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30 April 2007: Reminder about upcoming comment deadline
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We remind you that the deadline is Friday, 4 May 2007, for responding to the IASB Discussion Paper: Fair Value Measurements. The Discussion Paper sets out the IASB's preliminary views on how to measure fair values when fair value measurement is already prescribed under existing IFRSs. It does not propose any extensions of the use of fair values. The DP is built around FASB's recently issued SFAS 157 Fair Value Measurements. SFAS 157 establishes a single definition of fair value together with a framework for measuring fair value for financial reports prepared in accordance with US GAAP. |
30 April 2007: CESR-SEC discuss IFRS-US GAAP and information sharing
The heads of the US Securities and Exchange Commission and the Committee of European Securities Regulators (CESR) met on 27 April 2007 in Brussels to take stock of progress on the SEC and CESR Joint Financial Reporting Work Plan that was published in August 2006, and to discuss future collaboration. The discussion focused on developments in the United States and the European Union with respect to IFRSs and US GAAP issues. The chairs of the SEC and CESR also agreed in principle, subject to final approval by their respective bodies, to a template for bilateral protocols between the SEC and each of CESR's member jurisdictions covering the confidential exchange of information regarding dual-listed issuers. Click for SEC Press Release (PDF 37k).
28 April 2007: European Commission report on IASB/IASCF governance
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The European Commission has posted on its website a report on Governance Developments in the IASB and IASCF (PDF 49k). The report was submitted to the EU's Economic and Financial Affairs Council (ECOFIN). The report acknowledges that "significant improvements have been made in the IASC/IASB governance structures", but also highlights the following "main areas where further improvement is desirable": |
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- Firstly, concerning the governance structure of the IASCF/IASB, the Commission believes that further amendments would improve the accountability of the Board and of the Trustees to their constituents, in particular those jurisdictions which apply IFRS.
- Secondly, as regards the IASB's due process with stakeholders, strengthened consultation procedures are necessary, in particular for IFRIC. In particular, the IASB should explain, preferably in writing, the reasons for not taking into account comments made by stakeholders. In addition, the credibility of standards would be further enhanced by impact assessment and field testing procedures.... [Also] the IASB could usefully intensify its informal liaison relationships with national standards setters and preparers....
- Thirdly, on the issue of adequate representation of stakeholders in governing bodies of the IASCF/IASB, the composition of these bodies should ensure adequate representation and experience from countries and regions committed to use of IFRS.
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28 April 2007: EU President Barroso speaks on EU/US convergence
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In a Speech at the New York Stock Exchange (PDF 51k) yesterday, Jose Manuel Barroso, President of the European Commission, discussed transatlantic relations and next week's EU-US Summit in Washington. Mr Barroso spoke of the need to address existing, unnecessary barriers posed by divergent regulations and to avoid the emergence of new ones. He referred specifically to Transatlantic accounting and auditing issues: |
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It is my hope that by 2009, we will jointly be in a position to recognise the equivalence of accounting standards between the EU and US. This will reduce costs and make it easier for companies to list themselves wherever they see fit.
It is my hope the EU and the US will quickly reach a point where we can rely on each other's auditing oversights' systems and avoid burdensome and costly duplicative work and even conflicts of law.
It is my hope that we will be able to look closely at how we regulate securities' markets in the EU and the US. We share the same goals: adequate investor protection and market integrity. If we find that these goals are effectively met on both sides of the Atlantic, we should reflect on the conditions that could allow the mutual recognition of our rules.
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27 April 2007: Propuesta para un Proyecto de NIIF para las PyME
The IASB has published the Spanish translation of the Exposure Draft of a Proposed International Financial Reporting Standard for Small and Medium-sized Entities – Propuesta para un Proyecto de NIIF para Pequeñas y Medianas Entidades. Electronic copies of the Exposure Draft may be downloaded from The 'Open to Comment' Pages of the IASB's Website (until the comment period closes). The ED, Implementation Guidance, and Basis for Conclusions have all been translated. Hard copies are available soon to purchase from the IASCF for £23 each. Comments are due by 1 October 2007. French and German translations are forthcoming.
27 April 2007: European Parliament resolution opposing IFRS 8
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The Economic and Monetary Affairs Committee of the European Parliament has proposed a Parliamentary resolution that:
- expresses significant concerns about the adoption of IFRS 8 Operating Segments in Europe;
- calls on the European Commission to urgently carry out an in-depth impact assessment before endorsing the standard; and
- states that, should the Commission fail to carry out the assessment, Parliament will carry out its own impact assessment.
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Among the Committee's concerns about IFRS 8 are the following:
- Changing from IAS 14 to IFRS 8 is a move "from a regime which clearly defines how listed EU companies should define and report on segments to an approach that permits management itself to define operating segments as management finds suitable and which furthermore requires a lower level of disclosure".
- IFRS 8 should, but does not, include a defined measure of segment profit or loss, as IAS 14 does.
- IFRS 8 does not require companies to use IFRS measures in their disclosures about operating segments, which may have a negative impact on the comparability of financial information and thus may pose difficulties for users (for example, investors).
- Adopting IFRS 8 would "import into EU law an alien standard [SFAS 131] without having conducted any impact assessment".
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Click to download the Draft Resolution (PDF 89k) proposed by the Economic and Monetary Affairs Committee of the European Parliament. Voting on the resolution by was postponed until the Parliament's September meeting.
26 April 2007: UK-US will share information on application of IFRSs
The United Kingdom Financial Reporting Council (FRC), the US Securities and Exchange Commission (SEC), and the UK Financial Services Authority (FSA) have signed a protocol for implementing the Work Plan that was agreed in August 2006 between the SEC and the Committee of European Securities Regulators (CESR) for sharing information on the application of International Financial Reporting Standards by issuers listed in the UK and the US. The staff of the FRC and the SEC will share, on a confidential basis, information on the application of IFRSs in the financial statements of issuers listed in the UK and registered with the SEC. The FRC is charged with reviewing issuers' published financial statements in the UK. Click for:
25 April 2007: IFRSs in your Pocket 2007
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We have published the sixth edition of our popular guide to IFRSs – IFRSs In Your Pocket 2007 (PDF 363k). This 100-page guide includes information about:
- IASB structure and contact details.
- Use of IFRSs around the world, including updates on Europe, Asia, USA, and Canada.
- Summaries of each IASB Standard (through IFRS 8 and the amendment to IAS 23) and Interpretation (through IFRIC 12), as well as the Framework and the Preface to IFRSs.
- Background and tentative decisions on all current IASB projects.
- IASC and IASB chronology.
- Update on IFRS-US GAAP convergence.
- Other useful IASB-related information.
We are pleased to grant permission for accounting educators and students to print copies of the PDF file for educational purposes. Please contact your local Deloitte practice office to request a printed copy. You will find Links to our Many Other IFRS Publications here.
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25 April 2007: US SEC announces next steps re IFRSs
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The United States Securities and Exchange Commission has announced two steps it intends to take relating to the acceptance of International Financial Reporting Standards (IFRSs): |
- The Commission plans to issue a Proposing Release this summer requesting comments on proposed changes to the Commission's rules to allow the use of IFRSs in financial reports filed by foreign private issuers registered with the Commission. Foreign private issuers would be given a choice between IFRSs and US GAAP. The proposal would address eliminating the current requirement that IFRS filers include a reconciliation to US GAAP amounts beginning in 2009.
