of SAC Operations and Effectiveness
- Small and Medium-sized Entities
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8 February 2004: Agenda for February IASB meeting
The International Accounting Standards Board will meet at its offices in London on Wednesday-Friday, 18-20 February 2004. The agenda for the meeting is set out below. The Board will again be testing a Webcast Service at this meeting. The Board will also meet with its Standards Advisory Council on Monday and Tuesday, 23-24 February 2004.
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AGENDA FOR IASB MEETING 18-20 FEBRUARY 2004
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8 February 2004: IVSC proposal on valuation of assets for financial statements
A working group of the International Valuation Standards Committee has published, for comment, a draft position statement addressing the valuation implications arising from the recently revised IAS 16 Property, Plant and Equipment. The draft proposes a new valuation basis in response to the change in establishing fair value under IAS 16. The IVSC Management Board will debate the recommendations of the working group at its meeting in early April but approved the early release of the position statement for exposure. Comments are due 19 March 2004. Click to download:
8 February 2004: ACCA urges acceptance of IAS 32 and 39 in Europe
The Association of Chartered Certified Accountants (ACCA) has expressed dismay about the possible delay in European endorsement of the revised IAS 32 and IAS 39 on financial instruments. Allen Blewitt, ACCA Chief Executive, said: "The goal of achieving a truly global set of financial reporting standards is vital for the credibility of the world's capital markets. All parties must accept that the process of global convergence will necessarily involve some pain and some gain – they must keep their eye on the bigger picture." Click for ACCA Press Release (PDF 24k).
8 February 2004: New Australian Accounting Alert posted
7 February 2004: No more ".uk" in IASB website address
The IASB has reorganised its website and changed the URL to www.iasb.org (no longer www.iasb.org.uk). Click for the IASB's Press Release (PDF 27k). We have updated about 50 links on IASPlus pages to various subordinate pages on the IASB site. If you find one we missed, please let us know.
6 February 2004: Notes from the 3-4 February 2004 IFRIC meeting
The International Financial Reporting Interpretations Committee (IFRIC) met at the IASB offices in London on 3 and 4 February 2004. Presented below are our observers' preliminary and unofficial notes from the meeting.
3-4 February 2004
Tuesday, 3 February 2004
 D2 Changes in Decommissioning, Restoration and Similar Liabilities
The IFRIC discussed several issues related to the scope of the draft interpretation for changes in decommissioning, restoration, and similar liabilities. The IFRIC agreed to expand the scope to include liabilities recognised as part of the cost of mineral rights and mineral reserves such as oil, natural gas, and similar non-regenerative resources. However, the IFRIC decided not to expand the scope to address whether new liabilities that arise after the asset is recognised (for instance, as a result of a new law) should be expensed or capitalised.
The IFRIC discussed whether the zero-asset floor should consider the entire cost of the asset (including the decommissioning layer) or the cost of the asset excluding the layer. The IFRIC agreed that the entire cost of the asset should be considered when determining the amount to write off against the asset and the amount to expense. The IFRIC did not address how to account for costs previously expensed as a result of the zero-asset floor when the asset is subsequently written up.
The IFRIC discussed whether the transition should be retrospective under IAS 8. The members noted that IFRS provides an impracticability exception that should make the transition easier for older assets. Some members noted that the retrospective approach in the exposure draft would be preferable for first-time adopters. The majority of IFRIC members felt that an exception to IFRS 1 was not desirable. The IFRIC decided to recommend a 3-month effective date if the final Interpretation is issued by March 2004. A longer effective date will need to be reconsidered if the publication date is much later than March 2004.
The staff will proceed with a ballot draft to be issued (preferably) before the next IFRIC meeting. One member indicated an intent to dissent to the interpretation on grounds that all changes in the liability should be recognised in the P&L immediately; two other members said they may dissent for the same reason. One IASB Board member noted that he objects to issuing this interpretation for the same reason as the dissenting IFRIC member and would try to convince the other IASB members to also dissent. The staff noted that they did not believe the IASB would reject this document.
First-time Adoption of IAS 29 Financial Reporting in Hyperinflationary Economies
The IFRIC continued its discussion of the appropriate financial reporting when an entity begins to apply IAS 29. The IFRIC noted that this is not a change in accounting policy, but rather a change in circumstance (an economy becoming hyperinflationary). However, the IFRIC agreed that the commencement of accounting under IAS 29 should be treated similarly to a change in accounting policy, and consistent with IAS 8 an entity should apply IAS 29 as if it had always applied the standard where practicable.
The IFRIC approved issuance of a draft interpretation subject to any minor editorial amendments.
