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28 February 2007: New members appointed to EFRAG
The Supervisory Board of the European Financial Reporting Advisory Group (EFRAG) has approved the following composition of the EFRAG Technical Expert Group effective 1 April 2007:
- Stig Enevoldsen, Auditor, Denmark - TEG Chairman (reappointed)
- Mike Ashley, Auditor, member of the UK ASB (reappointed)
- Alan Dangerfield, Industry, Switzerland (new appointment)
- Francoise Flores, Industry, France
- Manuel Garcia-Ayuso, Academic, Spain
- Catherine Guttmann, Insurance Advisor, France (reappointed)
- Roberto Monachino, Banking specialist, Italy
- Hans Schoen, Auditor, The Netherlands (new appointment)
- Thomas Seeberg, Industry, Germany (reappointed)
- Anna Sirocka, Auditor, Poland
- Mike Starkie, Industry, UK (reappointed)
- Carsten Zielke, User, Germany
27 February 2007: IFAC lends its support to the IFRS for SMEs
At its meeting last week in New York City, the Board of the International Federation of Accountants (IFAC) agreed to assist the International Accounting Standards Board (IASB) in obtaining feedback on its proposed International Financial Reporting Standard (IFRS) for Small and Medium-sized Entities (SMEs) through field testing and other means. At the meeting, Paul Pacter, IASB Director of Standards for SMEs, outlined the proposed IFRS for SMEs. "Among other matters, Mr. Pacter urged all Board members and regional accountancy organizations to encourage responses from their respective constituencies on the proposed standard and perceived challenges to its adoption."
| IFAC President Fermin del Valle stated: IFAC is highly supportive of this project and recognizes the considerable progress made. To ensure that the final standard meets the needs of the SMP/SME marketplace, it is crucial that IFAC and its members help the IASB seek out and capture the views of all relevant constituents, primarily SMEs, SMPs, and users of SME financial statements.
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25 February 2007: Forum of Firms paper on application of IFRSs
IFAC's Forum of Firms has released a new good practices document entitled Perspectives on the Global Application of IFRS. Launched in January 2001, the Forum of Firms (FOF) is an organisation of international firms that perform audits of financial statements that are or may be used across national borders. The new FOF guidance document was developed by the FOF's Transnational Auditors Committee, which is chaired by P Nicholas Fraser of Deloitte (France). It is
based on interviews with ten Forum members, illustrates the progress made with IFRSs, and sets out examples of good practices that the network firms are implementing.
Click Download the Guidance Document (PDF 192k).
When the document refers to IFRSs, it includes not only IFRSs as issued by the IASB but also:
- IFRS as adopted by the European Union
- Australian GAAP (which incorporates Australian equivalents to IFRS)
- Hong Kong Financial Reporting Standards
- South African GAAP (which closely follows IFRS)
"This does not mean that the firms endorse departures from IFRS as issued by the IASB. Ideally, the firms would prefer all countries adopting IFRS to do so without variation. But the firms recognise the practical reality that these limited differences in IFRS frameworks exist."
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24 February 2007: End of reconciliation 'is clearly in sight' – SEC official
In remarks on The Promise of Transparency presented at the 29th Annual Conference on Securities Regulation and Business Law in Dallas, Texas, John W White, director of the Division of Corporation Finance of the US Securities and Exchange Commission spoke about a range of topics of international interest, including:
- Foreign deregistration
- Guidance on implementing Sarbanes-Oxley Section 404 (internal controls)
- E-proxies
- The SEC's new executive compensation disclosure ("the Division's biggest project from last year... historic rulemaking")
- Proxy access
- International Financial Reporting Standards ("I believe the time when the staff will recommend the 'end of reconciliation' is clearly in sight.")
- Interactive Data.
- PIPEs (private investment, public equity offerings)
- Restatements and Item 4.02 of Form 8-K
- Small business capital raising and private offering reform
An excerpt from Mr White's remarks is below. Click for full text of Mr White's Remarks (PDF 77k).
International Financial Reporting Standards
This is a big one. Last Tuesday (on February 13, 2007), the Commission
issued a press release announcing a staff roundtable we have coming up on
International Financial Reporting Standards ('IFRS') as promulgated by the
International Accounting Standards Board (the 'IASB') The roundtable
will explore where things stand today with the so-called 'roadmap' laid out
by then-Chief Accountant Donald Nicolaisen as to how we might eliminate
the requirement that companies filing IFRS financial statements reconcile
those with US GAAP The roundtable will be held on Tuesday, March 6, at
the Commission's headquarters in Washington.
The Division of Corporation Finance has already been extremely busy
reviewing filings from foreign private issuers that use IFRS. I detailed that
review and where we stand with our growing understanding of IFRS in a
speech I gave last month in London, and I do not have the time to go into
that much detail here today. Suffice it to say, the recognition and growing
use of IFRS is an exciting topic today and something we should all keep in
focus. I believe the Commission and the staff will be devoting considerable
attention and energy following the March 6 roundtable to developing and
announcing next steps, and I believe the time when the staff will
recommend the 'end of reconciliation' is clearly in sight.
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24 February 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 February 2007 meeting: |
24 February 2007: Heads Up on new US fair value option
In our news story of 16 February 2007, we reported that the US Financial Accounting Standards Board has issued a standard that provides companies with an option to report selected financial assets and liabilities at fair value. Statement 159 The Fair Value Option for Financial Assets and Financial Liabilities also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. Deloitte (United States) has prepared a Special Issue of the Heads Up Newsletter (PDF 120k) explaining FASB's new fair value option.