- In addition, the Commission plans a Concept Release relating to issues surrounding the possibility of treating US and foreign issuers similarly in this respect by also providing US issuers the alternative to use IFRSs.
Comments on both would be due in the autumn. Click for SEC Press Release (PDF 34k).
25 April 2007: Notes from the joint IASB-FASB meeting April 2007
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The International Accounting Standards Board and the US Financial Accounting Standards Board held a joint meeting on Monday and Tuesday 23-24 April 2007 in London. Click here for the Preliminary and Unofficial Notes Taken by Deloitte Observers at the meeting. Among other things, the Boards reached agreement on a revised standard on business combinations. |
24 April 2007: US domestic companies use IFRSs?
In his remarks earlier this month at the 32nd Annual Conference of the International Organization of Securities Commissions (IOSCO) in Mumbai, US SEC Commissioner Roel Campos spoke about the possibility that the SEC would permit or even require US domestic companies to use IFRSs. He also expressed some concern that most of the foreign SEC registrants that had been expected to submit IFRS financial statements for 2005 had, instead, submitted financial statements that are identified as conforming to "home country adaptation of IFRSs". Click to download the Remarks of Commissioner Campos (PDF 62k). Presented below are excerpts relating to both matters:
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US companies using IFRSs?
The good news is that the SEC is absolutely committed to doing what we can to facilitate meeting the goals of roadmap. To reiterate my theme, I think there has been increased focus on the roadmap given the fact that globalization issues have moved to the forefront over the past year. From the standpoint of the US, we hosted an IFRS roadmap roundtable at our SEC headquarters a few weeks ago. It was designed in large part to raise the profile of the roadmap in the US. At the roundtable, our Chairman Chris Cox and EU Internal Markets Commissioner Charlie McCreevy both affirmed their commitment to eliminating the need for reconciliation between IFRS and US GAAP. So, the US is serious about the roadmap and the timeline, and we're trying to make it work.
I should also point out some provocative new ideas that were bandied about at the roundtable. These ideas definitely moved beyond the main topic about when the SEC would accept IFRS financial statements without reconciliation. In particular, there was a discussion about whether US companies – not just foreign private issuers – should be given a choice to use IFRS or US GAAP. Given that the roadmap contemplates that foreign private issuers have such a choice, it certainly raises a legitimate question about whether US companies should also have that choice. Interestingly, when the question was put to Don Nicolaisen, who was spurred on by Chairman Cox, he responded by stating that the SEC should consider requiring that all US companies use the same standard as foreign companies, and not merely giving them a choice.
Conforming to home country adaptations of IFRSs
In many cases, financial statements prepared in accordance with home country adaptation of IFRS did not also contain a reference by both the company and its auditor that the financial statements also complied with IFRS in the form issued by the IASB. Indeed, the roadmap contemplated that we would see filings of financial statements prepared using IFRS as promulgated by the IASB. However, various jurisdictions have not accepted IFRS exactly as promulgated by the IASB, and have instead made various changes thereto. Consequently, we have seen filings containing financial statements based upon national jurisdictional adaptations of IFRS. These financial statements certainly fit within the SEC's filing requirements, but without the reference to IFRS as promulgated by the IASB, they do not appear to be financial statements that fit under the one set of global accounting standards that we wrote about in the roadmap.
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24 April 2007: Special newsletter on borrowing cost amendments
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Deloitte's IFRS Global Office has published a special edition of our IAS Plus Newsletter titled IASB Issues Revised Standard on Borrowing Costs (PDF 99k). On 29 March 2007 the IASB amended IAS 23 Borrowing Costs to eliminate the option to recognise all borrowing costs immediately as an expense. To the extent that borrowing costs relate to the acquisition, construction, or production of a qualifying asset, the revised IAS 23 requires that they be capitalised as part of the cost of that asset. All other borrowing costs should be expensed as incurred. The amendments eliminate the main difference in the fundamental accounting recognition principle between IFRSs and US GAAP in this area, although significant measurement differences remain. The revised Standard applies to borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after 1 January 2009. Earlier application is permitted. You will find all Past IAS Plus Newsletters Here. You can sign up for Free Subscription by Email. |
23 April 2007: Updated summary of IPSASs
We have updated our booklet summarising the provisions of all International Public Sector Accounting Standards (IPSAS) to include all IPSASs currently in issue, namely IPSASs 1 to 24. These summaries are intended as general information and are not a substitute for reading the entire Standard. IPSASs are developed by IFAC's International Public Sector Accounting Standards Board (IPSASB). This update adds summaries of IPSASs 22 to 24, which were not included in the previous edition, as well as summaries of two outstanding exposure drafts from the IPSASB. Click for:
23 April 2007: IASB/IASCF budget proposal for 2008 is £16.0 million
The International Accounting Standards Committee Foundation, under which the IASB operates, has published its draft budget for calendar year 2008. Part A of the budget statement describes the IASB's progress to date. Part B describes the principles underlying the 2008 budget. The proposed 2008 budget calls for total spending (IASB and IASCF) of £16.0 million (compares to a budget of £14.9 million for 2007 and estimated actual of £13.4 million for 2006). The budget calls for 45 full-time equivalent technical staff persons for 2008 (compares to 40 for 2007 and 32.5 for 2006). Click to Download the Draft Budget (PDF 132k) from the IASB website.
23 April 2007: CESR consults on national GAAP IFRS equivalence
The Committee of European Securities Regulators (CESR) is seeking technical advice on a mechanism for
determining the equivalence of the generally accepted accounting principles of non-EU countries with IFRSs. Under EU law, non-EU ('third country') issuers trading on an EU-regulated market must, starting in 2009, follow either EU-endorsed IFRSs or their national GAAP if that GAAP has been deemed equivalent to IFRSs. The decision on whether a national GAAP is equivalent rests with the European Commission. The Commission has asked CESR for advice regarding the definition of equivalence and a mechanism for determining equivalence. CESR has invited comments on its proposed mechanism.
The key elements of CESR's proposed mechanism for determining equivalence are:
- The process for determining equivalence should be initiated by an application to the European Commission by the national standard setter (NSS) seeking equivalent status of its accounting principles. The application should include an honest assessment of whether disclosures and measurement principles required by that country's GAAP are materially the same as IFRSs and where they are not an assessment of the differences.
- If the NSS concludes that there are no significant differences (for example because a convergence programme has reached a point where no material differences exist any more), such GAAP may be deemed equivalent without the need of additional 'rectification disclosures'.
- Even if the NSS concludes that there are significant differences, the third country GAAP may be considered equivalent to IFRSs if those differences can be 'rectified' at company level by non-complex disclosures. Those non-complex disclosures should be subjected to audit.
- Prior to giving any advice to the Commission, CESR would seek reactions from market users regarding the third country GAAP and the proposed rectifications via public consultation.
- An 'overall' assessment of equivalence should be made in the final instance by the European Commission via a comitology process once all other steps have been fulfilled and using the definition of equivalence CESR has already provided.
