31 May 2004: Most EU countries favour endorsing IAS 39 now
The European Commission has recently posted the Summary Record (Minutes) (PDF 31k) of the 30 April 2004 meeting of the Accounting Regulatory Committee. With regard to endorsement of IAS 39 for use in Europe, those notes say, in part:

31 May 2004: Deloitte comments on IASCF Constitution review
Our firm will be participating in the hearings that the trustees of the IASC Foundation will hold later this month as part of their Review of the IASCF Constitution. We have submitted a Letter of Comments (PDF 68k) addressing the specific issues to be discussed at the hearings that were raised by the IASCF in its 22 March 2004 issues paper. Those comments supplement our earlier comment letter to the IASCF on Identifying Issues for the IASC Foundation Constitution Review (66k).

30 May 2004: UK FSA CEO urges acceptance of IAS 39 in Europe
In a recent Speech (PDF 199k) at the 2004 Financial Services Authority Conference in London, FSA Chief Executive John Tiner urged that European banks and other listed companies accept IAS 39 and focus on ensuring a smooth transition to IFRSs in 2005. An excerpt from Mr Tiner's remarks:

30 May 2004: Joint IASB-ASB-FASB advisory group on comprehensive income
Three accounting standards setting bodies are jointly forming an advisory group to assist in their project on Reporting Comprehensive Income -- also known as performance reporting. The three are the International Accounting Standards Board, the United Kingdom Accounting Standards Board, and the United States Financial Accounting Standards Board. The advisory group will have about 20 members, most of whom will be professionals with significant experience and responsibility for preparing, analysing, auditing, or regulating financial statements. Nominations for membership on the advisory group should be submitted by 25 June 2004. Click for More Information (PDF 24k).

29 May 2004: Agreement between SEC and European regulators
The Director of the Office of International Affairs of the US Securities and Exchange Commission and the Secretary-General of the Committee of European Securities Regulators (CESR) have announced an agreement for enhanced cooperation and collaboration on cross-border securities regulatory matters. The overall goals of the cooperation are to identify emerging risks in the US and EU securities markets, and to engage in early discussions of potential regulatory initiatives in the interest of promoting convergence where possible. Detailed terms of the agreement will be announced at the upcoming CESR plenary meeting on 4 June 2004. Click for SEC Announcement (link to SEC website). The announcement is also on CESR's Website.

28 May 2004: IFRIC issues its first interpretation
The International Financial Reporting Interpretations Committee (IFRIC) has published its first interpretation. IFRIC Interpretation 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities contains guidance on accounting for changes in decommissioning, restoration and similar liabilities that have previously been recognised both as part of the cost of an item of property, plant and equipment and as a provision (liability). An example would be a liability that was recognised by the operator of a nuclear power plant for costs that it expects to incur in the future when the plant is shut down (decommissioned). The interpretation addresses subsequent changes to the amount of the liability that may arise from (a) a revision in the timing or amount of the estimated decommissioning or restoration costs or from (b) a change in the current market-based discount rate. Click for Press Release (PDF 27k).

28 May 2004: IASC Foundation is seeking an Asia-Pacific trustee
The IASC Foundation is seeking to appoint a Trustee resident in the Asia-Pacific region with senior experience in the field of accounting. Click for Announcement (PDF 7k).

28 May 2004: Four IASB members are reappointed
The trustees of the foundation that oversees the International Accounting Standards Board have reappointed four members of the Board with effect from 1 July 2004. Thomas E. Jones (who is the Board's vice-chairman) and Mary E. Barth will each serve a further term of five years, expiring on 30 June 2009, and Anthony T. Cope and Patricia L. O'Malley will each serve a second three-year term, expiring on 30 June 2007. Click for Press Release (PDF 26k), which includes biographies of the four Board members.

27 May 2004: EFRAG technical group meetings open to public observation
The European Financial Reporting Advisory Group (EFRAG) will open the meetings of its Technical Expert Group to public observation starting with its meeting to be held on 2-4 June 2004. For more information and to download the registration form go to the EFRAG Website. Registration must be completed no later than 1 June 2004.

