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29 February 2008: EC Single Market Newsletter - 'equivalence'
29 February 2008: Heads Up on structural changes at FAF, FASB, and GASB
In our News Story of 27 February 2008 we reported on the decision of the Trustees of the US Financial Accounting Foundation to make major changes to the oversight, structure, and operations of the FAF and its two standard-setting Boards, FASB and GASB, including reduction of the FASB from seven members to five. Deloitte & Touche LLP (United States) has published a special edition of the Heads Up Newsletter (PDF 104k) explaining the structural changes.
28 February 2008: Discussion Paper on how to define equity instruments
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The IASB has published for comment a Discussion Paper (DP) on Financial Instruments with Characteristics of Equity. The DP has two parts – an Invitation to Comment and, as a separate document, the FASB's November 2007 Preliminary Views Financial Instruments with Characteristics of Equity. The IASB's Invitation to Comment includes background information and invites responses to the questions already included in the FASB document and to a number of additional questions raised by the IASB. IAS 32 is the current IASB standard that addresses the distinction between liabilities and equity. The DP notes two broad types of problems with IAS 32 – uncertainties on how the principles in IAS 32 should be applied and, perhaps more significantly, whether application of those principles results in an appropriate distinction between equity instruments and non-equity instruments. |
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The FASB document describes three approaches to distinguish equity instruments and non-equity instruments – basic ownership, ownership-settlement, and reassessed expected outcomes. The FASB has reached a preliminary view that the basic ownership approach is the appropriate approach for determining which instruments should be classified as equity. The IASB has not deliberated any of the three approaches, or any other approaches, to distinguishing equity instruments and non-equity, and does not have a preliminary view.
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The IASB's DP describes some implications of the three approaches in the FASB document for IFRSs. For instance:
- Significantly fewer instruments would be classified as equity under the basic ownership approach than under IAS 32.
- The ownership-settlement approach would be broadly consistent with the classifications achieved in IAS 32. However, under the ownership-settlement approach, more instruments would be separated into components and fewer derivative instruments would be classified as equity.
The goal of the Discussion Paper is to solicit views on whether FASB's proposals are a suitable starting point for the IASB's deliberations. If the project is added to the IASB's active agenda (it's currently on the research agenda), the IASB intends to undertake it jointly with the FASB. The IASB requests responses to the DP by 5 September 2008. Click for Press Release PDF 52k).
28 Febrero 2008: Nuestra nueva página de recursos en español
28 February 2008: Guía del Nuevo Plan General de Contabilidad en España
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As a result of corporate and accounting law reforms in Spain, the Spanish Parliament recently adopted a new Plan General de Contabilidad (Spanish GAAP) effective for years beginning on or after 1 January 2008. It applies to individual companies and unlisted consolidated groups (listed consolidated groups are subject to IFRSs as adopted by the EU). The new Spanish GAAP is 'inspired by IFRSs' but not equivalent, and differences remain. Deloitte Spain has published a pocket guide, in Spanish, to the new Spanish GAAP: Nuevo Plan General de Contabilidad – Guía de bolsillo (PDF 361k, en español) The guide also includes a summary of the main changes in corporate law approved in parallel and a quick guide to the most significant differences with respect to the previous Spanish GAAP and International Financial Reporting Standards. |
27 February 2008: FASB trustees approve major structural changes
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The Board of Trustees of the Financial Accounting Foundation (FAF) has voted to approve major changes to the oversight, structure, and operations of the FAF and its two standard-setting Boards, the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB). The changes include reducing the size of FASB from seven to five members effective 1 July 2008 and vesting in the chairs of the two standards boards the authority to establish board agendas. Click for:
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| Key Structural Changes Approved by the FAF Board of Trustees
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Financial Accounting Foundation (FAF)
- Expand the number and breadth of investors, accounting, business, financial, and government organisations and entities invited to nominate FAF Trustees with the understanding that final authority for all appointments rests solely with the discretion of the Board of Trustees. The manner of implementation of this open nomination process will be determined pending further discussions among the Trustees and interested constituencies.
- Change the current term of Trustees from one three-year term with a possible second three-year term to one five-year term.
- Change the size of the Board of Trustees from a fixed 16 Trustees to a flexible range of 14 to 18 Trustees, the size to be fixed by Board resolution from time to time.
- Increase the Trustee governance activities, including its level of formal review, analysis, and oversight of the data and materials regularly provided by FASB, FASAC, GASB and GASAC.
Financial Accounting Standards Board (FASB)
- Reduce the size of the FASB from seven members to five, effective 1 July 2008.
- Retain the FASB simple majority voting requirement.
- Reaffirm the need for investor participation on the FASB by broadening the current by-law requirement that FASB members possess investment experience.
- Change the FASB's agenda-setting process to a 'leadership agenda process' whereby the FASB chair is vested with the authority, following appropriate consultation, to set the FASB project plans, agenda, and priority of projects.
Governmental Accounting Standards Board (GASB)
- Secure a stable and permanent funding source for the GASB.
- Retain the current size (seven members), term length (five years renewable once), and composition of the GASB.
- Change the GASB's agenda-setting process to a 'leadership agenda process' whereby the GASB chair is vested with the authority, following appropriate consultation, to set the GASB project plans, agenda, and priority of projects.
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26 February 2008: Reminder about the comment deadline on IFRS 1 revision
26 February 2008: We comment on two IAASB proposals
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Deloitte has recently submitted letters of comment to the International Auditing and Assurance Standards Board (IAASB) on two proposed International Standards on Auditing (ISAs), as listed below. You will find all of our past comments to the IAASB since 2004 Here. |
26 February 2008: FASB's VRG discusses six fair value issues
The US Financial Accounting Standards Board established a Valuation Resource Group (VRG) to provide the FASB staff with information about implementation issues regarding fair value measurements used in financial reporting. The VRG met on 1 February 2008 and discussed six valuation issues. Deloitte & Touche LLP (United States) has published the 20 February 2008 edition of the Heads Up Newsletter (PDF 117k) explaining the six issues, which are:
- VRG Issue 2008-1: Accounting for an Asset That the Acquirer Does Not Intend to Use or Intends to Use in a Way Other Than Its Highest and Best Use
- VRG Issue 2008-2: Customer Relationships
- VRG Issue 2008-3: Valuation of Intangible Assets Using the 'Current Replacement Cost' Method
- VRG Issue 2008-4: Meaning of 'Legally Permissible' in Assessing the Highest and Best Use
- VRG Issue 2008-5: Fair Value of Inventory
- VRG Issue 2008-6: Allocation of Portfolio-based Credit Adjustments for Hedge Effectiveness Testing
25 February 2008: UK government will use IFRSs starting 1 April 2008
The budget and the accounts of the Government of the United Kingdom will be prepared using IFRSs starting with the financial year that begins 1 April 2008. One of the biggest changes from moving to IFRSs is expected to be the inclusion of all of the Government's long-term liabilities in the statement of financial position. The UK Government Resources and Accounts Act 2000 requires that 'Whole-of-Government' accounts (consolidating the entire UK public sector, eventually including local councils) should be prepared to present a 'true and fair view' and to 'conform to generally accepted accounting practice':
25 February 2008: Conceptual Framework project pages reorganised
