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27 September 2007: Global audit regulators' group holds their second meeting
The International Forum of Independent Audit Regulators (IFIAR) held its second meeting on 24 and 25 September 2007 in Toronto. Audit regulators from 21 countries participated. Matters discussed at the meeting included:
- Possible implications for audit regulators of current market turbulence
- The role of audit inspections in driving audit quality
- Exchange of information between regulators
- Issues relating to International Auditing Standards.
- Audit market concentration and choice
- Cooperation between regulators in relation to registration and/or notification of auditors of foreign issuers
- The holding of workshops for members on audit inspection techniques
- Continue dialogue with other international organizations which have an interest in audit quality
- The future role and organization of IFIAR
Click for Press Release (PDF 40k). See our news story of 25 March 2007 for additional information.
27 September 2007: XBRL 'taxonomy' for US GAAP has been completed
The US Securities and Exchange Commission has announced that all work on developing XBRL data tags for the entire system of US generally accepted accounting principles has been completed. This will enable companies to more easily encode their financial statements in the XBRL language. XBRL makes the analysis and exchange of corporate financial information easier and more reliable by allowing data to be extracted and processed automatically by XBRL-aware applications. Click for SEC Press Release (PDF 34k).
27 September 2007: Deloitte 'roadmaps' on VIEs and software revenue
 | Deloitte & Touche LLP (USA) has released publications that provide guidance on consolidation of variable interest entities and on software revenue recognition as part of their 'roadmap' series: |
Other publications in the 'roadmap' series address employer pension accounting, business combinations and goodwill, uncertainty in income taxes, and share-based payment. They May Be Found Here.
26 September 2007: IASB and Accounting Standards Board of Japan will meet
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The IASB and the Accounting Standards Board of Japan will meet at the IASB's offices in London on Thursday and Friday 27 and 28 September 2007 (mornings only both days). The meeting is open to public observation. The agenda for the meeting is:
Thursday 27 September 2007
- Consolidation (including special purpose entities)
- Liabilities and Equity
Friday 28 September 2007
- Update on IASB Activities
- Revenue Recognition
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26 September 2007: Four projects will be proposed for IASB agenda
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At the meeting of the IASB and World Standard Setters in London on 24 and 25 September 2007, IASB staff identified four projects that will be proposed to the IASB in December 2007 as possible additions to the IASB's technical agenda: |
- Intangible assets. Staff indicated that the existing standard (IAS 38) 'is not very good' and that the project is likely to 'move to a standard that recognises, to a greater degree, intangible assets in the balance sheet'.
- Common control transactions. Transactions between entities under common control are not currently addressed in IFRSs and are specifically excluded from IFRS 3 Business Combinations. Nor are they being addressed in Phase 2 of the business combinations project. Examples of such transactions include group restructurings and acquisition of one entity by another when the owners of the two entities end up with the same percentage ownership of the combined entity.
- Emission rights trading and government grants. IFRIC 3 Emission Rights was issued in December 2004 but withdrawn in June 2005. Because emission rights are usually granted by a government, they are an example of a government grant. The project would reconsider IAS 20 Accounting for Government Grants and Disclosure of Government Assistance.
- Management commentary. The IASB published a discussion paper on Management Commentary prepared by some partner standard-setters in October 2005. That paper defines management commentary as follows:
| Management commentary is information that accompanies financial statements as part of an entity's financial reporting. It explains the main trends and factors underlying the development, performance and position of the entity's business during the period covered by the financial statements. It also explains the main trends and factors that are likely to affect the entity's future development, performance and position.
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The IASB staff also said that while good progress has been made by several partner standard setters in developing an agenda proposal on the Extractive Industries (oil and gas and mining) it will not be ready for Board consideration in December. Staff expressed a hope that it might be ready for agenda consideration in the fourth quarter of 2008. Staff also said they are exploring a possible agenda project that would involve a review of IAS 41 Agriculture.
25 September 2007: We support SEC's proposal to eliminate the reconciliation
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Deloitte has submitted a letter supporting the SEC's Proposed Rule, Acceptance from Foreign Private Issuers of Financial Statements Prepared in Accordance With IFRSs Without Reconciliation to US GAAP. We do suggest, however, that when a non-US registrant uses local GAAP or a 'jurisdictional version' of IFRSs, it should be permitted to reconcile to IFRSs as an alternative to reconciling to US GAAP. Here is our overall view: |
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We agree with the Commission's proposal to eliminate the US GAAP reconciliation for foreign private issuers that use IFRSs and believe that it is an important step toward developing a single set of globally accepted accounting standards. We note, however, that there may be issues in certain jurisdictions with the proposal that use of IFRSs is required if a company wishes not to reconcile to US GAAP. In European countries, for example, endorsement or approval of IFRSs by local authorities is required before such standards can be applied. Consequently, when a foreign private issuer is required to
follow the 'jurisdictional version' of IFRSs in describing how it has prepared its financial statements, it may not be able to make an explicit and unreserved statement of compliance with IFRSs because certain standards have not yet been endorsed or approved by the local authority.
Given these constraints, we believe that the Commission should consider allowing foreign private issuers that use local GAAP (including jurisdictional IFRSs) to reconcile to IFRSs instead of US GAAP, which would give them a choice of one of the following:
- US GAAP
- IFRSs
- Local GAAP (including jurisdictional IFRSs) reconciled to either US GAAP or IFRSs
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24 September 2007: New Global Offerings Services newsletter
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We have posted the August 2007 Edition of the Deloitte Global Offerings Services Newsletter (PDF 144k). 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, with hyperlinks to source material. Past GOs Newsletters are Here. |
23 September 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 September 2007 meeting: |
23 September 2007: Deloitte will co-sponsor an IFRS conference in London
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Deloitte is one of the sponsors of a conference titled IFRS 2007/8: Current Practical Interpretation and Future Direction, to be held in London on 4 October 2007. The opening event is a dialog with IASB Chairman Sir David Tweedie. Subsequent sessions will focus on IFRSs from an analyst's point of view, a preparer's view, audit and regulatory issues, legal issues, and implementation issues. A concluding forum will consider 'where do we go from here'. Deloitte speakers at the conference are Ken Wild, Deloitte's Global IFRS Leader, and Isobel Sharp, Deloitte UK Partner who currently is President of the Institute of Chartered Accountants of Scotland. Click for Conference Brochure (PDF 145k). |
23 September 2007: Summary of issues not added to IFRIC agenda is updated
We have updated our Summary of Issues Not Added to IFRIC's Agenda to reflect the IFRIC's final decisions at its September 2007 meeting not to add the following four topics to its agenda. Our summary now includes over 125 issues:
- IFRS 5 – Disclosures
- IAS 18 – Guidance on identifying agency relationships
- IAS 19 – Benefit allocation for defined benefit plans
- IAS 39 – Hedging future cash flows with purchased options
22 September 2007: Business combinations added to WSS agenda
A discussion of the IASB's project on Business Combinations Phase 2 has been added to the agenda of the World Standard Setters (WSS) meeting on Tuesday morning 25 September 2007. You will find the full updated agenda for that meeting in our News Story of 5 September 2007.
22 September 2007: FEI web address has changed
Financial Executives International (FEI) has changed its Web address to www.financialexecutives.org. The old address was www.fei.org. Later this year, FEI intends to launch a redesigned website. FEI's old domain address has been released to the Federation Equestre Internationale, the governing body for horse sport. An interim web page will ask visitors to www.fei.org to choose either group's site for 45 days. Click for FEI Press Release (PDF 30k).