26 May 2004: New Australian Accounting Alert
We have posted the latest Accounting Alert (PDF 45k) from Deloitte Australia. This issue is a Financial Instruments Update, reflecting the AASB's approval of a change to Pending AASB 139 to incorporate the macro hedging amendments to IAS 39 and the AASB's request for comments on the proposed "fair value option" amendment to IAS 39. This Accounting Alert provides an overview of the actual and proposed amendments to AASB 139 and some analysis of the issues arising.

24 May 2004: IOSCO is addressing several IFRS matters
The Final Communiqué (PDF 200k) of the XXIXth Annual Conference of the International Organization of Securities Commissions (IOSCO) addresses a number of accounting and auditing standards issues from the perspective of the world's securities and futures regulators. Several relate directly to IFRSs, including the following:

23 May 2004: Ireland will allow all unlisted companies to use IFRSs
The government of the Republic of Ireland has announced that all unlisted entities in Ireland will be permitted to follow International Financial Reporting Standards starting in 2005. Irish listed companies are already required to switch to IFRSs in 2005 under the European Union accounting regulation. Click for Press Release from the Institute of Chartered Accountants in Ireland.

22 May 2004: Agenda project pages updated
We have updated the following agenda project pages on IASPlus to reflect the IASB's deliberations and decisions at its meeting on 18-19 May 2004:

• Business Combinations Phase II
• Consolidation including SPEs
• Financial Activities - Risk Disclosures
• Financial Instruments: Cash Flow Hedge Accounting of Forecast Intra-group Transactions
• Accounting Standards for Small and Medium-sized Entities
• IAS 37 Provisions, Contingent Liabilities and Contingent Assets
• Revenue Recognition

21 May 2004: Coalition formed in US to support FASB stock option proposal
A broad coalition of 30 pension funds, consumer/investor groups, and labour unions is urging the United States Congress to stay out of the Financial Accounting Standards Board's process for considering a proposed standard that would require companies to expense all stock options and other share-based payment. FASB's proposed standard is similar to IFRS 2. The coalition – known as the Financial Accounting Coalition for Truthful Statements (FACTS) said that "H.R. 3574/S. 1890, 'The Stock Option Accounting Reform Act,' would establish the dangerous precedent of Congress intervening to substitute special interest provisions in place of standards that are set independently and objectively to achieve accurate and transparent financial reporting." Click to download the Coalition's Public Statement and list of members (PDF 30k).

21 May 2004: Internet-based IFRS technical updates now available on IASPlus
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. These are more than just summaries of the main requirements of the standards. They also identify the key impacts for companies reporting under UK GAAP, highlight implementation matters, and flag other practical issues to watch out for. The first session, addressing employee-related issues, was run on Thursday 20 May 2004 and covered IFRS 2 Share-based Payment and IAS 19 Employee Benefits. We have made a place on the UK Page where you will always find the link to the latest available update. It is intended that a recording of each session will be available on this website for a period of 3 to 4 weeks from the date of the presentation. We will announce each new one on this home page. Like our Deloitte IFRS e-Learning programmes, we are making these programmes available in the public interest without charge.

20 May 2004: Congress is told that EU wants SEC recognition of IFRSs
In Testimony (PDF 115k) before the US House Committee on Financial Services, Alexander Schaub, the Director General of the Internal Market Directorate of the European Commission, expressed a hope that the US SEC would recognise IFRSs as part of a programme of mutual US-EU recognition of each other's financial market regulations. The committee was conducting hearings on "The US-EU Regulatory Dialogue and Its Future". Mr. Schaub said:

20 May 2004: Notes from the second day of the May 2004 IASB meeting
We have combined our notes from the IASB meeting on 18-19 May 2004 onto a Single Page. These are preliminary and unofficial notes taken by Deloitte observers at the meeting.

19 May 2004: EFRAG seeks comments on two draft responses to IASB

The European Financial Reporting Advisory Group (EFRAG) is seeking comments by 28 June 2004 on its preliminary views on two current IASB exposure drafts:

19 May 2004: CESR publishes standard on financial information enforcement
The Committee of European Securities Regulators has published a standard on enforcement activities by supervisors of financial information in Europe. Click to download CESR Standard 2 (PDF 92k). CESR's announcement states: "The standards adopted will contribute to the creation within Europe of robust and consistent enforcement of the internationally recognised set of accounting standards (as published by the International Accounting Standards Board, IASB, and endorsed by the European Commission) to be implemented by 2005." Note: CESR's website address has recently changed to http://www.cesr-eu.org/.