The joint IASB-FASB Conceptual Framework project is being conducted in eight phases. We have reorganised our project summary on IAS Plus into a separate web page for each phase plus a page on the overall approach to the project. The Overall Approach page has a comprehensive meeeting-by-meeting chronology with links to the pages for those phases discussed at each meeting:
25 February 2008: Agenda for 6-7 March 2008 IFRIC meeting
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The International Financial Reporting Interpretations Committee (IFRIC) will meet at the IASB's offices in London on Thursday 6 March and Friday 7 March 2008. The meeting is open to the public and will be webcast. The tentative agenda is shown below. |
6-7 March 2008, London
Thursday 6 March 2008
- Introduction
- D22 Hedges of a Net Investment in a Foreign Operation – Preliminary discussion of comprehensive example – no decisions will be made
- D21 Real Estate Sales – Analysis of comment letters and first redeliberations
- Review of Tentative Agenda Decisions published in November and January IFRIC Updates
- IAS 37 Provisions, Contingent Liabilities and Contingent Assets – Deposits on returnable containers
- IAS 7 Statement of Cash Flows – Classification of Expenditures
- Staff Recommendations for Tentative Agenda Decision
- IAS 19 Employee Benefits – Settlements
- Administrative Session – IFRIC work in progress
Friday 7 March 2008 (morning only)
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25 February 2008: Agenda project pages updated
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We have updated the following IASB agenda project pages to reflect the discussions and decisions at the IASB's meeting on 19-21 February 2008. |
24 February 2008: New Global Offerings Services newsletter
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We have posted the January 2008 Edition of the Deloitte Global Offerings Services Newsletter (PDF 278k). 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 February 2008: CEBS finds Swiss and US bank supervision equal to Europe's
The European Union Capital Requirements Directive and the Financial Conglomerates Directive require EU member states' supervisors to assess whether the third country parent institutions of EU subsidiaries are subject to supervision that is 'equivalent' Europe's. To avoid duplication of work, the European Commission asked the Committee of European Banking Supervisors (CEBS) together with the Committee of European Insurance and Occupational Pensions (CEIOPS) to assess the equivalence of certain third country supervision. CEBS and CEIOPS have completed their assessments of the Swiss and United States financial regulatory authorities. The report on Switzerland concludes that the Swiss supervisory system is equivalent to Europe's. The report on the United States concludes that the banking supervisory system is equivalent to Europe's. However, because insurance regulation is at the State level in the USA, "EEA supervisory authorities must therefore conduct all equivalence assessments on a State by State and firm by firm basis". Click for:
22 February 2008: Notes from day 3 of the February 2008 IASB meeting
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The International Accounting Standards Board held its February 2008 meeting in London on Tuesday to Thursday 19-21 February 2008. The meeting is open to public observation and is being webcast. Click to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the Meeting. |
21 February 2008: Deloitte UK study on half-yearly reporting
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A Deloitte & Touche (United Kingdom) study has found that many companies are failing to comply fully with new reporting requirements for half-yearly financial reports following the UK's introduction of the EU's Transparency Obligations Directive (TOD). Deloitte's report, titled Half a story, considers the impact of the TOD, which introduced more detailed and extensive requirements for half-yearly financial reports, including compliance with IAS 34 and shorter reporting deadlines. The report also includes some comparisons with the findings of previous Deloitte studies of half-yearly reporting in 2002, 2004, and 2006. |
The key findings of the report include:
- Of 289 companies surveyed, 72 (25%) failed to provide a responsibility statement in their half-yearly reports. This is now a requirement for all listed companies;
- The average length of the half yearly financial report has increased by 27%;
- The risks and uncertainties disclosures, which focus on the second six months of the year, were handled well by 19 of 30 companies reviewed in detail. Only four companies referred to credit crunch issues, three in relatively general terms and only one in respect of indebtedness following a refinancing not apparently caused by credit market tightening;
- Nine of these 30 companies (30%), did not comply with the requirements of IAS 34. This was mainly due to missing disclosures on segments, accounting policies and earnings per share; and
- Only one of the 30 companies clearly followed all of the requirements in the DTR and IAS 34.
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Click for:
21 February 2008: IASB will release 2008 Bound Volume on 6 March
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The IASB will publish International Financial Reporting Standards 2008 – the English language Bound Volume containing the official consolidated text of all authoritative IASB pronouncements – on 6 March 2008. BV2008 will include all pronouncements issued or approved for issue by the IASB at 1 January 2008. That includes the revised IFRS 3 Business Combinations and amended IAS 27 Consolidated and Separate Financial Statements, which were issued in mid-January. You can Register Your Interest on IASB's Website now to receive priority shipping when BV2008 is released. |
21 February 2008: New IFRS e-Learning modules nearing completion
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Two new modules in Deloitte's IFRS e-Learning system are nearing completion. They will cover:
- IFRS 8 Operating Segments
- IFRIC 12 Service Concession Arrangements
We expect to release them by the end of March 2008 (announced, of course, here on IAS Plus). Thirty-five modules are currently available for download by clicking on the light-bulb icon on our Home Page. |
21 February 2008: Notes from day 2 of the February 2008 IASB meeting
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The International Accounting Standards Board held its February 2008 meeting in London on Tuesday to Thursday 19-21 February 2008. The meeting is open to public observation and is being webcast. Click to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the Meeting. |
21 February 2008: FASB webcast on IFRS convergence
The US Financial Accounting Standards Board (FASB) will conduct the second in a series of periodic webcasts focusing on topics of importance to its constituents. It is scheduled for Thursday 13 March 2008, 1:00 PM to 2:00 PM (EDT) and will focus on FASB's Accounting Standards Codification. Viewers will have the opportunity to email questions to panelists during the event. The webcast will be archived on the FASB website for access by the public. To register for the live and/or archived webcast, here is the URL: http://w.on24.com/r.htm?e=104519&s=1&k=BDD7BC6E5BD3B1CC8E9F2631759517DD.
FASB webcast on Accounting Standards Codification:
- Title of Webcast: The Move to Codification of US GAAP
- Date and Time: 13 March 2008, 1:00 PM to 2:00 PM (US EDT)
- Panelists: Larry Smith, a member of the FASB, and Tom Hoey, project director for the FASB codification project. Jay Hanson, National Director of Accounting for McGladrey & Pullen, will moderate the program.
- Topic: The panelists will discuss and demonstrate the use of the FASB Accounting Standards Codification. The Codification is an on-line research system that organises by topic all authoritative US GAAP. The Codification is in the verification phase, which means that it is not yet authoritative. During the verification phase, constituents are encouraged to use and provide feedback.
- Email Notification Service: To subscribe to an email notification service for future FASB webcasts, send an email to Join-fasb-webcast@listserv.lists.fasb.org. (It is not necessary to include any additional information in the subject line or body of your email.)
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20 February 2008: CFA Institute urges better executive comp disclosures
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The CFA Institute Centre for Financial Market Integrity has published a study It Pays to Disclose: Bridging the Information Gap in Executive Compensation Disclosures in Asia. (PDF 358k) that finds that prevailing disclosure regulations and practices in Hong Kong, Singapore, and Japan "leave room for questionable pay arrangements to continue or escalate in the future, and potentially harm corporate value and investor confidence". The study found that five factors "conspire to render Asian markets vulnerable to pay abuses": |
- lack of regulatory push,
- inadequate information in financial reports,
- little use of long-term incentive plans,
- poor board oversight, and
- lack of investor influence on companies' executive compensation.
The study calls for both voluntary corporate disclosures and stronger disclosure requirements. Press Release (PDF 47k).
