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JULY 2004

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31 July 2004: IASB announces new meeting week schedule
The IASB has announced that beginning in September it will generally hold its meetings in four half-day sessions during Board meeting weeks – Tuesday, Wednesday, and Thursday afternoons and Friday mornings, plus a non-decision-making educational session on Wednesday mornings, as follows:

IASB'S ANNOUNCEMENT OF ITS NEW MEETING WEEK SCHEDULE

In September 2004 the Board will adopt a new schedule for its meetings designed to make better use of Board time. The revised schedule provides for greater interaction between Board members and the IASB staff as well as time for small group meetings with constituents. This new schedule will not be in effect for the October and November meetings (owing to the joint meeting with the FASB in October and the Standards Advisory Council meeting in November) but will be resumed in December.

There will be four half-day meetings: Tuesday 1300-1600; Wednesday and Thursday 1300-1800; and Friday 0800-1200. Holding meetings in the afternoons will enable FASB staff to participate in the Board's discussions on joint projects. Meeting early on Friday accommodates project teams in Japan, Australia and New Zealand.

In addition, a public 'educational session' with the Board will be held on Wednesday morning 0800-1200. This session will be used to provide background and education on difficult issues, to help the staff identify potential points of confusion or ideas for solutions. These sessions will consider issues to be discussed in subsequent months' meetings. No decisions will be made.

Tuesday and Thursday mornings are available for public meetings between the Board and outside groups. Should such meetings be scheduled, the details will be announced on the IASB's Website in the usual way.

30 July 2004: Summary of 9 July 2004 ARC meeting
The Accounting Regulatory Committee of the European Commission met on 9 July 2004 to discuss the possible endorsement of IAS 32 and IAS 39 for use in Europe. We have previously posted reports from the meeting, including the possibility of "carving out" some paragraphs of IAS 39 dealing with hedge accounting and the fair value option. The official Summary Record (PDF 197k) of the meeting has now been released by the European Commission. Notes relating to the "carve-out" include the following:

The Chairman asked the Member States for their initial reactions in particular on a possible Commission proposal on a partial endorsement of IAS 39:
  • Many Member States adopted a very positive stance vis-a-vis a possible Commission proposal to adopt IAS 39 with the exception of the fair value option and of certain provisions relating to hedge accounting. Whilst a significant number of Member States were in favour of the Commission proposal, they needed more time and information to evaluate the suggestion properly....
  • Many Member States in favour of full endorsement indicated nevertheless their willingness to find constructive solutions and hence their readiness to examine a possible intermediate solution as sketched out by the Commission.
  • A few Member States maintained their strong preference for full endorsement of IAS 39 and rallied to an alternative proposal put forward by one of them that would consist of endorsing IAS 39 while granting Member States the possibility to disapply collectively or individually some of the provisions of IAS 39. This alternative did not attract much support and was opposed by some other Member States on the ground that it would lead to discrepancy in financial reporting throughout the EU and be contradictory to the objective of harmonisation sought after through the IAS Regulation....
  • Five Member States were not in a position to offer a view, as they had not yet completed their domestic consultations on the Commission proposal. Three Member States were not represented at the meeting.
  • A significant number of Member States insisted on the importance of allowing the full application of IAS 39 by companies that would wish to do so.
The ARC will meet next on 8 September 2004 to consider endorsement of IAS 39.

30 July 2004: Report from the July 2004 IFRIC meeting
The International Financial Reporting Interpretations Committee (IFRIC) held a one-day meeting in London on Thursday 29 July 2004. Presented below are the preliminary and unofficial notes taken by the Deloitte observers at the meeting.

NOTES OF THE IFRIC MEETING 29 JULY 2004

The Chairman (Gilbert Gelard in the absence of Kevin Stevenson) noted that a quorum was not present hence decisions could not be taken at the meeting.

Report of the Agenda Committee

Staff report on the Agenda Committee meeting and presented a list of the issues that were not taken onto the agenda.

Service Concession Arrangements

As requested by the IFRIC at its last meeting, staff prepared a set of draft Interpretations for the IFRIC to consider. They are:

  • D10A Service Concession Arrangements - Determining the Accounting Model
  • D10B Service Concession Arrangements - The Receivable Model
  • D10C Service Concession Arrangements - The Intangible Asset Model

The Flowchart (Click to Open in New Window) sets out the structure of the draft interpretations. New terminology is proposed. The party that grants the concession is called the grantor (formerly the concession provider), and the party that operates the concession is called, simply, the operator (formerly the concession operator). The terminology will be incorporated into SIC 29 as well for consistency purposes.

The July discussion was a preliminary one. Further discussion will take place at the IFRIC's September 2004 meeting. Staff hopes, after the September meeting, to be in a position to prepare definitive drafts, with a view to publishing them in October or, at the latest, November. A comment period of at least two months would be provided.

IFRIC D3: Determining Whether an Arrangement Contains a Lease (Rights of Use)

Scope

Concern was expressed that it was not clear where lease accounting ended and accounting for service concession arrangements begins. After discussion, IFRIC concluded that decisions had to be taken first on who controlled the assets, as this would determine the relevant accounting literature to look to.

The differences between 'control' and 'right of use' were discussed, with members indicating that control was a more permanent notion compared to right of use.

Members raised the concern as to how the holistic approach of examining service concession arrangements may potentially contradict the components approach in IAS 16 Property, Plant and Equipment. This concern was illustrated by considering an example where a road is layered with tar by an operator in line with a service concession agreement. Should the asset recognised by the operator only be that layer as the rest of the road potentially belongs to the grantor? This approach would be consistent with the components approach in IAS 16. Members agreed to continue the discussion of whether to 'draw a line' as to where the holistic view to be taken in the scope paragraph ends.

The need to define 'service concession arrangements' was discussed and staff would look into this. Members indicated that this may require that staff consider the multiple elements revenue recognition issues as well.

Control vs. risks and rewards, and consistency with IFRSs

IFRIC members generally agreed that the significance of the residual interest in the assets should be a factor in establishing who controls the assets. IFRIC discussed other factors that indicate control, including whether the asset was constructed by the operator, estimated useful lives and concession periods, replacement assets expected to be purchased or constructed in the future (whether obliged or not), and the passing on of ownership. This debate was in the context of the different models used in IAS 18 Revenue and IAS 17 Leases in establishing when risk and rewards are passed and therefore, who controls the assets.

Members requested that staff prepare examples for consideration by the IFRIC at the next meeting.

The IFRIC noted a decision taken previously that an interpretation was to be developed regarding a sale and leaseback arrangement with a repurchase agreement. It was noted that such an interpretation would complete the suite of guidance regarding such issues. IFRIC discussed whether such guidance would be issued in the form of an interpretation or as an amendment to IAS 17, but no decisions were made.

Receivables model and intangible asset model

IFRIC debated when each model should be used. The staff requested guidance on the issue of what type of asset arises when either the grantor pays the operator or when the end user makes payment. The IFRIC suggested looking into the segmentation of concession contracts, which would help identify an asset construction phase (if any) and then a service phase that would cover the operation of the asset or provision of specified services. The importance of this segmentation proposal was underscored by the fact that certain arrangements may dictate that the operator will only be compensated for the construction phase based on the maintenance of the asset (for instance, the road constructed must be kept in good condition). In such a case, where the first phase receivable depends on the second phase performance, such segmentation may not be required.

IFRIC also discussed whether a different treatment would result if two operators were engaged separately for each phase.

In terms of the receivables model, a discussion ensued regarding the type of receivable: whether it is an IAS 11 Construction Contracts type receivable similar to 'gross amount due from customers for contract work' or an IAS 39 Financial Instruments: Recognition and Measurement type financial asset. There was concern that such a receivable would not necessarily meet the definition of a financial asset. Staff will explore this issue further.