19 May 2004: SEC approves PCAOB's Auditing Standard No. 1
The US Securities and Exchange Commission has approved Public Company Accounting Oversight Board (PCAOB) 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 subject to PCAOB oversight, including audits of foreign SEC registrants, state that the engagement was performed in accordance with the standards of the PCAOB. This replaces previously required references to generally accepted auditing standards. A PCAOB Announcement states that AS 1 is effective 24 May 2004. Click to Download AS 1 (PDF 73k).

19 May 2004: New Zealand Accounting Alert
We have posted New Zealand Accounting Alert #22 (PDF 188k). This issue summarises four recent New Zealand exposure drafts that address employee benefit plans, consolidated and separate financial statements, special purpose entities, government grants, and the fair value option for financial instruments. Past Alerts may be found Here.

19 May 2004: Notes from the first day of the May 2004 IASB meeting
We have combined our notes from the IASB meeting on 18-19 May 2004 onto a Single Page. These are preliminary and unofficial notes taken by Deloitte observers at the meeting.

19 May 2004: We have posted the latest Accounting Roundup newsletter
Deloitte (United States) has published the 17 May 2004 edition of Accounting Roundup (PDF 173k). 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, SEC, and IASB. You will find past issues Here.

18 May 2004: FAF chairman expresses concern re Congressional interference
Robert Denham, the chairman of the Financial Accounting Foundation (which oversees FASB), has expressed "grave concern" over the approval of draft legislation that would pre-empt a FASB standard on share-based payment (see our news story of 15 May). "Advancing this bill in the legislative process harms the credibility of America's system for providing transparent and unbiased financial information to investors," Mr. Denham said. "By inserting Congress into the setting of standards for accounting by publicly traded companies, HR 3574 [the bill] would undermine the independence of the Financial Accounting Standards Board, which Congress recently reaffirmed in the Sarbanes-Oxley Act." The FASB has agreed to propose a stock options standard very similar to IFRS 2. Click for FAF News Release (PDF 23k).

18 May 2004: EU public consultation on improving financial information
The European Commission is undertaking an electronic Public Consultation on matters relating to (a) board members' responsibilities for financial and key non-financial information, (b) disclosure of related party and intra-group relationships and transactions, and (c) disclosure of corporate governance practices by listed companies in a proposed corporate governance statement. Interested parties are invited to complete the questionnaire and submit it electronically before 4 June 2004.

18 May 2004: IASB meets today, tomorrow in London
The IASB will meet at its offices in London on 18-19 May 2004. An issue related to Financial Reporting by Small and Medium-sized Entities has been added to the Meeting Agenda.

18 May 2004: Update on IASC Foundation constitution review
The constitution committee of the IASC Foundation has posted to the IASB website an Update on the Constitution Review (PDF 152k). The update identifies possible approaches that the committee is considering for each of the 10 main issues that it had previously identified for consideration. The committee has also announced the dates and places of a public meetings and hearings it will hold, as follows:

17 May 2004: Germany establishes a financial reporting enforcement mechanism
Under the auspices of the German Federal Ministry of Justice, representatives of 15 professional and industry associations have established the Financial Reporting Enforcement Panel (FREP). The role of the FREP is solely to discover infringements of financial reporting requirements by listed entities, including matters of compliance with IFRSs. It does not have any authority to impose sanctions. The FREP will inform the entity and the government's Financial Services Authority of any possible irregularity it has discovered. Thereafter, the Financial Services Authority has responsibility to take appropriate enforcement action. Click for Announcement (PDF 29k).

16 May 2004: IFRS copyright release in New Zealand
The Institute of Chartered Accountants of New Zealand has Announced (PDF 27k) that the New Zealand government and the IASC Foundation have reached a copyright agreement that will allow the free use of IFRSs in New Zealand.

15 May 2004: EFRAG comments on IFRIC D5
The European Financial Reporting Advisory Group (EFRAG) has submitted to the IASB its Letter of Comment on IFRIC D5 (PDF 42k). Also, EFRAG has posted on its Website its draft letter of comment to the IASB on the Board's exposure draft of Proposed Amendments to IFRS 3 Business Combinations: Combinations by Contract Alone or Involving Mutual Entities.