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By the way, IAS Plus has a Page of Links to about 200 organisations around the world whose activities relate to international financial reporting (always accessible by clicking 'Links' right below the IAS Plus logo at the top of each web page). |
21 September 2007: Notes from the September 2007 IASB meeting day 3
The IASB held its monthly Board meeting at its offices in London from 18-21 September 2007 (no meeting on 20 September). Click here for the preliminary and unofficial Notes Taken by Deloitte Observers at the meeting. The IASB will meet with World Standard Setters on Monday and Tuesday 24 and 25 September 2007 at the Renaissance Chancery Court Hotel in London. You will find the agenda for that meeting in our News Story of 5 September 2007.
21 September 2007: Over 1.4 million IFRS e-Learning modules downloaded
As of 20 September 2007, 1,409,645 Deloitte IFRS e-learning modules have been downloaded from IAS Plus. The total number of visitors to the IFRS e-Learning website was 4,975,649.. Deloitte's IFRS e-learning was launched at the end of January 2004. Many of the downloaded modules have multiple users because organisations are permitted to install them on their own servers for the internal use of their employees or students. In addition, several million additional modules have been completed online and offline by Deloitte staff. You can always access IFRS e-Learning without charge by clicking on the light bulb icon on the IAS Plus home page. Thirty-five modules are now available covering virtually all IFRSs. In our News Story of 18 September 2007, we reported on our plans for adding new modules and updating existing ones. We are making the Deloitte IFRS e-Learning available in the public interest without charge, and that includes upgrades.
21 September 2007: Comment deadline on SME Exposure Draft extended
At its meeting on 19 September, the IASB agreed to extend the deadline for comments on the proposed IFRS for SMEs to 30 November 2007. The deadline for submitting field test results is also extended to 30 November 2007. The Board decided to extend the comment deadline primarily to allow entities participating in the field tests and those assisting such entities more time to prepare their comments on the exposure draft. The Board strongly encourages entities and organisations that are not involved in the field testing to submit their comments on the exposure draft by the original 1 October 2007 deadline.
20 September 2007: Notes from the September 2007 IASB meeting day 2
The IASB held its monthly Board meeting at its offices in London from 18-21 September 2007 (no meeting on 20 September). Click here for the preliminary and unofficial Notes Taken by Deloitte Observers at the meeting. The IASB will meet with World Standard Setters on Monday and Tuesday 24 and 25 September 2007 at the Renaissance Chancery Court Hotel in London. You will find the agenda for that meeting in our News Story of 5 September 2007.
19 September 2007: UK ASB finds EC comments on SME ED 'disappointing'
Ian Mackintosh, Chairman of the United Kingdom Accounting Standards Board, has written to European Internal Markets and Services Commissioner Charlie McCreevy expressing disappointment at the negative stance toward the proposed IFRS for SMEs that Commissioner McCreevy expressed in his remarks at a public event in Portugal on 13 September 2007 (see our News Story of 14 September 2007). Mr Mackintosh said that "based on the results of a formal consultation and public meetings held in both the UK and the Republic of Ireland, the Accounting Standards Board (ASB) would like to be able to apply the IFRS for SMEs." Click to Download Mr Mackintosh's Letter (PDF 22k).
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The responses we had [to the ASB's invitation to comment on the IASB's SME Exposure Draft] expressed a large degree of support for the ED. While most respondents did not see the proposed IFRS for SMEs as being suitable for small, and
in particular micro, entities, there was a strong majority in favour of the standard being available for application by middle tier and larger companies that – in line with the IASB's definition – do not have public accountability and publish general purpose financial statements for external users. This view is consistent with the discussions that were held in the four public meetings in which the ASB participated with the major accountancy bodies in the UK and Ireland.
On the evidence of the feedback the ASB has received, it is disappointing that the Commission appears to be taking such a negative stance on the IASB's proposed IFRS for SMEs and seeming to rule out the possibility of Member States applying the
standard.
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19 September 2007: Notes from the September 2007 IASB meeting day 1
The IASB held its monthly Board meeting at its offices in London from 18-21 September 2007 (no meeting on 20 September). Click here for the preliminary and unofficial Notes Taken by Deloitte Observers at the first day of the meeting. The IASB will meet with World Standard Setters on Monday and Tuesday 24 and 25 September 2007 at the Renaissance Chancery Court Hotel in London. You will find the agenda for that meeting in our News Story of 5 September 2007.
19 September 2007: New Zealand delays IFRS equivalents for small companies
The New Zealand Accounting Standards Review Board (ASRB) and the Financial Reporting Standards Board (FRSB) have announced a decision to delay the mandatory adoption of NZ IFRSs for certain small entities. Financial reporting by small and medium sized entities (SMEs) has been the subject of recent world-wide debate. As a result of this, the IASB has produced the exposure draft of a Standard for financial reporting for SMEs. In addition, Australia has recently conducted a review of SME reporting, and in New Zealand there has been extensive consultation on the issue. The Minister of Commerce, the Hon Lianne Dalziel, recently advised the ASRB and FRSB that a government review of the financial reporting requirements applying to small and medium-sized companies under the Financial Reporting Act (the FRA) will commence in mid-2008.
As a result, the ASRB and FRSB have decided to delay, until further notice, the mandatory adoption of NZ IFRSs for certain small entities, defined as follows:
- Companies that are not issuers as defined by the FRA, in either the current or preceding accounting period and that:
- are not required by section 19 of the FRA to file their financial statements; and
- are not large, as defined by section 19A(b) of the FRA. A company is large if at least two of the following apply:
- total assets of the company and its subsidiaries (if any) exceed NZ$10,000,000;
- turnover or the company and its subsidiaries (if any) exceeds NZ$20,000,000; or
- the company and its subsidiaries (if any) have 50 or more full-time equivalent employees.
- Other entities that:
- are not subject to the FRA; and
- are not publicly accountable or large as defined in the Framework for Differential Reporting. An entity is large if at least two of the following apply:
- total assets exceed NZ$10,000,000;
- total income exceeds NZ$20,000,000; or
- 50 or more full-time equivalent employees.
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At this stage, the delay is for an indefinite period. Entities taking advantage of the delay should continue to use existing NZ GAAP financial reporting standards. Click for:
18 September 2007: Updates, new modules planned for our IFRS e-Learning
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The Deloitte IFRS e-Learning modules are regularly updated. It's a good idea to check periodically that you have the latest version. If you enter the e-Learning area (click on light bulb icon on the IAS Plus home page) there is a list of the latest version numbers and also a separate page with a complete history of updates for each module. You can check the version number on previously downloaded modules by right-clicking at any point in the module. The dialog box will tell you the version you have. We are making the Deloitte IFRS e-Learning available in the public interest without charge, and that includes upgrades. |
Updates to existing IFRS e-Learning modules under development:
We are working on updates to the following modules to reflect recent changes to the Standards and Interpretations. We expect to release them in early 2008:
- IASs 16, 17, 23, 28, 36, 32/39, and 37
- IFRSs 1 and 2
Two new modules are in the planning stage:
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16 September 2007: Heads Up on accounting for convertible debt
We have posted the 7 September 2007 Edition of the Heads Up Newsletter (PDF 142k) published by Deloitte & Touche LLP (United States). This issue of Heads Up summarises the impact that proposed FASB Staff Position No. APB 14-a would have on the financial statements of issuers of convertible debt securities. The guidance is proposed to be effective for fiscal years beginning after 15 December 2007 and would be retrospectively applied in prior-period financial statements issued for comparison purposes.
The proposed FSP, titled Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement), would require 'split accounting' on initial recognition, that is, separation of the convertible security into two components:
- A debt component representing the issuer's contractual obligation to pay principal and interest.
- An equity component representing the holder's option to convert the debt security into equity of the issuer or an equivalent amount of cash.