20 February 2008: Notes from day 1 of the February 2008 IASB meeting
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The International Accounting Standards Board held its February 2008 meeting in London on Tuesday to Thursday 19-21 February 2008. The meeting is open to public observation and is being webcast. Click to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the Meeting. |
19 February 2008: 2007 IFRS compliance questionnaire in Spanish
Deloitte & Touche Ltda (Colombia) has published Cuestionario cumplimiento NIIF 2007 – 2007 IFRS Compliance Questionnaire in Spanish (PDF 2,322k). It is a direct Spanish translation of the English version. The questionnaire summarises the recognition and measurement requirements in IFRSs issued on or before 31 August 2007. The items in this questionnaire are referenced to the applicable sections of the IFRSs. Please bear in mind that IAS 8.30 requires disclosures regarding Standards and Interpretations issued but not yet effective when the financial statements are issued. Therefore, in addition to the contents of the questionnaire, preparers will need to consider any Standards and Interpretations issued between 1 September 2007 and the date of issue of their 2007 financial statements. You will find a link to this and related publications on our Model IFRS Financial Statements Page.
19 February 2008: New ISA on audits of accounting estimates
The International Auditing and Assurance Standards Board (IAASB)has issued International Standard on Auditing (ISA) 540 (Revised and Redrafted) Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures. ISA 540 requires the auditor to focus attention on areas of higher risk, accounting judgement, and possible bias, thereby assisting the auditor to form appropriate conclusions about the reasonableness of estimates in the context of an entity's financial reporting framework. The ISA provides expanded guidance on auditing fair value accounting estimates, including audit considerations relating to the proper application of the requirements of the financial reporting framework relevant to such estimates and the use of models in valuations. ISA 540 is effective for audits of financial periods commencing on or after 15 December 2009. The IAASB has also decided to establish a Task Force to consider how best to approach the development of possible further fair value auditing guidance. Click for Press Release (PDF 65k).
19 February 2008: Classification of expenditures in the cash flow statement
We have written to express some disagreement with the basis for IFRIC's tentative decision not to interpet IAS 7 Statement of Cash Flows regarding the classification of certain expenditures as operating or investing. We disagree with IFRIC's conclusion that the issue could be resolved by referring it to the Board with the recommendation that IAS 7 should be amended to state that only expenditures resulting in the recognition of an asset qualify for classification as 'cash flows from investing activities'. An excerpt from our letter:
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We acknowledge that in many instances recognition of an asset is a good indicator for classifying the expenditure as investing cash flows. However, we believe requiring classification of all cash flows that do not result in asset recognition as operating cash flows has the potential to mislead users and possibly misrepresent the statement of cash flows. Furthermore, as a result of changes in IFRSs, if certain expenditures are recognised as an asset or no longer qualify for recognition, this will lead to changes in the allocation within the statement of cash flows without changing the economic substance of the underlying transactions.
Examples of expenditures generally made for investing purposes that, under the IFRIC's proposal, we believe would be classified as part of 'cash flows from operating activities' include:
- Exploration expenditures where an entity has an accounting policy of non-capitalisation of such expenditures
- Initial expenditures on development cost that do not qualify for recognition as an asset
- Acquisition-related expenditures in a business combination that are expensed immediately under the revised version of IFRS 3 Business Combinations
Therefore, we propose amending the recommendation to the Board to clarify the wording in IAS 7 to explain that, in determining the classification of expenditures that do not qualify for asset recognition, judgement needs to be applied.
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Click to Download the Deloitte Letter to IFRIC (PDF 104k).
18 February 2008: SEC launches 'Financial Explorer' data analysis tool
The US Securities and Exchange Commission has launched software called Financial Explorer on the SEC Web site to help investors analyse the financial results of public companies. Financial Explorer lets investors automatically generate financial ratios, graphs, and charts depicting important information from financial statements. Information including earnings, expenses, cash flows, assets, and liabilities can be analysed and compared across competing public companies. Financial Explorer uses financial information provided to the SEC as interactive data in eXtensible Business Reporting Language (XBRL). Click to Launch Financial Explorer. Here's the SEC Press Release (PDF 52k).
18 February 2008: Hyperinflationary countries for 31 December 2007 reporting
The International Practices Task Force (IPTF) of the AICPA's Centre for Audit Quality monitors the status of 'highly inflationary' countries. The Task Force's criteria for identifying such countries are similar to those for identifying 'hyperinflationary economies' under IAS 29 Financial Reporting in Hyperinflationary Economies. The IPTF has issued a report of discusisons with SEC staff on the IPTF's recommendations of which countries should be considered highly inflationary through 31 December 2007. Those countries are Angola, Myanmar, and Zimbabwe. The Task Force agreed that Angola would come off highly inflationary status as of the first period beginning after 31 December 2007. The following countries are on the Task Force's inflation 'watch list': Eritrea, Guinea, Haiti, Venezuela, Iran, and Zambia. Click to Download the Report (PDF 31k).
17 February 2008: US Senator writes to IASB and FASB about subprime crisis
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Senator Jack Reed, Chairman of the Banking Subcommittee on Securities, Insurance, and Investments of the United States Senate, has written to both FASB Chairman Robert H Herz and IASB Chairman Sir David Tweedie asking about steps their respective boards are considering with respect to improved standards about companies' off-balance sheet transactions and activities. In his letter to Sir David Tweedie, Senator Reed wrote: |
In testimony before the Senate Subcommittee Securities, Insurance, and Investment subcommittee of the Senate Banking, Housing and Urban Affairs Committee in October 2007, you stated the IASB is working on those '...items identified as part of SEC report on off balance sheet items and as part of a recent study by the Committee of European Securities Regulators, such as consolidations…financial instruments, including derecognition'. In the interest of improving transparency for investors, thereby enhancing the efficiency of the US capital markets, it would be helpful for the subcommittee if the IASB would provide it with a written description of steps the IASB is currently taking to adopt improved standards that would result in:
- Investors and the capital markets receiving in the near future, timely information regarding the effect off balance sheer financings can have on (a) the liquidity, cash flows and income of a company, (b) the key terms, conditions and events that can trigger such an effect, and (c) predictive information that will allow investors to make an assessment as to whether a material impact will likely occur in the reasonably foreseeable future, and the magnitude of such an impact.
- Structured transactions such as those using SIV’s or SPE’s that are economically a financing for a company, but are structured in such as way as to hide them off balance sheet, to be reported on balance sheet in a transparent fashion that will provide investors with necessary information regarding the related assets, liabilities and related cash flows.
It would also be of assistance to the subcommittee, if the IASB would provide it with a written description of the key differences, as well as similarities, between the FASB and IASB accounting and disclosure standards for off balance sheet financing transactions such as those involving securitisations, SIVs and SPEs. It would be useful if the description would include a discussion of how the FASB's accounting model and principle of control would apply when judging whether or not to consolidate an SIV, or an SPE. Please include a discussion of how consolidation would be affected by implicit or explicit arrangements between the sponsor and SPE, liquidity puts to the sponsor, sponsor guarantees or other forms of support for debt of an SIV or SPE, or reconsideration events.
The IASB's continuing efforts to improve the financial reporting and disclosure for off balance sheet transactions is very important to investors and the capital markets. After the decline in investor confidence brought on by first Enron and then other corporate scandals, and now the subprime related issues, further disruption of the markets caused by a lack of transparency and failure to address some of these issues is unacceptable. I appreciate your attention to this matter and look forward to your response.
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The Senator's letter to Mr Herz asked similar questions. Click to download:
17 February 2008: Judgements made by financial statement preparers and auditors
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At the upcoming meeting of the PCAOB's Standing Advisory Council on 27 February 2008, a panel will discuss one of the recommendations in the recent progress report of the SEC's Advisory Committee on Improvements to Financial Reporting (CIFiR) – see our News Story of 16 February 2008. The panel will focus on Recommendation 3.4 relating to accounting and auditing judgements. That recommendation states: |
| The SEC should adopt a judgement framework for accounting judgements. The PCAOB should also adopt a similar framework with respect to auditing judgements. |
Click to download the Briefing Paper on this topic prepared for the meeting (PDF 73k).