15 May 2004: US House subcommittee clears stock option legislation
A subcommittee within the US House of Representatives has cleared draft legislation – known as H.R. 3574, the Stock Option Accounting Reform Act – that would restrict the expensing of stock options in the United States to options granted to chief executives and the next four highest paid officers. Small businesses would be exempt from expensing options entirely, and newly public companies could delay expensing for three years. And the bill would prohibit the Securities and Exchange Commission from enforcing the proposed FASB rule until the SEC studies its economic impact. The legislation moves on to consideration by the full committee and, if approved, then on to the House. Before it could become law, identical legislation would have to be passed in the US Senate. Supporters of the legislation say it would "would preserve broad-based employee stock option plans and improve American competitiveness." A number of members of Congress have said they will oppose this legislation. For example, one senator issued a statement calling the House bill "misguided", saying that "stock option compensation is an expense that should be recorded on a company's income statement.... Companies that do not expense stock option compensation are misleading investors. [He] also expressed concern that members of Congress were substituting political decisions for complex technical accounting decisions and were undermining the independence of the nation's private accounting standards board."

14 May 2004: US Federal Reserve Board Governor supports IFRSs
In her Testimony (PDF 145k) yesterday before the US House of Representatives Financial Services Committee, Federal Reserve Board Governor Susan Schmidt Bies expressed strong support for the use of International Financial Reporting Standards by global banking organisations. Among other things, she praised the IASB's standards on financial instruments:

14 May 2004: SEC chairman reviews progress in securities market reforms
In a comprehensive presentation to the US National Association of Securities Dealers, SEC Chairman William H. Donaldson reviewed the SEC's progress and plans for restoring investor confidence, holding accountable those who have violated the public trust, promoting responsible corporate governance, and making the securities markets more efficient and transparent. Link to Remarks on SEC Website.

14 May 2004: Deloitte letter of comment on IFRIC D5
We have posted Deloitte's Letter of Comment on IFRIC D5 Applying IAS 29 Financial Reporting in Hyperinflationary Economies for the First Time. We concur with the consensus reached on the three issues dealt with by the Draft Interpretation. Regarding the issue of how an entity should account for opening deferred tax, we believe IFRIC should consider whether a portion of the restatement of a comparative period should be reflected as part of the net monetary adjustment as opposed to the tax line. You will find all Past Deloitte Letters to IASB here.

14 May 2004: IAS Guía Rápida – Edición Revisada

IAS Guía Rápida es una guía excepcional para ayudarle a conocer y entender cómo las normas contables continúan convergiendo a nivel mundial. Con el mayor énfasis en las Normas Internacionales de Contabilidad y el número creciente de empresas que deben adoptarlas en los próximos años, usted puede encontrar que IAS: Guía Rápida (PDF 732k, 114 paginas) es una guía muy útil. Al resumir la información clave sobre las NIC y sus interpretaciones, esta guía constituye una excelente introducción a un nuevo lenguaje que, en breve, será parte de su actividad profesional. IASPlus en Español

13 May 2004: EU Council approves Parliament's "Transparency Directive"
At its meeting on 10-11 May 2004, the Council of Economics and Finance Ministers of the European Union voted to support the draft Directive on transparency that was approved by the European Parliament on 30 March 2004. The Directive establishes minimum requirements with regard to information to be reported by issuers whose securities are admitted to trading on a regulated market. Details of the Directive as approved by Parliament can be found Here. Among other things, the Directive would establish a mechanism for assessing at EU level the equivalence between international accounting standards and non-EU country accounting standards for the purpose of allowing companies from non-EU countries to submit their national GAAP financial statements rather than IFRS statements.

13 May 2004: New Australian accounting alert
Deloitte (Australia) has published a new Accounting Alert on Proposed Amendments to AASB 119 'Employee Benefits' (PDF 114k). The Australian proposal mirrors the IASB's proposed amendments to IAS 19 (a) to introduce another option for recognising actuarial gains and losses (fair value changes reported directly in equity) and to extend the provisions relating to multi-employer defined benefit plans to a group of entities under common control. Past Alerts can be found Here.