This is similar to the IAS 32 requirement, except that IAS 32 applies to issuance of all compound financial instruments whereas FSP APB 14-a would apply only to convertibles that may be cash-settled. It would not affect the accounting for more traditional types of convertible debt securities that cannot be settled in cash upon conversion. Such convertible debt securities would continue, typically, to be accounted for wholly as debt.
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15 September 2007: IASB September 2007 Board meeting agenda - Revised
18-21 September 2007, London - Revised
Tuesday 18 September 2007 (afternoon only)
Wednesday 19 September 2007
Thursday 20 September 2007
Friday 21 September 2007 (morning only)
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14 September 2007: EU is concerned about IASB SME proposal
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In the field of accounting and auditing, the focus of the simplification plans lies on the possibilities of reducing costs for SMEs. The existing requirements entail administrative work which companies, and particularly small and medium-sized ones, often find unnecessarily burdensome. This has to improve.
The International Accounting Standards Board (IASB) has recently developed a draft accounting regime for SMEs. We have repeatedly emphasised that accounting for SMEs must be simple and reflect the nature of the business of small companies.
The feedback we have received from Member States, the European Parliament and stakeholders is that the current IASB draft is not simple enough to be applicable for the bulk of SMEs in the EU. At this stage, therefore, I do not intend to propose that
the IASB draft be endorsed for application in the EU.
Could Member States, nonetheless, allow their SMEs to apply the IASB draft standard? The starting point, in EU law, is that Member States have to follow the Accounting directives (the so-called 4th and 7th directives). It is not clear that the current IASB draft is in line with the existing EU accounting directives. Since there seems, at present, to be very little support from Member States and the European Parliament for the IASB draft, the Commission has no plans to propose changes,
either to the existing Directives or to the IAS Regulation. If there are Member States and other interested parties who want to allow application of the IASB draft, then I would like to hear from them.
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14 September 2007: EITF Snapshot for September 2007
We have posted the September 2007 edition of EITF Snapshot (PDF 117k)
summarising the 11 September 2007 meeting of FASB's Emerging Issues Task Force. EITF Snapshot, published by Deloitte & Touche LLP (USA), enables readers to identify relevant topics and to understand quickly the meeting's outcome. Past issues can be downloaded Here.
EITF Snapshot explains the three issues on which the EITF reached a tentative conclusion at this meeting:
- Issue 07-1 Accounting for Collaborative Arrangements (for the development and commercialisation of resource-intensive, and generally uncertain, products.)
- Issue 07-4 Application of the Two-Class Method Under FASB Statement No. 128, Earnings per Share, to Master Limited Partnerships
- Issue 07-6 Accounting for the Sale of Real Estate When the Agreement Includes a Buy-Sell Clause
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13 September 2007: China drops IFRS reporting for listed companies
The China Securities and Regulatory Commission (CSRC) has withdrawn its requirement that companies listed on Chinese stock exchanges that issue 'B' shares must publish audited financial statements that conform to International Financial Reporting Standards (IFRSs) in addition to financial statements that conform to Chinese Accounting Standards (CASs). 'B' shares are equity securities that trade in US dollars in Shanghai and in Hong Kong dollars in Shenzhen and, until 2001, could not be purchased by residents of mainland China. Currently, of the 1,477 companies listed on the Shanghai and Shenzhen Stock Exchanges, 109 have issued 'B' shares. In 2006, China adopted a completely new set of CASs that are based on and generally consistent with IFRSs, with a few exceptions. These new standards go into effect in 2007 for listed companies. The CSRC concluded that because CASs are similar to IFRSs, the dual reporting requirement is no longer necessary. The CSRC decision is reported in Zhengjian Kuaiji Zi[2007] No. 30 (PDF 144k, Chinese language, from CSRC Website).
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Deloitte's comparison of the new CASs and IFRSs:
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13 September 2007: Proposal to replace IAS 31 on joint ventures
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The IASB has published for public comment Exposure Draft 9 proposing to replace IAS 31 Interests in Joint Ventures with a new standard to be titled Joint Arrangements. A joint arrangement is a contractual arrangement whereby two or more parties undertake an economic activity together and share decision-making relating to that activity. Joint arrangements include joint assets, joint operations, and joint ventures. The Exposure Draft is now available for eIFRS subscribers and will be freely available on the IASB's website from 27 September. Comment deadline is 11 January 2008. Click for Press Release (PDF 66k).
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The main focus of the proposals is on the two aspects of the current accounting for joint arrangements that the IASB considers are an impediment to high quality reporting:
- The current accounting for joint arrangements follows the legal form in which the activities take place. This does not always reflect the contractual rights and obligations agreed to by the parties. Shifting the focus to these rights and obligations will provide a more realistic reflection of the joint arrangement in the financial reports of the parties involved.
- The existing standard gives preparers a choice when accounting for interests in jointly controlled entities (equity method and proportionate consolidation), making it difficult to compare financial reports. The IASB proposes to remove that choice by requiring parties to recognise both the individual assets to which they have rights and the liabilities for which they are responsible, even if the joint arrangement operates in a separate legal entity. If the parties only have a right to a share of the outcome of the activities their net interest in the arrangement will be recognised using the equity method.
The ED also proposes new requirements for disclosing information about joint arrangements, subsidiaries, and associates, including a description of the nature of joint arrangements and summarised financial information relating to an entity's interests in joint ventures.
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13 September 2007: Polish and Romanian translations of the SME Exposure Draft
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The IASB has posted on its website the Polish and Romanian language translations of the Exposure Draft of a Proposed International Financial Reporting Standard for Small and Medium-sized Entities: |
- Polish: Project Międzynarodowego Standardu Sprawozdawczości Finansowej dla Małych i Średnich Przedsiêbiorstw
- Romanian: Proiect de expunere de Standardul International de Raportare Financiară pentru Întreprinderi Mici si Mijlocii (IFRS pentru IMM)
The Board had previously posted Spanish, French, and German translations. This is the first IASB Exposure Draft that has been made available in other than English. You can download the translations from the 'Open to Comment' Pages of the IASB's Website. The comment period closes on 1 October 2007.
13 September 2007: Update on financial reporting in Colombia
In our February 2004 update on Financial Reporting in Colombia, we reported that the Colombian government invited comment on a draft law that would adopt IFRSs as Colombian GAAP. That law has not yet been enacted. We have updated our Colombia page with information from a World Bank ROSC Report on Accounting and Auditing for Colombia. Basically, Colombian accounting standards that were adopted by the Technical Council for Public Accounting in the early 1990s continue in use today, supplemented by various regulatory reporting requirements imposed by government agencies.
12 September 2007: EU Parliament committee discusses endorsement of IFRS 8
In a presentation to the Committee on Economic and Monetary Affairs of the European Parliament, Charlie McCreevy, the European Commissioner for Internal Market and Services, discussed the endorsement of IFRS 8 Operating Segments for use in the European Union. He presented the Commission's analysis of IFRS 8 and expressed the hope that the Parliament will agree with the Commission that endorsement of IFRS 8 should go ahead. An excerpt from Mr McCreevy's remarks is below. Click to download:
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I am therefore pleased to present our 'Analysis of Potential Effects' on the introduction of IFRS 8 in the EU. Our report is based on a wide-ranging consultation to which more than 200 organisations replied. It focuses on the issues discussed in
ECON last April.
The report concludes that adoption of IFRS 8 would have positive cost-benefit effects. This is in line with the clear majority of answers to our consultations and with most views expressed in discussions with stakeholders. In particular, the report concludes that:
- The use of the 'management approach' in IFRS 8 has an overall positive effect on the quality of segment information, whose usefulness and relevance would increase.