16 February 2008: Notes from Standards Advisory Council meeting
The International Accounting Standards Board met with the Standards Advisory Council on 14 and 15 February 2008 in London. Presented below are the preliminary and unofficial notes taken by Deloitte observers at the meeting. The IASB Board will hold its February 2008 meeting at the IASB's offices, 30 Cannon Street, London on Tuesday to Thursday 19-21 February 2008. The meeting is open to public observation and will be webcast. Here's the Agenda.
14-15 February 2008, London
 Open discussion with IASCF Trustees Chairman
Gerrit Zalm, the Chairman of the IASC Foundation addressed the Standards Advisory Council during the closing session of their February 2008 meeting. In his first appearance before the SAC as Chairman, he called the task of the IASB a 'romantic project' – a project of high ideals that was now achieving reality. The achievements of the IASB brought with them severe challenges, ones that had to be addressed in the Strategy Review.
He noted that relations with the European Parliament had been poor, but that efforts at the Trustee, Board and Staff level had contributed, and continue to contribute, to improving relations, better communication and a better mutual understanding of each others' positions and priorities. The removal of the EU 'carve-out' in IAS 39 was high on his wish-list and there are on-going efforts at several levels within the EU to achieve this.
Sustainable funding was a primary concern-as noted yesterday at the session devoted to the Strategy Review-both to the Trustees and the SAC. Private sector funding was open to criticism as it could be perceived as buying influence. A levy system was already in operation in Italy and the UK and this was seen as the best alternative; but it was for each jurisdiction to decide how best to raise the finds, which entities to levy, etc. As such, a final agreement on levies is still 'on the horizon'.
Finally, he noted that the integrity and authority of the IASB was a paramount concern of the Trustees. The success of the private-sector IASB was testament to the wisdom of keeping standard-setting out of the hands of government. However, the IASB had to acknowledge that it was, in effect, setting law in many jurisdictions and that law-makers in those jurisdictions have a legitimate interest in the work and decision-making process of the IASB. The challenge for the Trustees will be to maintain the delicate balance between private-sector neutrality and independence and the interests of governments.
In an open session with the SAC, Mr Zalm heard many suggestions and opinions about how the Trustees, SAC and IASB could respond to these and other challenges. Against the background of the Strategy Review, it was noted by SAC members that the success of the IASB was about to face a significant challenge: how would the United States react to the transition to IFRS? The FASB derived its authority from the US Securities and Exchange Commission's devolution of its standard-setting powers to the FASB. The presence of the SEC would be a significant challenge for the Trustees as they maintained the 'delicate balance' mentioned by Mr Zalm between competing IFRS constituents.
All of this suggests that much is riding on the composition of the proposed Monitoring Group and its ability to represent the integrity, neutrality and authority of the IASCF and IASB.
Discussions about Four IASB Agenda Projects
The SAC held a series of discussions with IASB and FASB staff on three projects nearing the issue of a discussion paper. FASB staff discussed the FASB Preliminary Views document Financial Instruments with the Characteristics of Equity and introduced the proposed questions to be included in the IASB's wrap-around Invitation to Comment. An IASB member noted that this topic was inextricably linked with other IASB projects, including parts of the Conceptual Framework, financial instruments, insurance, and liabilities (IAS 37).
The IASB staff presented an overview of a forthcoming discussion papers Reducing Complexity in Reporting Financial Instruments and Post-employment Benefits.
All three of these papers are expected in the first half of 2008 and this meeting was the last opportunity for the SAC to offer advice on the questions to be included in the various Invitations to Comment.
Regarding the proposed IFRS for Small and Medium-sized Entities, the IASB staff reviewed the project activities since issuance of the Exposure Draft in February 2007. Staff also presented a preliminary list of the most significant issues that have been raised in the letters of comment. These topics formed the basis of a lengthy SAC discussion.
2008 Constitution Review
Two proposals – creation of an IASCF monitoring group and enlarging the IASB from 14 to 16 members – will be 'fast-tracked', with a comment document to be issued in the second quarter of 2008. See our News Story of 15 Feb 2008.
This summary is based on notes taken by observers at the IASB meeting and should not be regarded as an official or final summary.
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16 February 2008: SEC financial reporting advisory panel makes 12 proposals
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The SEC's Advisory Committee on Improvements to Financial reporting has issued a Progress Report (PDF 989k) to the Commission. The report outlines the Committee's 12 developed proposals, conceptual approaches, and currently identified matters for future consideration. Deloitte & Touche LLP (USA) has published a Heads Up Newsleter (PDF 142k) discussing the report. |
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The SEC Advisory Committee's 12 proposals are: |
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- GAAP should be based on business activities, rather than industries. As such, the SEC should recommend that any new projects undertaken jointly or separately by the FASB be scoped on the basis of business activities rather than industries. Any new projects should include the elimination of existing industry-specific guidance in relevant areas as a specific objective of those projects, unless, in rare circumstances, retaining industry guidance can be justified on the basis of cost-benefit considerations.
- GAAP should be based on a presumption that formally promulgated alternative accounting policies should not exist. The SEC should recommend that any new projects undertaken jointly or separately by the FASB not provide additional optionality, unless, in rare circumstances, it can be justified. Any new projects should include the elimination of existing alternative accounting policies in relevant areas as a specific objective of those projects, unless, in rare circumstances, the optionality can be justified.
- Additional investor representation on standards-setting bodies is central to improving financial reporting. Only if investor perspectives are properly considered by all parties will the output of the financial reporting process meet the needs of those for whom it is primarily intended to serve.
- The SEC should assist the FAF with enhancing its governance of the FASB, including supporting the FAF's changes outlined in its Request for Comments on Proposed Changes to Oversight, Structure and Operations of the FAF, FASB and GASB, with minor modifications regarding composition of the FAF and the FASB.
- The SEC should encourage the FASB to further improve its standards-setting process and timeliness, as follows:
- Create a formal Agenda Advisory Group that includes strong representation from investors, the SEC, the PCAOB, and other constituents, such as preparers or auditors.
- Refine procedures for issuing new standards by: (1) implementing investor pre-reviews designed to assess perceived benefits to investors, (2) enhancing cost-benefit analyses, and (3) requiring improved field visits and field tests
- Improve review processes for new standards by conducting post-adoption reviews of every significant new standard, generally within one to two years of its effective date, to address interpretive questions and reduce the diversity of practice in applying the standard, if needed.
- Improve processes to keep existing standards current and to reflect changes in the business environment by conducting periodic assessments of existing standards.
- The number of parties that either formally or informally interprets GAAP and the volume of interpretative implementation guidance should continue to be reduced.
- The FASB or the SEC, as appropriate, should issue guidance reinforcing the concept of materiality.
- The FASB or the SEC, as appropriate, should issue guidance on how to correct an error consistent with the principles outlined in the report – generally fewer restatements of prior period financial statements.
- The FASB or the SEC, as appropriate, should develop and issue guidance on applying materiality to errors identified in prior interim periods and how to correct these errors.
- The SEC should adopt a judgment framework for accounting judgments. The PCAOB should also adopt a similar framework with respect to auditing judgments.... The proposed framework applicable to accounting-related judgments would include the choice and application of accounting principles, as well as the estimates and evaluation of evidence related to the application of an accounting principle.
- The SEC should, over the long-term, mandate the filing of XBRL-tagged financial statements after the satisfaction of certain preconditions.
