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30 July 2005: IFRSs are permitted for all companies in Suriname
We have updated our Table Summarising the Use of IFRSs for Reporting by Domestic Listed Companies to reflect the status of IFRSs in Suriname. Suriname does not have any legislation on
accounting principles or financial statements. The local exchange also does not prescribe a specific set of accounting principles to be used by its listed companies. Therefore, IFRSs are not mandatory for any of the
local companies, listed or not listed. A company is, however, free to use IFRSs as the basis for preparing its financial statements.
29 July 2005: UK iGAAP in your Pocket 2005
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Deloitte (United Kingdom) has published iGAAP in your Pocket 2005 (PDF 309k) – a summary of international financial reporting from a UK perspective. This 72-page booklet includes:
- Summaries of all International Financial Reporting Standards, each with:
- Objective
- Key features
- Effective date
- Related SIC and IFRIC interpretations
- Indication of main differences between that standard and UK GAAP
- Cross-reference table of IFRSs and UK GAAP
- List of effective dates of recent pronouncements
- List of outstanding IFRIC draft interpretations
- IASB agenda projects
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29 July 2005: IASB technical corrections policy
The IASB has invited comment on its Proposed IASB Policy on Technical Corrections (PDF 39k). Comment deadline is 30 September 2005. Technical corrections are minor changes to the wording of a standard or interpretation made after initial publication when it is clear that the words in a standard do not properly convey the IASB's intention, even when considered with the basis for conclusions and any related guidance. The technical corrections policy is designed to be a 'fast track' process to deal with those changes.
29 July 2005: Webcast covers IAS 39 FVO and IAS 12
The Deloitte United Kingdom 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 15th session was run on Thursday 28 July 2005 and focused on the June 2005 Amendment to IAS 39 'The Fair Value Option' and, as a follow-up to the November 2004 session, on further issues arising from IAS 12 Income Taxes. 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 2005: Summary record of ARC July 2005 meeting
- The ARC members voted unanimously to endorse, for use in Europe, the IASB's June 2005 Fair Value Option Amendment to IAS 39 and consequential amendments to IFRS 1 and IAS 32.
- The ARC discussed how European companies should account for emission rights in light of the IASB's withdrawal of IFRIC 3. It was noted that IAS 8 provides guidance on what companies should do if a transaction or event is not specifically addressed in IFRSs. "The CESR representative stated that it was unlikely that they would be looking at companies' accounting treatment of emission rights."
- Sir David Tweedie, Chairman of the IASB, addressed the ARC on the IASB's work on the convergence of international and national accounting standards. Max Kley, Trustee of the IASC Foundation, gave an update on the completion of the constitutional review. Questions asked by ARC Member States related to:
- How the decision is made as to which standard (IFRSs or US GAAP) is better.
- The timetable for convergence and how much change is appropriate in the next few years.
- Would IASB support a single technical accounting body speaking for Europe rather than the current situation where there are several European bodies.
- Regarding the joint IASB/FASB performance reporting project, the ARC meeting summary indicates that "some Member States found the proposals for a single statement of comprehensive income unacceptable". In that regard, the IASB chairman said that a final decision on whether to have one or two performance statements has not yet been made.
- The ARC discussed the issues of consistent application and enforcement of IFRSs in the EU. They considered whether to form a 'roundtable' involving a broad range of stakeholders, including the Commission, IASB/IFRIC, CESR, EFRAG, FEE, the Big Four, national standard setters, and preparers, that could:
- allow rapid discussion of important accounting issues, thereby minimising the risk of different interpretations of IFRSs across Europe;
- act as an early warning mechanism for contentious accounting issues; and
- facilitate cross-border consensus-building, thus minimising subsequent enforcement risks for EU issuers.
After discussion, the ARC decided to prepare a more detailed paper for the next ARC meeting that would include details on
the role and composition of the roundtable, how it would relate to the existing structure of national organisations, and draft terms of reference.
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The ARC will meet next on 7 October 2005.
28 July 2005: EFRAG enquiry on implementation of IFRSs
The Supervisory Board of the European Financial Reporting Advisory Group (EFRAG) has invited comments on a discussion paper Achieving Consistent Application of IFRS in the EU (Word .DOC 75k). The Supervisory Board's goal is "to stimulate debate in Europe on this very important subject". The paper seeks information about the nature and quantity of IFRS implementation issues that are arising in Europe and discusses various options available to Europe if problems are identified. Broad issues addressed in the paper are:
- Is there a problem and, if there is, what is it?
- What additional mechanisms might Europe need?
- IFRIC: standing ready to meet the demand
- European interpretations/interpretive guidance: not needed if the IFRIC delivers
- European implementation guidance: also not needed if the IFRIC delivers
- A European urgent issues mechanism: not feasible without shortcutting due process, which is not acceptable
- A European mechanism that supports the work of IFRIC: a possibility if needed
Comments are invited on the paper by 6 October 2005.