- The increased usefulness and relevance of segment information based on the management approach outweigh concerns expressed about the comparability of financial reports.
- IFRS 8 appropriately addresses the global needs of users of financial statements' for geographical disclosures and, in practice, would not reduce this information by comparison with the 'old standard' IAS 14.
- IFRS 8 does not create problems relating to corporate governance in the EU.
- IFRS 8 provides appropriate segment reporting rules for smaller listed companies. It is in the interest of smaller listed companies to provide the same information as larger companies as the information needs of investors are do not substantially differ according to company size.
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12 September 2007: Vzorové finanĉné výkazy 2006
12 September 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 6 September 2007 (PDF 39k). Currently, the following IASB pronouncements have not yet been endorsed for use in Europe:
- IFRS 8 Operating Segments
- IAS 1 Presentation of Financial Statements (revised September 2007)
- IAS 23 Borrowing Costs (revised March 2007)
- IFRIC 12 Service Concession Arrangements
- IFRIC 13 Customer Loyalty Programmes
- IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements, and their Interaction
11 September 2007: IFRSs required for banks in Mozambique in 2007
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The Government of the Republic of Mozambique and the Bank of Mozambique (BM, the central bank) are requiring all Mozambique banks to start publishing IFRS financial statements in 2007. The IFRS requirement will be extended to large non-banking corporations starting in 2009. The BM itself began reporting under IFRSs in 2006. The requirements were set out in: |
- A joint letter of intent from the Government of Mozambique and the BM to the International Monetary Fund (IMF) dated 28 March 2007 (available on the IMF's Website Mozambique Page; and also in
- A public notice (Aviso No. 4/GBM/2007) issued by the Bank of Mozambique on 25 March 2007 (available in Portuguese on Bank of Mozambique's Website).
Although not expressly addressed in the letter of intent and notice, the Government has informally indicated that it expects to extend the IFRS requirement to insurance companies in 2008 and to medium-sized companies in 2010. We have created a new Mozambique Page.
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Excerpt from Letter of Intent from Government of Mozambique and Bank of Mozambique to the IMF Dated 28 March 2007
27. The BM will also continue to strengthen and modernize its supervisory functions and implement the recently approved organizational changes in view of strengthening onsite and off-site monitoring. In this regard, training to adopt a risk-based supervision approach will start in 2007, at which time the new inspection manuals will also be used. The BM is implementing a timetable to adopt IFRS in the banking system in 2007. Based on the results of the FSTAP study, to be completed by mid-2008, the application of IFRS will also be extended to the corporate sector in January 2009 for large companies. This will improve the ability of the financial system to evaluate the quality of their loan portfolios. Further, new regulation on the assessment, classification and provisioning of credits as well as a regulation on integral risk management for credit institutions and finance companies have been approved and will become effective during the first
semester of 2007. The BM will issue its own 2006 financial statements in line with IFRS in 2007.
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11 September 2007: Proposed revisions to IPSAS on foreign exchange rates
IFAC's International Public Sector Accounting Standards Board (IPSASB) has published an exposure draft (ED) of revisions to the standard that addresses accounting for fluctuations in exchange rates. ED 33, Amendments to IPSAS 4, The Effects of Changes in Foreign Exchange Rates, proposes to update IPSAS 4 to reflect the latest revisions to the corresponding IFRS issued by the IASB, particularly recent revisions to IAS 21 The Effects of Changes in Foreign Exchange Rates. Click for Press Release (PDF 30k). Comments on the ED are requested by 31 December 2007. The ED may be viewed by going to www.ifac.org/EDs.
11 September 2007: Deloitte Korea IFRS website
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The IFRS Services Group of Deloitte Anjin LLC, the Deloitte member firm in Korea, has developed a Korean language IAS Plus website: www.iasplus.co.kr. The website includes selected news stories and other information from the www.iasplus.com as well as local news, in Korean.
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11 September 2007: UNCTAD reports on practical IFRS implementation issues
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In connection with the meeting of the Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) on 30 October and 1 November 2007, the United Nations Conference on Trade and Development (UNCTAD) has published three case studies of practical implementation issues for IFRSs in three countries. The UNCTAD secretariat has also prepared a summary of the main practical implementation issues identified in the case studies. These include practical implementation issues in the areas of regulatory framework, enforcement, and technical capacity-building. Click to download: |
Click here for More Information About UNCTAD and ISAR (UNCTAD website).
10 September 2007: IFRIC issues pages updated
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We have updated our IFRIC agenda issues pages to reflect the deliberations at the September 2007 meeting of the International Financial Reporting Interpretations Committee (IFRIC), as follows: |
10 September 2007: US SEC history - speeches back to 1960
9 September 2007: IASB Vice Chairman Tom Jones in FEI Hall of Fame
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Financial Executives International (FEI) has announced that Thomas Jones, Vice Chairman of the International Accounting Standards Board and Samuel Siegel, former Vice Chairman, CFO, Treasurer and Secretary for Nucor Corporation have been selected as inductees for the 2007 class of the FEI Hall of Fame. The FEI Hall of Fame, co-sponsored by Deloitte & Touche USA LLP, recognises individuals who epitomise the performance, leadership, and integrity of the most exemplary financial executives throughout their careers. Click for FEI Press Release (PDF 42k). |
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Thomas E Jones was appointed to the International Accounting Standards Board (IASB) in January 2001. Mr. Jones has held numerous significant leadership positions throughout his career and has nearly 40 years of experience in various aspects of international financial reporting. Prior to his current position, Mr. Jones held high ranking positions at Citicorp for nearly two decades, most recently as the Principal Financial Officer and Executive Vice President where he was responsible for financial reporting issues spanning more than 100 countries.
Mr. Jones previously served successively for the International Accounting Standards Committee (IASC) as a vice-chairman and member of the Executive Committee (1998-2000) and as Chairman (2000-2001). He has also held the position of Chairman of FEI's Committee on Corporate Reporting, and served as trustee of the Financial Accounting Foundation and as a member of the Financial Accounting Standards Board's (FASB) Emerging Issues Task Force. His role there contributed significant impact to the development of new accounting standards and he is credited by his peers with developing the ongoing dialogue between the IASB and standard setting organizations around the world.
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9 September 2007: SEC staff comments on compensation disclosures
We have posted the 7 September 2007 Edition of the Heads Up Newsletter (PDF 116k) published by Deloitte & Touche LLP (United States). This issue of Heads Up summarises recent comment letters from the SEC staff to the chief executive officers of registrants, which asked for more detail and clarification regarding the revised executive and director compensation disclosures in the registrants' filings. The SEC staff has performed a comprehensive review of the first filings that include these revised disclosures and had comments on various topics, including performance targets, change of control, and Compensation Discussion and Analysis.
8 September 2007: Notes from the September 2007 IFRIC meeting
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The International Financial Reporting Interpretations Committee (IFRIC) met at the IASB's offices in London on Thursday and Friday 6 and 7 September 2007. Presented below are the preliminary and unofficial notes taken by Deloitte observers at the meeting. |
6-7 September 2007
Thursday 6 September 2007
 IAS 27 – Accounting for non-cash distributions
The IFRIC continued its discussion of the accounting for non-cash distributions, formerly called 'demergers and other in-specie distributions' (see July IFRIC Meeting Notes). The discussion at this meeting concentrated on the following issues:
- (i) How should an entity measure non-cash distributions and the corresponding dividends payable?
- (ii) At the time an entity makes the distributions, how should any difference between the dividends payable and the carrying amount(s) of the asset be accounted for?
- (iii) Should there be any exceptions to the measurement principle?
- (iv) Should IFRS 5 Non-current Assets Held for Sale and Discontinued Operations be applied to the assets to be distributed after an entity declares non-cash distributions?