- The SEC should issue a new comprehensive interpretive release regarding the use of corporate websites for disclosures of corporate information. The guidance should address issues such as liability for information presented in a summary format, treatment of hyperlinked information from within or outside a company's website, treatment of non-GAAP disclosures and GAAP reconciliations, and clarification of the public availability of information disclosed on a reporting company's website.
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16 February 2008: SEC proposes all-electronic disclosure for foreign issuers
The US Securities and Exchange Commission has voted to propose amendments to modernise its disclosure requirements for foreign companies, including eliminating all requirements for paper submissions. The SEC is also proposing to accelerate the reporting deadline for annual reports filed on Form 20-F by foreign private issuers from six months to 90 days after the issuer's financial year-end in the case of large accelerated filers and accelerated filers, and to 120 days after year-end for all other, issuers, after a two-year transition period. Click for Press Release (PDF 48k).
16 February 2008: Heads Up on fair value measurements
- FAS 157-2, which partially defers Statement 157's effective date, and
- FAS 157-1, which excludes FASB Statement No. 13 Accounting for Leases, as well as other accounting pronouncements that address fair value measurements on lease classification or measurement under Statement 13, from Statement 157's scope.
The IASB is working on a Fair Value Measurement Project. In November 2006, the IASB issued a wrap-around Discussion Paper inviting comments on FAS 157. The Board plans to hold public roundtables on the issues in the second quarter of 2008.
16 February 2008: Deloitte Canada Countdown IFRS transition newsletters
Deloitte Canada has released its first issue of a new Countdown IFRS transition newsletter, to provide a snapshot of where we are now as far as IFRS is concerned – both in Canada and in Deloitte. This issue includes a convergence timeline for a calendar year entity and links to various Deloitte IFRS convergence activities. Future issues will focus on updates on IFRS convergence in Canada, related Deloitte activities, technical briefings, and tips and tools to assist Canadian companies and others in the IFRS transition. Click to download:
You also can find information about financial reporting in Canada on our Canada Page.
15 February 2008: Fast-track for proposed IASCF monitoring group, enlarged IASB
- Creation of a 'monitoring group' of representatives of official organisations, including securities regulators, that would approve Trustee appointments and review Trustee oversight activities, including the adequacy of the annual funding arrangements as well as the overall budget.
- Expansion of the IASB to 16 members from the present 14. While maintaining the existing Constitutional criteria for selecting members of the IASB, the Trustees will consider whether the Constitution should also explicitly ensure a minimum geographical balance. The balance they are currently considering is 4 members from Europe, 4 from the North America, 4 from Asia-Oceania, and the remaining 4 from any area.
At yesterday's meeting of the Standards Advisory Council, IASCF Trustee Antonio Vegezzi and IASCF Director of Operations Thomas Seidenstein reported that the Trustees intend to fast-track their consideration of these two issues. Accordingly, they expect to publish formal proposals for public comment some time during the second quarter of 2008. They also reported that the remainder of the Constitution Review will get under way in third quarter 2008 and is expected to take about two years.
15 February 2008: IFRS concept paper from Canadian securities regulators
The Canadian Securities Administrators (CSA) – the consortium of the provincial securities regulators in Canada – has invited public comment on CSA Concept Paper 52-402. The Concept Paper discusses securities regulation issues relating to Canada's upcoming adoption of IFRSs. The Accounting Standards Board (AcSB) of Canada proposes to that all Canadian publicly accountable enterprises must adopt Canadian IFRS equivalents by 1 January 2011. As CSA rules refer to Canadian generally accepted accounting principles established by the AcSB, the CSA is considering the need for amendments to those rules and is seeking feedback on three main issues:
- Use of IFRSs by domestic issuers before 1 January 2011. CSA members are leaning toward allowing the use of IFRSs starting in 2009, two years ahead of the AcSB's mandatory changeover.
- Use of US GAAP by domestic issuers. Currently, Canadian companies that are registered with the US SEC are allowed to use US GAAP rather than Canadian GAAP. The CSA members have tentatively concluded not to allow a domestic issuer to use US GAAP starting in 2009 except existing US GAAP users could continue doing so for up to five years (that is, through 2013).
- Reference to IFRSs instead of Canadian GAAP in CSA securities rules. The AcSB's current plan is to import IFRSs into Canadian GAAP and to continue using the term 'Canadian GAAP'. The CSA members do not agree with that terminology and believe that the auditor's report should refer to IFRSs as adopted by the IASB rather than to Canadian GAAP. CSA acknowledges that changes to some laws may be required.
Comments on the Concept Paper should be sent by 13 April 2008. Click to:
15 February 2008: IVSC announces interim board of trustees
The International Valuation Standards Committee (IVSC) has announced its interim board of trustees that will oversee the restructuring of the IVSC. The restructuring was announced in November 2007 (see the IAS Plus News Story of 29 Nov 2007). The restructuring will transform IVSC into an independent standard setting organisation that will develop International Valuation Standards acceptable to the international capital markets. Former IASC Foundation Trustee Jens Roder and former IASC Chairman Michael Sharpe are among the seven interim IVSC trustees. Here is the Press Release on IVSC Interim Trustees (PDF 82k).
15 February 2008: IAS Plus Newsletter on puttable financial instruments
15 February 2008: Canadian standards board confirms 2011 transition to IFRSs
The Canadian Accounting Standards Board (AcSB) has confirmed that use of International Financial Reporting Standards (IFRSs) will be required in 2011 for publicly accountable profit-oriented enterprises. IFRSs will replace Canada's current national GAAP for those enterprises. These include listed companies and other profit-oriented enterprises that are responsible to large or diverse groups of stakeholders. The official changeover date is for interim and annual financial statements relating to financial years beginning on or after 1 January 2011. Private companies (non-publicly accountable enterprises), and not-for-profit organisations are not required, but are permitted, to adopt IFRSs in 2011. Click for AcSB Press Release (PDF 50k).
14 February 2008: Puttable instruments and obligations arising on liquidation
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The IASB has amended IAS 32 Financial Instruments: Presentation with respect to the balance sheet classification of puttable financial instruments and obligations arising only on liquidation. Under the current requirements of IAS 32, if an issuer can be required to pay or transfer cash or another financial asset in return for redeeming or repurchasing a financial instrument, the instrument is classified as a financial liability. As a result of the amendments, some financial instruments that currently meet the definition of a financial liability will be classified as equity because they represent the residual interest in the net assets of the entity. The amendments have detailed criteria for identifying such instruments, but they generally would include: |
- Puttable instruments that are subordinate to all other classes of instruments and that entitle the holder to a pro rata share of the entity's net assets in the event of the entity's liquidation. A puttable instrument is a financial instrument that gives the holder the right to put the instrument back to the issuer for cash or another financial asset or is
automatically put back to the issuer on the occurrence of an uncertain future event or the death or retirement of the instrument holder.
- Instruments, or components of instruments, that are subordinate to all other classes of instruments and that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation.
The Board also amended IAS 1 Presentation of Financial Statements to add new disclosure requirements relating to puttable instruments and obligations arising on liquidation. The amendments result from proposals that were in an Exposure Draft published by the Board in June 2006. The amendments are effective for annual periods beginning on or after 1 January 2009, with earlier application permitted. Click for IASB Press Release (PDF 51k).