11 May 2004: Ratings agency studies impact of IFRS 4 Insurance Contracts
Fitch Ratings – a leading global fixed income rating agency – has analysed the implications of IFRS 4 Insurance Contracts and has concluded that Fitch "does not expect any rating actions as a direct result of the move to IFRS. However, Fitch cannot rule out the possibility that the additional disclosure and information contained in the accounts could lead to rating changes due to an improved perception of risk based on the enhanced information available." The special report Mind the GAAP: Fitch's View on Insurance IFRS provides an overview of IFRS 4 and the issues being addressed in Phase II of the IASB's insurance project; assesses the implications including increased volatility, greater use of discounting and fair values, changes to income recognition, and enhanced disclosures; and discusses how the changes affect ratings analysis. An excerpt:

10 May 2004: CFA Institute is new name of AIMR
The Association for Investment Management and Research has changed its name to CFA Institute. CFA Institute, which administers the Chartered Financial Analyst (CFA) examinations, is an association of 129 member financial analysts' societies in 50 countries. The 70,000 members of these societies constitute one of the primary groups of users of IFRS financial statements. More information on CFA Institute's Website.

9 May 2004: IFAC is studying IFRS implementation issues
The IFAC Board has begun a project to obtain the views of individuals and groups of professional accountants and other stakeholders on the extent to which they have seen challenges and successes in implementing IFRSs and International Standards on Auditing. The project includes a series of focus groups and interviews with members of regional accountancy organisations and with professional accountants from different backgrounds (large firms, medium-sized firms, small firms, members in business, and national accounting and auditing standard setters), regulators, users, and other interested parties. Individuals who would like to provide input should send an email to implementationstandards@ifac.org.

8 May 2004: IFAC adopts mandatory continuing education standard
The International Federation of Accountants has issued a new International Education Standard that would require every member of an IFAC member body to complete continuing professional development activities relevant to their work on an ongoing basis. The continuing education requirement would apply not only to accounting professionals who work in public practice but also those working in commercial, governmental, academic, and not-for-profit entities, and those who no longer work in traditional accounting roles. The standard does not specify subject areas in which professional accountants must maintain competence, as these will vary depending on the accountant's role and area of employment and focus. All IFAC member bodies are expected to comply starting 1 January 2006. IFAC News Release.

8 May 2004: Reminder – comment deadline on IFRIC D5 is 14 May 2004
The deadline for comments on the IFRIC Draft Interpretation D5 Applying IAS 29 Financial Reporting in Hyperinflationary Economies for the First Time is this coming Friday, 14 May 2004.

8 May 2004: IASB will meet in London 18-19 May 2004
The IASB will meet at its offices in London on Tuesday and Wednesday, 18-19 May 2004. The Board will not be meeting on Monday 17 May. The announced agenda for the meeting is as follows:

• Business Combinations Phase II
• Consolidation including SPEs
• Financial Activities - Risk Disclosures
• Financial Instruments: Cash Flow Hedge Accounting of Forecast Intra-group Transactions
• IFRIC Update
• IAS 37 Provisions, Contingent Liabilities and Contingent Assets
• Revenue Recognition

7 May 2004: UK auditing board will adopt International Standards on Auditing
The United Kingdom Auditing Practices Board is proposing to adopt the "complete suite" of International Standards of Auditing (ISAs) issued by the International Auditing and Assurance Standards Board. The APB notes that "in the aftermath of accounting and auditing failures in the US and Continental Europe, securities regulators and governments have recognised the value of harmonised auditing standards. In particular the European Commission is in the process of introducing an amended Directive on the statutory audit that will, in all probability, require the adoption of ISAs by all Member States." Link to the APB Announcement.

7 May 2004: Students perform well on new IFRS section of ICAEW exam
Questions on applying International Financial Reporting Standards were added to the chartered accountancy examination for the first time in the March 2004 by the Institute of Chartered Accountants in England and Wales, and an ICAEW Announcement expresses pleasure that the exam candidates did particularly well on the IFRS-related questions.

7 May 2004: OECD corporate governance standards address accounting
The governments of the 30 OECD countries have approved a revised version of the OECD's Principles of Corporate Governance, adding new recommendations that respond to issues that have undermined the confidence of investors in company management in recent years. They call on governments to ensure genuinely effective regulatory frameworks and on companies themselves to be truly accountable. Those principles support the adoption of either internationally recognised accounting standards or domestic accounting standards that are consistent with international standards. Click to Download the OECD Principles (PDF 559k) or Press Release (PDF 31k). IFAC has issued a Press Release (PDF 70k) supporting the OECD principles. Here is an excerpt relating to financial reporting:

7 May 2004: IASB project timetable updated
We have updated our Timetable for IASB's Agenda Projects to reflect discussions at recent IASB meetings and recent IASB activity.