The issue of whether a receivable still existed if the amount was dependent on demand risk (level of activity in the service phase, such as number of cars using the road) was raised. The IFRIC appeared to be in general agreement that a receivable existed under IAS 11 but this was not the case in terms of IAS 39. Staff were again asked to explore the disconnect between the two standards. It was expressed that a receivable might exist that was based on part performance (that is, not an executory contract) but absent any demand risk. This scenario was effectively where the grantor had 'guaranteed' a minimum amount based on work done but subject to completion of construction.

Regarding the demand risk discussion, staff asked the IFRIC to consider whether an intangible asset existed, instead of a financial asset. A debate ensued but no decisions were made.

Revenue and profit or loss treatment of services provided in exchange for an intangible asset

A general discussion took place regarding the exchange notion contained in IAS 16 and IAS 38 Intangible Assets. Specifically, IFRIC discussed any changes to the cash configuration as a principle that is used in existing literature. A conclusion was not reached as to whether cash flows changed in a service concession arrangement. Members noted that for an exchange to take place there must be an asset given up, whereas in the context of the discussion on service concession arrangements, it was not yet clear whether the assets in question were controlled by the operator. The debate was postponed as this issue had not yet been finalised.

D5 Applying IAS 29 Financial Reporting in Hyperinflationary Economies for the First Time

Staff presented an overview of responses received on D5. In total, 30 comment letters were received. A significant number of respondents raised concerns pertaining to broader issues in relation to IAS 29 itself. Some debate around these broader issues ensued with IFRIC concluding that the issues had to be elevated to the IASB, as the IAS 29 approach required revision. Staff raised the concern that it was unlikely that the IASB would be able to take this onto its agenda in the short term.

The IFRIC suggested that staff take these issues to the Board members individually as well as to the Director of Technical Activities in order to get input from them for consideration at the next IFRIC meeting. The tentative proposal from IFRIC was that the following issues should form part of the IASB's short-term project with the specific suggestion that amendments be made to IAS 29 ahead of the long-term project that would revisit inflation accounting as a whole:

  • 'High' vs. 'hyper' inflation – the IFRIC observed that in practice, the 100%-in-three-years guideline is used more definitively than intended whereas jurisdictions with cumulative inflation rates in the region of say 40% to 80% should ideally be applying the standard were in fact not doing so. The IFRIC suggestion would be to redraft IAS 29 appropriately in this regard.
  • Having removed the 100% criteria, the existence of 'high' inflation would then be determined on the basis of expected future inflation levels as opposed to the current criteria, which are based on past inflation.
  • Amend IAS 29 such that it only requires restatement from the point in time when it is determined that hyperinflation exists. The rationale for this was that it made no sense to restate from the time the asset was acquired as a similar principle was not applied to jurisdictions with inflation of say 6%. IFRIC members believe such an amendment would result in more comparable information.

The requirements of US GAAP were noted (remeasure into a hard currency), but IFRIC members generally felt that the IAS 29 model was superior.

The IFRIC noted that if the IASB were to take on this project, D5 would become redundant and therefore would not be issued.

A discussion ensued regarding specific issues related to D5:

  • Deferred taxation - a member indicated his intention to dissent if the wording in BC12 remained in the Interpretation. This member felt that IFRIC should reach a conclusion as to whether deferred taxation is a monetary or non-monetary item; otherwise, BC12 should not refer to the issue. This member also pointed out that the manner in which deferred taxation is measured does not influence its nature. Some debate around this point took place, but not agreement was reached. The point was then made that resolution of this issue was unlikely to alter the conclusions reached in D5.
  • The IFRIC was in general agreement with the suggestion to limit the example to an illustration of just the deferred taxation issue, as the whole example was generally viewed as too simplistic.
  • The IFRIC expressed general agreement with a comment received regarding a misallocation in the example between the deferred taxation charge / credit to the income statement and the monetary adjustment. Staff agreed to amend D5.

Employee Benefit Trusts

At its May meeting, the IFRIC began discussing issues concerning employee benefit trusts (EBTs) relating to share-based payment arrangements. The IFRIC discussed a request from the IASB to consider:

1. Whether the scope of SIC-12 Consolidation-Special Purpose Entities should be amended once IFRS 2 becomes effective, to remove the scope exclusion for equity compensation plans.

This phase (step 1) culminated in the issuance of IFRIC D7 Scope of SIC-12 Consolidation - Special Purpose Entities on 30 June 2004, with a request for comments by 13 September 2004.

2. Whether any guidance should be developed on accounting for employee benefit trusts relating to share-based payment arrangements.

The discussion at this meeting would focus on the second step – guidance on accounting for employee benefit trusts relating to share-based payment arrangements. The following issues were discussed but no decisions were made:

  • The scope of the interpretation, to distinguish the employee benefit trusts covered by the interpretation from those within the scope of IAS 19 Employee Benefits.
  • Whether any guidance should be given on determining whether an EBT is under the entity's control.
  • Whether the EBT should be treated as a branch or a subsidiary.
  • What guidance, if any, should be given on the consolidation process?

The IFRIC discussed whether to provide guidance similar to that in the UK UITF 38 on consolidation procedures around employee compensation trusts. There was no overwhelming support that such an interpretation should receive IFRIC priority and should only be addressed (if at all) once the results of D7 were known. As a result, that feedback would be considered at the October meeting.

Constitution of an Obligating Event by Future Market Share

Certain types of products bear an obligation of the producer to contribute to the cost of waste management at the end of the product's life cycle. The obligation sometimes depends on the future market share of the producer at that time. The accounting question for the producer is whether the obligating event for the waste management cost occurs (a) when the product has been put onto the market or (b) when the future market share determines the cost for waste management.

The issue has arisen under EU Directive 2002/96/EC on Waste Electrical and Electronic Equipment (WEEE), which regulates the collection, treatment, recovery, and environmentally sound disposal of waste equipment. The Directive came into force on 13 February 2003.

The issue has been addressed by the Accounting Interpretations Committee of the German Accounting Standards Board (AIC) which has developed a draft interpretation on WEEE in December 2003 (D-AIC-1). The draft interpretation provides guidance on applying IAS 37 Provisions, Contingent Liabilities and Contingent Assets relating to the constitution of an obligating event. The draft proposes that if an obligation for cost of waste management depends on a participation of the producer in the future, i.e. future market share, the obligating event is the future participation in the market and not the date when the products are put onto the market.

The was some debate around the specific provisions of the draft interpretation put before the IFRIC with the following notable points:

  • IFRIC decided to rename the interpretation to 'Liabilities arising from market share'. It was decided not to include the notion of 'future' market share into the title.
  • Although no decision was made, IFRIC members questioned whether the draft interpretation should deal with measurement issues pertaining to the obligation, as it did not seem to be part of the issue brought to them to consider.

There was agreement not to mention the EU directive in the draft Interpretation but instead to use more generic wording.

This summary is based on notes taken by observers at the IFRIC meeting and should not be regarded as an official or final summary.

30 July 2004: IASB announces 2005 meeting schedule
The IASB has announced its own meeting schedule through December 2005 and those of the Standards Advisory Council and the International Financial Reporting Interpretations Committee. The schedules are noted below. You can always find them on our IASB Future Meetings Page.