23 February 2007: Notes from day 3 of the February 2007 IASB meeting
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The International Accounting Standards Board held its February 2007 Board meeting at its offices, 30 Cannon Street, London, on Tuesday through Thursday 20-22 February 2007. Click here for Complete Meeting Notes (preliminary and unofficial) taken by Deloitte observers at the February 2007 IASB meeting. |
23 February 2007: Statistics database on cross-border securities updated
We have updated our Database of Statistics that, we believe, provide clear evidence of the globalisation of the world's capital markets and of the need for global financial reporting standards. The latest updates reflect January or February 2007 data on the number of non-US companies listed on member exchange of the World Federation of Exchanges and details of cross-border listings on the New York Stock Exchange, NASDAQ, and the London Stock Exchange.
22 February 2007: Notes from day 2 of the February 2007 IASB meeting
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The International Accounting Standards Board held its February 2007 Board meeting at its offices, 30 Cannon Street, London, on Tuesday through Thursday 20-22 February 2007. Click here for Complete Meeting Notes (preliminary and unofficial) taken by Deloitte observers at the February 2007 IASB meeting. |
22 February 2007: UK FSA risk outlook includes IFRSs
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The United Kingdom Financial Services Authority has published Financial Risk Outlook 2007 (PDF 2,019k). This annual publication is intended to raise awareness of the priority risks which the FSA believes it, along with providers and users of financial services, should consider. In the areas of accounting and auditing, the FSA sees three potential risks stemming from: |
- the move to International Financial Reporting Standards
- the convergence between IFRSs and US Generally Accepted Accounting Principles
- the concentration of audit services, and international coordination.
In the area of financial reporting, the FSA sees "two major risks to the continued success of IFRSs":
Inconsistent application across national economies, and
the potential direction of the future development of the IFRS Framework, including decision-usefulness, greater emphasis fair value accounting, and convergence with US GAAP. Some excerpts:
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Inconsistent application
With regard to inconsistency, the true benefit of IFRS can only be realised through enabling a better comparison of similar entities across national boundaries, which, in turn, will provide enhanced transparency for markets and a more efficient global capital market. We also acknowledge that, under a principles-based accounting framework, there may be relevant economic and legal differences between countries such that similar transactions might
legitimately be reported in different ways. However, should local custom or
national interest operate to threaten the consistent application of IFRS, much
of this anticipated benefit could be lost.
IASB Framework
For the development of the IFRS framework itself, there are concerns that the standards in some areas are of lesser quality than those that they have replaced. There is also a growing concern that IFRS will be interpreted and audited in a more prescriptive and rules-based way than was typically the case under UK GAAP – a risk of more 'form-over-substance' when agreeing accounting treatments. Going forward, the main areas of concern arise, in part from convergence with US GAAP and in part from the move towards 'decision usefulness' and an increasing emphasis on fair-value accounting.... Should the move towards fair value for all assets and liabilities advance significantly, many question whether the resulting information would remain sufficiently reliable to enable investors to make informed decisions about the effectiveness of the stewardship of their companies. At the same time, the ability of the audit profession to apply judgement on what constitutes a 'true
and fair' view might be ever more constrained by detailed rules, resulting in a 'presents fairly in accordance with' model of financial reporting. The progress made over the next 18 to 36 months will be critical in determining whether the potential benefits of IFRS and convergence are realised, or whether the costs connected and the ultimate outcomes experienced are
potentially disproportionate, or even negative, for UK stakeholders.
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22 February 2007: IASCF trustees publish IFRIC's Due Process Handbook
The trustees of the IASC Foundation (IASCF) have published the Due Process Handbook for the International Financial Reporting Interpretations Committee (IFRIC). When the trustees initiated a review of the organisation's Constitution in November 2003, they identified the resources and effectiveness of the IFRIC as one of the major issues to review. In March 2005 the IASCF invited comment on a consultation paper IFRIC Review of Operations, and in May 2006 the trustees published the IFRIC due process handbook in draft for public comment. The Trustees approved an amended version at their meeting in January 2007. The Handbook may be downloaded from the IASB's Website. Click for Press Release (PDF 51k).
22 February 2007: Proposal to amend related party disclosure standard
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The IASB has published an exposure draft of proposed amendments to IAS 24 Related Party Disclosures. The amendments would:
- Exempt some state-controlled entities from related party disclosures
- Change the definition of a 'related party'.
Comment deadline is 25 May 2007. The ED is now available for eIFRS subscribers and will be freely available on the IASB's website from 5 March 2007. Click for Press Release (PDF 63k). Here is the IAS Plus Project Summary for the IAS 24 amendment project.
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Proposed Amendments to IAS 24 |
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State controlled entities
The ED proposes to reduce the disclosure requirements in IAS 24 for some entities that are related only because they are each state-controlled or significantly influenced by the state. The changes respond to concerns expressed by interested parties about the difficulties that these entities have in obtaining the information required by IAS 24. In many cases, the entities affected may not even know that they are related to others controlled or influenced by the state. The IASB concluded that for those entities affected the cost of complying with IAS 24 is likely to outweigh the benefits of the disclosures to users of their financial statements. The exemption proposed is limited to those circumstances in which it is clear that the related entities are not influencing each other.
Definition of 'related party'
The main amendments to the definition are:
- the inclusion, in the definition of a related party, of the relationship between a subsidiary and an associate of the same entity, in the individual or separate financial statements of both the subsidiary and the associate.
- the removal, from the definition of a related party, of situations in which two entities are related to each other because a person has significant influence over one entity and a close member of the family of that person has significant influence over the other entity.
- the inclusion, within the definition of a related party, of two entities where one is an investee of a member of key management personnel (KMP) and the other is the entity managed by the person that is a member of KMP.