12 February 2008: Two new public sector standards based on IFRSs
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The International Public Sector Accounting Standards Board (IPSASB) has issued two new International Public Sector Accounting Standards (IPSASs) that further converge public sector GAAP with IFRSs: |
- IPSAS 25 Employee Benefits. IPSAS 25 sets out the reporting requirements for the four categories of employee benefits dealt with in the IASB's IAS 19 Employee Benefits. These are short-term employee benefits, such as wages and social security contributions; post-employment benefits, including pensions and other retirement benefits; other long-term employee benefits; and termination benefits. The new IPSAS also deals with specific issues for the public sector, including the discount rate related to post-employment benefits, treatment of post-employment benefits provided through composite social security programs, and long-term disability benefits. IPSAS 25 is effective for reporting periods beginning on or after 1 January 2011.
- IPSAS 26 Impairment of Cash-Generating Assets. Some public sector entities (other than government business enterprises, which would already be using full IFRSs) may operate assets with the main purpose of generating a commercial return (rather than providing a public service). IPSAS 26, which is based on IAS 36 Impairment of Assets, applies to such assets. It sets out the procedures for a public sector entity to determine whether a cash-generating asset has lost future economic benefit or service potential and to ensure that impairment losses are recognised in its financial reports. Non cash-generating assets, those used primarily for service delivery, are addressed separately in IPSAS 21 Impairment of Non-Cash-Generating Assets. IPSAS 26 is effective for reporting periods beginning on or after 1 April 2009.
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Click for Press Release (PDF 99k).
11 February 2008: IASCF proposals for a monitoring group, enlarged IASB
In November 2007, the Trustees of the IASC Foundation (IASCF), under which the IASB operates, announced proposals to enhance the organisation's governance arrangements and reinforce the organisation's public accountability (see our News Story of 7 Nov 2007). Those proposals included creation of a 'monitoring group' of representatives of official organisations, including securities regulators, that would approve Trustee appointments and review Trustee oversight activities, including the adequacy of the annual funding arrangements as well as the overall budget. The monitoring group proposal was jointly Endorsed by IOSCO, SEC, EC, and FSAJ. Subsequently, the trustees began a series of consultations with key stakeholders on those proposals in the build up to the Constitution Review, which is scheduled to start later this year. At their meeting on 29-30 January 2008, the Trustees reached the following further conclusions regarding the Constitution Review (click for Press Release (PDF 67k):
- An accelerated consideration of a monitoring group: The Trustees will accelerate consideration of their proposals on the size, composition, and mandate of a monitoring group with the goal of reaching conclusions in the second half of 2008. Initial proposals will be published for comment in the second quarter of 2008.
- A proposal to expand the IASB to 16 members: At the same time, the Trustees will propose a gradual expansion of the IASB to 16 members. While maintaining the existing Constitutional criteria for selecting members of the IASB, the Trustees will consider whether the Constitution should also explicitly ensure a minimum geographical balance.
- An extended consultation process on other Constitutional matters: The Trustees intend to publish in the first half of 2008 a discussion document inviting comments and suggestions on other elements of the Constitution. The Trustees will attempt to conclude the broader review of the Constitution by the end of 2009.
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We have created a New Page for the 2008 Constitution Review. Until completion of the review we will have a link to this page under 'IASB Structure' in the right column of this home page.
11 February 2008: FSF interim report on stability of the global financial system
The Financial Stability Forum's (FSF) Working Group on Market and Institutional Resilience has presented an Interim Report (PDF 49k) to G7 Finance Ministers and Central Bank Governors at their meeting this past weekend in Tokyo. The IASB is a member of the Working Group. The report discusses the Working Group's views to date on current conditions in the global financial system and the causes of and weaknesses revealed by recent market turbulence. The report proposes broad policy directions for strengthening the resilience of key elements of the financial system in six areas:
- supervisory framework and oversight;
- underpinnings of the originate-to-distribute model;
- the uses and role of credit ratings;
- market transparency;
- supervisory and regulatory responsiveness to risks; and
- authorities' ability to respond to crises.
The policy proposals address a number of accounting and auditing issues. Here are two examples:
- Financial institutions need to improve the usability of disclosed information about risk exposures and valuations, including those related to structured products and off-balance sheet vehicles. Investors, industry representatives, and auditors should work together to identify the types of relevant and useful disclosures, including those about valuation methodologies and the key valuation assumptions and drivers of changes in value.
- Authorities should encourage market-led improvements in market transparency and disclosure standards. But a more prescriptive approach by securities market regulators, bank supervisors, and accounting standard setters may prove necessary if these are inadequate.
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10 February 2008: Where do IAS Plus visitors come from?
We had our six millionth visitor last night. Cumulatively, since we started tracking in May 2003, the top 10 jurisdictions from which visitors to IAS Plus come are United Kingdom, United States, Germany, Hong Kong, China, Australia, France, Malaysia, India, and Canada. Lately, however, there is a marked shift of visitors toward the countries where IFRSs are beginning to be used. Not only is the United States now #1, but also Canada, Pakistan, India, Japan, and South Africa have moved higher in the top 10.
10 February 2008: SEC continues planning for IFRSs for US companies
In a speech titled The SEC Agenda for 2008, US Securities and Exchange Commission Chairman Christopher Cox discussed a broad range of issues currently facing the Commission. One issue is planning an approach for making IFRSs available to US domestic registrants. Click to Download Chairman Cox's Remarks (PDF 77k). Here is an excerpt relating to IFRSs:
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Because of the significant progress that has been made in developing IFRS as a high-quality accounting standard – and in light of its rapid and growing acceptance around the world – the Commission last year voted unanimously to take the next step on the SEC's 'roadmap' announced three years ago. As a result, foreign issuers can now file their financial statements with the SEC using IFRS, without need of keeping a second set of books under US GAAP.
Then, last August, the Commission issued a Concept Release seeking advice on whether US issuers should be allowed to choose to prepare financial statements using IFRS. And in December 2007 we held roundtables on this subject and heard from more than two dozen experts. The many comments the Commission has received make one thing exceptionally clear: the rapidly growing acceptance in the rest of the world of IFRS as a high-quality accounting standard will make the US GAAP-IFRS convergence project increasingly important for US investors and issuers. In 2008, the Division of Corporation Finance and the Office of the Chief Accountant, led by Wayne Carnall and Julie Erhardt, will formally propose to the Commission an updated 'roadmap' that lays out a schedule, and appropriate milestones on which the schedule will be conditioned, for continuing the progress that the United States is making in moving to accept IFRS in this country.
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9 February 2008: IOSCO urges subprime lending disclosures
The Technical Committee of the International Organization of Securities Commissions (IOSCO) has identified four key steps that can be taken by market participants to help restore confidence in the operation of the market that has been shaken by the subprime lending crisis. Three of the four steps involve enhanced disclosures. Click to Download the IOSCO Technical Committee Statement (PDF 29k). Here are the four key steps in the IOSCO Statement:
Key steps that can be taken by market participants to help restore confidence in the operation of the market:
- Financial institutions are encouraged to enhance the information available to the primary market for structured finance instruments.
- Market participants should cooperate to identify information that would be relevant and useful in achieving an appropriate level of transparency in the secondary market.
- Financial institutions should make accurate and complete disclosure of the size and the level of their exposures related to structured finance to the market.
- Institutional investors and asset managers are encouraged to develop and undertake strict due diligence processes in their assessment prior to any investment into complex structured products.