I A S B   a n d   S A C   M E E T I N G S   2 0 0 4
London, UK22-24 September 2004
27 September Meeting with World Standard Setters
28 September Meeting with Chairs of Partner National Standard Setters
Norwalk, CT, USA18-22 October 2004
London, UK15-17 November 2004
(and 18-19 November 2004 Standards Advisory Council)
London, UK15-17 December 2004
I A S B   a n d   S A C   M E E T I N G S   2 0 0 5
London, UK17-21 January 2005
London, UK14-18 February 2005
(and 10-11 February 2005 Standards Advisory Council)
London, UK14-18 March 2005
London, UK18-22 April 2005
London, UK16-20 May 2005
London, UK20-24 June 2005
(and 27-28 June 2005 Standards Advisory Council)
London, UK18-22 July 2005
London, UK19-23 September 2005
Norwalk, CT, USA17-21 October 2005
London, UK14-18 November 2005
(and 10-11 November 2005 Standards Advisory Council)
London, UK12-16 December 2005

I F R I C   M E E T I N G S   2 0 0 4
London, UK2-3 September 2004
London, UK7-8 October 2004
London, UK4-5 November 2004
London, UK2-3 December 2004
I F R I C   M E E T I N G S   2 0 0 5
London, UK3-4 February 2005
London, UK31 March - 1 April 2005
London, UK2-3 June 2005
London, UK28-29 July 2005
London, UK1-2 September 2005
London, UK3-4 November 2005
London, UK1-2 December 2005

29 July 2004: Second edition of Deloitte German GAAP–IFRS comparison
The publisher is now accepting orders for the second edition of Deloitte's 170-page comparison of German GAAP and IFRSs – Rechnungslegung nach IFRS – which is expected to be available in the last week of August.
Ab dem Jahr 2005 wird die Bilanzierung nach IFRS-Richtlinien für börsennotierte Unternehmen verbindlich - für viele ein tiefer Einschnitt in interne Organisationsprozesse, der sich nicht nur auf das Rechnungswesen beschränkt. Aus dem Inhalt: Allgemeine Grundsätze für die Aufstellung von Jahresabschluss und Lagebericht, tabellarische Gegenüberstellung von IFRS- und HGB-Regeln, Besonderheiten der Konzernrechnungslegung, Ausblick auf Arbeitsprogramm 2004/2005 des IASB.
For more information please visit the Publisher's Website.

29 July 2004: Summary of new IASB business combinations standards in German
Deloitte (Germany) has published a German Language Overview of IFRS 3 Business Combinations and the related new rules in IAS 36 Impairment of Assets and IAS 38 Intangible Assets (PDF 579k). The title of this 21-page publication in German is IFRS 3: Unternehmenszusammenschlüsse sowie Änderungen der IAS 36 Wertminderung von Vermögenswerten und IAS 38 Immaterielle Vermögenswerten.

29 July 2004: FASB considers convergence for unremitted foreign earnings
At its meeting earlier this week, the US Financial Accounting Standards Board agreed to explore the possibility of converging with IAS 12 Income Taxes by removing the existing exception to comprehensive recognition of deferred taxes for unremitted earnings of foreign subsidiaries. Under current US GAAP, a deferred tax liability is not recognised for taxes potentially payable on profits earned and held overseas. US accounting treatment follows the tax law, which taxes overseas earnings only when received as dividends or realised through sale of the investment. Under IAS 12, however, these deferred taxes are accrued.

29 July 2004: New Accounting Roundup newsletter is available
We have posted the 28 July 2004 Edition of Accounting Roundup (PDF 161k), a newsletter published by Deloitte & Touche (USA). Accounting Roundup summarises recent accounting and financial reporting developments and provides Internet links to related content. This issue has information about developments at FASB (including several proposed FSPs), EITF, GASB (including a proposal on net assets restricted by enabling legislation), AICPA (including several new Technical Practice Aids and a survey for private company stakeholders), SEC, PCAOB, and IASB (including exposure drafts on financial instruments disclosures and limited amendments to IAS 39). You will find all Past Issues Here.

29 July 2004: Board-level overview of Australian equivalents to IFRSs
Deloitte (Australia) has today released a new Discussion Paper: An Overview of Australian Equivalents to IFRS – A Guide for Boards and Audit Committees. With the final versions of the Australian equivalents to International Financial Reporting Standards (A-IFRSs) having been issued by the Australian Accounting Standards Board last week, this publication is designed to assist boards and audit committees to quickly come to terms with the requirements of A-IFRSs and their immediate impacts on current financial reporting. The guide also includes a number of key questions that boards and audit committees can use to assess preparedness for the transition to A-IFRSs, as well as examples of the narrative disclosures that might be appropriate for disclosing the impact of adopting A-IFRSs. Click to Download the Discussion Paper (PDF 4,021k*). Because A-IFRSs are virtually identical to IFRSs, this publication is likely to be useful globally, not just in Australia.
*Because of the large file size, a white screen may appear for a while when downloading.

28 July 2004: Web-based technical update on IAS 32 and IAS 39
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 third Webcast was run on Thursday 22 July 2004 and covered certain aspects of IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement. 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.

28 July 2004: ICAEW guidance on audit implications of IFRSs
The Institute of Chartered Accountants in England and Wales has published guidance on Auditing Implications of IFRS Transition (PDF 93k) intended to assist auditors in assessing the state of their clients' readiness for the transition to IFRSs and to prepare for the auditing implications. The guidance warns against complacency that there are not many differences between UK GAAP and IFRSs:

It is easy to make a high-level comparison of UK GAAP and IFRS and conclude that there are few major differences; however there are many important detailed differences, many of which will be discovered only by a thorough analysis of a company's transactions and exposures. Matters that need to be considered include:
  • changes brought by the move to IFRS will mean a major change in the actual format of the accounts;
  • differences in definitions may mean that items previously classified in one way will need to be classified differently;
  • some items that are not recognised under UK GAAP are recognised as assets or liabilities under IFRS, whilst others may cease to be recognised;
  • some items may have to be measured differently in the accounts of an individual subsidiary and in the consolidated accounts;
  • more extensive disclosure requirements will result in greater data capture needs; and
  • some changes in accounting policies may require accounting systems to give different information.
Click for Press Release (PDF 36k).

28 July 2004: Reminder of two approaching comment deadlines
The comment deadlines on the following two IASB exposure drafts are 31 July 2004:

28 July 2004: Revised agenda for IFRIC 29 July 2004 meeting
The International Financial Reporting Interpretations Committee will hold a one-day meeting on 29 July 2004 at the IASB's offices in London. The agenda below reflects a revision to the one originally announced by IFRIC, which we had noted on 20 July:

AGENDA OF THE IFRIC MEETING 29 JULY 2004

28 July 2004: IOSCO report on Islamic capital markets
The International Organization of Securities Commissions (IOSCO) has published Islamic Capital Market Fact Finding Report (PDF 611k) intended to assist regulators in assessing the extent of the development and potential regulatory issues relating to the Islamic capital market, as well as to gather information on Islamic financial products and activities. Among the sections of interest from an IFRS perspective:

  • 3.3.1 Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI)
  • 4.3.2 Key issues relating to the Islamic capital market, which describes, among other things, how IFRSs are used by Islamic financial institutions.
Two excerpts relating to accounting:
"In some cases, Islamic financial institutions encounter accounting problems because the existing accounting standards such as International Accounting Standards (IASs), Generally Accepted Accounting Principles (GAAPs) or domestic standards, were developed based on conventional institutions, conventional product structures or practices, and may be perceived to be insufficient to account for and report Islamic financial transactions. Shariah compliant transactions may not have parallels in conventional financing and therefore, there may be significant accounting implications. For example, in the case of Mudharabah contracts, the transaction is neither equity nor liability in nature as the depositor does not assume the rights of an equity holder (i.e., shareholder) of the Islamic financial institution and neither is he guaranteed of returns. Hence, from an Islamic accounting viewpoint, a Mudharabah account may be presented as an 'investment account', appearing as a separate line item from equity or liability on the balance sheet."

"The current approach to developing financial standards for Islamic transactions is to benchmark against international standards such as International Accounting Standards (IASs) to ensure consistency with globally accepted standards and modifying them, where necessary, in order to ensure financial statements present fairly the financial position, financial performance and cash flows of the Islamic financial institution.... This can be seen as a response to the growth and increasing maturity of the Islamic capital market that requires more specific disclosure and standards that address the specific features of Islamic products and services. Hence, international Islamic financial institutions such as AAOIFI have begun to set international Islamic accounting standards for Islamic financial institutions which are likely to be used by the global Islamic financial services industry."