Emission Rights
The staff updated the IFRIC on the progress and plans for this project. Consistent with the decision made by the IFRIC in December, the IASB decided to amend IAS 38 with the result that the emission rights and liabilities should be measured at fair value, with changes in value recognised in profit and loss. The IASB has decided that the IFRIC should re-expose its interpretation on emission rights at the same time as the Board exposes its intention to withdraw IAS 20 and to amend IAS 38. An exposure draft is expected in June 2004 with a final interpretation issued in November 2004. The staff was unclear whether it would recommend a required effective date for those adopting IFRS in 2005.
IAS 19 Employee Benefits - Plans with a Guaranteed Minimum Return
The IFRIC continued its discussion of applying IAS 19 to a plan that would be a defined contribution plan but for the existence of a minimum return guarantee. Previously the IFRIC had concluded that such plans must be treated as defined benefit plans. The IFRIC determined that until such time as the corridor approach is removed from IAS 19 it must be included in the IFRIC interpretation. However, the IFRIC asked that its conceptual disagreement with the application of the corridor approach to this situation should be specifically included in the basis for conclusions.
The IFRIC determined that where assets are not plan assets as defined in IAS 19, they should be treated as notional assets. A definition of notional assets that includes those relevant assets that are not held by a plan will be drafted and included in the interpretation.
The IFRIC considered a revised example that uses the straight-line allocation method to illustrate that the assessment of whether higher levels of benefit are attributed to later years of service would have to take into account expected future salaries. The IFRIC agreed that the example was appropriate.
The IFRIC agreed that subject to the amendments above, and any minor editorial amendments, the document should be issued as an draft interpretation.
Recognition and Measurement of Biological Assets and Agriculture Produce in Accordance with IAS 41 Agriculture
The purpose of this project is to provide the IASB with suggested wording to amend certain requirements and statements in IAS 41.
The IFRIC discussed the appropriate method for determining fair value in measuring biological assets and agriculture produce in accordance with IAS 41. Particularly, the IFRIC discussed whether material selling costs should be included as a deduction in determining the recognised fair value of the assets. The IFRIC noted that selling costs are not included as a deduction in determining the recognisable value of financial instruments in accordance with IAS 39. However, the IFRIC determined that often agricultural assets cannot be sold in an active market without necessarily incurring selling costs, such as harvesting and transportation, and therefore such costs ought to be factored into the measurement of fair value.
The IFRIC discussed the requirement of IAS 41.21 that the objective of a calculation of the present value of expected net cash flows is to determine the fair value of a biological asset in its present location and condition, and that the present condition excludes any increases in value from additional biological transformation. The IFRIC discussed whether this means that the expected future biological transformation should not be considered in determining the fair value of the assets in their current state. The IFRIC determined that ideally the fair value of the assets should be determined as the discounted value of the expected future cash flows, with the discount rate used including the risk factors associated with the successful biological transformation required before the asset is readily marketable.
The IFRIC also discussed the impact of future restoration obligations (such as replanting obligations) on the determination of fair value. The IFRIC concluded that where the restoration obligation will create an additional asset for the entity, it should be capitalised as part of the asset. Where the restoration provision does not result in an additional asset for the entity (for example, restoring leased land at the end of the operating lease), the cost should be expensed.
In accordance with the IFRIC's previous decision, and the subsequent agreement of the IASB to that decision, the staff will bring an amended copy of IAS 41 to the next meeting for IFRIC's consideration.
Wednesday, 4 February 2004
Service Concession Arrangements
The IFRIC discussed how existing IASB literature should be applied in accounting for service concession arrangements. The IFRIC agreed that there are a number of accounting methodologies that are, in some ways, analogous to accounting for service concession arrangements, particularly accounting for leases, with accounting for intangible assets and construction contracts also noted as relevant. The IFRIC discussed a number of examples of issues relating to the recognition of service concession arrangements on the balance sheet in relation to the leasing model in IAS 17 and agreed to continue its debate on these topics at a future meeting.
The IFRIC discussed a number of issues regarding the impact of service concession arrangements on recognised profit and loss. The IFRIC asked that staff give consideration to the appropriate definition of contract revenue and to costs that ought to be deferred as part of service concession arrangements, and present a position to the IFRIC at a future meeting.
Members' Shares in a Co-operative Bank
Three representatives of the European Association of Co-operative Banks made a presentation to IFRIC expressing the concern of that association that members' shares in co-operative banks may be considered liabilities in accordance with the revised IAS 32. They detailing their reasons for believing the members shares should be treated as equity.
The IFRIC agreed that absent the existence of a redemption provision, the members' shares as described should be classified as equity. In reaching this conclusion, the IFRIC considered the voting, dividend, and liquidation rights typically associated with these instruments.