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8 February 2008: Agenda for February 2008 IASB meeting
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The International Accounting Standards Board will hold its February 2008 meeting at the IASB's offices, 30 Cannon Street, London on Tuesday to Thursday 19-21 February 2008. The meeting is open to public observation and will be webcast. The tentative agenda is shown below. The Board will also meet with the Standards Advisory Council on Thursday and Friday 14 and 15 February 2008. Click here for Details of the SAC Meeting. |
19-21 February 2008, London
Tuesday 19 February 2008 (afternoon only)
Wednesday 20 February 2008 (morning only)
Thursday 21 February 2008 (afternoon only)
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8 February 2008: Noticias sobre información financiera internacional
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Deloitte & Touche Ltda (Colombia) has translated into Spanish the January 2008 IAS Plus Quarterly Newsletter. This 38-page newsletter reports on the 4th quarter 2007 activities of the IASB, the IFRIC, and the IASC Foundation, and also on worldwide issues and events relating to international financial reporting:
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7 February 2008: IOSCO urges clear disclosure of accounting framework
The International Organization of Securities Commissions (IOSCO) – the consortium of the world's securities regulators – has published a statement urging publicly traded companies to provide investors with clear and accurate information on the accounting standards used to prepare their accounts. In particular, IOSCO is concerned that, with the convergence of global accounting standards, investors may assume that all company accounts are generally comparable, even when they are prepared in accordance with quite different GAAPs. This commonly occurs where national standards assert that they are based on but do not fully implement International Financial Reporting Standards (IFRS). This could occur, for instance, if a jurisdiction:
- adopts some but not all IFRSs as its national GAAP,
- modifies an IFRS when adopting it,
- delays adoption of a new or amended IFRS including Interpretations, or
- changes the effective date or method of transition.
Click to Download the IOSCO Press Release, which includes the full text of the IOSCO Statement (PDF 32k). Here are the principles in the IOSCO Statement:
Companies preparing annual and interim financial statements on the basis of national standards that are modified or adapted from IFRS should include at least the following statements:
- A clear and unambiguous statement of the reporting framework on which the accounting policies are based;
- A clear statement of the company's accounting policies on all material accounting areas;
- An explanation of where the accounting standards that underpin the policies can be found;
- A statement that explains that the financial statements are in compliance with IFRS as issued by the IASB, if this is the case; and
- A statement that explains in what regard the standards and the reporting framework used differs from IFRS as issued by the IASB, if this is the case.
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7 February 2008: EU Parliament committee report on the IASB
EU involvement in standard setting
- The tools the EU has for making its views known to the IASB (ARC and EFRAG) "do not allow it to deal on an equal footing" with countries with more centralised structures (FASB and the SEC in the United States and the ASBJ and FSA in Japan). Accordingly the report calls on the Commission to put forward a proposal for creating a more streamlined EU structure, including possibly abolishing some existing bodies.
- The European Parliament should be involved earlier in the process for endorsing IFRSs for use in Europe.
- Carve-outs should be a 'last resort'.
IASB structure and due process
- 'The IASCF/IASB lack transparency, legitimacy, accountability and are not under the control of any democratically elected parliament or government'. The report recommends that 'a debate should be launched on the conditions for integrating the IASCF/IASB into the system of international governance' such as the IMF, World Bank, or OECD.
- A public oversight body should be established to oversee the IASCF and the IASB. It should involve 'all IASCF/IASB public stakeholders including in particular legislators and supervisors'. That group would report annually 'on the functioning of international accounting standard setting' and would appoint IASCF trustees.
- The IASB should strengthen its due process 'so that the views of all IFRS users and investors are taken into account'.
- The process for appointing members of the IASB, SAC, and IFRIC must be improved.
IASB standard setting
- IASCF trustees should be more involved in supervising the IASB and its work plan.
- The European Parliament should be involved 'in drafting the work plan and in setting the priorities and direction of new standard setting projects'.
- The IASCF constitution should 'ensure that the IASB develops accounting solutions that are not only technically correct but also reflect what is necessary and possible from the point of view of all users (investors and supervisors) and preparers'.
- IASB should carry out impact assessments for all projects.
- An accounting standard 'should be drawn up or modified only when 'it has been ensured that there is a clear and beneficial need for it.
- There are a number of technical issues on IASB's agenda that are of particular concern to the Committee (the report comments on these individually).
- The IASB should limit the scope of fair-value principle.
- The proposed IFRS for SMEs 'is far to complicated for SMEs'. The Commission should undertake a comprehensive consultation process to assess the appropriateness of applying the IFRS for SMEs in Europe.
- The chairpersons of the IASCF and the IASB should report to the European Parliament at least once a year on such matters as work programme, staff decisions, funding, and controversial standards.
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6 February 2008: МСФО в кармане.
2007 год – IFRSs in your Pocket in Russian
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Deloitte & Touche CIS (Russia) has published МСФО в кармане. 2007 год (PDF 1,427k, 72 pages) – a Russian translation of IFRSs in your Pocket 2007. This pocket guide includes summaries of all IFRSs issued through 30 June 2007. Therefore, the summaries cover IASs through IAS 41 and IFRSs through IFRS 8, as well as Interpretations through IFRIC 12. Please click here for Information about Deloitte Russia. |
6 February 2008: Accounting Roundup – January 2008
FASB Developments
- FASB Issues FSP on Deferral of Interpretation 48 for Nonpublic Enterprises
- FASB Approves Two Clarifications on Applying the Shortcut Method
- FASB Launches Accounting Standards Codification for Verification
- FASB Proposes Guidance on Measuring the Fair Value of Liabilities
SEC Developments
- SEC Amends Proxy Rules to Facilitate Electronic Shareholder Forum
- SEC Issues Clarification on Accounting Associated With the Streamlined Foreclosure and Loss Avoidance Framework
PCAOB Development
- PCAOB Adopts Auditing Standard 6 on Evaluating Consistency of Financial Statements
GASB Development
- FAF Requests Comments on Proposed Changes to the Oversight, Structure, and Operations of the FAF, FASB, and GASB
International Developments
- IASB Revises Accounting for Business Combinations and Noncontrolling Ownership Interests
- IASB Amends IFRS 2 on Share-Based Payments
- IFRIC Proposes Guidance on Distributions of Noncash Assets to Owners
- IFRIC Proposes Guidance on Accounting for Customer Contributions
Other Developments
- GAO Issues Auditing Implementation Tool
- Audit Firm CEOs Propose Framework for Principles-Based Accounting Standards
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You will find past issues of Accounting Roundup Here.
6 February 2008: Survey of IFRS presentation and disclosure practices in UK
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Deloitte & Touche (United Kingdom) has surveyed the presentation and disclosure practices under IFRSs of 100 UK listed companies, based on annual reports published between August 2006 and July 2007. The objectives of the survey were to determine: |
- How the disclosure requirements of IFRSs are interpreted in practice
- The underlying trends in presentation of IFRS financial statements
- The extent to which the format is still influenced by UK GAAP reporting requirements
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Among the issues illustrated in the report are: |
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- What is included in operating profit
- Non-GAAP performance measures
- Choice of SORIE or SOCIE in reporting changes in equity
- Classifications in the cash flow statement
- Accounting policy disclosures
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- Disclosures of critical judgements and key sources of estimation uncertainty
- Segment reporting
- Defined pension pension plans
- Impairments
- Associates and joint ventures
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Click to download a Summary of Survey Findings (PDF 747k).
5 February 2008: IFRS Taskuopas 2007 – IFRSs in your Pocket in Finnish
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Deloitte & Touche (Finland) has published IFRS Taskuopas 2007 (PDF 354k, 101 pages) – a Finnish translation of IFRSs in your Pocket 2007. This pocket guide includes summaries of all IFRSs including Interpretations issued through 30 June 2007. Because no major changes to IFRSs are expected to be applicable until 2009, this guide is an excellent summary of the current standards required for 2007 and 2008 reporting. However, there is also a summary of recent changes that will be effective in 2009. |
5 February 2008: SEC and EC leaders meet
At a meeting on 1 February 2008, US SEC Chairman Christopher Cox and the European Commissioner for the Internal Market and Services Charlie McCreevy held a wide-ranging discussion on topics of mutual interest, including the current market volatility, accounting standards, sovereign wealth funds, credit rating agencies, XBRL developments, and mutual recognition of securities regulation. Click for Announcement (PDF 34k).