27 July 2004: Comment letters to IASB on IAS 39 fair value option
The IASB has Posted on its Website the 81 comment letters it has received on the Exposure Draft of Proposed Amendments to IAS 39 Financial Instruments: Recognition and Measurement: The Fair Value Option.

26 July 2004: EFRAG posts final and draft comment letters
The European Financial Reporting Advisory Group (EFRAG) has submitted to the IASB its final comments on three IASB proposals and one draft interpretation. Also, EFRAG has invited comments on its draft comment letters on two additional documents:
Final comment letters to IASB:

Draft comment letters: (download from EFRAG's website www.efrag.org)
  • ED of Amendments to IAS 39: Financial Guarantee Contracts and Credit Insurance (comments due 24 September 2004)
  • IFRIC D9 Employee Benefit Plans with a Promised Return on Contributions or Notional Contributions (comments due 27 August 2004)

23 July 2004: US SEC begins assessment of the benefits of 'tagged data'
The US Securities and Exchange Commission is assessing the benefits of tagged data and its potential for improving the timeliness and accuracy of financial disclosure and analysis of Commission filings. The Commission will seek public comment on alternative methods and the costs and benefits associated with tagged data. In addition, the Commission will consider a staff proposal to accept voluntary supplemental filings of financial data using eXtensible Business Reporting Language (XBRL). This voluntary program would enable the Commission staff to further investigate the types of data tagging currently available in the marketplace. The Commission may propose a rule this fall that would, if adopted, establish the voluntary program beginning with the 2004 calendar year-end reporting season.

  • Click for SEC Press Release.
  • Information about XBRL (a system for tagging data) can be found on the XBRL International Website. IASB commercial director Kurt Ramin chairs the XBRL International Steering Committee.
  • An exposure draft dated 15 June 2004 International Financial Reporting Standards (IFRS) General Purpose Financial Reporting for Profit-Oriented Entities (GP) can be found Here.
  • Other XBRL financial reporting taxonomies can be found Here.
  • The 10th XBRL International Conference, Financial Reporting Goes Global: XBRL and IFRS Working Together, will be held 15-17 November 2004 in Brussels. Click for More Information.
  • The European Commission has granted €1,000,000 to accelerate the development and adoption of XBRL in Europe. Press Release (PDF 110k).

22 July 2004: Notes from the third day of the July 2004 IASB meeting
The IASB met at its offices in London on 22 July 2004, the third and final day of a three-day Board meeting. We have combined our notes for all three days in a Separate Page.

22 July 2004: Four IFRIC members reappointed
The Trustees of the IASC Foundation have reappointed four members of the International Financial Reporting Interpretations Committee (IFRIC) for three-year terms expiring 30 June 2007. The four are Jeannot Blanchet, Morgan Stanley Europe; Domingo Mario Marchese, Marchese, Grandi, Meson & Asociados, Argentina; Mary Tokar, KPMG International Financial Reporting Group; and Ian Wright, PricewaterhouseCoopers. Two other members of the IFRIC will be leaving a year before their terms expire — Clement Kwok, Hong Kong and Shanghai Hotels Limited, and Wayne Lonergan, Lonergan Edwards & Associates Limited. A search is underway for their replacements. Click for Press Release (PDF 17k) and Search Announcement (PDF 9k).

22 July 2004: IASB issues ED 7 on financial instruments disclosures
The IASB has issued an exposure draft that would add certain new disclosures about financial instruments to those currently required by IAS 32, would replace the disclosures now required by IAS 30, and would put all of those financial instruments disclosures together in a new standard. IAS 32 would then deal only with financial instruments presentation matters. ED 7 Financial Instruments: Disclosures would require disclosures in the following areas, among others:

  • Disclosure of the significance of financial instruments for an entity's financial position and performance (this would incorporate many of the requirements previously in IAS 32).
  • Qualitative and quantitative disclosures about exposure to risks arising from financial instruments. The qualitative disclosures describe management's objectives, policies, and processes for managing those risks. The quantitative disclosures provide information about the extent to which the entity is exposed to risk, based on information provided internally to the entity's key management personnel. Together, these disclosures provide an overview of the entity's use of financial instruments and the exposures to risks they create.
  • Disclosures about credit risk, including credit enhancements and the fair value of and other information about collateral received.
  • Disclosures about interest rate risk, which would include both cash flow interest rate risk and fair value interest rate risk. Sensitivity analyses for interest rate and foreign exchange rate risks would be required.
  • Disclosures about market risk, including information about asset quality and the liquidity of the markets in which a financial asset might be disposed.
  • Disclosures about other risks, sometimes called residual value risks, that underlie financial instruments and that are not captured by the other disclosures.
  • Details about an entity's own equity; qualitative information about the entity's objectives, policies, and processes for managing capital; whether during the period it complied with any capital targets set by management and any externally imposed capital requirements; and if it has not complied, the consequences of such non-compliance.
ED 7 would delete the current IAS 30 disclosures about contingencies, commitments, and general banking risks.
Click for the IASB Press Release (PDF 31k). ED 7 will be available for public download from www.iasb.org starting 2 August 2004. Comment deadline is 22 October 2004. The Board expects to issue a final standard in early 2005. It would be mandatory for financial periods beginning on or after 1 January 2007. Early adoption will be encouraged, and therefore that standard could be applied by 2005 first time adopters.

22 July 2004: Notes from the second day of the July 2004 IASB meeting
The IASB met at its offices in London on 21 July 2004, the second day of a three-day Board meeting. We have combined our notes for all three days in a Separate Page.

22 July 2004: New Deloitte publication on internal controls
We have posted a new Deloitte publication, Taking Control: A Guide to Compliance with Section 404 of the Sarbanes-Oxley Act of 2002. This 43-page book provides step-by-step guidance on implementing a strong system of internal control to meet the requirements of Sarbanes-Oxley section 404. SEC-registered companies that have not yet begun to develop their system of internal control – such as non-accelerated filers and foreign private issuers -- may benefit from a cover-to-cover reading. Accelerated filers, who are likely to be further along with their internal control project because of the Act's earlier effective date for them, may opt to pick and choose cafeteria-style from the material either to measure their progress or to ensure quality control. An appendix contains supplementary information, sample forms, glossary, and reference material. Click to Download Taking Control (PDF 1.02mb).

21 July 2004: Deloitte comment letter on IAS 39 fair value option
Deloitte has submitted a Letter of Comment (PDF 119k) on the IASB's exposure draft of Proposed Amendments to IAS 39 – The Fair Value Option. Here is an excerpt from the letter:

We believe the Proposed Amendment diverges from a principle-based approach to a set of arbitrary rules. In addition, the basis for the proposed rules is unclear, which creates the potential for differing interpretations that are not consistent with the Board's intent. We also believe the introduction of a new “verifiability” measurement standard as a condition for using the fair value option will raise numerous implementation issues. We do not believe the Proposed Amendment is an ideal or workable solution.

The worldwide system of reporting should be based on open and transparent accounting, free from national distortions and pressures. We believe political involvement in the standard setting process hinders the movement towards a single set of high quality, globally accepted accounting standards. We note that there has been much debate surrounding the use of fair value as a measurement basis for financial assets (and liabilities). We do not believe the proposals represent a high quality solution and, accordingly, we question whether the Proposed Amendment would be accepted by other standard-setters in the quest for convergence around high quality solutions.

21 July 2004: EU might delete 17 paragraphs from IAS 39 before endorsing
Bloomberg News and Reuters are reporting that EU Financial Services Commissioner Frits Bolkestein told the European Commission, at a meeting in Strasbourg, France, yesterday, that the European Union should 'carve out' 17 paragraphs from IAS 39 before endorsing that standard for use in Europe. The deleted paragraphs relate to derivatives and hedge accounting and the fair value option. Those paragraphs would not be endorsed pending the IASB's review of concerns that have been expressed by the EU about the effect of the IAS 39 the hedging provisions and fair value option particularly on banks. Mr. Bolkestein indicated that after receiving the non-binding opinion of the Commission's Accounting Regulatory Committee, which meets 9 September 2004, the proposal to endorse IAS 39 minus the carved out parts would be put before the 30-member European Commission for a vote before the end of October 2004, Bloomberg News reported.