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21 February 2007: Market approach to valuing share-based payment
Because employee stock options and other share-based payment awards do not trade in a market, most companies
use pricing models, such as the Black-Scholes-Merton model, to measure an award's grant date fair value for accounting purposes under IFRS 2 Share-based Payment and under the comparable US standard FAS 123(R). In the United
States, Zions Bancorporation believes, and the SEC concurs, that it has sufficiently designed an instrument to serve
as a market-based approach to valuing employee share-based payment awards, including employee stock options. Based on a test auction, Zions's approach suggests a value of 68-72 percent of the value of the same stock option as determined by the Black-Scholes-Merton model. Deloitte (United States) has prepared a Special Issue of the Heads Up Newsletter (PDF 78k) explaining Zions's model, the SEC's views about it, and how it could be applied for accounting purposes. There are hyperlinks to Zions's report and related SEC reports and commentary.
21 February 2007: Notes from day 1 of the February 2007 IASB meeting
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The International Accounting Standards Board held its February 2007 Board meeting at its offices, 30 Cannon Street, London, on Tuesday through Thursday 20-22 February 2007. Click here for Complete Meeting Notes (preliminary and unofficial) taken by Deloitte observers at the February 2007 IASB meeting. |
20 February 2007: EC opinions on consolidated and separate statements
At the 2 February 2007 meeting of the European Commission's Accounting Regulatory Committee, the Commission presented two final interpretive opinions dealing respectively with the meaning of 'annual accounts' and the possibility to issue annual
accounts prepared in accordance with IFRS before consolidated ones. Both relate to application of the requirements of IAS 27 Consolidated and Separate Financial Statements within the European Union:
- If a parent company in the EU is not required by the Seventh Directive to prepare consolidated accounts, can it issue IFRS 'annual accounts' (its own separate financial statements) in conformity with IFRSs? In almost all circumstances, if a company is a parent, IAS 27 requires the preparation of consolidated financial statements. Under IAS 27, the parent's separate financial statements are an additional set of financial statements not required by IAS 27. The Commission has concluded, however, that the Seventh Directive takes precedence in Europe in determining when consolidated statements must be prepared. Therefore, if the Seventh Directive does not require consolidated financial statements, a parent company can prepare its separate financial statements using IFRSs. The Commission's view is that "the IAS 27 requirements to prepare consolidated accounts do not apply." Click for Commission's Opinion (PDF 25k).
- Can a company that prepares both individual and consolidated accounts in accordance with IFRSs adopted for use in Europe issue the individual accounts before issuing the consolidated accounts? In rejecting an agenda topic in March 2006, the IFRIC concluded that separate financial statements issued before consolidated financial statements could not be considered to comply with IFRSs, because separate financial statements are required by IAS 27 paragraph 42 to identify the consolidated financial statements to which they relate. However, the European Commission has concluded that the interpretation under the EU IAS Regulation is different. If a company chooses or is required to prepare its annual accounts in accordance with IFRSs
as adopted by the EU, it is permitted to prepare and file them independently from the preparation and filing of its consolidated accounts – and thus in advance – where the national law transposing the Directives requires or
permits separate publication. Click for Commission's Opinion (PDF 25k).
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20 February 2007: Support for SME ED in Australia, Ireland, UK
Australia At its February 2007 meeting, the Australian Accounting Standards Board considered staff papers on differential reporting and small and medium-sized entities (SMEs) and tentatively decided that Australia should adopt a two tiered approach in relation to Australian corporate entities, as follows:
- Australian equivalents to IFRSs (A-IFRSs) will be required for corporates that are publicly accountable
- an Australian version of the IFRS for SMEs will be adopted by corporates that are not publicly accountable but which prepare general purpose financial reports.
The AASB decided that under a revised financial reporting regime, all financial reports that are prepared and lodged with Australia Securities and Investments Commission under the Corporations Act 2001 would be regarded as general purpose financial reports, because they are available on a public register for access by users. Once the new reporting regime (based on IFRSs and the IFRS for SMEs) is put in place, this decision will effectively remove the 'reporting entity' concept for corporate entities that report under the Corporations Act 2001.
Ireland A press release issued by the Institute of Certified Public Accountants of Ireland said: 'The Institute of Certified Public Accountants positively welcomes the publication by the International Accounting Standards Board (IASB) of draft guidance on International Financial Reporting Standard for Small and Medium-sized Entities.... This initiative is designed to facilitate a move towards one common set of international financial reporting standards without disadvantaging SMEs.' Click for CPA Ireland Press Release (PDF 132k).
United Kingdom The United Kingdom Accounting Standards Board (ASB) has issued a press release welcoming the publication of the Exposure Draft of an IFRS for SMEs (see News Story of 15 February 2007). The ASB is currently defining its strategy and approach to this Exposure Draft. The Board is minded to issue the ED of IFRS for SMEs for consultation with an accompanying ASB invitation to comment (ITC) giving an insight into the Board's initial views on the Exposure Draft and potential implications for UK and Irish entities. The ITC would also set out with any additional questions the ASB considers appropriate. The ITC would also aim to provide an analysis of the significant differences between the existing FRSSE [UK Financial Reporting Standard for Smaller Entities] and the proposed IFRS for SMEs. The ASB encourages UK and Irish constituents to comment both to our forthcoming consultation and directly to the IASB. The IASB has asked for comments on the Exposure Draft by 1 October 2007. The ASB plans to publish its formal comments by the same date after considering UK constituents feedback to their proposed consultation paper on the IFRS for SMEs Exposure Draft. Click for ASB Press Release (PDF 16k).