- For the purposes of establishing equivalence, CESR assumes that third country GAAPs are properly applied including the provision of any rectifying disclosures necessary. CESR further assumes that the necessary filters for ensuring market confidence are in place for third country issuers using or participating in the EU capital markets.
- Finally, CESR considers that the assessment of the reliability of the audit of the financial statements should be another step in the mechanism. Compliance with the 8th Directive should be a relatively easy thing to establish about any jurisdiction that is applying for its GAAP to be recognised as equivalent.
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Comments are requested by 8 May 2007. Click to download:
23 April 2007: Reminder about upcoming comment deadline
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We remind you that the deadline is 27 April 2007 for responding to the Exposure Draft: Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards. The Exposure Draft proposes to allow a parent to use a 'deemed cost' to measure its investment in subsidiaries when it first adopts IFRSs. This deemed cost can be determined by reference to the parent's investment in the net assets of the subsidiary or the fair value of the parent's investment. In addition, the proposals would alleviate the need to restate the pre-acquisition accumulated profits of the subsidiary in accordance with IFRSs for the purposes of classifying dividends. |
22 April 2007: CEBS proposes to amend its IFRS Guidelines
The Committee of European Banking Supervisors (CEBS) has invited comments on proposed amendments to its
Guidelines on Financial Reporting. Those Guidelines are intended to be used by banking groups when preparing their financial reports based on IASs/IFRSs as required by the Supervisory Authorities within the European Union. The Guidelines were originally approved in December 2005 and revised in December 2006. One of the proposed amendments to the Guidelines on Financial Reporting incorporates the option recently added to IAS 19 Employee Benefits to allow entities the option of recognising actuarial gains and losses in full in the period in which they occur, outside profit or loss, in a statement of recognised income and expense. The current Guidelines do not provide for this option. The CEBS is also proposing a number of other changes. Responses are requested by 20 May 2007. Click for:
21 April 2007: CAPA supports the IASB's draft IFRS for SMEs
"CAPA Supports IASB SME New Exposure Draft" is the headline in the February-March 2007 issue of CAPA Chronicle, the newsletter of the Confederation of Asian and Pacific Accountants (CAPA). CAPA members are 32 professional accountancy organisations in 22 Asia-Pacific jurisdictions. Click for Full Story from CAPA Chronicle (PDF 225k). Click here for CAPA Website.
21 April 2007: Board agenda project pages updated
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We have updated the following agenda project pages to reflect the discussions and decisions at the International Accounting Standards Board's April 2007 meeting: |
20 April 2007: New format for FASB standards
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The US Financial Accounting Standards Board has changed the format of its standards in several respects designed to improve understandability:
- Standards will use bold text at the beginning of each section to convey the accounting principle for that section, similar to the approach that the IASB and the IASC have historically used.
- Examples will be included in the body of the standard to illustrate the proposed accounting guidance for certain paragraphs. Several IASs, including IAS 12 and IAS 19, use this approach, but more recently in IFRSs and amended IASs the IASB has put examples in appendices of 'application guidance' (described as 'an integral part of the Standard) and 'implementation guidance' (described as accompanying but not part of the Standard).
- All pronouncements at the top level within the generally accepted accounting principles hierarchy will be regarded as Statements, eliminating multiple types of accounting guidance formats that are at the same level in the hierarchy. Thus, interpretations, amendments, and revisions will no longer be used and will all be considered Statements with clarifying language included in the title to describe whether the Statement interprets, amends, or revises existing accounting literature.
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FASB's new Exposure Draft of a Proposed Statement of Financial Accounting Standards Accounting for Financial
Guarantee Insurance Contracts: an interpretation of FASB Statement No. 60, Downloadable Without Charge from FASB's Website (PDF 301k), is the first ED in this format. FASB will continue its practice of including a summary at the front of its pronouncements. The summary in the financial guarantee ED is organised as follows:
- Why Is the FASB issuing this proposed Statement?
- What is the scope of this proposed Statement?
- How will this proposed statement change current practice?
- What is the impact of this proposed statement on existing accounting pronouncements?
- What is the impact of this proposed statement on convergence with International Financial Reporting Standards?
- What is the effective date of this proposed Statement?
20 April 2007: Notes from IASB meeting April 2007 day 3
19 April 2007: Notes from IASB meeting April 2007 day 2
19 April 2007: Restructuring of IVSC approved
Members of the International Valuation Standards Committee (IVSC) have voted unanimously to proceed with the restructuring of the organisation, as proposed in January 2007 (see our News Story of 5 Feb 2007). The restructuring includes creation of a global valuation standards board. The new IVSC structure will be "similar to the IASB model where the Standards Board is the focal point or the heart and soul of the organisation rather than an organisation of valuation organisations". There will also be an interpretations committee and a management board of trustees entrusted strictly with the management and financial health of the organisation.
19 April 2007: New Global Offerings Services newsletter
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We have posted the March 2007 Edition of the Deloitte Global Offerings Services Newsletter (PDF 126k). Global Offerings Services is a global team of Deloitte practitioners assisting non-US companies and non-US practice office engagement teams in applying US and International accounting standards (that is, US GAAP and IFRSs) and in complying with the SEC's financial reporting rules. The GOs Newsletter is an update on relevant GAAP, regulatory, and other matters, webcasts, and publications. Past GOs Newsletters are Here. |
19 April 2007: PCAOB report on internal control audits
The US Public Company Accounting Oversight Board has issued a report on the second year implementation of its Auditing Standard No. 2 An Audit of Internal Control over Financial Reporting Performed in Conjunction with an Audit of Financial Statements. The report is based on PCAOB inspections that looked at portions of approximately 275 audits of internal control over financial reporting (ICFR) by registered public accounting firms. Click to Download the PCAOB Report (PDF 67k).
19 April 2007: Notes from IASB meeting April 2007 day 1
19 April 2007: Our comments on proposed International Standards on Auditing
Deloitte has recently submitted letters of comment to the International Auditing and Assurance Standards Board (IAASB) on the following proposed International Standards on Auditing. You can find past Deloitte letters to the IAASB Here.
18 April 2007: Corporate governance in China – some improvements, but...
 | The CFA Institute Centre for Financial Market Integrity has published a study on corporate governance in China. The findings show that while the Chinese government has done much to put in place a sound corporate governance framework, observable changes are still not evident in financial disclosures and transparency, which are viewed by the survey respondents as very important for decision-making. The CFA Institute represents 89,000 professional financial analysts. With regard to accounting standards, the report notes: |
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In February 2006, the Ministry of Finance released the Basic Accounting Standards for Business Enterprises (ASBE), consisting of 38 standards to be applied to all listed Chinese companies. The aim of this initiative is to facilitate further development of a market-like economy in China, raise the quality of financial information, and boost investor confidence. The new ASBE standards are intended to bring Chinese accounting practices largely in line with the IFRS. Although there are concerns that these new Chinese standards do not completely replicate the IFRS as intended by the international accounting
standard setters, they have incorporated many of its key principles....