21 July 2004: US House overwhelmingly approves stock options legislation
The United States House of Representatives has approved HR 3574 Stock Option Accounting Reform Act by a vote of 312 to 111, with 10 nonvoting. This legislation would restrict the SEC from recognising a FASB standard on expensing stock options to options granted to the top five officers of a company, would exclude volatility from the calculation of fair value for those options, and would delay implementation for at least a year pending completion of a joint study by the Secretaries of Commerce and of Labor of the economic impact of the mandatory expensing of employee stock options. The bill would not prohibit voluntary expensing of stock options by SEC registrants. The Senate must also pass the same legislation before the bill becomes law. The FASB has issued an exposure draft proposing that the fair value of all share-based payment, including stock options, be recognised as an expense. The FASB proposal is very similar to IFRS 2. Before adopting HR 3574, the House considered but rejected a substitute bill that sought to preserve the independence of the FASB. Click for the Full Text of the bill as passed (PDF 104k).

20 July 2004: Notes from the first day of the July 2004 IASB meeting
The IASB met at its offices in London on 20 July 2004, the first day of a three-day Board meeting. We have combined our notes for all three days in a Separate Page.

20 July 2004: New Google search engine for IASPlus website
We have replaced our old search engine for IASPlus with the Google search engine. Three big improvements:

  • The Google search engine will search within PDF files.
  • The results are returned with the search terms highlighted in the context (one or two sentences) in which they appear in the documents that were found.
  • Google is extremely fast.
Click  Search  at the top of any page or the button at the left on this Home Page.

20 July 2004: EFRAG posts final and draft comment letters
The European Financial Reporting Advisory Group (EFRAG) has submitted to the IASB its final comments on the IASB's proposals for Strengthening IASB's Deliberative Process (PDF 38k). Also, EFRAG has submitted its final endorsement advice to the European Commission Recommending Adoption of IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities (PDF 35k). Further, EFRAG has drafted its preliminary views on the following IASB and IFRIC proposals and is seeking comments by the dates indicated:

  • IFRIC D7 Scope of SIC 12 Consolidation – Special Purpose Entities (20 August 2004)
  • IFRIC D8 Members' Shares in Co-operative Entities (20 August 2004)
  • ED Amendments to IAS 39: Cash Flow Hedge Accounting of Forecast Intragroup Transactions (24 September 2004)
  • ED Amendments to IAS 39: Transition and Initial Recognition of Financial Assets and Liabilities (24 September 2004)
The final comment letters and draft preliminary views can all be downloaded from EFRAG's website www.efrag.org.

20 July 2004: Agenda for IFRIC 29 July 2004 meeting is announced
The International Financial Reporting Interpretations Committee will hold a one-day meeting on 29 July 2004 at the IASB's offices in London. The meeting will not continue to 30 July, as had been previously announced. Here is the agenda:

AGENDA OF THE IFRIC MEETING 29 JULY 2004

19 July 2004: IAASB proposes to enhance its operating procedures
The International Auditing and Assurance Standards Board (IAASB) has issued an exposure draft proposing certain enhancements to its due process and working procedures. The enhancements are designed to increase confidence that the activities of the IAASB are properly responsive to the public interest and will lead to high quality international standards. Proposed enhancements include:

  • Public forums or round-tables, or the issue of consultation papers, where wider or further input would be appropriate.
  • Enhanced meeting agenda material and easier access to comment letters to assist in its deliberative process.
  • An expanded description of the process by which the IAASB considers the need to re-expose a draft IAASB international standard or practice statement.
  • The possibility of issuing a separate document explaining its basis for conclusions on final IAASB international standards or practice statements where necessary.
  • A process to address circumstances where issues over due process are raised with the IAASB.
For IAASB's press release, including a link to download the exposure draft, Click Here (PDF 89k). Comment deadline is 15 October 2004.

19 July 2004: US House may vote this week on stock options legislation
The United States House of Representative may vote as early as Tuesday 20 July on legislation (known as H.R. 3574, the Stock Option Accounting Reform Act) that would restrict the SEC from recognising a FASB standard on expensing stock options to options granted to the top five officers of a company, would exclude volatility from the calculation of fair value for those options, and would delay implementation for at least a year. The Senate must also pass the same legislation before the bill becomes law. On 8 July 2004, FASB Chairman Robert H. Herz testified on the bill before the Commerce, Trade, and Consumer Protection Subcommittee of the House Committee on Energy and Commerce. Mr. Herz's testimony may be found on FASB's Website.

19 July 2004: FASB may adopt IASB's black letter/gray letter style
FASB's Response to July 2003 SEC Staff Report to Congress on a Principles-Based Accounting System (see story below) indicates that FASB "is considering using the black letter/gray letter style of the International Accounting Standards Board (IASB) and will use that style in its business combinations Exposure Draft. The Board intends to request constituent input on that style and will address the advantages and disadvantages of using that style in all FASB standards at a later date."

19 July 2004: FASB response on principles-based accounting
The US Financial Accounting Standards Board has submitted a Response to July 2003 SEC Staff Report to Congress on a Principles-Based Accounting System (PDF 97k). The 2003 SEC Report (PDF 495k) had been prepared pursuant to Section 108(d) of the Sarbanes-Oxley Act of 2002. The FASB response states that "the Board welcomes the SEC's study and agrees with the recommendations." A section of the FASB response (pages 10-11) relates to international convergence. The SEC staff report had made the following recommendations:

  • The FASB should issue objectives-oriented standards.
  • The FASB should address deficiencies in the conceptual framework.
  • The FASB should be the only organization setting authoritative accounting guidance in the United States.
  • The FASB should continue its convergence efforts.
  • The FASB should work to redefine the GAAP hierarchy.
  • The FASB should increase access to authoritative literature.
  • The FASB should perform a comprehensive review of its literature to identify standards that are more rules-based and adopt a transition plan to change those standards.

18 July 2004: The evolution of US GAAP
Professor Stephen A. Zeff, Rice University, presented an all-day seminar on the Evolution of US Generally Accepted Accounting Principles (1932 to today) at an International Symposium on Accounting Standards sponsored by the Ministry of Finance of the People's Republic of China, Beijing, 12 July 2004. We are grateful to Prof. Zeff for permitting us to post a comprehensive Outline of the Presentation (PDF 75k). The outline will remain available on the USA Page.

17 July 2004: Australian companies slow to begin implementing IFRSs
A survey of 122 Australian corporate entities conducted by the Institute of Chartered Accountants in Australia (ICAA) has found that less than half of those surveyed (49%) have begun the process for implementing International Financial Reporting Standards (IFRSs). 61% believe that IFRSs will assist Australian companies in general, while only 40% feel that IFRSs will assist their own business. Click for ICAA Press Release (PDF 19k). As noted in the story immediately below this one, IFRSs as of 31 March 2004 are now Australian GAAP and go into effect in 2005.

17 July 2004: Australia brings all IFRSs as of 31 March 2004 into effect
The Australian Accounting Standards Board (AASB) has voted to formally adopt all IASs and IFRSs existing at 31 March 2004 as Australian Accounting Standards, thereby effectively introducing those international accounting standards into Australian law for all companies and other entities for reporting periods commencing on or after 1 January 2005. The AASB's policy is to have standards in place one year before entities must adopt them, to allow time for entities to address systems changes and other transition problems. Thus – with one exception – any further changes to IFRSs would take effect in Australia after 2005. The one exception is the standard expected to result from IASB's ED 6 on exploration and evaluation costs in the extractive industries. That exposure draft would, in effect, "grandfather" Australia's existing national GAAP for those industries. Thus, transition problems are not expected. Because they are delegated legislation, the standards still must pass through a final endorsement process in both houses of the Australian Parliament. They can be rejected in whole or part by a majority vote in either house. Click for AASB Media Release (PDF 39k).