19 February 2007: Special EFRAG meeting on service concessions
The European Financial Reporting Advisory Group will hold an extra meeting on IFRIC 12 Service Concession Arrangements on Friday 9 March 2007 in its offices 13/14 Avenue des Arts, Brussels. This is in addition to the scheduled EFRAG meeting on 14-16 March 2007. Our news story of 13 February 2007 reported that EFRAG's tentative view is to recommend that the European Commission endorse IFRIC 12 for use in Europe. However, a significant minority of EFRAG members disagree. Here is a link to download EFRAG's Draft Comment Letter (DOC 132k). Comments are requested by 28 February 2007.
18 February 2007: SEC Commissioner speaks about IFRSs
Kathleen L. Casey, the newest member of the US Securities and Exchange Commission, spoke about International Financial Reporting Standards in her remarks at the Practicing Law Institute's SEC Speaks conference. Click for Commissioner Casey's Remarks (PDF 47k). An excerpt:
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Likewise, as you have just heard from the prior panel, the Commission is committed to the roadmap announced in 2005 that sets out a timeline for the Commission's consideration of the various steps necessary to make a determination on the elimination of the reconciliation requirement for foreign private issuers that use International Financial Reporting Standards ('IFRS'). As we begin Year 2 of IFRS, we are working through application issues with foreign issuers and continue dialogue with international regulators to analyze the faithfulness and consistency of the application and interpretation of IFRS in financial statements.
We also continue to monitor the progress of the IASB and FASB in their convergence projects. I strongly support these efforts and am committed to identifying issues and obstacles early in order to move toward our goal in a timely manner.
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16 February 2007: IFRS implementation review panel formed in Netherlands
The Netherlands Authority for Financial Markets (Autoriteit Financiele Markten or AFM) has formed a Financial Reporting Committee of 12 external IFRS experts to advise the Authority on the application of IFRSs and the supervision thereof. Click for AFM's Press Release (PDF 15k). The AFM is responsible for supervising the financial reporting of Dutch listed companies. They have announced that their 2007 reviews of the 2006 financial reporting will focus on the application of IAS 12 Income Taxes and IAS 7 Cash Flow Statements. Click for Letter Sent to Listed Companies (PDF 283k) setting out the results of AFM's review of 2005 reports and example questions for 2006.
16 February 2007: FASB adopts fair value option for financial instruments
The US Financial Accounting Standards Board has issued a standard that provides companies with an option to report selected financial assets and liabilities at fair value. Statement 159 The Fair Value Option for Financial Assets and Financial Liabilities also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. FAS 159 is effective for an entity's first financial year beginning after 15 November 2007, with earlier adoption permitted. Under FAS 159, the fair value option:
- May be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method
- Is irrevocable (unless a new election date occurs)
- Is applied only to entire instruments and not to portions of instruments.
The FAS 159 fair value option is similar, but not identical, to the fair value option in IAS 39 Financial Instruments: Recognition and Measurement. The IAS 39 fair value option is subject to certain qualifying criteria not included in FAS 159, and it applies to a slightly different set of instruments. Click for FASB News Release (PDF 58k). You can download FAS 159 from FASB's Website.
16 February 2007: IAS Plus Newsletters for February 2007
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The February 2007 IAS Plus Quarterly Newsletter has been published. The newsletter reports on the 4th quarter 2006 and early 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 22-page news content as the Global Edition plus 7 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. |
15 February 2007: IASB invites comments on SME exposure draft
The IASB has published an Exposure Draft of an International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs). The ED is a simplified, self-contained set of accounting principles for SMEs. Compared to full IFRSs, the volume has been reduced by 85%. The IFRS for SMEs is based on full IFRSs, which are developed for public capital markets. Modifications are based on user needs and cost-benefit considerations. The IFRS for SMEs would enable investors, lenders, and others to compare SMEs' financial performance, financial condition, and cash flows while, at the same time, reducing the burden of preparing SME financial statements. Thirteen Board members voted in favour of the ED, and one opposed. An overview is presented below. Comment deadline is 1 October 2007. Click for Press Release (PDF 98k) and here for Project Background Info. The ED is now available to subscribers on the IASB's website. It will be publicly available 26 February 2007.
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OVERVIEW OF EXPOSURE DRAFT OF IFRS FOR SMEs
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Definition of an SME
The IFRS for SMEs is intended for an entity with no public accountability. An entity has public accountability (and therefore should use full IFRSs) if:
- it has issued debt or equity securities in a public market; or
- it holds assets in a fiduciary capacity for a broad group of outsiders, such as a bank, insurance company, securities broker/dealer, pension fund, mutual fund, or investment bank.
Stand-alone document
The Board intends the IFRS for SMEs to be a stand-alone document for a typical SME with about 50 employees. The IASB has not specified a quantified size test, though jurisdictions adopting the IFRS for SMEs may add one. There is no mandatory fallback to full IFRSs.
Small listed companies
They are not eligible to use the IFRS for SMEs. Listed companies, large or small, have elected to seek capital from outside investors who are not involved in managing the business and who do not have the power to demand information that they might want. Full IFRSs have been designed to serve public capital markets.
Based on concepts and principles in full IFRSs
The draft IFRS for SMEs was developed by extracting the fundamental concepts from the IASB Framework for the Preparation and Presentation of Financial Statements and the principles and related mandatory guidance from IFRSs with appropriate modifications in the light of users' needs and cost-benefit considerations.