28 July 2005: SEC nominee will support stock option expensing
The US Senate Committee on Banking, Housing and Urban Affairs held a confirmation hearing on 26 July 2005 on President Bush's nomination of Congressman Christopher Cox as Chairman of the US Securities and Exchange Commission. Mr. Cox would replace William H. Donaldson, who resigned effective 30 June 2005. Although Mr. Cox did not express a view on the expensing of the cost of share-based payments to employees (stock options) in his Prepared Statement (PDF 152k), in response to questions he said he strongly supported expensing share-based payments and would not seek to stop the implementation of FASB Statement 123R Share-Based Payment. On two occasions in the past, Congressman Cox had co-sponsored legislation that would block the implementation of a FASB standard on share-based payment.
27 July 2005: IFRS 7 release date is 18 August
The IASB has announced that it expects to publish IFRS 7 Financial Instruments: Disclosures and the related Amendment to IAS 1 – Capital Disclosures on 18 August 2005. Revised near-final drafts are now available to IASB subscribers on the IASB's Website. IFRS 7 will be effective for annual periods beginning on or after 1 January 2007, with earlier application encouraged. Early appliers will be given some relief with respect to comparative prior period disclosures. IFRS 7 will:
- add certain new disclosures about financial instruments to those currently required by IAS 32;
- replace the disclosures now required by IAS 30; and
- put all of those financial instruments disclosures together in a new standard on Financial Instruments: Disclosures. IAS 32 would then deal only with financial instruments presentation matters.
27 July 2005: Agenda for IFRIC meeting 1-2 August
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The International Financial Reporting Interpretations Committee (IFRIC) will meet at the IASB's offices in London on Monday and Tuesday, 1-2 August 2005. The agenda for the meeting is set out below.
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1-2 August 2005, London
Monday 1 August 2005
- Administrative matters
- Minutes of the June 2005 IFRIC meeting
- IFRIC D12 - D14 Concessions, including IAS 17 – Sale and leasebacks with repurchase options
- IAS 34 – Interaction with IAS 36 and IAS 39
- IAS 19 Employee Benefits – Measurement
- Consideration of recommendations of Agenda Committee as tabled at June meeting of IFRIC from March/April Agenda Committee meeting
Deferred at June meeting
- IAS 7 Value-added tax
- IAS 12 Non-amortisable intangible assets
- IAS 17 Recognition of operating lease incentives under SIC 15
- IAS 39 Accounting for securities sold but not yet purchased (short trading)
Newly tabled at June meeting
- IAS 11 Classification of contract assets
- IAS 37 Obligations to repair/maintain another entity's property, plant, and equipment
- IAS 38 Regulatory asset
- IAS 39 Meaning of delivery – Gold hedging
Tuesday 2 August 2005
- IAS 19 Employee Benefits – Defined contribution/defined benefit distinction and allocation of future salary increases
- IAS 19 Employee Benefits – Effect of minimum funding requirement on the asset ceiling
- Tabling from June Agenda Committee of wording for issues proposed for rejection
- Employee long-service leave
- Employee share loan plans
- Discretionary participation features
- Single asset entities
- Activities of other interpretive bodies
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27 July 2005: New PCAOB ethics and independence rules, audit standard
The US Public Company Accounting Oversight Board has adopted certain ethics and independence rules addressing tax services, contingent fees, and certain related general ethics and independence standards. The Board also adopted an auditing standard on reporting on whether a previously reported material weakness in internal control over financial reporting continues to exist. Click for Press Release (PDF 19k).
26 July 2005: Three Deloitte comment letters to IASB/IFRIC
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We have posted the Deloitte letters of comment to the IASB and IFRIC on the following draft documents: |
- IASB Draft Memorandum of Understanding on the Role of Accounting Standard-setters (PDF 30k)
| "We are generally supportive of the Draft Memorandum and commend the International Accounting Standards Board for taking the initiative to forge closer links with the various accounting standard-setters around the world, documenting that process, and placing it on the public record." |
- IASB Due Process Handbook (PDF 47k)
"We support the approach outlined in the Draft Handbook and think that it will be a useful document in explaining the approach to standard-setting adopted by the IASB. However, we are puzzled about what the IASC Foundation Trustees expect to receive from this exposure....
The Draft Handbook should distinguish clearly the components of its due process (i.e., the principles identified in the IASC Foundation Constitution and the steps adopted voluntarily by the IASB and the IASC Foundation Trustees) from operational practices. We think this distinction is vital because much of the document is explanatory, describing the Board's day-to-day operations and how it puts its due process requirements into effect. We think that the Board should have greater freedom to change operational aspects of its due process without extensive consultation – for example to improve efficiency in light of experience." |
- IFRIC Review of Operations (PDF 72k)
| "We are supportive of the IFRIC seeking external comment on its review of operations, and generally believe that the proposals in the Consultative Document are a significant step in the right direction. However, we do have some concerns about the rigour of the IFRIC's review of its operations, and whether or not the commonly expressed concerns of constituents have genuinely been addressed."