How should an entity measure non-cash distributions and the corresponding dividends payable?
The IFRIC noted that when an entity declares a non-cash distribution to its equity holders, it has an obligation to deliver non-cash assets. Accordingly, the journal entry would debit distributable reserves (equity) and credit dividends payable.
With regard to the measurement of the dividends payable the IFRIC considered the following three alternatives:
Alternative 1
All dividends payable should be measured in accordance with IAS 39 Financial Instruments: Recognition and Measurement.
Alternative 2
All dividends payable should be measured in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
Alternative 3
Dividends payable should be measured in accordance with IAS 37 or IAS 39 depending on the type of asset to be distributed.
The IFRIC tentatively decided that dividends payable should be measured in accordance with IAS 37 (Alternative 2).
Under alternative 2 the initial measurement of the dividends payable should be based on the fair value of the assets to be distributed as the fair value of the assets represents the best estimate to settle the obligation. The IFRIC emphasised that the focus of this project was on measurement of the liability, rather than asset measurement.
At the time an entity makes the distributions, how should any difference between the dividends payable and the carrying amount(s) of the asset be accounted for?
The IFRIC noted that the project addresses situations in which the entity distributes 'something valuable to its equity holders' and that in these situations the fair value of the distribution should be known.
The IFRIC pointed out that any difference between the carrying amount of the asset and the dividend payable (measured with reference to the fair value of the asset) should result in a credit entry to be made. The IFRIC noted that any credit amount arises as a result of the settlement of the dividends payable, that is, the derecognition of a liability.
The IFRIC tentatively decided that the difference arising at the time an entity settles its dividends payable should be recognised in comprehensive income.
Staff was directed to proceed with the project considering alternative accounting treatments of the credit entry in other comprehensive income. The paper is to be brought back to the next meeting.
Should there be any exceptions to the measurement principle?
The IFRIC then discussed whether any exceptions should be made to this measurement principle in situations in which the fair value of the distributed assets cannot be measured reliably, for instance, ownership interests not traded in active markets, intangible assets not recognised in the financial statements of the entity or common control transactions. The IFRIC tentatively decided that no exceptions should be made for ownership interests not traded in active markets or intangible assets not recognised in the financial statements of the entity. Regarding common control transactions the IFRIC tentatively concluded that common control transactions were outside the scope of the project, and therefore no exception was required.
Should IFRS 5 Non-current Assets Held for Sale and Discontinued Operations be applied to the assets to be distributed after an entity declares non-cash distributions?
The IFRIC acknowledged that a distribution is not a sales transaction. Consequently, the IFRIC tentatively decided that after declaration of the distribution, an entity should not apply the measurement and disclosure requirements in IFRS 5 to the assets to be distributed. However, IFRIC acknowledged that the disclosures required by IFRS 5 would be useful to users. Staff was directed to prepare a paper for the next IFRIC meeting that considers two alternatives:
- A recommendation to the Board of amendments to IFRS 5 to include distributed assets within the scope of the standard.
- Disclosures to be included within a draft Interpretation requiring disclosure of information equivalent to that required by IFRS 5. This alternative should ensure any such disclosures do not conflict with the requirements of other Standards.
IAS 18 Revenue – Guidance on identifying agency arrangements
At the July 2007 meeting the IFRIC decided not to add this issue to its agenda but asked the staff to develop guidance that might be recommended to the Board for inclusion in the appendix of IAS 18.
The IFRIC reaffirmed that an entity is acting as a principal when it has exposure to the significant risks and rewards associated with the sale of goods or the rendering of services. It was noted that determining whether an entity is acting as a principal or an agent depends on facts and circumstances and requires judgement.
Mainly based on the existing guidance in EITF 99-19 (US GAAP), the staff proposed the following features that, individually or in combination, may indicate that an entity is acting as a principal:
- (a) The entity has the primary responsibility for providing the goods or services desired by the customer or for fulfilling the order. Indications that the entity has such primary responsibility include, for example:
- the entity modifies the product or performs part of the services;
- the entity has discretion in selecting the supplier used to fulfil an order from a customer;
- the entity is involved in the determination of products or services specifications.
- (b) The entity has inventory risk before or after the customer order, during shipping or on return.
- (c) The entity has discretion in establishing prices directly or indirectly, such as by providing additional goods or services.
- (d) The entity has credit risk.
Accordingly, an entity is acting as an agent when it does not have exposure to the significant risks and rewards associated with the sale of goods or the rendering of services. One feature that may indicate that an entity is acting as an agent is that the amount the entity earns is predetermined, being either a fixed fee per transaction or a stated percentage of the amount billed to the customer.
The IFRIC tentatively decided to remove the sub-indicators under indicator (a) above. In addition to other editorial amendments, the IFRIC tentatively decided to include following guidance from paragraph 7 of EITF 99-19 in indicator (a):
'If a company is responsible for fulfilment, including the acceptability of the profit(s) or service(s) ordered or purchased by the customer.'
The IFRIC tentatively agreed to recommend the revised indicators to the Board for consideration. The IFRIC also confirmed its decision not to take this item to the Agenda (see below 'Review of tentative Agenda Decisions' published in July 2007 IFRIC Update).
IAS 18 Revenue – Customer contributions
The IFRIC continued their discussion of the accounting for non-cash distributions (see July IFRIC Meeting Notes). The discussion at this meeting concentrated on the following issues:
- (i) How to account for the receipt of customer contributions
- (ii) Estimating the duration of the ongoing service (service period)
- (iii) Potential extensions of the scope
How to account for the receipt of customer contributions
The staff presented a flowchart illustrating the approach agreed at the July meeting:
- Step 1: Assess whether an item of property, plant and equipment (PPE) has been transferred
- Step 2: Assess whether the ongoing service arrangement contains a leaseback to the customer
With regard to step 1 the IFRIC decided not to provide detailed guidance on the notion of control of an item of PPE. Any Interpretation should reference to the existing guidance in IFRSs and just point out the key factors.
Regarding step 2 the IFRIC decided that such assessment should be made with reference to IFRIC 4 Determining whether an Arrangement contains a Lease.
The IFRIC then discussed the accounting implications of the three accounting models arising from this approach. (For a detailed analysis and illustrative examples we refer to Agenda Papers 4A and the Appendix to Agenda Paper 4 available on the IASB website).
Contributions with no lease back
In this case the PPE is initially recognised on the balance sheet at fair value with a corresponding liability. The PPE is depreciated over its useful economic life. The obligation is recognised in income on a basis that reflects the provision of access to the ongoing services provided, that is, over the service period.
Contributions with an operating lease back
The only difference to contributions with no lease back is that part of the revenue arises from rental income rather than from the provision of a service.
Contributions with a finance lease back
The IFRIC believed that in this case no item of PPE has been transferred (step 1) and the transaction would therefore be outside the scope.
The IFRIC reaffirmed its tentative decision at the July 2007 meeting that PPE transferred by the contributor should be recorded at fair value in the financial statements of the service provider unless the application of IFRIC 4 results in a finance lease back.
Estimating the duration of the ongoing service (service period)
In July 2007 the IFRIC noted that the service provider would need to assess whether the contribution resulted in any ongoing obligation. If so, this obligation should be recognised in the balance sheet and the contribution should be recognised in income over the periods in which the obligation is satisfied.
The IFRIC had a lengthy discussion and mixed views were expressed. The following questions were raised:
- What is the obligation of the provider: to grant initial access to the asset, to provide ongoing access to the asset and/or to provide an ongoing service?
- Should the service period be the period for which the customer has the right to receive access to the asset and/or ongoing services (for example, under a contract or under statute) or the period over which the customer is expected to receive access to the asset and/or the ongoing services (that is, taking into account contract renewals)?