Modifications of IFRSs
The modifications are of three broad types based on needs of users of SMEs' financial statements and cost-benefit considerations:
1. Topics omitted. IFRS topics not relevant to a typical SME are omitted, with cross-references to the IFRS if needed. These are:
- General price-level adjusted reporting in a hyperinflationary environment.
- Equity-settled share-based payment (the computational details are in IFRS 2 Share-based Payment).
- Determining fair value of agricultural assets (look to IAS 41 Agriculture, but the ED also proposes to reduce the use of fair value through profit or loss for agricultural SMEs).
- Extractive industries (look to IFRS 6 Exploration for and Evaluation of Mineral Resources).
- Interim reporting (look to IAS 34 Interim Financial Reporting).
- Lessor accounting finance leases (finance lessors are likely to be financial institutions who would be ineligible to use the IFRS for SMEs anyway).
- Recoverable amount of goodwill (SMEs would test goodwill for impairment much less frequently than under IAS 38 Intangible Assets, but if an SME is required to perform such a test it would look to the calculation guidance in IAS 38).
- Earnings per share and segment reporting, which are not required for SMEs, and Insurance contracts (insurers would not be eligible to use the IFRS for SMEs).
2. Only the simpler option included. Where full IFRSs provide an accounting policy choice, only the simpler option is in the IFRS for SMEs. An SME is permitted to use the other option by cross-reference to the relevant IFRS. These are:
- Cost-depreciation model for investment property (fair value through profit or loss is permitted by reference to IAS 40 Investment Property).
- Cost-amortisation-impairment model for property, plant and equipment and intangibles (the revaluation model is allowed by references to IAS 16 Property, Plant and Equipment and IAS 38).
- Expense borrowing costs (capitalisation allowed by reference to IAS 23 Borrowing Costs).
- Indirect method for reporting operating cash flows (the direct method is allowed by reference to IAS 7 Cash Flow Statement).
- One method for all grants (or an SME can use any of the alternatives in IAS 20 Government Grants and Disclosure of Government Assistance).
In adopting the IFRS for SMEs, an individual jurisdiction could decide not to allow the option that is cross-referenced to the full IFRS.
3. Recognition and measurement simplifications. Here are some examples:
- Financial instruments:
- Two categories of financial assets rather than four. This means no need to deal with all of the intent-driven held to maturity rules or related 'tainting', no need for an available for sale option, and many other simplifications.
- A clear and simple principle for derecognition - if the transferor has any significant continuing involvement, do not derecognise. The complex 'pass-through testing' and 'control retention testing' of IAS 39 Financial Instruments: Recognition and Measurement are avoided.
- Much simplified hedge accounting.
- Goodwill impairment - an indicator approach rather than mandatory annual impairment calculations.
- Expense all research and development cost (IAS 38 would require capitalisation after commercial viability has been assessed).
- The cost method for associates and joint ventures (rather than the equity method or proportionate consolidation).
- Less fair value for agriculture - only if 'readily determinable without undue cost or effort'.
- Defined benefit plans - a principle approach rather than the detailed calculation and deferral rules of IAS 19 Employee Benefits. Complex 'corridor approach' omitted.
- Share-based payment - intrinsic value method.
- Finance leases - simplified measurement of lessee's rights and obligations.
- First-time adoption - less prior period data would have to be restated than under IFRS 1 First-time Adoption of IFRSs.
Frequency of updating the IFRS for SMEs
- Approximately once every two years via an 'omnibus' exposure draft.
Organisation of the ED
The ED is issued in three documents:
- The draft IFRS for SMEs (254 pages),
- Implementation guidance (80 pages, consisting of illustrative financial statements and a disclosure checklist), and
- Basis for conclusions (48 pages).
The IFRS for SMEs is organised topically, rather than in IAS/IFRS statement number sequence. It has 38 sections and a glossary.
Next steps
- Comment deadline on the ED is 1 October 2007.
- During the exposure period the Board will conduct round-table meetings with SMEs and small firms of auditors to discuss the proposals. The Board will field test the proposals in the ED.
- Final standard is expected in mid-2008.
- It would be effective according to decisions in each jurisdiction that adopts the IFRS for SMEs.
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15 February 2007: New UK publication on interim financial reporting
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Deloitte (United Kingdom) has published Clear All Year–Considering New Rules and Practice in Interim Reporting. This 92-page publication considers, among other things, the EU Transparency Obligations Directive and its impact on United Kingdom reporting by fully listed companies. The publication consists of seven parts:
- An overview of the new rules in UK periodic reporting arising from Disclosure and Transparency Rules (DTR).
- A survey on corporate periodic reporting.
- A model half-yearly financial report in accordance with IAS 34 Interim Financial Reporting and the DTR.
- A half-yearly financial report disclosure checklist.
- A model Interim Management Statement (IMS).
- An IMS disclosure checklist.
- A guide to IAS 34.
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It is aimed at:
- Finance Directors and Financial Controllers of public and AIM companies; and
- non-executive directors, including Audit Committee members, of listed and AIM companies, who may be interested in financial reporting issues.
Click to Download Clear All Year (PDF 760k). |
14 February 2007: US SEC plans roundtable discussion of the 'roadmap'
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On 6 March 2007, senior SEC staff members from the Office of the Chief Accountant, the Division of Corporation Finance, and the Office of International Affairs will hold a roundtable discussion on the 'roadmap' regarding IFRSs. The roadmap is a plan for eliminating the need for non-US SEC registrants that file IFRS financial statements to reconcile to US GAAP. That plan was first articulated by then SEC Chief Accountant Donald Nicolaisen in April 2005. The 6 March 2007 roundtable will be moderated by Conrad Hewitt, the SEC's Chief Accountant, and John W. White, Director of Corporation Finance. It will be held at the SEC's offices in Washington, DC, and will be open to the public.