A significant concern of both foreign and domestic investors in Chinese companies relates to the adequacy and transparency of disclosures. In view of this, the government has moved recently to strengthen disclosure rules. Moving forward, investors will have more information available in quarterly and annual reports.
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Please note that the report is copyright CFA Institute and has been posted on IAS Plus with their kind permission.
18 April 2007: Deloitte Australia 2007 Special Purpose Model Annual Report
Deloitte (Australia) has published 2007 Special Purpose Model Annual Report. This model annual report illustrates the minimum disclosure requirements of a proprietary company's special purpose financial report as of 30 June 2007 prepared in accordance with:
- the provisions of the Corporations Act 2001
- Accounting Standards and Interpretations issued by the Australian Accounting Standards Board up to 1 March 2007 (A-IFRSs)
- other requirements and guidelines current as at the date of issue, including Australian Securities and Investments Commission (ASIC) Class Orders, Practice Notes, Policy Statements and Media Releases.
The publication comprises two documents:
18 April 2007: Commissioner McCreevy comments on IFRSs
European Commissioner Charlie McCreevy recently addressed a meeting of the Hundred Group of Finance Directors
on the subject of International Financial Reporting Standards (IFRSs) and their implementation in the European Union. Click to download Commissioner McCreevy's Remarks (PDF 102k). Excerpts:
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The Commission welcomes the various steps already taken by CESR (Committee of European Securities Regulators) to ensure an EU wide approach [to consistent implementation of IFRSs]. The Commission has also set up an informal 'Roundtable' to assist. This Roundtable is a forum where all interested parties can discuss practical application problems relating to IFRS. Issues of widespread concern can, if necessary, be referred to IFRIC for interpretation. However, it is clear that we do not want an EU body providing interpretations and guidance. This runs counter to the whole philosophy of worldwide principles-based standards....
My firm view is that the principles-based nature of IFRS must be maintained. The convergence agenda must not be used to introduce US rules-based GAAP by the back door. In order to try and ensure a balanced evolution, we are insisting on proper
consultation on the convergence programme and projects between the IASB and the FASB. We have made it clear that joint convergence projects must be subject to full due process with all stakeholders.
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18 April 2007: Notes from IASB meeting with EFRAG representatives
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The International Accounting Standards Board is holding its April 2007 Board meeting at its offices, 30 Cannon Street, London, on Tuesday through Thursday 17-19 April 2007. On the morning of 17 April 2007, the Board met with representatives of the European Financial Reporting Advisory Group (EFRAG). Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the Meeting with EFRAG. |
18 April 2007: RSS feed added to IAS Plus
We have added an RSS feed to IAS Plus. RSS (Really Simple Syndication) is an easy way for you to be automatically updated on key additions to the IAS Plus website. You can subscribe to RSS feeds (sometimes called XML feeds) from multiple websites, scan through all their latest headlines in one place, and directly access content of interest with a single click. We have put a permanent link  to our RSS page at the top of the left column of this home page. When you click on that link, you will be taken to our RSS page.
- Some browsers, including MSIE 7 and Firefox, automatically support RSS. When you go to our RSS page, those browsers will ask if you want to subscribe.
- You can also subscribe directly in Outlook 2007;
- If your browser doesn't do that (eg MSIE 6) you can subscribe by signing up for a web-based service (such as MyYahoo!, a personalised Google homepage or Google reader, Bloglines, etc.). Just copy and paste the URL of our RSS page http://www.iasplus.com/rss/rss.xml into your chosen reader:
- You can also download and install separate RSS reader software onto your computer. You can find some information about RSS readers Here and Here.
Deloitte offers a number of other RSS feeds. Click Here for a list.
18 April 2007: SEC staff view on principles-based standards
James L. Kroeker, Deputy Chief Accountant of the US Securities and Exchange Commission, discussed how accounting standards can achieve an appropriate balance of principles and implementation guidance in a presentation at the 2007 Conference on Principles-Based Accounting and the Challenges of Implementation. Click to download Mr Kroeker's Presentation (PDF 59k). Here is an excerpt:
It may be helpful to start with a brief explanation of objectives-oriented standards, as was laid out in the 2003 Staff Report*:
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[T]he optimal principles-based accounting standard involves a concise statement of substantive accounting principle where the accounting objective has been incorporated as an integral part of the standard and where few, if any, exceptions or internal inconsistencies are included in the standard. Further, such a standard should provide an appropriate amount of implementation guidance given the nature of the class of transactions or events and should be devoid of bright-line tests. Finally, such a standard should be consistent with, and derive from, a coherent conceptual framework of financial reporting.
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In fact, this explanation may help shed some light on why many might assert that U.S. standards are not as principles-based as those of the IASB. Personally I do not necessarily agree that accounting standards in the U.S. lack underlying objectives or principles. Rather, in some instances, exceptions, bright-lines and a volume of application guidance may appear to obscure the objective or principle underpinning the standard (or to state it another way the reporting of the economic substance of the business transaction). Take Statement 133 dealing with derivatives and hedging transactions (used as an example by many to criticize that U.S. standards are not based upon principles) as an example. I believe that Statement 133 at its core is based upon sound principles. The objectives of the standard are laid out in a few paragraphs and seem fairly straight forward (derivatives represent assets or liabilities, such assets and liabilities should be recorded at fair value, changes in fair value should be recorded in income and special accounting for hedging should be provided only for qualifying items). However, the standard is accompanied by 800 plus pages of implementation type guidance providing a host of well meaning scope exceptions, bright-lines, and rules. It is the volume of guidance, that in many cases makes it more difficult, rather than easier, to apply the standard. Accordingly, it is not hard to understand why someone could lose sight of the bigger picture. As I will mention again later, the idea is for there to be an appropriate amount of implementation guidance to help in applying the objective, but not so much additional guidance that the objective gets lost.
*Study Pursuant to Section 108(d) of the Sarbanes-Oxley Act of 2002 on the Adoption by the United States Financial Reporting System of a Principles-Based Accounting System, released July 25, 2003.
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17 April 2007: Extracts of European IFRS enforcement decisions
The Committee of European Securities Regulators (CESR) has published extracts from its database of enforcement decisions taken by EU National Enforcers participating in European Enforcers Co-Ordination Sessions (EECS). EU National Enforcers of financial information monitor and review financial statements and consider whether they comply with IFRSs and other applicable reporting requirements, including relevant national law. Click for:
16 April 2007: Minutes of first SARG meeting posted
The European Commission has posted the minutes of the first meeting of the Standards Advice Review Group (SARG), which was held on 2 March 2007 in Brussels. The SARG's role is to assess whether the endorsement advice given by the EFRAG is well balanced and objective. The SARG will deliver its advice to the Commission normally within three weeks. The final advice will be published on the Commission's website. Click to download Minutes of SARG 2 March 2007 Meeting (PDF 32k). These minutes describe the EC's process for endorsing IFRSs as follows:
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Endorsement process starts as soon as COM receives a new IFRS standard or IFRIC interpretation from the IASB. COM then asks EFRAG for its endorsement opinion and notifies members of the Standards Advice Review Group that the endorsement advice has
been requested indicating the approximate time of its delivery. Upon delivery of EFRAG's final opinion on endorsement, Standards Advice Review Group has three weeks to give its advice to the Commission. In exceptional circumstances this may be extended to four weeks.