- Does the accounting treatment differ in situations in which the PPE is contributed by one party but access to the asset and ongoing service and/ or the ongoing service is received by another party? In these cases it was acknowledged that the contributor normally contributes the asset in return for an ability to access a service rather than a right to access the service; for example, a property developer may contribute an electricity sub-station to facilitate the development of a number of houses. The developer does not itself use the asset or service, rather the ultimate customer who purchases a house within the development receives the access to the service.
With regard to the first two issues, some IFRIC members noted that in some jurisdictions industries are regulated (for example, energy suppliers) and therefore the obligation to grant access could be considered to be perpetual. Others mentioned that the legal contract period may be unreasonably short compared to the expected life of the service contract.
Regarding the third issue some believed that there would be no further obligation in cases where the service provider is only required to grant initial access to the asset. Other IFRIC members were concerned about full revenue recognition on day 1 as, in their view, it does not appear reasonable that an item of PPE is contributed and the other party 'is obliged to do nothing'.
No decisions were made; however, there was a consensus that the service period should not exceed the useful life of the PPE.
The staff was directed to include in the draft Interpretation indicators how the revenue arising from the credit entry should be allocated to future periods taking into account the views and concerns expressed at this meeting. The draft Interpretation should also identify the different types of performance obligations that may arise.
Potential extensions of the scope
The IFRIC tentatively decided to extend the scope to contributions of PPE or cash which is contributed for the construction or acquisition of specific items of PPE.
The IFRIC intends to discuss a draft Interpretation reflecting these decisions at the next meeting.
IFRS 2 Share-based Payment – Group cash-settled share-based payment transactions
At the July 2007 meeting the IFRIC decided not to add this issue to its agenda but asked the staff to draft a tentative agenda decision as well as potential amendments to IFRS 2 (particularly paragraph 3) and consequential amendments to IFRIC 11 (see July IFRIC Meeting Notes).
The alternative approach
The staff brought to attention of the IFRIC an alternative approach. That is to add this issue to the agenda and to amend IFRIC 11 to clarify that both arrangements in question are within the scope of IFRS 2 and to specify how the employee services received by the subsidiary should be measured in its financial statement. The staff noted that this would be a more efficient approach as the amended Interpretation is expected to be effective significantly earlier than the amended IFRS 2.
The IFRIC reached a consensus that the proposed amendments to IFRS 11 would be within the boundaries of an interpretation and decided to add this project to the agenda. In addition the IFRIC agreed to suggest amendments to IFRS 2 to the Board for inclusion in the annual improvement process.
Subject to editorial comments the IFRIC agreed to the proposed amendments (omitted from observer notes) and asked the staff to bring back the revised wording for approval at a future meeting.
New issue
The IFRIC was also asked whether the following arrangement should be addressed in the proposed amendments to IFRIC 11:
- A subsidiary grants rights to its equity instruments to its employees, and
- The employees of the subsidiary are entitled to put the equity instruments of the subsidiary to the parent for cash at an amount that is based on the price of the equity instruments of the subsidiary.
There seemed to be a consensus that such an arrangement should be treated as equity-settled in the financial statements of the subsidiary and therefore would be outside the scope of the proposed amendments to IFRIC 11. The IFRIC asked the staff to make clear in the revised wording that this type of arrangement is not addressed.
Staff Recommendations for Tentative Agenda Decisions
The IFRIC reached a tentative decision not to add the three issues below to its Agenda. Tentative Agenda Decisions will be published in the September 2007 issue of IFRIC Update.
IAS 19 Employee Benefits – Treatment of employee contributions
The IFRIC considered a request to clarify the treatment of employee contributions in cost-sharing pension plans.
The accounting issues raised in the submission were whether:
- the service cost should reflect the cost-sharing nature of the arrangement;
- any surplus that must be used to adjust members' benefits or required contributions should be treated as an addition to the liability;
- any additional contributions that are expected to be required from members to finance a deficit should be treated as a deduction from the liability
The IFRIC agreed with the staff analysis that there was sufficient guidance in IAS 19 to answer the issues. The staff was asked to adapt its analysis for inclusion in the tentative agenda decision.
IAS 19 Employee Benefits – Changes to a plan caused by government
The IFRIC discussed a request to provide guidance on how to account for changes in a defined benefit plan resulting from government action: as an actuarial gain or as a past service cost.
- Mainly based on the guidance in paragraphs 73, 86 and 88 of IAS 19 the staff analysis pointed out:
- When a change in a plan caused by a government affects the employer's cost of providing the benefits (that is,actuarial assumptions), this change should be accounted for as an actuarial gain or loss.
- When a change in a plan caused by a government affects the benefits to be received by the employees for services before the change, this change should be accounted for as a past service cost.
The IFRIC agreed with the staff analysis that there was sufficient guidance in the Standard, however, acknowledged that the principles are sometimes difficult to apply in practice. The staff was asked to adapt its analysis for inclusion in the tentative agenda decision.
IAS 19 Employee Benefits – Death in service benefits: Attribution of death in service benefits in accordance with IAS 19
The IFRIC considered a request to provide guidance on the attribution of death in services and other non-service related benefits to periods of service.
The staff noted that differing views exist as to how the Projected Unit Credit Method should be applied to such benefits. However, the staff believed that the issue is not sufficiently significant and that any guidance would be guidance on the application of the Projected Unit Credit Method.
The IFRIC agreed with the staff's conclusion. The staff was asked to adapt its analysis for inclusion in the tentative agenda decision.
Friday 7 September 2007
Review of Tentative Agenda Decisions Published in July 2007 IFRIC Update
The IFRIC confirmed its decisions not to take the following items to its agenda:
- IAS 18 Revenue – Guidance on identifying agency relationships
- IAS 19 Employee Benefits – Post employment benefits: Benefit allocation for defined benefit plans
- IAS 39 Financial Instruments: Recognition and Measurement – Hedging future cash flows with purchased options
- IFRS 5 Non-current Assets Held for Sale and Discontinued Operations – Disclosure
In doing so, the IFRIC had suggestions on the wording of the agenda decision notices.
Update on Tentative Agenda Decisions Postponed in July 2007
IAS 39 Financial Instruments: Recognition and Measurement – Scope of IAS 39.11 and AG33(d)(iii)
In the May 2007 IFRIC Update the IFRIC published its tentative agenda decision regarding the application of two paragraphs of IAS 39:
- AG 33(d)(iii) – The issue particularly relates to assessing the economic environment in which the transaction takes place in the context of determining whether a currency is commonly used in contracts to buy or sell non-financial items.
- Paragraph 11A – The issue relates to whether the fair value option in this paragraph can be applied to all contractual arrangements with one or more embedded derivatives, including contractual arrangements with hosts outside the scope of IAS 39.
The IFRIC reviewed the responses to both tentative agenda decisions. In the light of the issues raised by respondents, the IFRIC agreed that the staff needed additional time to analyse those issues further to be in a position to recommend any action to the IFRIC.
The staff presented a paper outlining the outcomes of research into the issues raised:
- Both the original commentators on the tentative agenda decision and the national standard setters contacted subsequently confirmed that considerable confusion regarding the application of AG33(d) exists in their jurisdictions. Consequently, they expect diversity in practice.
- In relation to the fair value option in paragraph 11A, respondents confirmed the information provided by the original commentators on the tentative agenda decision. That is, the fair value option in paragraph 11A is being applied to contracts with embedded derivatives and non-financial hosts provided they meet the conditions in that paragraph. However, the staff research seems to indicate that this application is limited almost entirely to 'normal' purchase and sale contracts that are not otherwise within the scope of IAS 39. Some respondents indicate that they are not aware of paragraph 11 A being applied to any other types of contracts.