7 May 2004: Nominations invited for IASB insurance working group
Now that IFRS 4 Insurance Contracts is completed, the IASB is reactivating Phase 2 of its insurance project. The Board is forming a small group of about 15 senior insurance professionals to help it analyse the issues. Four IASB members will participate in the working group's activities. The IASB is seeking nominations for membership on the working group. Here is the Announcement (PDF 11k).

7 May 2004: IASB has posted the comment letters on ED 6 on extractive industries
The IASB has Posted on its Website the 52 letters of comment it has received on ED 6 Exploration for and Evaluation of Mineral Resources.

6 May 2004: Comments are invited on Draft Interpretation D6
The IFRIC has published Draft Interpretation D6 Multi-employer Plans, which proposes guidance on when a pension plan meets the definition of a multi-employer plan, how defined benefit accounting should be applied to such plans, and what to do when the necessary information might not be available. D6 requires an entity to make "every practicable effort to apply defined benefit accounting to multi-employer plans in which it participates." The draft may be downloaded by IASB subscribers immediately and by non-subscribers starting tomorrow. Comment deadline is 9 July 2004. Click for Press Release (PDF 23k).

6 May 2004: Statistics on cross-border securities listings
We have updated our database of Statistics on Cross-Border Securities Listings that demonstrate, we believe, the importance of global accounting standards.

6 May 2004: Report from the second day of the IFRIC meeting

The International Financial Reporting Interpretations Committee (IFRIC) held a two-day meeting in London on 4-5 May 2004. Presented below are the preliminary and unofficial notes taken by the Deloitte observers at the second day of the meeting. Notes from the IFRIC Meeting 5 May 2004 IAS 17: Accounting for Service Concession Arrangements Combining and Segmenting Service Concession Contracts The IFRIC continued its discussions from the previous day on combining or segmenting of service concession arrangements. The IFRIC agreed that the development of a position on combining and segmenting concessions arrangements should use the same language and semantics as in the IFRIC's separate project on Combining and Segmenting Contracts more generally. Overview Issues The IFRIC determined that they needed to address in more detail the issues around the nature of the asset held by the concession operator before progressing with the more specific issues. The IFRIC discussed the various implications for the amount and timing of revenue recognised under various models depending on whether the physical asset was recognised by the concession operator, a receivable was recognised by the concession operator or an intangible asset was recognised by the concession operator. The staff agreed to present a paper on the nature of the concession operator's asset in various situations as the June IFRIC meeting. IAS 27 - Fiduciary Control The IFRIC discussed whether to add an agenda item to address whether (or when) delegated or operational control should require consolidation. IFRIC members noted this would end up being an interpretation of what "so as to receive economic benefits" means in the definition of control in IAS 27. The IFRIC concluded that this is a broader issue of consolidation that should be addressed by the IASB in its project. The IFRIC will, however, ask the IASB to identify areas IFRIC should address (if any) in conjunction with the IASB project. IFRS 2 - Consolidation of Share Trusts The IFRIC discussed consolidation issues related to trusts used to undertake share-based payment transactions in accordance with IFRS 2. The IFRIC was asked and generally concluded in favour of issuing an interpretation to eliminate the scope exemption in SIC 12 for equity compensation benefits. This draft interpretation would be issued shortly. The IFRIC agreed to take on a second phase to address whether guidance should be issued on applying the consolidation model to these trusts. These issues will be discussed further at future IFRIC meetings. The IFRIC also noted that the scope exemption in SIC 12 should be aligned with the scope of IAS 19. IFRIC D3: Determining Whether an Arrangement Contains a Lease The IFRIC was provided with a summary of comment letters on D3. The IFRIC concluded that it should continue with the project, but that field tests should be conducted. Some IFRIC members noted their objection to the general model and would rather have a model based on control of the asset – not control over the output as required in D3. The IFRIC agreed to reconsider this model, noting the requirements in EITF Issue 01-8. The IFRIC discussed at length the issue of components and proportions of an asset. Some IFRIC members suggested remaining silent on these issues. Other members noted a model based on output is flawed if IFRIC does not answer 'output from what'. The IFRIC noted that a final interpretation should be effective for 2005 first-time adopters. IFRIC D4: Decommissioning, Restoration and Environmental Rehabilitation Funds The IFRIC was presented with a summary of comment letters on D4. The IFRIC decided to reconsider whether a model based on IAS 37 or IAS 39 was appropriate. This analysis will be conducted as a result of comments received on whether the asset cap equal to the liability is appropriate. This summary is based on notes taken by observers at the IFRIC meeting and should not be regarded as an official or final summary. Scroll down for notes from 4 May 2004.