The role of the Group is to assess whether EFRAG's opinion on endorsement is well-balanced and objective.
After COM receives EFRAG's opinion and advice of SARG, it will draft the endorsing Regulation, with standard or interpretation in its Annex. Together with all required documents it will be sent for consultation with other Commission services – so-called Inter-service consultation.
COM will also send this Regulation to members of the Accounting Regulatory Committee and schedule a meeting of the Accounting Regulatory Committee to vote on proposal for endorsement. Accounting Regulatory Committee (ARC) is composed of representatives from Member States and is chaired by the Commission.
The role of ARC is to ensure the formal representation of Member States interests in the endorsement process under so-called Comitology procedure. Accounting Regulatory Committee approves implementing measures by qualified majority.
Draft implementing measures should be also sent to the European Parliament two months
before the meeting. After the meeting, the EP has another one month to consider whether the
Commission has exceeded its implementing powers.
These comitology rules will be modified in the future. IAS Regulation will be amended to
include a new 'regulatory procedure with scrutiny'. Under this new procedure the
Commission will, after obtaining Accounting Regulatory Committee's favourable opinion,
submit the draft measure for scrutiny by the EP and the Council. The new procedure will
extend the time for EP and Council to react to 3 months, unless a fast track procedure will be
adopted.
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Next SARG meetings are 12 April 2007 (focus on IFRIC 12, minutes not yet published) and 3 July 2007.
16 April 2007: Final Communique from IOSCO's annual conference
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The International Organization of Securities Commissions (IOSCO) held its 32nd Annual Conference on 9-12 April 2007 in Mumbai. The Final Communique (PDF 48k) of the Conference made the following comments about IFRSs:
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The need to progress toward internationally recognised financial reporting standards has been a central issue in the global financial services markets for some time. IOSCO has done much in this field and has consistently focused on convergence, implementation and also application, through the building of an IOSCO Database which is administered by the IOSCO General Secretariat that will facilitate the sharing by securities regulators of decisions relating to the enforcement of IFRSs. In January 2007, the IOSCO IFRS Database became fully operational and the indications are that the database will provide a useful reference source for regulators that will further aid coordination and convergence.
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16 April 2007: Agenda for 3-4 May 2007 IFRIC meeting
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The International Financial Reporting Interpretations Committee (IFRIC) will meet at the IASB's offices in London on Thursday and Friday 3-4 May 2007. The meeting is open to the public and will be webcast. The tentative agenda is shown below. |
3-4 May 2007, London
Thursday 3 May
Friday 4 May 2007 (morning only)
- IAS 18 – Customer Contributions to Property, Plant and Equipment of a Supplier
- Review of Tentative Agenda Decisions Published in March IFRIC Update
- IFRS 3 – Re-assessments on a business combination
- IAS 1 and IAS 39 – Current or non-current presentation of derivatives classified as 'held for trading' under IAS 39
- IAS 16 and IAS 18 Revenue – Sale of assets held for rental
- IAS 19 Employee Benefits – Curtailments and negative past service costs
- Staff Recommendations for Tentative Agenda Decisions
- IAS 39 – Gaming transactions
- IAS 39 – Hedging future cash flows with purchased options
- IAS 39 – Hedging multiple risks with a single derivative hedging instrument
- IAS 39 – Scope of IAS 39 paragraph 11A
- IAS 39 – The meaning of 'commonly used currencies' in AG 33(d)
- IFRS 5 – Plan to Sell the Controlling Interest in a Subsidiary
- IFRS 5 – Disclosures
- IAS 12 – Deferred tax arising from unremitted overseas earnings [this item added 18 April 2007]
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14 April 2007: Financial Instruments Working Group will meet
The IASB's Financial Instruments Working Group will meet in London on 25 and 26 April 2007. The Working Group was formed in September 2004 to help the IASB take a fresh look at IAS 39 Financial Instruments: Recognition and Measurement – with a goal of improving, simplifying, and ultimately replacing IAS 39. The agenda of the upcoming meeting includes:
Wednesday 25 April 2007
- The FASB liability/equity models and the Loss Absorption liability/equity model
- Financial Statement Presentation project update
- Overview of the Financial Instruments Due Process Document (FI DPD)
Thursday 26 April 2007
- Fair Value Measurement
- IAS 39: Proposed amendment on hedge accounting
- Insurance Discussion Paper: Overview and comparison with IAS 39
- FI DPD – fair value model: Scope, unit of account and measurement, measurement of certain contracts and hedge accounting
More information on IASB's Website.
14 April 2007: IAS Plus quarterly newsletters for April 2007
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The April 2007 IAS Plus Quarterly Newsletter has been published. The newsletter reports on the 1st quarter 2007 activities of the IASB, the IFRIC, and the IASC Foundation, and also on worldwide issues and events relating to international financial reporting. The Asia-Pacific edition has the same 19-page news content as the Global Edition plus 10 more pages of accounting standards updates for the Asia-Pacific region.
You will find all Past IAS Plus Issues Here. Sign up for Free Subscription by Email. |
13 April 2007: Asia-Pacific IFRS regional forum
The Accounting Standards Board of Japan (ASBJ) hosted an International Financial Reporting Standards (IFRS) Regional Policy Forum in Tokyo on 29 March 2007. Delegates from 14 jurisdictions across the Asia-Pacific region represented accounting standard setting and oversight bodies, professional accounting bodies, and government. Representatives from the International
Accounting Standards Board (IASB), including the Chairman, Sir David Tweedie, attended. Click to Download a Summary of Discussions (PDF 118k) prepared by the ASBJ.
13 April 2007: IASB Chairman addresses EU Parliamentary committee
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On 10 April 2007, IASB Chairman Sir David Tweedie made a presentation to the Economic and Monetary Affairs Committee of the European Parliament in Brussels. His remarks covered:
- Steps that the IASB and the Trustees have taken to improve the accountability and transparency of the organisation, including recent decisions regarding the Trustees' oversight of the IASB, feedback given by the IASB to commentators on our proposals, and the Board's engagement with the European Parliament.
- An update of convergence efforts with the United States.
- Progress toward an International Financial Reporting Standard aimed at small and medium-sized entities (SMEs).
Click to Download Sir David's Presentation (PDF 51k). Here are several excerpts: |
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There is clear momentum towards accepting IFRSs as a common financial reporting language throughout the world. Today, companies in the European Union are benefiting from reduced compliance costs associated with the removal of the need for the consolidation of different national accounts into a single statement to meet their home country's requirements. Investors are able to make comparisons of companies operating in different jurisdictions more easily. Regulatory authorities are now more able to develop more consistent approaches to supervision across the European economies.
As momentum towards a common set of international standards has built, the relevance of the IASB's work to the world's economy naturally invites increased scrutiny of our operations and the standard-setting process. This is something that the IASC Foundation Trustees and my IASB colleagues and I welcome. At the same time, I would ask for your help as elected representatives within the European Union, a leading beneficiary of IFRSs, in sustaining and protecting the project underway. Any unnecessary shock to the emerging IFRS system could derail what is becoming a global consensus around IFRSs.