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26 July 2005: IFRSs are permitted for listed companies in Morocco
We have updated our Table Summarising the Use of IFRSs for Reporting by Domestic Listed Companies to reflect the status of IFRSs in Morocco. Under a revision to the Stock Exchange Law (Law 52-01), which took effect in May 2004, all companies listed on the Casablanca Stock Exchange with the exception of banks and other financial institutions have a choice of preparing their financial statements using International Financial Reporting Standards or Moroccan GAAP. Banks and other financial institutions must use Moroccan GAAP.
25 July 2005: Agenda project pages updated
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We have updated the following IASB agenda project pages to reflect the discussions and decisions at the Board's meeting on 19 to 21 July 2005: |
25 July 2005: Half-yearly presentation and disclosure checklist
We have posted a Presentation and Disclosure Checklist for Half-yearly Financial Reports (PDF 86k) developed by Deloitte (Australia). This checklist summarises the presentation and disclosure requirements (but not recognition and measurement requirements) set out in Australian Accounting Standards as issued by the AASB and UIG. Because Australian standards are essentially equivalent to IFRSs, they include all disclosures required in IFRSs, though some additional disclosures have been added. The items in the checklist are referenced to the applicable sections of the actual pronouncements as published by the AASB. Users of the checklist should have a thorough understanding of the pronouncements and should refer to the text of the pronouncements, as necessary, in considering particular items in the checklist. Our Australia Page has links to download annual and half-year model Australian financial reports for 2005.
25 July 2005: Australian Accounting Alert on hedge accounting
Deloitte (Australia) has published Australian Accounting Alert 2005/08 (PDF 101k) on Hedge Accounting Using Non-zero Fair Value Derivatives. The Alert discusses scenarios in which an entity designates an existing derivative into a new hedging relationship. The non-zero fair value of the existing derivative may give rise to unexpected ineffectiveness in the hedging relationship, which may result in the derivative being disqualified from hedge accounting. Links to all past Alerts are Here.
24 July 2005: IASB insurance working group to meet
The IASB's Insurance Working Group will meet in London on 26-27 July 2005. The agenda for the meeting is available on IASB's Website (PDF 17k). A group of insurance companies, known as the Group of North American Insurance Enterprises (GNAIE), has submitted to the IASB a draft of proposed principles of accounting for insurance contracts. Click for the GNAIE:
23 July 2005: Special edition of IAS Plus on fair value option
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Deloitte's Global IFRS Leadership Team has prepared a special edition of our IAS Plus newsletter detailing the Fair Value Option Amendments to IAS 39 (PDF 64k) issued by the IASB on 16 June 2005. The newsletter outlines the categories of financial instruments that may be classified as at fair value through profit or loss, and explains the transitional requirements (both for existing IFRS users and first-time adopters) and the additional disclosure requirements imposed by the amendments to IAS 39. You will find past issues of all IAS Plus Newsletters Here.
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22 July 2005: Notes from IASB meeting 21 July 2005
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We have combined all of the notes taken by Deloitte observers at the IASB's July 2005 Board meeting onto a Separate Page. |
21 July 2005: Notes from IASB meeting 20 July 2005
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We have combined all of the notes taken by Deloitte observers at the IASB's July 2005 Board meeting onto a Separate Page. |
21 July 2005: 14 European 'roadshows' completed, 4 upcoming
The IASB has organised a series of 'roadshows' jointly with national standard setters in a number of European countries. The focus of the discussion is the Board's current and future projects. In June and July 2005, roadshows were held in the Netherlands, Germany, Denmark, Finland, Italy, Greece, Belgium, Lithuania, Austria, Norway, Portugal, Switzerland, United Kingdom, and Spain. Roadshows upcoming in September are:
- Stockholm, Sweden – 13 September 2005
- Dublin, Ireland – 16 September 2005
- Paris, France – 14 September 2005
- Warsaw, Poland – 29 October 2005
21 July 2005: Reminder about upcoming comment deadlines
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We remind IAS Plus visitors that the deadlines are nearing for submitting comments on the following documents:
- IASC Foundation Consultation Documents on:
- Due Process of IASB: Draft Handbook of Consultative Arrangements.
- IFRIC - Review of Operations: Consultative Document.
Issued 27 April 2005. Comment deadline 31 July 2005.
- Draft Memorandum of Understanding on the Role of National and Regional Accounting Standard-Setting Bodies and their Future Relationships with the IASB. Issued 2 March 2005. Comment deadline 29 July 2005.