5 February 2008: SEC begins a small business cost-benefit study of SOX 404
The US Securities and Exchange Commission has launched a cost-benefit study of an upcoming auditor attestation requirement for smaller companies under Section 404(b) of the Sarbanes-Oxley Act of 2002. The study will collect and analyse 'real world' cost and benefit data from a broad array of companies currently complying with Section 404 under newly-issued guidance for companies and auditors. In addition, the SEC proposed a further one-year extension of the Section 404(b) auditor attestation requirement for smaller companies – to financial years ending on or after 15 December 2009. The postponement would allow time for completion of the study. Click for SEC Announcement (PDF 38k).
5 February 2008: IAS Plus Newsletter on 'distributions' and 'contributions'
4 February 2008: Model financial statements using Hong Kong standards
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Deloitte (China) has published Financial Reporting in Hong Kong – Illustrative Financial Statements and Disclosure Checklist 2007. Click to Download the Book (PDF 2,589k, 336 pages). This book contains:
- Model 2007 annual report for a listed company that complies with Hong Kong Financial Reporting Standards (virtually identkical to IFRSs) and the Hong Kong Companies Ordinance and Listing Rules
- Comprehensive presentation and disclosure checklist
- Overview on HKFRSs
- Special guidance and examples for applying HKFRS 7 (identical to IFRS 7)
This book complements Financial Reporting in Hong Kong, which Deloitte (China) published in January 2008. You can find more Information about Both Books Here, including details for ordering printed copies. |
4 February 2008: IAASB amends standards on review engagements
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The International Auditing and Assurance Standards Board (IAASB) has amended the following International Standards on Review Engagements (ISREs) to clarify to which engagements each respectively is to be applied: |
- ISRE 2400 Engagements to Review Financial Statements; and
- ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity.
ISRE 2410 is amended to apply not only to reviews by the entity's auditor of interim financial information but also to the auditor's reviews of historical financial information. ISRE 2400 is amended to restrict its scope to a review of any historical financial information performed by a practitioner who is not the entity's auditor. Click for Press Release (PDF 30k).
3 February 2008: A 'roadmap' toward IFRSs for US companies
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In a speech on 1 February 2008 to the European-American Business Council, US Securities and Exchange Commission Chairman Christopher Cox said that during 2008 the SEC will "map the future for US firms and International Financial Reporting Standards". Click to Download the Speech (PDF 54k). Here is an excerpt: |
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Last year, the Commission voted unanimously to permit European and other non-US issuers to prepare their SEC financial statements using International Financial Reporting Standards, without the need to keep a second set of books under US Generally Accepted Accounting Principles. This was only possible because of the great progress that the International Accounting Standards Board has made in developing IFRS as a single, high-quality accounting standard that is implemented consistently in multiple jurisdictions around the world.
This year, the Commission will consider how we will map the future for US firms and International Financial Reporting Standards. But one thing is certain: the expanded use of a single, high-quality accounting standard will eventually empower investors to make better informed investment decisions by giving them information that is more easily comparable.
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2 February 2008: Analyst Representative Group will meet 13 February
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The IASB will meet with the Analyst Representative Group will meet on 13 February 2008 09:00-17:00h at the IASB Offices, 30 Cannon Street, London. The meeting is open to public observation. Topics on the agenda are: |
- Market issues
- Update – IASB work plan
- Current Interpretation matters
- Consolidation
- Reporting entity
- Measurement
- Financial instruments
- Earnings per share
1 February 2008: Further guidance on new Chinese Accounting Standards
In February 2006, the China Accounting Standards Committee (CASC) adopted a comprehensive set of New Chinese Accounting Standards (CASs) that took effect for the 2007 financial reports of listed companies in China. Unlisted companies are encouraged also to use the new CASs. The new CASs cover nearly all of the topics under the current IFRSs and, with a few exceptions, are substantially in line with IFRSs. Since then, the Ministry of Finance has been issuing both mandatory Interpretations and less formal guidance for applying the new standards. The guidance, which is being developed by an expert team formed by the CASC, includes two sets of Questions and Answers published in February and April 2007. On 21 January 2008, this team issued a Third Set of Q&A (PDF 96k, Chinese) addressing the following issues:
- Accounting for restricted shares by an investor who does not have control, joint control, or significant influence
- Accounting for warrant that are issued together with a bond
- How to apply the Interpretation to CASs No. 1 retrospectively to investments in subsidiaries that are obtained before the date of first-time adoption of new CASs
- Determining the value of the underlying assets and liabilities in the corporate reorganisation of state-owned enterprises
- Accounting by securities investment funds and similar entities
You'll find lots more information about accounting in China on our China Page.
1 February 2008: Korean translation of IFRSs is completed
The Korea Accounting Institute (KAI), which is responsible for setting accounting standards in Korea, has released the Korean translation of International Financial Reporting Standards. This translation is part of a plan, announced in March 2007 by the KAI and the Korean Financial Supervisory Commission, for adopting Korean equivalents of IFRSs (K-IFRSs). All listed companies will be required to prepare their annual financial statements under K-IFRSs beginning in 2011. Listed companies other than financial institutions will be permitted to do so beginning in 2009. Unlisted companies will be allowed to use K-IFRSs. The translation of IFRSs into Korean is a word-for-word translation of the IASB's standards, including all mandatory guidance, and interpretations. Translation of the non-mandatory guidance that accompanies several of the IFRSs is now under way and will be completed by the end of 2008. The translation can be downloaded from the KAI Website free of charge, for use within the Republic of Korea and by any foreign subsidiary, joint venture, associate, or branch of a Korean company. Click for:
1 February 2008: Israel – IFRSs are now required for listed companies, optional for others
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Starting 1 January 2008, Israel has required IFRSs for listed companies and has made IFRSs optional for others. Listed companies had been permitted to use IFRSs since July 2006. Here are some details of the new requirements:
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- Listed companies. All companies listed on the Tel Aviv Stock Exchange (approximately 820 companies) are required to follow IFRSs, with one mandatory exception and one optional exception:
- Banks. Banks must continue to follow an accounting framework that is close to US GAAP.
- Dual registrants. Companies that are dually listed in the United States as well as in Israel may choose to use US GAAP instead of IFRSs. There are approximately 50 such companies. Some of them may now consider switching to IFRSs, now that the SEC no longer requires a reconciliation for Foreign Private Issuers reporting under IFRSs.
- Subsidiaries and associates of listed companies. In practice, subsidiaries and associates of listed companies will also apply IFRSs in order to meet their shareholders' needs. Consequently, overall a few thousand Israeli companies are expected to use IFRSs as from 1 January 2008.
- Unlisted companies. All unlisted companies except banks are permitted to follow IFRSs as an alternative to Israeli GAAP.
- Interim reports. Companies using IFRSs will begin doing so in their interim reports for 2008. Listed companies are required by law to report on a quarterly basis.
- Auditor's report. The auditor's report will refer to conformity with IFRSs. The exact wording of the auditor's report has not yet been adopted by the Institute of Certified Public Accountants in Israel.
- Basis of presentation note. Will refer to conformity with IFRSs as required by paragraph 14 of IAS 1.
- Future changes to IFRSs. These will automatically become mandatory in Israel. An 'endorsement process' will not be followed.
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