Last week, the Trustees considered the comments received from the European Commission and others on our working procedures and responded positively to those comments. The Trustees are working with the IASB to build a framework that makes more explicit how cost-benefit considerations are taken into account when the IASB addresses new standards. Using field research and building upon its consultative processes, the IASB will seek to explain the impact of new standards on capital markets more clearly. Furthermore, the IASB will establish feedback statements related to comments received throughout the consultation process, enabling respondents and others to see clearly how the IASB dealt with comments received. Other regulatory groups, including the Committee of European Securities Regulators, adopt this approach to explain their conclusions, and the IASB will look to them as models.
The Trustees also discussed the need for a more active engagement on both the Trustee and IASB-level with key stakeholders, including the European Parliament. It is fair to say that we have not established regular contact with the members of the ECON committee, and the IASB wants to rectify this.
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13 April 2007: Standard setting activity in Asia-Pacific region
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We have updated the following pages on this website to reflect recent standard setting activity in the Asia-Pacific region:
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12 April 2007: Agenda for April 2007 IASB meeting
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The International Accounting Standards Board will hold its April 2007 Board meeting at its offices, 30 Cannon Street, London, on Tuesday through Thursday 17-19 April 2007. Presented below is the agenda for the meeting. The Board will also hold a joint meeting with the US Financial Accounting Standards Board in London on Monday and Tuesday 23-24 April 2007 (agenda details in the second news story below).
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17-19 April 2007, London
Tuesday 17 April 2007
Wednesday 18 April 2007
Thursday 19 April 2007
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12 April 2007: Agenda for Joint IASB-FASB meeting
| The International Accounting Standards Board will meet with the US Financial Accounting Standards Board on Monday and Tuesday 23-24 April 2007 at Painters' Hall, 9 Little Trinity Lane, London EC4V 2AD. The agenda for the meeting is presented below. |
AGENDA FOR THE JOINT IASB-FASB MEETING23-24 April 2007, London
Monday 23 April 2007
- Intangible Assets – Agenda proposal
- Liability and Equity
- A presentation of a discussion paper prepared by staff of the Accounting Standards Committee of Germany on behalf of the German Accounting Standards Board and the European Financial Reporting Advisory Group. The paper provides an alternative view on distinguishing between liabilities and equity.
- Conceptual Framework – Measurement Bases
- Conceptual Framework – Project plan
Tuesday 24 April 2007
- Business Combinations
- The Boards will discuss several convergence issues related to the proposed business combinations standard. The Boards also will consider an analysis of the benefits and costs of the proposed business combinations and non-controlling interest standards.
- Leases – scope of a discussion paper
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11 April 2007: IFRS matters discussed at ARC's 16 March 2007 meeting
The European Commission has posted a summary of the discussions at the Accounting Regulatory Committee and Contact Committee on 16 March 2007. Click to Download the ARC Meeting Summary (PDF 59k). Presented below is a brief summary of selected IFRS-related matters discussed.
- IFRIC 12 Service Concession Arrangements. Views of ARC members were divided regarding whether the ARC should recommend endorsement, including possibly some type of transitional modification of IFRIC 12 for use in Europe. The ARC decided to continue consideration of endorsement at its 6 June 2007 meeting. Meanwhile ARC members were invited to put their views in writing by 30 April 2007.
- Effective dates of IFRSs. The Commission Services presented the issue of suitable wording for the date of application of IFRSs and IFRICs adopted in Commission Regulations. Two alternatives were discussed. Member States appeared to unanimously support the following approach for the 'date of applicability' clause in the endorsing Commission Regulations endorsing IFRSs and IFRICs: The endorsed IFRS or IFRIC should apply to the company's first financial year beginning after a specific date.
- Roundtable for Consistent Application of IFRSs in Europe. The Commission Services reported on discussions at the three Roundtable meetings that have taken place to date (May and September 2006, January 2007). Twenty-six issues have been discussed of which five have been concluded as being of common concern regarding consistent application of IFRS in Europe.
- CESR experience in IFRS implementation. The Committee of European Securities Regulators (CESR) will publish, in 'early summer', a report giving a general overview of issues. Another report with information on about 20 enforcement decisions taken by EU Regulators is expected to be published by the end of March 2007. Some CESR members have also
issued reports on IFRS application at a national level.
- IFRS branding. The ARC discussed an IASB plan to modify IAS 1 to require companies to disclose any differences between full IFRSs and the company's reporting framework if that framework is based on, but not fully compliant with, full IFRSs. The ARC considered such matters as:
- Whether the differences between IFRSs as adopted by the EU and full IFRSs are likely to be so material that they merit a disclosure in the accounts.
- Whether the SEC's requirement for reference to full IFRSs is in accordance with the principle of the mutual recognition of EU-US accounting standards.
- Whether there is a need for a standard formulation for those companies using the carve out (a standardised description of the differences).
- Equivalence of IFRSs and Third-Country GAAP. The Commission Services described the key points to be covered in its first report to the European Securities Committee and European Parliament under the two legislative measures adopted in late 2006. It will describe the work timetables towards convergence to IFRSs in Canada, Japan, and the US.
- Simplification of accounting rules for small and medium-sized entities (SMEs) – possible revision of the 4th and 7th Directives. The ARC discussed a range of issues relating to SMEs, including introduction of a category of 'micro entities' and relieving small entities of any requirement to publish annual accounts. Regarding the IASB's Proposed IFRS for SMEs: "The majority of Member States confirmed that the exposure draft of the IFRS SME standard would not be suitable for most SMEs in Europe, as it does not contain enough simplifications. Member States also explicitly expressed their opposition to making a future SME standard binding for non-listed companies in the EU."
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11 April 2007: Heads Up newsletter on SOx Section 404
In the United States the SEC and the PCAOB are working to make the internal control provisions of Section 404 of the Sarbanes-Oxley Act 'more efficient and cost effective'. At an open meeting earlier this month, the SEC discussed collaboration with the PCAOB on potential modifications to the standards proposed in December by the PCAOB: An Audit of Internal Control Over Financial Reporting [ICFR] That Is Integrated With an Audit of Financial Statements, and Considering and Using the Work of Others in an Audit. The 10 April 2007 Edition of the Heads Up Newsletter (PDF 79k) summarises those discussions. Also, to promote harmony with the proposed ICFR standard, the SEC discussed its proposed interpretive guidance to help management improve Section 404 implementation (see the 8 January 2007 Heads Up (PDF 338k).
9 April 2007: EFRAG and the IASB representatives will meet
On 17 April 2007 a delegation from the European Financial Reporting Advisory Group (EFRAG) will meet with IASB representatives in London in order to present European views on certain convergence topics. This will be the third meeting of this kind and is part of the consultation arrangements between the IASB and EFRAG
6 April 2007: SEC will simplify implementation of SOx Section 404
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The US Securities and Exchange Commission has endorsed a number of steps designed to make the internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002 "more efficient and cost effective". Steps the Commission has agreed to take include: |
- Swift consideration of the PCAOB's new auditing standard AS-5 when the PCAOB submits it to the SEC in the coming weeks (currently this is Proposed Auditing Standard An Audit of Internal Control Over Financial Reporting that Is Integrated with an Audit of Financial Statements)
- Aligning the SEC's proposed new management guidance under Section 404 with the new AS-5
- Scaling the 404 audit to account for the particular facts and circumstances of companies, particularly smaller companies
- Encouraging auditors to use professional judgment in the 404 process, particularly in using risk-assessment; and
- Following a principles-based approach to determining when and to what extent the auditor can use the work of others.