The roundtable will consist of three panels organised to address each of the following issues with respect to the roadmap:
- the effect on the capital raising process in the US capital markets;
- the effect on issuers in the US capital markets; and
- the effect on investors in the US capital markets.
Click to download:
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14 February 2007: Agenda for leases working group meeting
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The IASB and FASB Working Group on Lease Accounting will meet on 15 February 2007 (tomorrow) at the Crowne Plaza London - St James, 45-51 Buckingham Gate, London. The meeting is open to public observation. The agenda is below. Click here to Download the Agenda Papers (AP) from the IASB's website.
Agenda: IASB and FASB Working Group on Lease Accounting
15 February 2007, 10:00am to 17:30pm |
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- The need for change – IASB Member Warren McGregor
- Project overview and objectives of the meeting – AP 1
- Identification of the assets and liabilities arising in a simple lease contract and analysis of different possible accounting models – AP 5 and AP 6
- Characteristics and terms of common lease contracts – AP 7
- Initial recognition of assets and liabilities arising in a lease contract – AP 8
- Identification of the assets and liabilities arising in a lease with a lessee option to renew and analysis of different possible accounting models – AP 9 and AP 10
- Options to terminate a lease – AP 11
Additional agenda papers are:
- AP 2 History of Lease Accounting
- AP 3 Academic research on Lease Accounting
- AP 4 Asset and Liability definitions
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13 February 2007: EFRAG proposes to support IFRIC 12 on service concessions
The European Financial Reporting Advisory Group has invited comment on its draft letter to the European Commission proposing to endorse IFRIC 12 Service Concession Arrangements for use in Europe. EFRAG reached that decision after discussion that included a special meeting on 23 January 2007. Here is a link to download EFRAG's Draft Comment Letter (DOC 132k). Comments are requested by 28 February 2007. Four EFRAG members have concerns about IFRIC 12 that cause them to believe that EFRAG should not recommend the Interpretation for endorsement. Those members' reasoning is explained in an appendix to the draft letter.
12 February 2007: IAASB survey on plan for 2008-2010
The International Auditing and Assurance Standards Board (IAASB) is developing a strategic plan for its activities for the period 2008-2010. The Board is seeking public comments on key issues for discussion during strategy review forums and meetings planned for 2007. To obtain those views, the Board is conducting an on-line survey to which responses are invited by 23 February 2007. Here is the link to the On-Line Survey Questionnaire.
11 February 2007: SEC Chief Accountant comments on reconciliation
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In remarks at a recent conference, US SEC Chief Accountant Conrad W. Hewitt commented on the goal of eliminating the US GAAP reconciliation requirement for IFRS filers by '2009 or possibly sooner'. Click for Mr Hewitt's Remarks (PDF 66k). An excerpt: |
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International convergence is another ongoing major project for us, and we are monitoring very closely what is commonly referred to as the 'Roadmap', which my predecessor laid out. The Roadmap sets forth the milestones toward eliminating the need for the US GAAP reconciliation requirement for foreign issuers who list in the US capital markets and who prepare financial statements using International Financial Reporting Standards ('IFRS') by 2009 or possibly sooner. The SEC staff continues to review foreign registrants' IFRS filings to help us better understand the differences and application of IFRS.
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10 February 2007: IASB will publish SME exposure draft next week
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The IASB expects to release to its subscribers on Thursday 15 February 2007 the exposure draft of the International Financial Reporting Standard for Small and Medium-sized Entities (SMEs). Printed copies will be available later. The English text of the document will be freely available on the IASB's Website from Monday 26 February 2007. Spanish, French, and German translations are expected in April 2007. The deadline for comments will be 1 October 2007. The ED will consist of three documents:
- Exposure Draft (organised by topic, 38 sections)
- Illustrative Financial Statements and Disclosure Checklist
- Basis for Conclusions
Click for Project Information. |
10 February 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 5 February 2007 (PDF 34k). The 5 February 2007 update reflects the recent recommendation of the Accounting Regulatory Committee that the EC endorse IFRS 8, IFRIC 10 and IFRIC 11 (see news story below). 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
- IFRIC 12 Service Concession Arrangements
- IFRIC 11 IFRS 2: Group and Treasury Share Transactions
- IFRIC 10 Interim Financial Reporting and Impairment
10 February 2007: ARC recommends endorsement of IFRS 8, IFRICs 10 and 11
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At its meeting on 2 February 2007, the European Commission's Accounting Regulatory Committee (ARC) voted to recommend that the EC endorse IFRS 8, IFRIC 10, and IFRIC 11 for use in Europe. The ARC will consider IFRIC 12 at its 16 March 2007 meeting. Click for Summary Votes at ARC 2 Feb 07 Meeting (PDF 13k). |
9 February 2007: Standards Advisory Council meets 26-27 February
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The Standards Advisory Council will meet with the International Accounting Standards Board on Monday and Tuesday, 26 and 27 February 2007, at the Renaissance Chancery Court Hotel, 252 High Holborn, London. Presented below is the agenda for the meeting.
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26-27 February 2007, London
Monday, 26 February 2007 (afternoon only)
- Discussion of IASB work plan:
- Report from IASB Chairman
- Work plan and staff resources
- Convergence with US GAAP
- Feedback on discussions with regions and countries adopting/converging with IFRSs:
- XBRL: IASC Foundation plans and possible implications for financial reporting
Tuesday 27 February 2007
- Conceptual Framework
- Update on Education initiatives
- Introductory presentation by the new Director of Communications:
- IFRS for Small and Medium-sized Entities:
- Presentation
- Breakout Group discussions
- Group leaders' summary and plenary debate
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9 February 2007: Agenda for February 2007 IASB meeting
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The International Accounting Standards Board will hold its February 2007 Board meeting at its offices, 30 Cannon Street, London, on Tuesday through Thursday 20-22 February 2007. Presented below is the agenda for the meeting.