5 May 2004: IFAC Public Sector Committee update
IFAC's Public Sector Committee (PSC) has published PSC Update 11 (PDF 229k) summarising the committee's deliberations at its March 2004 meeting. The PSC develops International Public Sector Accounting Standards (IPSAS) based (to the extent appropriate) on the International Financial Reporting Standards. Past Updates and background information on the PSC can he found Here.

5 May 2004: Report from the first day of the IFRIC meeting

The International Financial Reporting Interpretations Committee (IFRIC) is holding a two-day meeting in London on Tuesday and Wednesday, 4-5 May 2004. Presented below are the preliminary and unofficial notes taken by the Deloitte observers at the first day of the meeting. Notes from the IFRIC Meeting 4 May 2004 Recognition and Measurement of Biological Assets in Accordance with IAS 41 Agriculture The IFRIC agreed to recommend to the IASB proposed improvements to IAS 41 to clarify the application of the fair value measurement objective. The IFRIC discussed certain aspects of the proposed changes: The IFRIC discussed whether to add the term "highest and best use" to IAS 41 to clarify that fair value should be the price an economically rational company would choose. For example, if the price for grapes used to make wine is higher than for grapes used as by-product, the entity should assume it would sell its grapes to the wine producers if possible (that is, the grapes are of quality for wine). There was concern about adding this phrase in the text of IAS 41 as it is generally only used for property valuations. However, there was general agreement on the principle. The IFRIC then discussed the question of what fair value should be assigned to the unripened grapes when only a market for ripe grapes exists. The IFRIC noted that a value of nil would generally not be appropriate in this case and that the value of the unripe grapes should be determined by reference to the price of ripe grapes. The IFRIC decided to ask the IASB for further assistance in trying to identify the correct market to be used in determining fair value when many markets exist. For example, if there is a market for 2 year old and 10 year old trees, which market should be used to value 1 year old trees – the value in 1 year or the value in 9 years? No conclusions were reached on this issue. The IFRIC noted that the issues discussed here are similar to the issues being discussed by the IASB in its discussions around "Day 1 profits" under IAS 39. IAS 32: Members' Shares in Co-operative Entities The IFRIC was presented with, and voted unanimously in favour of issuing, a draft interpretation on the classification of members' shares in cooperative banks and similar entities under revised IAS 32. The IFRIC noted that redemption amounts may be different depending on the class of shares purchased and noted concern about measuring the liability and equity components when some of shares are liabilities and some shares are equity. The IFRIC concluded that when this is the case, the liability should be measured at the highest amount that could legally be redeemed. The IFRIC confirmed its earlier decision to allow shares to be reclassified from liability to equity and vice versa as deemed appropriate under IAS 32. There was general concern about the classification change being created by self-imposed restrictions. However, the IFRIC noted that this exists when an entity writes forwards on its own shares. The IFRIC discussed the measurement of the liabilities that have been reclassified and whether they should be discounted. The IFRIC concluded that this was an IAS 37 issue generally, but indicated the shares should be measured at their nominal amount to avoid gains or losses on reclassification. The IFRIC discussed a fact pattern in which 5% of the shares could be redeemed in any given year. The IFRIC noted that if 5% were redeemed each year, in 20 years nearly all the shares would be redeemed. Therefore, the IFRIC concluded that in this fact pattern, all shares would be considered liabilities. That is, if the concern is not whether the shares will be exercised, but when, then the shares should be classified as liabilities since the passage of time is a certainty. The IFRIC noted that the effective date should be the same for as an entity applying IAS 32. Therefore, the exception from applying IAS 32 retrospectively for first-time adopters would also apply here. The IFRIC discussed further editorial comments and requested the staff finalise a draft for final IFRIC review and approval. IAS 17: Accounting for Service Concession Arrangements The IFRIC was presented with a comprehensive set of papers addressing the following issues in accounting for service concessions: Recognition Combining or segmenting construction and services contracts Treatment of finance costs in construction and services contracts Obligations in construction and services contracts Accounting if the Concession Operator recognises the physical