Click for SEC Press Release (PDF 31k).
6 April 2007: FEI plan 'to combat financial reporting complexity'
Financial Executives International (FEI) has issued a "four-point plan to combat financial reporting complexity.... The capital markets are not well served, and US competitiveness is hindered, when scarce financial resources are not used in value-enhancing business initiatives but to satisfy disclosure and accounting requirements that fail to meet cost-benefit tests. The FEI's Four-Point Plan (PDF 59k) recommends action by both FASB and IASB, including global convergence and mutual recognition:
FEI's Recommendations to Address Complexity in Financial Reporting
- 1. The FASB and SEC, in coordination with key financial reporting stakeholders (preparers, auditors and financial statement users), should take steps to end the proliferation of detailed rules.
- a. Agree to a stable platform for a specified period of time, during which no new accounting standards would be issued. Efforts would be shifted from new standards to completion of the conceptual framework, including the development of a comprehensive accounting and disclosure model that is integrated with the codification project.
- b. Upon completion of the model,work jointly with the IASB to evaluate proposals by stakeholders to improve and simplify the most complex standards by making them more principles-based, and eliminate important differences between US GAAP and IFRS. Stakeholders in the financial reporting process should continue to encourage global convergence and mutual recognition of high-quality accounting standards.
- 2. Congress should consider meaningful class-action reform.
- 3. The SEC and PCAOB should develop a framework that provides effective regulation in a principles-based environment, one that balances the objective of investor protection with the need to maintain market competitiveness.
- 4. Stakeholders should come together to form an independent 'Committee on Complexity'.
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6 April 2007: Accounting Roundup – first quarter 2007 review
We have posted Accounting Roundup: First Quarter in Review–2007 (PDF 365k), prepared by the National Office Accounting Standards and Communications Group of Deloitte & Touche LLP (USA). During the first quarter of 2007, accounting standard setters and regulators issued a number of pronouncements affecting accounting, financial reporting, and corporate governance. Accounting Roundup: 1st Quarter in Review–2007, presents brief descriptions of those pronouncements, and outlines other first-quarter regulatory and professional developments. This quarterly review consists of articles, adapted as necessary, from issues of Accounting Roundup published in the first quarter of 2007, as well as new articles for the month of March. You will find past issues Here.
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Please note that for months that end a calendar quarter, separate monthly Accounting Roundups will no longer be published. This should ensure a more timely release of the Quarter in Review issues. |
5 April 2007: IASB publishes an Overview of the SME exposure draft
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The International Accounting Standards Board has published a Staff Overview of the exposure draft of the proposed IFRS for SMEs. The Overview is written in question-and-answer format and is intended as a high level introduction to the proposals. However, it has not been approved by the IASB, and it is not intended to serve as the basis for commenting on the exposure draft. You can Download the SME ED Overview from the IASB's website (PDF 277k). Comment deadline on the ED is 1 October 2007. Click for More Information about the Project. |
4 April 2007: PCAOB proposals on consistency and GAAP hierarchy
The US Public Company Accounting Oversight Board (PCAOB) has proposed for public comment an auditing standard Evaluating Consistency of Financial Statements and a concept release concerning Rule 3523 Tax Services for Persons in Financial Reporting Oversight Roles. In addition, the PCAOB published guidance, in the form of questions and answers, on Rule 3522 Tax Transactions and Rule 3523. Click for Press Release (PDF 24k).
4 April 2007: Notes from public portion of IASCF Trustees' meeting
The Trustees of the IASC Foundation, under which the IASB operates, met in London on 2 and 3 April 2007. The public portion of the meeting was be held on the afternoon of 2 April 2007. The preliminary and unofficial notes taken by Deloitte observers at the public session are presented below.
Public Session 2 April 2007 Afternoon
Trustees' Procedures Committee Issues
Fostering more effective interaction between the Trustees and the IASB
The chairman of the Trustees' Procedures Committee, Antonio Vegezzi, presented a proposal for a way of securing a closer interaction between the Trustees and IASB members to discuss strategic (but not technical) issues. This is seen as a way to facilitate the Trustees' oversight role and enhance public confidence in the IASB, while maintaining the Board's independence.
Trustees were generally supportive, but were concerned that some technical matters became very political, and maintaining the independence of the IASB when faced with such a situation might be difficult.
The Trustees approved the proposed terms of reference:
- The Procedures Committee will assume responsibility for managing and maintaining this dialogue with the IASB.
- Two or three members of the Procedures Committee will meet twice annually with the IASB in London during a closed administrative session.
- To ensure that a wide range of relevant issues are addressed, the members of the Procedures Committee attending the meeting with the IASB will consult with the other Trustees for topics in advance of the meetings with the IASB.
- The IASC Foundation secretariat should prepare an agenda for the meeting following consultation between the IASB Chairman and the Procedures Committee Chair.
- The IASC Foundation secretariat will circulate minutes of the meetings to the other Trustees.
- The Trustees attending the meeting with the IASB will make a formal report to the full Trustees in public session at the next meeting of the Trustees.
Developing 'measures of effectiveness' in oversight
The Trustees discussed how they might measure [demonstrate] their effectiveness in exercising oversight of the activities of the IASB. An important foundation to the discussion was a letter (or report) from the European Commission to the Trustees that apparently gave the Commission's views on various aspects of the IASC Foundation's activities. This paper was not available to Observers and thus it is difficult to put some of the comments made in context.
Neutrality
The Trustees agreed that the best way for the IASB to ensure that an IFRS is neutral was through a thorough consultation process, by which a sustainable accounting solution was achieved. However, the consultation should not result in a biased result – the accounting standard should still report economic phenomena in a neutral and truthful manner.
Field research
The Trustees agreed to work with the Board to develop a workable, cost-efficient approach to undertaking field research. Field research was a collective phrase for both field tests (in which a draft standard is applied 'as if effective', which involves systems changes, etc) and field visits (which are more informal and qualitative). It was agreed that 'impact assessments' were beyond the capability of the IASCF and should not be considered.
There was lots of concern expressed that the IASCF were being asked to entertain matters that would blur the dividing line between oversight and intervention.
The Chairman noted that the fact that an accounting standard was costly to implement was not a good enough reason not to issue the standard. However, it was important to get the substance of the standard right. As an example, he noted that standards on post-retirement healthcare benefits were costly to implement, but it was the right thing to do.
Communicating
The Trustees supported a suggestion that the IASB experiment with providing a 'feedback statement' that would accompany a new standard. The statement would be more detailed than the Basis for Conclusions that accompanies an IFRS, and would bring together the staff analysis of issues, views of constituents (including comment letters and the SAC), and the results of field research, together with the Board's resolution of those issues. It is likely that this idea will be developed further before it is tested at the IASB.