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20 July 2005: Notes from IASB meeting 19 July 2005
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We have combined all of the notes taken by Deloitte observers at the IASB's July 2005 Board meeting onto a Separate Page. |
20 July 2005: Commissioner McCreevy talks about reconciliation
In a speech on The Commission's Financial Services Policy 2005-2010 (PDF 87k) in Brussels on 18 July 2005, Charlie McCreevy, the European Commissioner for Internal Market and Services, spoke about opportunities for easing regulatory burdens in Europe. In that context, he commented on the potential benefits of the current efforts by both the US SEC and the EC to assess the equivalence of IFRSs and US, Japanese, and Canadian GAAPs and, if deemed equivalent, to eliminate the costs and burdens of reconciliations:
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The Commission is analysing the issue of US-GAAP, Japanese and Canadian GAAPs as equivalent to IFRS in the European Union. We are carefully examining CESR's advice on this issue at the moment. There are estimates that for each of the 250 or so European issuers in the US reconciliation imposes a yearly burden of between $5 and $10 million. Dropping the reconciliation requirements on both sides of the Atlantic would mean great reductions in costs for business. Certainly gains in the low billions of euros per year. I will work with the US and with other partners to achieve similar success in the
areas of deregistration, insurance, corporate governance, supervisory cooperation
and others.
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19 July 2005: IASCF seeks nominations for nine trustees
The IASC Foundation, under which the IASB operates, is seeking to fill nine IASCF trustee positions. Three are newly created positions resulting from the recent Expansion of the board of trustees from 19 to 22 members. The six other vacancies arise from the departure of existing trustees who are either ineligible for or do not seek reappointment. Four of the nine appointments will be from the Asia/Oceania region, one from Europe, three from North America, and one from any area of the world. The Foundation is seeking indications of interest by 14 September 2005. All appointments would be for renewable three-year terms ending on 31 December 2008. One of the newly appointed trustees may be asked to serve as chairman. Click for Press Release (PDF 29k).
19 July 2005: Deloitte comment letters on IFRIC D16 and D17
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We have posted the following two Deloitte comment letters on IFRIC Draft Interpretations D16 and D17: |
- IFRIC D16 Scope of IFRS 2 (31k). "We support the issuance of an IFRIC Interpretation clarifying that share-based payments may exist in scenarios where goods and services provided in exchange for the equity instruments may not be readily identifiable." We agree with the main approach in the draft interpretation and offer some suggestions for changes.
- IFRIC D17 Group and Treasury Share Transactions (33k). "We concur with the consensuses reached by the IFRIC on the issues set out in paragraph 6(a) and (b) of D17. Our concerns with the consensus on the issue set out in paragraph 6(c) are detailed in the Appendix to [our] letter."
You will find all past comment letters Here.
19 July 2005: Accounting Roundup second quarter 2005 review
We have posted Accounting Roundup - 2nd Quarter 2005 in Review (PDF 1,082k), a quarterly 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 2005, and have been updated where appropriate. Accounting Roundup is published by the National Office Accounting Standards and Communications Group of Deloitte & Touche LLP (United States). You will find links to all past issues Here.
18 July 2005: Nelson Carvalho named independent SAC chairman
The Trustees of the IASC Foundation, under which the IASB operates, have appointed L Nelson Carvalho, Professor of Accounting and Finance, University of Sao Paulo, Brazil, as Chairman of the Standards Advisory Council (SAC). The SAC is a forum for organisations and business leaders to advise the IASB on the Board's work programme and priorities. The recent Revision of the IASCF's Constitution created the position of an independent chairman of the SAC. In addition to his role at the University of Sao Paulo, Nelson Carvalho serves on the boards of several Brazilian corporations and as an arbitrator for two the International Courts of Arbitration. Professor Carvalho has served as the Head of Banking Supervision of the Central Bank of Brazil (1991-1993) and a Commissioner of the Brazilian Securities and Exchange Commission (1990-1991). Prior to joining public sector, he was an auditor and financial consultant for 25 years. He has served as a member of the SAC since its formation in 2001 and is also a member of the Consultative Advisory Group of the International Auditing and Assurance Standards Board. He also was a board representative on the IASC, the IASB's predecessor. Professor Carvalho's term as chairman of the SAC expires 31 December 2008. Click for Press Release (PDF 28k).
18 July 2005: EFRAG comments on IFRIC D16 and D17
The European Financial Reporting Advisory Group (EFRAG) has submitted its comments on the following two IFRIC Draft Interpretations, both of which EFRAG supports but with recommendations for changes:
- EFRAG Letter (PDF 14k) on IFRIC Draft Interpretation D16 Scope of IFRS 2
- EFRAG Letter (PDF 16k) on IFRIC Draft Interpretation D17 IFRS 2 - Group and Treasury Share Transactions
17 July 2005: IAS 32-39 Parts II and III e-learning now available
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Our IFRS e-learning modules for IAS 32 and IAS 39 Parts II and III are now available. These modules cover the concepts of hedge accounting and derecognition of financial instruments. Click on the light bulb icon on our home page to access. This brings the total available modules to 35, including the intro-help module, and completes our suite of modules for the 'stable platform' IFRSs for 2005. Well over 250,000 modules have already been downloaded – not counting downloads by Deloitte people, who access IFRS e-learning via an internal network. |
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16 July 2005: Agenda project summaries updated
We have updated the following agenda project summaries (and other pages on IAS Plus) to reflect decisions at the June 2005 Board meeting:
15 July 2005: Basel Committee consultation on fair value option
The Basel Committee on Banking Supervision has issued a consultative document Supervisory Guidance on the Use of the Fair Value Option by Banks under IFRSs that discusses supervisory guidance on banks' use of the IAS 39 fair value option. Two key areas of supervisory guidance are addressed:
- What constitutes a set of sound risk management and control processes around use of the option?