16 July 2004: Deloitte comment letter on proposed IFRS 3 scope amendments
Deloitte has submitted a Letter of Comment (PDF 20k) on the IASB's exposure draft of Proposed Amendments to IFRS 3 – Combinations by Contract Alone or Involving Mutual Entities. Our view:

We strongly disagree with the proposed amendments and the issuance of any standard arising from this Exposure Draft. The proposed amendments create an additional form of purchase accounting with different rules than those for other business combinations. We believe the proposals constitute an unsuitable short-term solution and believe it would be more appropriate to leave the standard unchanged until such time as adequate research into, and resolution of, the accounting issues created by such transactions is completed. We urge the Board to proceed with its project on 'fresh start accounting' as we consider exploration of this possibility may assist in the identification of conceptually robust solutions to this issue.

16 July 2004: Agenda for the July 2004 IASB meeting in London
The IASB will hold its July meeting at its offices, 30 Cannon Street, London, United Kingdom, on 20-22 July 2004. The agenda is presented below.

AGENDA OF THE IASB MEETING 20-22 JULY 2004

16 July 2004: Testimony at IASCF Tokyo hearing has been posted
The Constitution Review Committee of the IASC Foundation held a public hearing in Tokyo on 13 July 2004. The prepared testimony has posted on IASB's Website.

16 July 2004: New – US Reporting newsletter for non-US based companies
Here's a great new resource from Deloitte's Global Offerings Services group (GOs) for non-US companies that must report in the United States. GOs comprises a global team of practitioners assisting non-US companies and non-US practice office engagement teams in applying US GAAP and International Financial Reporting Standards and in complying with the SEC's financial reporting rules. GOs has recently begun publishing a US Reporting Newsletter for Non-US Based Companies. We are adding these to IASPlus. Click to download the current issue – Global Offerings Services Newsletter June 2004 (PDF 381k). Past issues are available on the United States Page. We will announce each new edition here.

 

16 July 2004: Reminder – comment deadline on IAS 39 fair value option amendment
The deadline for comments on IASB's Exposure Draft on Amendments to IAS 39 - The Fair Value Option is this coming Wednesday, 21 July 2004. The ED proposes to restrict the availability of the option to classify individual financial assets and liabilities as measured at fair value through profit and loss by limiting the types of financial assets and financial liabilities to which the option may be applied, and by requiring that the option may be applied only to financial assets and financial liabilities whose fair value is verifiable.

15 July 2004: Responses requested to joint venture survey by 28 July 2004
The FASB website reports that the International Accounting Standards Board is conducting a research project that is the first phase of a longer-term effort to improve IAS 31 Interests in Joint Ventures. The Australian Accounting Standards Board is leading a team of standard setters from Hong Kong, Malaysia, and New Zealand that are conducting the research project. As a first step in the research, a joint venture questionnaire was developed as a way of identifying the various structures of joint arrangements used worldwide. In some cases where two or more parties invest in an undertaking together, these arrangements have the characteristics of, and are classified under IFRSs as, joint ventures. In other cases, they are classified under IFRSs as investments in associates. Under US GAAP, these types of investments are generally classified as equity-method investments, although some may be variable interest entities. The survey is intended to elicit information on these types of investments regardless of how they are currently accounted for. The questionnaire can best be answered Online or by printing a hard copy of the Joint Ventures Survey (PDF 199k). The information provided through this questionnaire will be used for research purposes only and will be treated confidentially. Responses are requested by 28 July 2004.

15 July 2004: New ISA on planning an audit of financial statements
The International Auditing and Assurance Standards Board (IAASB) has published a revised International Standard on Auditing (ISA) 300 on Planning an Audit of Financial Statements. The standard requires the auditor to establish the overall strategy that sets the scope, timing, and direction of the audit. ISA 300 builds on the new audit risk standards issued last year and requires the auditor to plan the audit so that the engagement will be performed in an effective manner. The standard emphasises that planning is a continual and iterative process throughout the engagement and that unexpected events, changes in conditions, or other circumstances may lead the auditor to re-evaluate the planned audit procedures. IAS 300 is effective for audits of financial statements for periods beginning on or after 15 December 2004. It may be downloaded from IFAC's Website.

15 July 2004: Comment letters on IFRIC D6 are posted
The IASB has posted on its Website the comment letters it has received on IFRIC Draft Interpretation D6 Multi-employer Plans.

15 July 2004: Australian financial reporting update
Deloitte (Australia) has published Australian Accounting Alert 2004-15 (PDF 80k) June 2004 Financial Reporting Update. The Alert provides an outline of some of the significant areas that may impact financial reporting for annual reporting periods ending 30 June 2004. Major topics include new and/or revised Accounting Standards and Urgent Issues Group Abstracts.

14 July 2004: IFAC Public Sector Review Panel issues final report
The IFAC Public Sector Committee (PSC) External Review Panel has considered the PSC's role, governance, and organisation as well as its approach to the translation of PSC pronouncements. The panel's conclusions and recommendations are outlined in its Final Report (PDF 187k). It is the policy of the PSC to base International Public Sector Accounting Standards on IFRSs "to the extent appropriate". The report also recommends convergence of public and private sector standards as a long-term goal:

In the Panel's view the long-term aspiration of the PSC should be for a convergence of financial reporting standards between the private and public sectors where appropriate. This aspiration should recognise that there are a number of issues specific to the public sector or of particular significance to the public sector. Separate standards or adaptations of private sector standards are likely to be needed for such issues. However, the objective of "convergence when appropriate" will not be achieved in the short-term or even medium-term. In order to ensure that the PSC is positioned to fulfil this aspiration it is important that the component of the work programme addressing harmonisation with IAS/IFRS is maintained and adequately resourced.

14 July 2004: Two new Australian Accounting Alerts
Deloitte (Australia) has published two Australian Accounting Alerts:
  • 2004-13 (PDF 64k) Pending AASB 124 'Related Party Disclosures'
  • 2004-14 (PDF 73k) The AASB issues Pending Framework for the Preparation and Presentation of Financial Statements
One of the main differences between the Pending Framework and existing Australian accounting pronouncements is that the Pending Framework contains a different notion of income and revenue from that contained in SAC 4.... SAC 4 defines revenue as 'inflows or other enhancements, or savings in outflows, of future economic benefits in the form of increases in assets or reductions in liabilities of the entity'. The equivalent concept in the Pending Framework is income. This is defined as 'both revenue and gains'.

'Revenue' is defined as arising in the course of the ordinary activities of an entity, and 'gains' are determined on a net basis and represent other items that meet the definition of income and 'may, or may not, arise in the course of the ordinary activities of an entity'.

As a result of this change, the current requirement to report proceeds on the sale of assets will no longer form part of revenue, rather the net gain or loss will be appropriately classified. The broad impact of the definition of income as 'revenue and gains' means that some items will be reported on a net basis and others will be reported on a gross basis.

A similar issue arises in respect of expenses, which are defined to encompass both 'losses as well as those expenses that arise in the course of the ordinary activities of the entity'.

13 July 2004: New Accounting Roundup second quarter review posted
We have posted Accounting Roundup: Second Quarter in Review 2004 (PDF 865k), a quarterly edition of the US Accounting Roundup newsletter that summarises selected recent accounting and financial reporting developments and provides Internet links to related content. The articles included in this edition were drawn primarily from issues of Accounting Roundup published in the second quarter of 2004, and have been updated where appropriate. Accounting Roundup is published periodically as developments warrant by Deloitte (USA). Past issues are Here.