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20-22 February 2007, London
Tuesday 20 February 2007 (afternoon only)
- Conceptual Framework – Discussion of:
- 1. A working definition of a potential element, tentatively called claims, and its implications if used to replace the liabilities and equity elements
- 2. A staff analysis of comments received on the July 2006 Discussion Paper on objective and qualitative characteristics
Wednesday 21 February 2007
Thursday 22 February 2007
- IAS 41 Agriculture – Measurement: Whether to remove the prohibition on taking into account 'additional biological transformation' in estimating the fair value of biological assets using discounted cash flows (issue referred from IFRIC)
- Annual Improvements Process:
- A perceived conflict in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors regarding the status of Implementation Guidance
- Whether IFRS 1 should be restructured to make it less complex and more clear
- Post-employment benefits – Preliminary Views
- Definition of defined contribution, defined benefit and asset-based benefit promises
- Introduction to measurement options for cash balance and similar plans
- Presentation options for defined benefit pension plans.
- Business Combinations Phase 2 – Redeliberations of proposed revisions to IFRS 3 Business Combinations
- Financial Statement Presentation
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8 February 2007: Hong Kong 2006 model financial statements
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Deloitte (China) has published HKFRS Model Financial Statements and Disclosure Checklist 2006 (PDF 1,877k). This 292-page publication reflects all Hong Kong Financial Reporting Standards (HKFRSs) issued as of 25 January 2007. It includes an illustrative 2006 annual report issued by a fictitious listed company, a presentation and disclosure checklist for 2006, and a section that gives a summary of the key changes to HKFRSs and listing rules during 2006 that affect the disclosure and presentation of information in the financial statements. As of 1 January 2005, HKFRSs became fully harmonised with International Financial Reporting Standards (IFRSs), except for a few minor differences.
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8 February 2007: Members of Standards Advice Review Group (SARG)
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The European Commission has announced the members of its
Standards Advice Review Group (SARG). The Group's task will be to assess whether the endorsement advice given by the EFRAG is well balanced and objective. The group will deliver its advice to the Commission normally within three weeks. The final advice will be published on the Commission's website. Members of the SARG are:
- Josef Jilek
- Elisabeth Knorr
- Carlos Soria Sendra
- Herve Stolowy
- Enrico Laghi
- Jan Klaasen
- Geoffrey Mitchell
Click for
7 February 2007: IFRS 8 disclosure checklist
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We have published an IFRS 8 Disclosure Checklist as a supplement to our IFRS Presentation and Disclosure Checklist for 2006. IFRS 8 Operating Segments was issued in November 2006 and is effective for annual financial statements for annual periods beginning on or after 1 January 2009. Earlier application is permitted.
IFRS 8 replaces IAS 14 Segment Reporting. Once IFRS 8 is effective, segment reporting under IFRSs and US Generally Accepted Accounting Principles will be converged except for some minor differences. Click to download: |
There are permanent links to these and related Deloitte publications on our Model Financial Statements Page.
7 February 2007: Deloitte partner named SEC Deputy Chief Accountant
The US Securities and Exchange Commission has named James L Kroeker as Deputy Chief Accountant for Accounting in the Commission's Office of the Chief Accountant. Mr Kroeker comes from Deloitte &Touche, LLP where, since June 2002, he has been a partner in the firm's National Office Accounting Services Group and responsible for providing consultation and support regarding the implementation, application, communication and development of accounting standards, including disclosure and reporting matters. From August 1999 to June 2001, Mr Kroeker served as a Practice Fellow at the Financial Accounting Standards Board. Click for SEC Press Release (PDF 33k).
6 February 2007: Accounting Roundup – January 2007
FASB Developments
- Cleared Guidance on Implementation Issue B40 on securitised interests in prepayable financial assets
- Proposed FSP for Computing Diluted EPS
- Invitation to Comment on Valuation Guidance
- FASB Decides Not to Delay Interpretation 48 on uncertainty in income taxes
- FASB Establishes Investors Technical Advisory Committee
- Herz Reappointed as FASB Chairman
AICPA Developments
- AICPA Issues Audit Risk Alerts
- ASB Issues SAS 114 The Auditor's Communication With Those Charged With Governance
- AICPA Issues Framework for Reporting Deficiencies to Insurance Regulators
SEC Developments
- SEC Letter on Filing Restatements for Errors in Accounting for Stock Option Grants
- SEC Proposed Rule on Universal Internet Availability of Proxy Materials
- Government Agencies Issue Final Statement on Complex Structured Finance Activities
- SEC Issues Q&As on Executive Compensation and Related Person Disclosure
PCAOB Developments
- PCAOB Observations on Auditors' Responsibilities With Respect to Fraud
International Developments
- IASB Issues Exposure Draft on Proposed Amendments to IFRS 1
- IASB and FASB Hold Roundtable Discussions on Measurement
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You will find past issues of Accounting Roundup Here.