- How might a bank's use of the option affect supervisory assessments of a bank's risk management systems and regulatory capital? The guidance suggests additional information that supervisors might collect to help them better understand how banks are using the fair value option and how this use impacts the supervisory assessment of banks' financial condition.
The proposal does not impose additional accounting or disclosure requirements beyond those in the June 2005 IAS 39 Fair Value Option Amendment. Under the approach proposed in the consultative document, for those banks capable of fully meeting the supervisory expectations set out in this paper, no adjustments to regulatory capital would be required as a consequence of their use of the fair value option. One exception to this general approach is the Committee's view, published in June 2004, that gains and losses arising from changes in a bank's own credit risk associated with its liabilities should not be included in a bank's regulatory capital. For banks that do not meet the supervisory expectations set forth in the consultative paper, a range of possible supervisory responses is discussed, including possible supervisory actions with respect to regulatory capital. The comment period ends 31 October 2005. Click to download:
15 July 2005: 'Near final draft' on financial guarantee contracts
The IASB has posted on its website the 'near-final draft' of its amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 4 Insurance Contracts relating to financial guarantee contracts. The amendments are effective for annual periods beginning 1 January 2006, with earlier application permitted. The intent of the amendments is to clarify which standard – IAS 39 or IFRS 4 – should be followed in accounting for financial guarantee contracts. Near-final drafts may be accessed by subscribers to IASB publications.
15 July 2005: EFRAG responds to IASB SME questionnaire
In their Response to the IASB's SME Questionnaire (PDF 80k), the European Financial Reporting Advisory Group (EFRAG) expresses support for the Board's decision to develop a separate set of financial reporting standards for small and medium-sized entities (SMEs). "We see this as an opportunity to further harmonise accounting standards in Europe and globally," the letter to the IASB states. EFRAG recommends that the IASB develop SME standards with a typical medium-sized SME in mind. "All the decisions it makes about the transactions to be addressed and the simplifications to be made should be based on that type of entity. We would though recommend that the IASB should include all other non-publicly accountable entities within the scope of its SME standards and should leave each jurisdiction to decide exactly where to draw the line between entities that should follow the listed entity standards and entities that are permitted to apply SME standards."
14 July 2005: Application and enforcement of IFRSs in Europe
In a recent Speech on Regulatory and Supervisory Challenges of Financial Integration (PDF 74k) in London, Charlie McCreevy, the European Commissioner for Internal Market and Services, commented on the benefits to Europe of rigorous application and enforcement of IFRSs:
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Over the coming months, Europe must show it can deliver on effective application and enforcement of IAS. This will be one of the first tests for our supervisory structures. It is a test we cannot afford to fail. If we do we will lose the prize now within our sights of reducing costs for business through recognition of equivalence of accounting standards. In a globalised economy Europe has to act in a global way – and lead.
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14 July 2005: Australian financial reporting update
A new Deloitte Australian Accounting Alert 2005/07 (PDF 80k) outlines some of the significant areas that may affect financial reporting for annual reporting periods ending 30 June 2005. Topics covered include revised AASB 1046 on director and executive disclosures, disclosure of the impacts of adopting Australian 'equivalents' to IFRSs (AASB 1047), amendments to the Corporations Act 2001 arising from the enactment of CLERP 9 Corporate Governance Reforms (PDF 45k), and the ASX extension of reporting deadlines for half-yearly and preliminary final reports. Links to all past Alerts are Here.
13 July 2005: EC 'FAQ' publication on IAS 39 fair value option
- Why did the Commission carve out the full fair value option in the original IAS 39 standard?
- Do prudential supervisors support the IAS 39 FVO as published by the IASB?
- When will the Commission to adopt the amended standard for the IAS 39 FVO?
- Will companies be able to apply the amended standard for their 2005 financial statements?
- Does the amended standard for IAS 39 FVO meet the EU endorsement criteria?
- What about the relationship between the fair valuation of own liabilities under the amended IAS 39 FVO standard and under Article 42(a) of the Fourth Company Law Directive?
- Will the Commission now propose amending Article 42(a) of the Fourth Company Directive?
- What about the remaining IAS 39 carve-out relating to certain hedge accounting provisions?
13 July 2005: Reminder about upcoming comment deadlines
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We remind IAS Plus visitors that the deadlines for submitting comments on the following IFRIC Draft Interpretations are 18 July 2005:
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13 July 2005: IASB will meet in London 19-21 July 2005
The IASB will meet at its offices in London on Tuesday to Thursday, 19-21 July 2005. The announced agenda for the meeting is below.