asset as its own These papers were presented together with an overview paper. The overview paper notes that the following two issues also require consideration at a future meeting: Consideration received - what is the concession operator's asset in a construction and services contract? Rights of use - which party has the right of use of the physical asset? The IFRIC considered a flow chart depicting the framework within which they propose to develop interpretations on the above issues. The framework started by considering which entity recognises the physical asset, and then whether (a) whether IAS 16 Property, Plant and Equipment should be applied to the asset or (b) IAS 11 Construction Contracts and IAS 18 Revenue should be applied to the contract. The IFRIC agreed that the flow chart will be reproduced in the next IFRIC update to give an indication to the public of the parameters within which this project is currently being conducted. The IFRIC debated the merits of applying the risks and rewards approach required by IAS 17 Leases and IAS 18 Revenue to determine whether an asset should be accounted for in accordance with IAS 16. (That is, if substantially all the risks and rewards of an asset are held by a particular entity that entity should account for the asset as its own in accordance with IAS 16). The IFRIC agreed that the social rewards to governments from having a particular concession contract in existence (for example, a road) should not be considered in determining whether the government or the concession operator have substantially all the risks and rewards. The IFRIC agreed that while some members questioned the validity of the risks and rewards approach to recognising an asset in accordance with IAS 16, IFRIC would continue its discussions at this time based on using those criteria. The IFRIC discussed the impact of the sale and leaseback requirements of IAS 17 and agreed to draw to the IASB's attention the apparent discrepancy between the treatment of a sale that fails the recognition criteria in IAS 18 and a sale and lease back under IAS 17. The IFRIC agreed that if a sale transaction exists together with a repurchase option, the transactions should be considered together as a whole. The IFRIC agreed to return to further debate of this issue once the concessions project is more advanced. The IFRIC discussed whether, if an entity builds property on land that is recognised as an asset of another entity, that property should be recognised as an asset of the entity that holds the land. A number of IFRIC members dissented from this proposition for a variety of reasons. Staff agreed to reconsider this issue and present an alternative means of achieving the intended objective at a future meeting. Combining and Segmenting Service Concession Contracts The IFRIC discussed the difficulties of appropriately segmenting a service concession contract into is component construction and services parts. The IFRIC agreed that where different components of a concession arrangement have substantially different margins (particularly construction components and services components) they should be accounted for in a manner that reflects those margins. The IFRIC considered a proposition that one could arrive at this answer without needing to segment the contract under IAS 11 and IAS 18, but did not reach consensus on whether this was possible. Administrative Matters Following consideration of the importance of the concessions project, the IFRIC agreed to further discuss accounting for service concessions on the second day of the meeting. At the close of the first day it appears likely that IFRIC will discuss the following agenda items on the second day: Service Concessions IFRS 2 - Accounting for Employee Share Ownership Plans IAS 27 - Applying IAS 27 to Agents and Delegates It appears likely that the following items on the agenda for the May meeting will be deferred to a future meeting: Analysis of comment letters on IFRIC D3: Determining Whether an Arrangement Contains a Lease Analysis of comment letters on IFRIC D4: Decommissioning, Restoration and Environmental Rehabilitation Funds This summary is based on notes taken by observers at the IFRIC meeting and should not be regarded as an official or final summary.

1 May 2004: Surveys on extended use of IFRSs in European Union
The European Union Accounting Regulation requires that European companies listed in a European securities market must use IFRSs to prepare their consolidated financial statements starting in 2005. EU countries have the option to:

• Require or permit IFRSs for unlisted companies
• Require or permit IFRSs in parent company (unconsolidated) financial statements
• Permit companies whose only listed securities are debt securities to delay IFRS adoption until 2007
• Permit companies that are listed on exchanges outside of the EU and that currently prepare their primary financial statements using a non-EU GAAP (in most cases this would be US GAAP) to delay IFRS adoption until 2007.