Reporting on the oversight responsibility
The IASC Foundation's annual report will contain a report from the Trustees on their oversight activities.
Procedures Committee
The Trustees agreed to expand the Procedures Committee from five to seven members.
Report from the IASB Chairman
The IASB Chairman Sir David Tweedie presented a report of the IASB's activities and the status of its projects. These activities are reported in detail on IASPlus.com. However, there were some interesting items to note.
Business combinations
The IASB and the FASB continue to disagree on two significant issues – the measurement of non-controlling interest ('minority interest') and the accounting treatment for step acquisitions. The problem with non-controlling interest is that the IASB wants an exception from fair value on the basis of undue cost or effort, whereas the FASB does not. With respect to step acquisitions, the IASB has decided on one of at least five methods in use currently but it was proving a hard sell. The problem was that the alternatives were equally unpalatable.
Sir David was candid when he said that the IASB did not have the votes to approve a standard at present.
Conceptual Framework
Sir David acknowledged that the issue of stewardship needed to be addressed. It was apparent that the Boards had not explained their decisions effectively and that many constituents had misinterpreted what they had written. The FASB and IASB had never intended 'decision usefulness' to imply prospective usefulness only. They did mean useful for retrospective assessments too. It was also apparent that constituents did not have a clear idea of what was implied by 'stewardship' either. A Trustee noted that an effective and meaningful resolution of this issue is vital if supporters of the stewardship concept in financial reporting were not to be left 'perpetually dissatisfied'.
Leases
It seems likely that the IASB will ask the major accounting firms to review the 'draft standard' developed by the G4+1 in 1998 to determine whether the principles in it could be audited, and then ask IOSCO whether such a standard could be enforced effectively.
The IFRS reporting assertion
The Trustees discussed the background to the draft proposed amendment to IAS 1 with respect to reporting compliance with IFRSs. The draft proposed amendment had been prepared at the suggestion of the International Auditing and Assurance Standards Board, whose constituents are increasingly being asked to report on financial statements prepared in accordance with 'IFRS as adopted in...'. IOSCO has subsequently raised concerns. It thinks that IAS 1 is fine as it is and sees nothing to be gained in lending legitimacy to 'IFRS clones'. However, there is a clear political problem in many jurisdictions, one both of law and sovereignty over accounting standards. Many corporations and securities acts require reporting in accordance with local GAAP, so the local standard setter is obliged to issue IFRSs as local GAAP, even though it is identical to IFRSs.
No conclusions were reached, but the Trustees were made aware of the problems being faced by IFRS preparers, their auditors, and regulators.
Report from the Chairman of the Standards Advisory Council (SAC)
The SAC Chairman gave a brief report of the February SAC meeting, noting that the Council had also discussed the IFRS reporting assertion in much the same terms as the Trustees.
Most of this session concentrated on efforts of the Council to measure its effectiveness. It is proving a matter of increasing frustration for Council Members and the Chairman in particular. However, as the Council brings together constituents with a variety of backgrounds, experience and views, and is advisory in nature, developing a measure of 'effectiveness' is proving elusive.
The Trustees discussed this for some time, but noted that the diversity of opinion around the Council is a sign of strength, not a weakness. However, the challenge for the Council was to determine (i) how it provides valuable input to the IASB; and (ii) how the IASB demonstrates that it has taken the Council's views into consideration. The resolution of both issues would require the SAC and the IASB (and the Trustees) to develop a clear understanding of their expectations of the Council, since the IASB is the Council's primary 'user'. Effectiveness could only be measured if there is clarity about expectations.
The Trustees encouraged the SAC Chairman to work with the IASB 'sooner rather than later' and report to the Trustees as soon as possible. The SAC brings together high-calibre people, and it is important that the resource the Council represents is used appropriately.
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3 April 2007: Proposal to increase IFRIC to 14 members
The International Accounting Standards Committee Foundation has proposed to increase the size of the International Financial Reporting Interpretations Committee (IFRIC) from 12 to 14 voting members. From the comments received in the consultations on the IFRIC Due Process Handbook, the Trustees of the IASC Foundation concluded that the IFRIC would benefit from a greater diversity of members with practical experience in the application of International Financial Reporting Standards (IFRSs) and analysis of financial statements using IFRSs. This is particularly important in the light of the expanding adoption of IFRSs throughout the world. As the size of the IFRIC is prescribed by the IASC Foundation's Constitution, the proposed change must await an amendment to the Constitution. The Trustees therefore invite comments on the proposed amendment set out in a consultative document Proposal for Enlarging the International Financial Reporting Interpretations Committee (PDF 238k). Comments should be submitted in writing to be received by 31 July 2007. Click for Press Release (PDF 297k).
1 April 2007: Updated EFRAG endorsement status report
The European Financial Reporting Advisory Group has updated its report showing the status of endorsement, under the EU Accounting Regulation, of each IFRS, including standards, interpretations, and amendments. Click to download the Endorsement Status Report as of 20 March 2007 (PDF 26k). The 20 March 2007 update indicates that it is not clear when the Commission might endorse IFRS 8 or IFRIC 12. You can always find a link to the Endorsement Status Report on our EFRAG Page. Currently, the following IASB pronouncements have not yet been endorsed for use in Europe:
- IFRS 8 Operating Segments
- IAS 23 Borrowing Costs (revised March 2007)
- IFRIC 11 IFRS 2: Group and Treasury Share Transactions
- IFRIC 10 Interim Financial Reporting and Impairment
- IFRIC 12 Service Concession Arrangements
1 April 2007: SEC Commissioner discusses IFRS-US GAAP reconciliation
In a Speech at a Conference in Dublin (PDF 99k), US SEC Commissioner Paul S Atkins provided an update on the SEC's consideration of elimination of the current SEC requirement that registrants using IFRSs must provide a reconciliation of profit or loss and of equity to similar amounts under US GAAP. An excerpt:
So how far along the road to reconciliation are we now? I believe that we are well on our way to eliminating the reconciliation requirement. Thanks to Commissioner McCreevy's leadership, the European Commission bolstered the move towards equivalence by extending an exemption to make reconciliation of US GAAP to IFRS unnecessary. Just imagine how counter-productive it would be to our mutual recognition efforts if the EU would impose a new reconciliation requirement, essentially saying that the two are not equivalent! Think how difficult it would be for us to then disagree with our friends and determine the opposite – that they are in fact equivalent.
Meanwhile, the SEC has been gaining its first insights into just how IFRS is working in practice. Last summer, our staff began reviewing the filings that we received from foreign private issuers that adopted IFRS in 2005. Our staff is working with the Committee of European Securities Regulators pursuant to a joint work plan that the chairmen of CESR and the SEC announced last summer.
The objective of the SEC staff's reviews is to see how closely IFRS filers in fact are adhering to IFRS standards. The purpose is not to attempt to dictate how IFRS ought to be applied. The purpose is also not to turn IFRS from principles-based accounting standards into rule-based standards. Rather our staff is looking at whether IFRS filings are complete and adhere to IFRS standards. I suspect that many of the problems that we have seen in these areas are a natural by-product of the first year of IFRS implementation and will disappear as companies and their auditors become more accustomed to IFRS.
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