19-21 July 2005, London
Tuesday 19 July 2005
Wednesday 20 July 2005
Thursday 21 July 2005 (afternoon only)
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13 July 2005: Australian Accounting Alert on fair value option
Deloitte (Australia) has published Australian Accounting Alert 2005/06 (PDF 43k) covering AASB 2005-4 Amendments to Australian Accounting Standards issued by the Australian Accounting Standards Board (AASB). AASB 2005-4 amends AASB 139 Financial Instruments Recognition and Measurement to reflect the restrictions on using the fair value option recently adopted by the IASB. This Accounting Alert provides an overview of that change. Links to all past Alerts are Here.
12 July 2005: IASB statement on withdrawal of IFRIC 3
The IASB has issued a Public Statement on Withdrawal of IFRIC 3 (PDF 42k). For more information please Click Here.
12 July 2005: IAASB standard on reviews of interim information
The International Auditing and Assurance Standards Board (IAASB) has released a new International Standard on Review Engagements (ISRE) to assist auditors engaged to review the interim financial information of an audit client. ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity outlines the general principles of a review of interim financial information, provides guidance on the procedures to be performed, and prescribes the content of the review report. In addition, an appendix to the standard includes examples of an engagement letter, management representation letter, analytical procedures the auditor may consider when performing the review, and illustrative review reports. ISRE 2410 is effective for engagements to review the interim financial information of an audit client for periods beginning on or after 15 December 2006. Click for Press Release (PDF 77k).
11 July 2005: CESR advice on national GAAP equivalence to IFRSs
The Committee of European Securities Regulators (CESR) has published its final technical advice to the European Commission on the equivalence between Canadian, Japanese, and US general accepted accounting principles (GAAP) and IFRSs. CESR's principal conclusion is that "the three countries' GAAPs, each taken as a whole, are equivalent to IFRSs". Therefore, CESR recommends that non-European companies trading in European securities markets be allowed to submit financial statements in Canadian, Japanese, and US GAAP without a full reconciliation of their accounts to IFRSs. However, they must provide information about certain specific differences between those national GAAPs and IFRSs. CESR's advice includes a non-exhaustive standard-by-standard list of differences as of 1 January 2005 for which disclosure of the nature and effect of the differences is required. CESR intends to update the list as of 1 January 2007. In addition, CESR proposes the following:
- Companies that have subsidiaries such as Qualifying Special Purpose Entities (QSPEs) that are not consolidated for third country GAAP purposes, but are required to be consolidated for the purposes of IFRS, must report a pro-forma balance sheet and profit and loss account on their local GAAP basis, but including the unconsolidated subsidiaries.
- Companies reporting under Japanese GAAP that have either accounted for mergers by the pooling of interest method and/or have consolidated subsidiaries on the basis of GAAPs that are not consistent with either IFRS or any of the third country GAAPs should report a pro-forma balance sheet and profit and loss account on the basis of IFRS covering business combinations and consistent accounting policies, respectively.
- Japanese and US issuers must adopt accounting policies for the expensing of stock options on a basis equivalent (but not necessarily identical) to IFRSs, for implementation on or before 1 January 2007. (The US has already adopted such a standard, and Japan is considering doing so.)
Click for:
11 July 2005: CESR recommends amending the prospectus regulation
The Committee of European Securities Regulators (CESR) has published a consultation paper that sets out recommendations for a possible amendment of the Commission's Prospectus Regulation regarding historical financial information that must be included in a prospectus. The Prospectus Regulation, which came into effect on 1 July 2005, requires (among other things) three years' audited historical information for the issuer as a whole. Sometimes, however, the issuer has not prepared its historical financial information as a single business during the whole of the three-year period, for example, because:
- the issuer is a newly incorporated holding company inserted over an established business;
- the issuer consists of companies that were under common control or ownership but that never formed a legal group;
- the issuer has made a significant acquisition (representing more than 25% of the group) during the three-year historical period;
- the issuer has disposed of a significant part of its business since the last audited accounts;
- the issuer has changed the end of its financial year during the three year period.
CESR's recommendations relate to what additional information should be included in prospectuses in circumstances such as the foregoing. CESR requests replies by 15 September 2005 and will hold a hearing on 6 September 2005. Click to download:
11 July 2005: ARC endorses revised IAS 39 fair value option
At its meeting on 8 July 2005, the Accounting Regulatory Committee, which advises the European Commission on adoption of individual International Financial Reporting Standards for use in the European Union, agreed unanimously to recommend endorsement of an amended version of IAS 39 that includes revised provisions relating to the fair value option (FVO). When the Commission adopted IAS 39 last year, the FVO provisions were carved out. The Commission has already consulted the European Parliament on the revised FVO and, provided Parliament raises no objections, the Commission intends to adopt the amended standard by the end of September 2005. Adoption will be retroactive to 1 January 2005, so that companies can apply the amended standard for their 2005 final statements. Click for:
11 July 2005: New Accounting Roundup newsletter posted
- FASB developments - including SFAS 154 on accounting changes; FASB-IASB joint EDs on business combinations and noncontrolling interests; final FSPs on warrants, electronic waste, and employee compensation; and proposed FSPs on minimum revenue guarantees and life settlement contracts.