The IFRIC discussed the two issues and noted that the issues are interrelated. Staff was directed to pursue the project further and prepare a paper to be presented to the Board. The paper is initially to be brought back to the IFRIC at a future meeting.
The IFRIC also deferred to a future meeting its decision on whether to confirm the tentative agenda decision.
This summary is based on notes taken by observers at the IFRIC meeting and should not be regarded as an official or final summary.
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7 September 2007: IASB September 2007 Board meeting agenda
The International Accounting Standards Board will hold its September 2007 meeting at its offices, 30 Cannon Street, London, on Tuesday through Friday 18-21 September 2007 (no public meeting on Thursday 20 September). Presented below is the agenda for the meeting. The agenda was revised - see our news story of 15 September 2007 The meeting will be webcast live. The IASB will meet with World Standard Setters on Monday and Tuesday 24 and 25 September 2007. You will find the agenda for that meeting in our News Story of 5 September 2007.
7 September 2007: IFRSs required in Chile starting 2009
In Chile, the Accounting Standards Board of the Colegio de Contadores de Chile, in conjunction with the Interamerican Development Bank (BID), has adopted a programme of converging to International Financial Reporting Standards. Starting 1 January 2009, all business entities are required to prepare their financial statements in conformity with IFRSs. We have added a Chile Page to our pages of Information by Jurisdiction.
7 September 2007: Guía Rápida IFRS (IFRSs in your Pocket Spanish)
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Esta edición de Guía Rápida a las normas Internacionales de información Financiera (Deloitte Chile) considera los cambios y nueva normativa que se han incorporado a las NIIF hasta diciembre de 2006, constituye una excelente herramienta que le servirá para conocer y comprender las NIIF, facilitar su implantación y saber cómo se están aplicando estas normas de información en todo el mundo. Guía Rápida IFRS (IFRSs in your Pocket in Spanish) (PDF 836k, 88 paginas, Marzo 2007). En Chile, el Colegio de Contadores a través de la comisión de Principios y Normas de contabilidad, junto con el Banco Interamericano de Desarrollo (BID), acordó iniciar un proceso de convergencia
a las Normas Internacionales de Información Financiera, convergencia planificada a partir del 1
de enero de 2009, con lo cual todas las empresas deberán preparar estados financieros de acuerdo
a esta normativa.
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7 September 2007: FASB rethinks the objective of financial reporting
At its meeting on 29 August 2007, the US Financial Accounting Standards Board redeliberated issues related to the objective of financial reporting – the basic building block of the conceptual framework that FASB and IASB are jointly developing. Specifically, the FASB addressed (1) concerns raised by respondents about the role of stewardship in the objective of financial reporting and (2) the logical flow of Chapter 1 of the FASB's Preliminary Views. FASB's Action Alert of September 6, 2007 reports the following decisions:
FASB conclusions on the objective of financial reporting:
- The objective of general purpose external financial reporting is to provide financial information about the reporting entity that is useful to present and potential investors and creditors in making decisions in their capacity as capital providers.
- Chapter 1 of the Exposure Draft should be structured as follows so that it flows logically from the premise that the basic perspective of financial reporting is that of the entity.
- The basic perspective underlying financial reporting is the perspective of the reporting entity.
- That entity perspective involves reporting on the entity's resources (assets), the claims on the entity's resources (liabilities and equity), and the changes in them.
- The primary user group comprises those who have a claim (or potentially may have a claim) on the entity's resources – its present and potential equity investors and creditors (capital providers). The objective of financial reporting is focused on meeting the information needs of the primary user group.
- The primary user group is interested in financial information because that information is useful in the decision making of investors and creditors in their capacity as capital providers.
- The decisions made by investors and creditors include resource allocation decisions as well as decisions relating to protecting or enhancing their claim on the resources of an entity.
- Investors and creditors use information about an entity's resources, claims to those resources, and changes in resources and claims as inputs into the decision-making process.
- Other potential user groups may benefit from financial reporting information, but they are not the focus of the objective.
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7 September 2007: Agenda for the presentation working group meeting
The Joint International Group on Financial Statement Presentation will meet at the offices of the US Financial Accounting Standards Board, Norwalk, Connecticut, USA on Friday, 14 September 2007. FASB's Financial Institutions Advisory Group will also participate, as will some members of the FASB and IASB. Topics to be discussed include:
- An overview of the preliminary model for financial statement presentation
- The statement of comprehensive income
- The statement of cash flows and related reconciliation of the statement of cash flows to the statement of comprehensive income
- Possible additional segment disclosures
- A brief report on the recent recasting exercise and input from participants in that exercise
7 September 2007: Accounting Roundup – August 2007
FASB Developments
- FASB Proposes FSP on Convertible Debt Instruments
- FASB Invites Comments for an Agenda Proposal on Accounting for Insurance Contracts
- FASB Removes FSP on Quantifying Misstatements From Agenda
AICPA Developments
- AICPA Issues SSARS
- AICPA Proposes SSARS-Defining Professional Requirements
- AICPA Professional Ethics Executive Committee Issues Proposed Guidance on Network Firms
- AICPA Professional Ethics Division Issues FAQ on the Independence Impact of Providing Interpretation 48 Services to an Attest Client
SEC Developments
- SEC Issues Concept Release on Giving US Issuers the Choice to Apply IFRSs
- SEC Updates Compliance and Disclosure Interpretations
- SEC Proposes to Revise Limited Offerings Exemptions in Regulation D
- SEC Issues Final Rule to Define 'Significant Deficiency'
- SEC's Office of the Chief Accountant Updates FAQs on Auditor Independence
- SEC Adopts Revisions to EDGAR Filer Manual
- First Meeting of the SEC Advisory Committee on Improvements to Financial Reporting
- SEC Issues Letter Clarifying Servicers' Ability to Make Loan Modifications
FASAB Developments
- Proposed Statement on Reporting Gains and Losses From Changes in Assumptions
International Developments
- IASB and ASBJ Agree on Achieving Convergence by 2011
- IFRIC Clarifies Effects of Interpretation 14
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You will find past issues of Accounting Roundup Here.
7 September 2007: Guidance on translation services and auditor independence
The Office of Chief Accountant of the US Securities and Exchange Commission has updated their Frequently Asked Questions on Auditor Independence to address an issue relevant to foreign companies registered with the Commission and foreign subsidiaries of US registrants – namely whether translation services performed by an auditor in connection with filings with the SEC impair the auditor's independence:
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Prohibited Non-audit Services - Question 8 (issued August 06, 2007)
Q: Regulation S-T Rule 306 and Exchange Act Rule 12b-12(d) require foreign private issuers to provide all filings, related exhibits and all documents under the cover of Form 6-K using the English language. In connection with filings with the Commission, is an accountant independent if at any point during the audit and professional engagement period the accountant provides translation services to SEC audit clients based in foreign jurisdictions or US clients with foreign operations?
A: No. Translation services require the accountant to make decisions and judgments on behalf of the client's management on the selection and application of words, phrases, and specific accounting, business and industry terms, in order to appropriately convey the meanings as expressed by management in the original language. This might create a mutual or conflicting interest between the accountant and the audit client and might put the auditor in a position of auditing its own work.
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6 September 2007: Proposal to clarify hedge accounting
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The IASB has published for public comment an exposure draft of proposed amendments to IAS 39 Financial Instruments: Recognition and Measurement. The proposal, titled IAS 39 – Exposures Qualifying for Hedge
Accounting, addresses:
- What can be designated as a hedged item in a hedge accounting relationship – that is, which risks qualify for designation as hedged risks when an entity hedges its exposure to a financial instrument.