12 July 2004: New EITF Roundup posted
We have posted the June/July 2004 edition of EITF Roundup, a newsletter published by the National Office Accounting Standards and Communications Group of Deloitte & Touche LLP (USA). EITF Roundup provides an overview of the issues discussed, consensuses reached, and administrative matters at the 30 June /1 July 2004 meeting of FASB's Emerging Issues Task Force. Click to Download (PDF 111k).

12 July 2004: Deloitte comment letter on IFRIC D6
Deloitte has submitted to the IASB our Comment Letter on IFRIC D6 Multi-employer Plans PDF 56k). Click here for a Summary of IFRIC D6.

We believe that the current requirements in IAS 19.29-35 are appropriate in accounting for multi-employer plans. Whilst implementation of these requirements often involves judgement, such requirements are sufficiently clear. As a result, we question the need for the draft Interpretation and suggest that IFRIC reconsider the status of any final document that may be issued. In addition, we have concerns about certain aspects of the guidance provided in D6. In particular, we believe that whilst some of the guidance provided may be useful, other guidance proposed may bring more confusion than clarity.

11 July 2004: EFRAG letter on IAS 39
At its meeting in Brussels on 8 July 2004 the Technical Expert Group of the European Financial Reporting Advisory Group agreed to recommend that the European Commission endorse IAS 32 Financial Instruments: Presentation and Disclosure for use in Europe. However, EFRAG concluded not to make any recommendation on endorsement of IAS 39 Financial Instruments: Recognition and Measurement. We had previously posted the EFRAG letter on IAS 32 (news story of 9 July). Click here to Download EFRAG's IAS 39 Letter (PDF 133k). An Excerpt:

Five members support endorsement of IAS 39 in its present form, but six members oppose endorsement. EFRAG cannot recommend non-endorsement of a standard unless there is a two-thirds majority vote against the standard, and EFRAG does not support endorsement unless there is majority in favour. Therefore, EFRAG does not issue any advice whether to endorse IAS 39 or not.

9 July 2004: New accounting standard setting body in Mexico
As of 1 June 2004, the Council for Research and Development of Financial Information Standards (Consejo Mexicano para la Investigacion y Desarrollo de Normas de Informacion Financiera, CINIF) took over the responsibility for setting accounting standards in Mexico from the Mexican Institute of Public Accountants (IMCP). The IMCP's Accounting Principles Commission had been the standard setter since 1968. CINIF is an independent public-private sector partnership. All companies listed on the Mexican Stock Exchange (Bolsa Mexicana de Valores) are required to follow CINIF standards. Link to CINIF Website.

9 July 2004: EFRAG endorses IAS 32 but not IAS 39
At its meeting yesterday in Brussels, the Technical Expert Group of the European Financial Reporting Advisory Group (EFRAG) agreed to recommend that the European Commission endorse IAS 32 Financial Instruments: Presentation and Disclosure for use in Europe. However, EFRAG concluded not to make any recommendation on endorsement of IAS 39 Financial Instruments: Recognition and Measurement because only 5 members were in favour of endorsement while 6 were against. The EC's Accounting Regulatory Committee (ARC) meets today to consider, as EFRAG did, whether to recommend that the Commission adopt IAS 39 for use in Europe. Like EFRAG's, the ARC's recommendation is non-binding. Click to download EFRAG's Letter on IAS 32 (PDF 38k).

9 July 2004: Adoption of IFRSs delayed in Venezuela – Revised
In our news story of 6 July 2004 (below) we reported an announcement that implementation of IFRSs in Venezuela will be delayed to 2007 for all companies and that only the old IASs 1-41 and related SIC Interpretations have been adopted. We have now been informed that this is incorrect. IFRS will be delayed in Venezuela to 2006 for listed companies and to 2007 for all other companies. Further, Venezuela will be adopting all current IFRSs in full, not the old IASs and SICs.

8 July 2004: IASB proposes three amendments to IAS 39
The IASB has published three short exposure drafts proposing limited amendments to IAS 39 Financial Instruments: Recognition and Measurement. Comment deadline on all is 8 October 2004. The EDs will be available on the IASB's website starting 19 July. Click for Press Release (PDF 41k).

  • The ED Transition and Initial Recognition of Financial Assets and Financial Liabilities proposes an amendment that would apply when entities first adopt IAS 39. It would give an entity a choice of applying the "day one gain and loss" recognition requirements either prospectively to transactions entered into after 25 October 2002 or retrospectively under IAS 39.104. "Day one gains and losses" arise when the transaction price differs from fair values calculated by using, for example, a valuation model. These gains and losses can only be recognised in certain circumstances – when variables in the valuation model include only data from observable markets. This change would allow entities conform their treatment under IAS 39 to US GAAP. Proposed effective date: Annual periods beginning on or after 1 January 2005.

  • The ED Cash Flow Hedge Accounting of Forecast Intragroup Transactions addresses whether forecast intragroup transactions can be considered hedged items. Under IAS 39 prior to the December 2003 revisions, forecast intragroup transactions could be designated as a hedged item if the criteria in IGC 137-14 were met. That approach was consistent with US GAAP. However, IAS 39 as revised in December 2003 removed IGC 137-14 without including its guidance in the standard. As a result, it was unclear whether forecast intragroup transactions could still be considered hedged items. The Exposure Draft confirms that the forecast intragroup transactions can not be considered hedged items. However, the ED provides guidance that in the consolidated accounts, a highly probable forecasted external transaction that gives rise to an exposure that will have an effect on consolidated profit or loss can be designated as the hedged item. Proposed effective date: Annual periods beginning on or after 1 January 2006.

  • The ED Financial Guarantee Contracts and Credit Insurance proposes that the issuer of a financial guarantee contract should measure the contract initially at fair value. If the financial guarantee contract was issued in a stand-alone arm's length transaction to an unrelated party, its fair value at inception is likely to equal the premium received. The ED also addresses the subsequent measurement of those guarantees:
    • A guarantee that meets the IFRS 4 definition of an insurance contract (guarantee against failure of a specific debtor to pay) would initially be measured at fair value and subsequently at the higher of (a) the amount initially recognised minus amortisation under IAS 18 and (b) IAS 37.
    • A guarantee arising on derecognition would be accounted for under IAS 39 (mark to market through profit or loss) even if it is like an insurance contract.
    • A guarantee that is indexed based on a credit index or other variable would be treated as a derivative under IAS 39 (mark to market through profit or loss).
    Proposed effective date: Annual periods beginning on or after 1 January 2006.

8 July 2004: IFRIC publishes draft interpretation on cash balance benefit plans
The International Financial Reporting Interpretations Committee (IFRIC) has published for comment a draft interpretation D9 Employee Benefit Plans with a Promised Return on Contributions or Notional Contributions giving guidance on the accounting for cash balance plans. These are employee benefit plans with benefits that depend on future returns on assets. Comments are due 21 September 2004. Click for:

6 July 2004: ICAEW warns companies to communicate impact of IFRSs
A study by the Institute of Chartered Accountants in England and Wales has found that 27% of UK listed companies surveyed expect that their key performance indicators will be negatively affected as a result of the introduction of International Financial Reporting Standards in 2005. Yet, only 17% of the listed companies surveyed have a plan in place for communicating the impact of IFRSs to financial analysts and investors. 13% of the companies anticipate a favourable impact. Click to Download the ICAEW press release (PDF 50k). Here is the Link to the ICAEW website.

6 July 2004: English Institute urges immediate endorsement of IAS 39
The chief executive of the Institute of Chartered Accountants in England and Wales has written to the United Kingdom Minister of State for Industry, expressing the Institute's "serious concern" over the uncertainty regarding the endorsement of the international financial instruments standard IAS 39. "We urge the UK Government to continue to seek early endorsement of the latest version of IAS 39, unamended and unabridged. Anything less is likely to lead to long-term damage to the credibility and quality of European financial reporting." Click to Download the ICAEW letter (PDF 340k).