The IFRIC considered the circumstances in which the redemption provision causes the members' shares to be classified as liabilities and agreed that where the redemption of shares is at the discretion of the issuer, the instruments should generally be classified as equity. However the IFRIC noted the importance of providing very clear guidance on this matter to ensure that when applied by analogy the guidance is not misinterpreted.
The IFRIC agreed that a considerable portion of the next meeting should be dedicated to resolving this issue.
IAS 27: Investments of Joint Venture Capital
The chairman briefly discussed a recent request from the EFRAG that IFRIC give consideration to the issues surrounding consolidation of investment funds by investment companies. The IFRIC agreed to debate this issue further. Staff will make a comprehensive presentation of the issues and proposed solutions at a future IFRIC 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.
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4 February 2004: UK GAAP 2004 In Your Pocket
Deloitte & Touche (United Kingdom) has published the 2004 version of its popular guide UK GAAP 2004 In Your Pocket (PDF 266k). This 48 page booklet is a summary of United Kingdom financial reporting, including UK ASB standards and UITF interpretations in issue at 1 January 2004, standards issued by the ASB's predecessor body, and current Statements of Recommended Practice. The summaries of the standards include key features, related UITFs, Deloitte guidance, and an indication of the impact of IFRS implementation in 2005. There is no charge to download this useful publication. |
3 February 2004: Three FT stories on IASB in Europe
Yesterday's edition of the Financial Times (2 February 2004) contained three stories about the adoption of IFRS in Europe:
- US warns Europe on accounting rules. In this front page story, Donald Nicolaisen, chief accountant of the US Securities and Exchange Commission, "warned the European Union not to water down controversial accounting rules on derivatives, fearing that it could endanger global accounting convergence.... The IASB is under intense pressure from the European Commission for further concessions on its derivatives rules, known as IAS 39, because EU banks fear they could inject strong volatility into their accounts."
- French call IASB to account. "French banks have warned that the long-standing goal of convergence between US and international accounting standards must not thwart suitable accounting rules on derivatives for the European Union.... French banks want significant changes to the IASB's derivatives rules, known as IAS 39, which are based on US equivalents."
- A convenient fudge to keep the dividends up. Nice people, those folk at the IASB. "The IASB is expected to require pension fund surpluses and deficits to appear on the face of the accounts. At current levels of pension fund deficits this could lead to a big reduction in distributable profits in the EU." The writer goes on to say: "I hear the IASB is now planning to borrow a fudge from the UK's FRS 17 on pensions. This standard applies to group accounts, but adoption by subsidiary companies is not mandatory. The law on distributability, in contrast, applies to single companies, but not to the group. So it would be possible, for example, even if the group accounts showed a company to be technically insolvent after including the pension fund deficit, to pay a dividend."
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3 February 2004: Special newsletter edition summarises improvements to IASs
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We have posted a Special Global Edition (PDF 154k) of our IASPlus newsletter highlighting some of the more significant changes to IFRS that resulted from the issuance of 13 revised International Accounting Standards (IASs) by the Board in late December 2003. A separate global newsletter to be published shortly will address the changes to IAS 32 and IAS 39. |
2 February 2004: IASB regional standard setters meeting in Malaysia
The Malaysian Accounting Standards Board (MASB) will host an International Accounting Standards Board Regional Standard Setters Meeting in Kuala Lumpur on 3 March 2004. This regional event will bring together key personnel of standard setters in ASEAN (Association of Southeast Asian Nations) for a meeting and dialogue with IASB Chairman Sir David Tweedie and liaison Board member Warren McGregor. Click for More Information.
2 February 2004: Update on IFRS as part of EC Financial Services Action Plan
In an Address (PDF 101k) at the Edinburgh Finance and Investment Seminar on 29 January 2004, Frits Bolkestein, the EC Commissioner of Internal Markets, Taxation and Customs spoke about progress toward implementing the European Commission's Financial Services Action Plan. Regarding IFRS he said:
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The decision to move to a common system for financial reporting for EU listed companies has been one of the boldest and most significant steps under the FSAP. For the first time, European investors will be able to compare "like with like" when reading annual accounts. On IAS 39, we are aware of profound concern regarding the prospects for reaching a satisfactory solution. The Commission is doing everything in its power to find a viable solution. Failure could have significant consequences for our long-term objective of facilitating the emergence of a global financial reporting standard.
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1 February 2004: EFRAG posts its draft comments on three IASB proposals
The European Financial Reporting Advisory Group has invited comments on its
Preliminary Views on three IASB comment documents: IFRIC Draft Interpretation D3 (determining whether an arrangement contains a lease); IFRIC Draft Interpretation D4 (decommissioning and environmental funds); and IASB Exposure Draft ED 6 (mineral resources). EFRAG's comment deadlines are 8 March 2004 for the two draft interpretations and 31 March 2004 for ED 6.
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