- EITF developments - EITF meeting 15-16 June 2005
- AICPA developments - including an exposure draft of eight proposed auditing standards
- SEC developments - including the SEC's report on off-balance-sheet arrangements and final Regulation NMS on requirements for US equity exchanges
- PCAOB developments - including guidance on XBRL attestation
- International developments - including IASB's amendments to IFRS 1 and IFRS 6 and fair value option amendments to IAS 39; proposed amendments to IAS 37; and summaries of the IASB's 22-23 June 2005 meeting and IFRIC's 2-3 June 2005 meeting.
All past issues of Accounting Roundup are Here.
10 July 2005: IASB chairman meets with the ARC
IASB chairman Sir David Tweedie met with the European Commission's Accounting Regulatory Committee (ARC) in Brussels to discuss the development of International Financial Reporting Standards and, in particular, the convergence of international and national accounting standards. Sir David was accompanied by IASC Foundation Trustee Max Dietrich Kley. The ARC is composed of representatives of EU Member States and was set up to advise the Commission on proposals to endorse individual IFRSs for use in Europe. Click to download Sir David's Prepared Remarks (PDF 42k). An excerpt:
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The European Commission, the European Parliament and EU Member States deserve much credit for providing the impetus to our efforts. Your choice of an international approach to accounting standards over a national and regional approach for Europe is a model for others. At the same time, if we are to achieve truly global standards and all the benefits that they will bring, accounting convergence must necessarily involve the United States, which accounts for nearly half of the world's total market capitalisation.
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6 July 2005: Deloitte reply to IASB's SME questionnaire
Deloitte has submitted a response to the IASB's Staff Questionnaire on Possible Recognition and Measurement Modifications for Small and Medium-sized Entities (SMEs). We continue to support the IASB's efforts to develop an appropriate and comprehensive reporting regime for SMEs. We make a number of recommendations for recognition and measurement simplifications for SMEs, and we request clarification of several aspects of the Board's approach to SME standards, including the definition of SMEs. Overall, we conclude:
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We believe it is very important that the Board develops a set of financial reporting standards for SMEs as soon as possible. Many jurisdictions around the world currently have differential reporting regimes. Full IFRS, with their focus on providing information for making economic decisions in the context of developed capital markets, may not be suitable for SMEs simply because they are not designed to meet the needs of this particular sector. In our experience, users of SMEs' financial statements are looking for standards which result in financial reporting which is likely to be meaningful and comprehensible to them. Standards that provide the least cumbersome method of achieving the accounting treatment and/or disclosure that is not complex are sought. Standards are wanted that provide guidance that is widely relevant to the transactions of SMEs and that are written in terms that can be understood by such businesses. We hope that the outcome of this project will be a simplified accounting regime which provides entities with a means of communicating financial information to their stakeholders in a manner appropriate to that entity's nature.
In our comment letter we have detailed a number of accounting choices which we believe should be left open for SMEs. We note that where an SME chooses a particular accounting model, that decision ought to be treated as an accounting policy choice and applied consistently by that SME in respect of all similar transactions.
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Click to Download Our Response to the SME Questionnaire (PDF 82k). All of Deloitte's past comment letters to the IASB and the IASC may be found Here.
5 July 2005: Slight delay in publishing final IFRS 7
The IASB has announced that the publication of IFRS 7 Financial Instruments: Disclosures, previously scheduled for 15 July, has been "delayed by technical publication difficulties". The Board said it will announce a revised publication date "in due course". IFRS 7 will be effective for annual periods beginning on or after 1 January 2007, with earlier application encouraged. Early appliers will be given some relief with respect to comparative prior period disclosures. Click for Background on Development of IFRS 7.
4 July 2005: IFAC releases revised code of ethics and an ED
The Ethics Committee of the International Federation of Accountants has released a revised version of the Code of Ethics for Professional Accountants. The revised Code establishes a conceptual framework for all professional accountants to ensure compliance with the five fundamental principles of professional ethics. These principles are integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. Under the framework, all professional accountants will be required to identify threats to these fundamental principles and, if there are threats, apply safeguards to ensure that the principles are not compromised. The framework applies to all professional accountants, those in public practice and those in business, industry and government.
The revised Code is effective June 30, 2006. Earlier adoption is encouraged. It can be viewed and downloaded by going to www.ifac.org/Store/. The Ethics Committee has also issued an exposure draft that proposes revisions to the definition of a network firm. Network firms are required to be independent of an audit client of a firm within the network. The proposed changes would classify a firm as a network firm of another firm if the two share a common brand name or if they share significant professional resources or revenues, profits, costs or expenses. The new ED, Proposed Revised Section 290, Independence - Assurance Engagements, may be downloaded from IFAC's Website. Comments are due by 30 September 2005. Click for Press Release (PDF 64k).