6 July 2004: IASCF constitution review hearing 13 July in Tokyo
The constitution committee of the IASC Foundation will hold its third public hearing in connection with its current Review of the Foundation's Constitution on 13 July 2004 at the offices of Keidanren Kaikan, 1-9-4,Otemachi, Chiyoda-ku, Tokyo. Details about the hearing may be found on the IASB Website.

6 July 2004: EFRAG will meet tomorrow on endorsement of IAS 32 and IAS 39
The European Financial Reporting Advisory Group (EFRAG) will meet on 7 July 2004 to finalise its endorsement advice to the European Commission regarding IAS 32 and 39. The meeting is open to the public, begins at 10:00 a.m., and will be held at the office of the European Federation of Accountants, 83 rue de la Loi, Brussels.

6 July 2004: EU Council discusses IAS 39; ARC will meet 9 July
At its meeting in Brussels yesterday, the Council of Economics and Finance Ministers of the European Union received a report from Internal Market Commissioner Frits Bolkestein about "the pending endorsement of IAS 39, on recognition, derecognition, and measurement of financial instruments (notably derivatives), and hedge accounting". Mr. Bolkestein reported on the 14 June 2004 meeting of the Accounting Regulatory Committee (see news story of 5 July below). He said that the Commission is awaiting the opinion of EFRAG and will outline its suggestions concerning how best to proceed as regards endorsement of IAS 39 at a further meeting of the Accounting Regulatory Committee on 9 July. Click for Press Release (PDF 88k).

6 July 2004: Reminder – comment deadline on IFRIC D6
The deadline for comments on IFRIC's Draft Interpretation D6, Multi-employer Plans is this Friday, 9 July 2004. D6 would require an entity to "make every practicable effort to apply defined benefit accounting to multi-employer plans in which it participates."

6 July 2004: Adoption of IFRSs delayed in Venezuela
In our news story of 21 April 2004 we reported that Venezuela would be adopting IFRSs in their entirety without modification effective 2005 for listed companies, 2006 for large companies, and 2007 for small companies. Also, a special commission was formed to define the implementation process. A recent Announcement by the presidents of two key Venezuelan professional bodies suggests that implementation will be delayed.

5 July 2004: CESR seeks comments on enforcement standards
The Committee of European Securities Regulators (CESR) has invited comments on a proposed approach to implementing its Standard No. 2, Coordination of Enforcement Activities. Standard 2 is establishes principles for coordinating enforcement at a pan-European level. CESR's Current Proposal (PDF 99k) involves guidance for implementing those principles. Written comments are due by 6 September 2004 and can be posted directly on the CESR Website.

5 July 2004: Minutes of the 14 June 2004 EC Accounting Regulatory Committee
The European Commission has published the Minutes of the 14 June 2004 meeting of the Accounting Regulatory Committee, at which endorsement of IAS 39 was the principal topic of discussion. As previously reported (see our story of 15 June 2004) the governments of four European countries objected to the rule and six others abstained. Fifteen voted in favour. The Commission has asked the countries to put their views in writing by 30 June. After then, the Commission will make a decision. The minutes also note that IAS 32 will be proposed for endorsement because IFRIC Draft Interpretation D8 satisfactorily addresses the accounting treatment for cooperative shares.

5 July 2004: Differences between IFRSs and US GAAP – Chinese translation
We have published the Chinese Translation of our Summary of Key Differences Between IFRSs and US GAAP (PDF 576k). The booklet reflects all IFRSs issued and revised through mid-June 2004, including those that do not become mandatory until 2005. A status note reflects what, if anything, is now being done about each difference. You can Download the English Language Version Here (PDF 258k). We are pleased to grant permission for accounting educators and students to make copies of either version for educational purposes.

5 July 2004: Deloitte urges IAS 32/39 endorsement in Europe
Deloitte has urged the European Financial Reporting Advisory Group (EFRAG) to recommend that the European Commission adopt IAS 32 and IAS 39 for use in Europe starting in 2005. Our Letter to EFRAG (PDF 51k) cites a number of "far reaching and damaging" consequences for the transition to IFRSs in Europe in 2005 if there is not a "fully endorsed and wholly supported standard on the recognition and measurement of financial instruments".

Whilst IAS 39 is not perfect, there is much to be warmly welcomed. We believe the principles for hedge accounting established by IAS 39 are sound and will, if adopted, provide a model for recognition and measurement that, notwithstanding the shortcomings, will enhance the transparency and consistency of corporate reporting, including reporting by financial institutions, across the EU.

5 July 2004: FEE supports IAS 32/39 endorsement in Europe
The European Federation of Accountants has sent separate letters to the European Financial Reporting Advisory Group (EFRAG) supporting EFRAG's draft letters endorsing IAS 32 and IAS 39 for use in Europe. You can download FEE's letters from the FEE Website. In its letter on IAS 39, FEE wrote:

The standard will probably introduce some volatility in reported equity of financial institutions, but this will be clearly identifiable and explainable. We therefore agree with the position taken by the assenting view TEG members that the standard in its current form is sufficiently robust to form a basis for reporting on financial instruments in Europe and have concluded that IAS 39 meets the requirements of the Regulation and should accordingly be adopted for use in Europe. This conclusion has overwhelming support of the FEE Council although we note that a very small number of Member Bodies have not yet taken position on this issue.

4 July 2004: Considerations in transition to IFRS 2
We have posted a small Brochure (PDF 178k) outlining the key issues that a company must consider in making the transition to IFRS 2 Share-based Payment. We have previously posted our 76-page book of Guidance for Applying IFRS 2 Share-based Payment.

2 July 2004: FASB may delay its stock options standard until 2006
Several news reports have indicated that Robert Herz, chairman of the US Financial Accounting Standards Board, has said that FASB is considering delaying the effective date of its proposed standard on share-based payment until 2006, because companies are facing more immediate deadlines on financial reporting changes, including some imposed by the Sarbanes-Oxley Act. FASB's proposal would require expensing of all stock options and is essentially the same as IFRS 2 Share-based Payment, which goes into effect in 2005. The Chief Accountant of the SEC is reported to favour delaying the FASB standard until 2006.

1 July 2004: Agenda project pages updated
We have updated the following IASB and IFRIC agenda project pages to reflect deliberations and decisions at the Board's June 2004 meeting:

1 July 2004: Deloitte comments on strengthening IASB due process
Our firm has submitted a Letter of Comments (PDF 80k) on the IASB's paper Strengthening the IASB's Deliberative Processes dated 24 March 2004. The IASB issued that paper as part of its Internal Review of its procedures for developing standards. An excerpt from our comments:

We strongly encourage the use and enhancement of the due process mechanisms suggested in the paper, and we have attached our specific comments on each mechanism in the Appendix to this letter. We believe that the due process mechanisms mentioned in the paper should be, and in many cases are, inherent in the operations of the IASB. However, we do believe that these mechanisms have not been used to their fullest potential. We believe it is important that this review of due process is undertaken so as to ensure that the IASB gains the most benefit out of future due process activities; that is they are able to use the inputs gained from constituents to ensure the development of the highest quality standards.

1 July 2004: Support for IFRSs at EU-US summit meeting
An EU-US summit meeting, known as the Trans-Atlantic Business Dialogue (TABD), was held on 25 and 26 June 2004 at Dromoland Castle in Ireland. Participants included the President of the European Commission, Romano Prodi, together with the President-in-office of the European Council, Taoiseach Bertie Ahern, and US President George W. Bush. A number of EU Commissioners also participated as did the US Secretaries of State and Commerce. The goal of the TABD is to promote closer transatlantic ties and eliminate barriers in the transatlantic market. The TABD agreed to make recommendations to governments on four priority areas, one of which involves IFRSs. The priority areas are (1) open trade and security, (2) intellectual property rights and the fight against counterfeiting, (3) capital markets and International Accounting Standards, and (4) the World Trade Organisation and the Doha Development Round.

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