6 February 2007: Updated summary of issues not added to IFRIC agenda
- IAS 39 – Definition of a derivative: Indexation on own EBITDA or own revenue (Issue referred to the Board for possible amendment of IAS 39)
- IAS 39 – Short trading
- IAS 39 and IAS 27 – Financial instruments puttable at an amount other than fair value
6 February 2007: IFRSs in your Pocket 2006 – Turkish language edition
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Deloitte Turkey has published UFRS Cep Kitapcigi 2006, the Turkish Language Version of IFRSs in your Pocket 2006 (PDF 1,239k, 72 pages). This edition includes all of the information in the English language edition. There is also a discussion of the use of IFRSs in Turkey. |
5 February 2007: EFRAG launches redesigned website
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The European Financial Reporting Advisory Group (EFRAG) has launched a redesigned website: www.efrag.org. Among the improvements: |
- Improved structuring of the home page and menu system.
- Revised project overview and status views.
- Ability to upload comment letters via the website directly.
- New meeting organisation area.
- A separate section devoted to the Endorsement Status Report.
5 February 2007: Restructuring of IVSC is proposed
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The International Valuation Standards Committee (IVSC) has embarked on a proposed major restructuring process not unlike that undertaken by the International Accounting Standards Committee in the late 1990s that led to the creation of the International Accounting Standards Board. The restructuring proposals have been developed by a Governance Group established by the IVSC Management Board. The key recommendations of the Group are: |
- That a new International Valuation Standards Board (IVSB) be created as an independent and autonomous decision making body with up to nine compensated (full-time or part-time) members. Concurrently, an International Valuation Standards Interpretations Committee would be created as an arm of the IVSB;
- That the IVSC be renamed the International Valuation Standards Council. It would remain a membership based organisation but the criteria for membership would be broadened beyond national professional valuation institutes to include valuation companies, national standard setters, users of valuations, academics and others. IVSC members would provide input to the IVSB.
- That an elected Board of Trustees would have responsibility for oversight of the work of the IVSC and IVSB. Responsibility would include appointment members of the IVSB and Interpretations Committee, ensuring adequate funding and resources, and protecting the Board's independence and integrity.
- That a new International Valuation Professional Board (IVPB) be created to develop criteria for the education of and professional practices of valuation practitioners.
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The IVSC is inviting comments on the proposals by 9 March 2007. A special meeting of the IVSC will be held in San Francisco on 12 April 2007 when member bodies of the IVSC will be asked to approve the restructuring proposals. If accepted, the proposed structure would come into effect on 1 January 2008. Click to download the Proposal for the Restructuring of the IVSC (PDF 579k).
5 February 2007: Comprehensive history of the IASC is published
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WoltersKluwer/CCH have published The International Accounting Standards Committee: A Political History, by Robert J. Kirsch, PhD. The book covers the history of the IASC from its earliest days starting in 1962. It looks at the human side of the organisation's history, its institutional and economic development, administrative policies and practices, and its various constitutions and structures. Additionally, it charts the flow of its technical international accounting standard setting work through its various stages of development. Written in plain English, the book discloses much previously publicly unpublished information. |
Title of book: The International Accounting Standards Committee: A Political History
Author: Robert J. Kirsch, PhD
Number of pages: 465
ISBN: 978-1-84140-608-4
Ordering details: Quote product code: UP/KIRSCH-BI7001
- By phone: CCH's Customer Service Department in the United Kingdom at +44 (0)870 777 2906; or
- By email: customerservice@cch.co.uk.
The book's 11 chapters cover:
- Introduction
- The Formative Period: 1966 to 1973
- Challenges, Responses and The First Standards: 1974 to 1977
- The Fight to Maintain Autonomy: 1977 to 1982
- Towards a Critical Mass of Standards: 1982 to 1985
- Building the Foundations for Comparability: April 1985 to June 1990
- Improvements: 1990 to 1994
- Organizational Issues in the Final Years: 1995 to 2001
- Standard Setting from 1995 to 2001
- The New Structure
- Synthesis
There are 14 appendices covering such topics as IASC officers, biographical notes on the chairmen and secretaries-general, board members, representatives and technical advisers, meetings, standards history, and various constitutional documents.
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5 February 2007: Comparison of Taiwanese GAAP and IFRSs
Deloitte & Touche in Taiwan has published Comparisons of Republic of China (ROC) GAAP and IFRSs, which details the differences between ROC Statements of Financial Accounting Standards and IFRSs as of 30 September 2006. This booklet is written both in Chinese and English and is a line-item by line-item comparison. It provides a quick overview of the difference between ROC GAAP and IFRSs that are commonly found in practice. Comparisons of ROC GAAP and IFRSs can be purchased by email to fltsai@deloitte.com.tw or On Line (Chinese).
3 February 2007: IFRS presentation and disclosure checklist in German
1 February 2007: Leases Working Group will meet 15 February 2007
The IASB Working Group on Lease Accounting will meet on 15 February 2007 at the Crowne Plaza London - St James, 45-51 Buckingham Gate, London. The meeting is open to public observation. For more information go to the Working Group Meeting Page on the IASB website. Click here for Project Information including a list of Working Group members.
1 February 2007: Center for Audit Quality formed in the United States
The American Institute of CPAs (AICPA) and eight public company auditing firms – including Deloitte & Touche – have formed a new organisation aimed at improving audit quality in the United States. The Center for Audit Quality (CAQ) will work to increase confidence in the audit process and make public company audits even more reliable and relevant by advancing constructive suggestions for change. To this end, the Center will convene a national public dialogue through scheduled events with key stakeholders across the country. It will also conduct research on these topics and ultimately make recommendations that will foster confidence in the capital markets. CAQ membership is open to any US auditing firm registered with the PCAOB. Associate membership is available for US audit firms not registered with the PCAOB. The CAQ will be led by a governing board comprising the CEOs of the AICPA and the six largest audit firms plus two rotating firms, and leaders from the investor and issuer communities. For more information:
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