- Circumstances in which an entity may designate a portion of the cash flows of a financial instrument as a hedged item.
The ED is now available for eIFRS subscribers and will be freely available on the IASB's website from 17 September 2007. Comment deadline is 11 January 2008. Click for Press Release (PDF 15k).
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6 September 2007: Revised IAS 1 requires statement of comprehensive income
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The IASB has issued a revised IAS 1 Presentation of Financial Statements. The main changes from the previous version are to require that an entity must:
- Present all non-owner changes in equity (that is, 'comprehensive income' – see box below) either in one statement of comprehensive income or in two statements (a separate income statement and a statement of comprehensive income). Components of comprehensive income may not be presented in the statement of changes in equity.
- Present a statement of financial position (balance sheet) as at the beginning of the earliest comparative period in a complete set of financial statements when the entity applies an accounting policy retrospectively or makes a retrospective restatement.
- Disclose income tax relating to each component of other comprehensive income.
- Disclose reclassification adjustments relating to components of other comprehensive income.
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IAS 1 changes the titles of financial statements as they will be used in IFRSs:
- 'balance sheet' will become 'statement of financial position'
- 'income statement' will become 'statement of comprehensive income'
- 'cash flow statement' will become 'statement of cash flows').
Entities are not required to use the new titles in their financial statements. All existing Standards and Interpretations are being amended to reflect the new terminology. The revised IAS 1 resulted in consequential amendments to 5 IFRSs, 23 IASs, and 10 Interpretations. The revised IAS 1 is effective for annual periods beginning on or after 1 January 2009. Early adoption is permitted. Click for Press Release (PDF 17k).
Comprehensive income for a period includes profit or loss for that period plus other comprehensive income recognised in that period. The components of other comprehensive income include:
- changes in revaluation surplus (IAS 16 and IAS 38).
- actuarial gains and losses on defined benefit plans recognised in accordance with paragraph 93A of IAS 19.
- gains and losses arising from translating the financial statements of a foreign operation (IAS 21).
- gains and losses on remeasuring available-for-sale financial assets (IAS 39).
- the effective portion of gains and losses on hedging instruments in a cash flow hedge (IAS 39).
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5 September 2007: Quarterly update on accounting matters in South Africa
Deloitte (South Africa) publishes a quarterly newsletter Technically Speaking that provides insights, guidance, and summaries of issues that are affecting the accounting, auditing, and regulatory environment in South Africa, as well as other matters of general interest. We have begun posting these to our South Africa Page. Here is the link to download the September 2007 Issue (PDF 657k). Among the IFRS-related points covered in this issue are:
- IFRS Current Issues – Disclosure of an analysis of the age of financial assets that are past due but not impaired
- IFRS Advisory
- IFRS 7 – Credit Risk Disclosures
- Preliminary Views on Insurance Contracts
- Practical Application of Grant Date of Share-Based Payments
5 September 2007: Agenda for World Standard Setters meeting
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The International Accounting Standards Board will host its annual meeting with World Standard Setters on Monday 24 September and Tuesday 25 September 2007. The meeting, which is open to public observation, will take place at the Renaissance Chancery Court Hotel, 252 High Holborn, London. Representatives from over 50 accounting standard setting bodies are expected to participate.
Presented below is the agenda for the meeting.
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Annual IASB Meeting with World Standard Setters
24-25 September 2007, London
Monday 24 September 2007, 10:30h to 17:00h
- Adoption and Implementation of IFRSs – Shared experiences
Implementation – our experiences:
- Adoption: Australia
- Convergence: PR China
Adopting IFRSs – our experience:
- Canada
- Korea
Contemplating adoption – our plans and issues:
- India
- Mexico
- US GAAP/IFRS Convergence Update
- Implementation and Enforcement of IFRSs
- Round-table questions and answers with all of the day's presenters
Tuesday 25 September 2007, 09:00h to 16:45h
- IASB Planning and Priorities
- Business Combinations
- Round-table Discussions
- IFRSs for SMEs
- IFRSs Technical Update
- Element Definitions, Recognition and Measurement – Conceptual Framework phases B and C
- The Reporting Entity and Consolidations – Conceptual Framework phase D, Consolidations and Joint Ventures
- Presentation of Financial Statements – phase B
- Fair Value Measurements
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3 September 2007: Accounting Without Borders: Has Its Time Come?
An article in the September 2007 issue of Financial Executive magazine discusses how three leading companies whose primary financial statements are in United States GAAP are being affected by the growing use of International Financial Reporting Standards around the world. The three companies are IBM Corp., Credit Suisse Group, and Intel Corp. We have posted the article Accounting Without Borders: Has Its Time Come? (PDF 1,114k) by Ellen M. Heffes and Cheryl de Mesa Graziano with the kind permission of Financial Executive magazine. Excerpts:
- IBM. Though application is currently concentrated in areas where it is mandatory, IBM is looking to IFRSs to facilitate more streamlined accounting operations and standardised accounting policy in countries where IFRS adoption is optional.
- Credit Suisse. To reduce operational risk, Credit Suisse is applying 'full-fledged IFRSs; we're not taking any shortcuts.' That is, the company is applying the full set of standards, rather than considering the 13 IFRS exemptions permitted by IFRS 1 First-time Adoption of IFRS. Furthermore, the company made a conscious decision, where possible, to 'align our treatment and application – our interpretation of IFRSs – to be the same as US GAAP'.
- Intel. Maxwell J. Downing, Intel's IFRS policy controller, notes that in mid-2006, when Intel "really began to focus our efforts on trying to characterise the opportunity that IFRS would allow," the company also looked at standardising policies, training and procedures. "Our focus stemmed from an interest that IFRSs would be 'one-size-fits-all' [that] would allow us to standardise and simplify and potentially centralise many of our statutory-related activities." In retrospect, he comments, this hasn't proven to be entirely accurate, due to local tailoring. An example of this, he says, is Chinese accounting, characterised as a movement towards IFRSs. It's true, says Downing, the standards are an improvement and more aligned with IFRSs than Chinese GAAP was in the past. "But they're only generally aligned to IFRS," he says. "And, we're finding this to be fairly common around the world."
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2 September 2007: Good financial reporting raises shareholder value
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The Association of Chartered Certified Accountants (ACCA) in collaboration with CFO Asia Research Services has published the report of a survey of business opinion in Asia Pacific on the impact of regulation on companies and their shareholders. One-hundred seventy-six senior finance executives responding to the survey in China, Hong Kong, Malaysia, and Singapore have, on the whole, a positive view of regulation, with nearly 60% reporting that it enhances shareholder value. Less than 25% believed it hinders economic growth. Overall, most felt regulation allows more, not less, focus on strategy. |
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A key finding was that "three types of rules – financial reporting standards, tax regulations, and stock exchange regulations – are viewed as the most helpful in creating shareholder value". The study also found that "regulations create a level playing field for businesses, but only when they are mandatory and enforced consistently".
"Some areas of regulation and disclosure are believed to be more beneficial than others. The introduction of IFRSs has been seen widely as a success story, adding value to the Asian capital markets by creating easy comparability for Western investors and by allowing a flexible, principles-based approach. The downsides reported were unsuitability to small enterprises and a lack of local context for countries such as China."
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The report of the study, titled A Critical Connection: Making the Link Between Regulation and Shareholder Vvalue, can be Downloaded from the ACCA Website (PDF 1,041k).
1 September 2007: Revised target dates for several IASB agenda projects
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Based on presentations made by IASB Board Members at the IASCF Conference in Singapore this past week, the target dates for the next milestones in a number of IASB agenda projects have been revised, as follows. We have updated our Timetable accordingly: |
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