4 July 2005: IAASB exposure draft on auditors' report
The International Auditing and Assurance Standards Board (IAASB) has published the following exposure drafts of proposed International Standards on Auditing (ISAs), which may be downloaded from IFAC's Website. Comment deadline is 31 October 2005:
- Proposed ISA 701, The Independent Auditor's Report on Other Historical Financial Information. This proposed ISA 701 addresses auditors' reports for a wide variety of engagements, including reporting on a single financial statement, or a specific element of a financial statement. It also provides guidance on determining the acceptability of the financial reporting framework used in preparing and presenting the financial information, and matters the auditor considers in forming an opinion on the financial information, including considerations relevant to financial statements designed to give a true and fair view or fair presentation on the one hand, and to those prepared under a compliance framework on the other.
- Proposed ISA 800, The Independent Auditor's Report on Summary Audited Financial Statements. This proposed ISA 800 recognises that criteria for preparing and presenting summary financial statements may not exist. It contains new standards and guidance on the criteria used and procedures performed in an engagement to report on summary financial statements.
Click for Press Release (PDF 64k).
4 July 2005: UK ASB report on insurance accounting
The United Kingdom Accounting Standards Board has released its Report to HM Treasury on Financial Reporting for Life Assurance. This report, together with accounting standard FRS 27 Life Assurance issued in December 2004, completes the ASB's response to the request from the Financial Secretary to the Treasury asking for an urgent study into accounting by life assurers. The report summarises the needs of different users of financial statements of life assurance entities, and the improvements introduced in FRS 27 to meet those needs. It also analyses key areas where further improvements may be made, including the measurement of liabilities, profit recognition, the distinction between equity and liabilities, and the role of embedded value methods.
The report notes that the following matters still require fuller consideration. They are likely to be addressed in the IASB's Project on Accounting for Insurance Contracts:
- Liability measurement and the role of management discretion.
- Basis for recognition of profit for these long term contracts.
- Liability/equity distinction for those surpluses not yet allocated.
- Role of embedded value information in the financial reports.
3 July 2005: IFAC extends comment period on auditor competence ED
IFAC's Education Committee has extended the comment period on its exposure draft Competence Requirements for Audit Professionals (PDF 128k) until 15 August 2005. The deadline had been 15 July 2005. The proposal calls for auditing professionals to have an advanced level of knowledge in three areas: financial statement audits, financial accounting and reporting, and information technology. That advanced level of knowledge is deeper than is expected of other professional accountants. The ED also would require individuals to gain a period of relevant practical experience (normally a minimum of three years) before having substantial involvement in a financial audit assignment. For audits of financial statements in specific industries (such as banking and finance, extractive industries, and insurance) and specific environments (such as transnational audits), the proposed standard would require that the audit professional possess professional knowledge and experience relevant to those environments or industries. Click for Press Release (PDF 67k).
3 July 2005: CESR recommendations on financial reporting
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The Committee of European Securities Regulators (CESR) has published its Final Technical Advice on Possible Implementing Measures of the Transparency Directive. Matters covered by CESR's recommendations include: |
- Half-yearly reporting. CESR proposes that the minimum content of half-yearly financial statements not prepared in accordance with IFRSs should be defined by reference to the principles of IAS 34 Interim
Financial Reporting. Further, CESR proposes that in half-yearly reports, the definition of 'related party transactions' in IAS 24 Related Party Disclosures should apply both when an issuer prepares consolidated accounts and when it does not.
- Equivalence of third countries' disclosure requirements. This part of the paper develops the concepts that CESR will use to establish equivalence. CESR's intends to test equivalence by (a) looking first at the key principles and objectives of the different disclosure requirements of the EU Transparency Directive and then (b) establishing what a third country's framework has to include in order to be deemed to be equivalent. CESR notes that "the requirements of the third country do not need to be identical; equivalence can be declared when general disclosure rules provide investors with understandable information which will lead to a broadly equivalent assessment of the issuer's position."
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Click for CESR Transparency Report (PDF 388k) and CESR Press Release (PDF 68k).
2 July 2005: New SEC disclosures for shell companies
The US Securities and Exchange Commission has adopted regulations aimed at regulations deterring fraud and abuse in the securities markets through the use of shell companies. Special rules require foreign private issuer shell companies to report transactions that cause them to cease being shell companies on Form 20-F, providing disclosure comparable to that which domestic companies will report on Form 8-K. Click for SEC Press Release (PDF 57k).
1 July 2005: IASB proposes amendments to provisions standard
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The IASB has invited comment on proposed amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets (to be retitled Non-financial Liabilities) and complementary limited amendments to IAS 19 Employee Benefits. The amendments to IAS 37 would change the conceptual approach to recognising non-financial liabilities. Entities would be required to recognise in their financial statements all obligations that satisfy the definition of a liability in the IASB's Framework, unless they cannot be measured reliably. Uncertainty about the amount or timing of the economic benefits that will be required to settle a liability would be reflected in the measurement of that liability instead of (as is currently required) affecting whether it is recognised. This change would enhance financial reporting because some liabilities previously only disclosed in the notes to the financial statements will now be included in the balance sheet. Moreover, it would make the IASB approach consistent with the approach under US GAAP. Comments are due by 28 October 2005:
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