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31 October 2008: IFRS in the oil and gas industry (English and Spanish)
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Deloitte LLP (United States) has published IFRS Considerations for the Oil and Gas Industry as part of their IFRS Industry Series. As acceptance of IFRS in the United States becomes imminent, more oil and gas companies are now asking questions about what IFRS mean for them. How do IFRS affect my company? What events would influence my company's pace of IFRS adoption? What obstacles might we need to consider?
This publication provides practical industry insights on IFRS and includes useful sections on:
- Understanding the implications of IFRS for the oil and gas industry for accounting and finance, systems and tax
- Key differences between IFRS and US Generally Accepted Accounting Principles (GAAP) for the oil and gas industry
- Evaluating approaches to IFRS conversion
- Developing an IFRS road map
- IFRS lessons from the European experience
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Deloitte (Colombia) has published a Spanish translation. Click to download:
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31 October 2008: Deloitte Canada Countdown IFRS transition newsletter
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Deloitte Canada has released the October 2008 issue of their Countdown IFRS transition newsletter, to provide a snapshot of where we are now as far as Canada's transition to IFRSs is concerned – both in Canada and in Deloitte. This edition of Countdown focuses on:
- Credit crunch – economic slowdown driving IFRS accelerated changes
- Acquisition accounting under IFRS – merger and acquisition strategy considerations
- Release of iGAAP 2008 – IFRS for Canada
- An update on current IFRS events
Click below for:
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30 October 2008: IAS 39 reclassifications newsletter in Chinese
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Deloitte China has translated into Chinese the October 2008 IAS Plus Special Edition Newsletter explaining the IASB's recent amendments to IAS 39 that permit an entity to reclassify non-derivative financial assets out of the 'fair value through profit or loss' and 'available-for-sale' categories in limited circumstances. You can download this newsletter from the Deloitte China CAS Plus Website.
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30 October 2008: Study finds 'net benefits' for IFRS adoption in Europe
A paper titled Market Reaction to the Adoption of IFRS in Europe examines the European stock market reaction to sixteen events associated with the adoption of IFRS in Europe. The researchers – Chris Armstrong, Mary E. Barth, Alan D. Jagolinzer, and Edward J. Riedl – found that 'investors in European firms perceived net benefits associated with IFRS adoption'. The abstract states:
| European IFRS adoption represented a major milestone towards financial reporting convergence yet spurred controversy reaching the highest levels of government. We find a more positive reaction for firms with lower quality pre-adoption information, which is more pronounced in banks, and with higher pre-adoption information asymmetry, consistent with investors expecting net information quality benefits from IFRS adoption. We also find that the reaction is less positive for firms domiciled in code law countries, consistent with investors' concerns over enforcement of IFRS in those countries. Finally, we find a positive reaction to IFRS adoption events for firms with high quality pre-adoption information, consistent with investors expecting net convergence benefits from IFRS adoption. Overall, the findings suggest that investors in European firms perceived net benefits associated with IFRS adoption.
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You can Download the Working Paper Here.
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30 October 2008: Fair value measurement needs 'further work'
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In his opening remarks at the US Securities and Exchange Commission's roundtable on mark-to-market accounting yesterday, SEC Chairman Christopher Cox said that the SEC will be considering, among other things, the impact fair value accounting standards have on the quality of financial information provided to investors, the FASB's process for developing accounting standards, and whether existing fair value measurement guidance should be modified or be replaced by an alternative approach. The roundtable is part of the Commission's Congressionally-mandated study on the use of mark-to-market accounting by financial institutions. Click to download Chairman Cox's Opening Remarks (PDF 32k). Chairman Cox also announced that a follow-up roundtable will be held on 21 November 2008. An excerpt:
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As we have learned, illiquid markets bring new challenges to the measurement of fair value that may not have been fully appreciated in past years. These challenges have brought into focus the need for further work on improving the tools that companies have at their disposal to achieve transparent, decision-useful financial reporting.
Transparency is the cornerstone of world class financial reporting. Transparent and unbiased financial reporting allows investors to make informed decisions based upon a company's financial performance and disclosures. A clear, concise, and balanced view into the companies that participate in our capital markets is fundamentally important to those who choose to invest in our markets. Informed decision making results in efficient capital allocation.
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30 October 2008: Where do IAS Plus visitors come from?
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For 2008 to date, the top 10 jurisdictions from which visitors to IAS Plus come are:
- United States 13.9%
- United Kingdom 11.4%
- Hong Kong 3.7%
- Germany 3.5%
- Canada 3.4%
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- Australia 3.3%
- India 3.3%
- China 3.0%
- Pakistan 2.6%
- Japan 2.4%
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plus 215 other jurisdictions not shown, each with less than 2.4%. There has been a shift in visitors away from Europe and more toward Asia-Pacific, where IFRSs are gradually being adopted. For example:
- In October 2004 the top 10 visitor jurisdictions included Netherlands, France, Belgium, and Italy. None of those was in the top 10 in 2008. Instead, the list now includes Hong Kong, India, China, and Pakistan.
- In October 2004, Canada wasn't even in the top 20. Now, with Canada moving to adopt IFRSs in 2011, they are #5.
Click here to view a Map of Where our 2008 Visitors Have Come From.
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30 October 2008: Updated newsletter on IAS 39 reclassifications
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On 22 October 2008, we posted an IAS Plus Newsletter explaining the IASB's amendments to IAS 39 that permit an entity to reclassify non-derivative financial assets out of the 'fair value through profit or loss' (FVTPL) and 'available-for-sale' (AFS) categories in limited circumstances. As noted in our news story immediately below, the IASB used its October 2008 Update newsletter to provide clarifying guidance on the effective date of the reclassifications. We have updated the Deloitte IAS Plus Newsletter Amendments to IAS 39 & IFRS 7 – Reclassification of Financial Assets (PDF 193k) to reflect the new IASB clarifying guidance. You will find all Past IAS Plus Newsletters Here. You can sign up for Free Subscription by Email. |
29 October 2008: IAS 39 reclassifications – 3 days to go!
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The IASB has issued guidance clarifying the effective date of the fast-tracked IAS 39 amendments permitting Reclassifications of certain financial assets in certain circumstances. The guidance is set out on page 1 of the IASB Update newsletter for October 2008, which may be Downloaded from the IASB's Website without charge.
The key dates are as follows:
- Reclassifications cannot be applied retrospectively before 1 July 2008
- The decision to reclassify a financial asset to a date between 1 July 2008,and 31 October 2008, must be made before 1 November 2008
- All reclassification made on or after 1 November 2008 shall be effective from the date of reclassification, irrespective of when the accounting period starts.
Therefore, those entities wishing to take advantage of the amendment to reclassify financial assets retrospectively must do so before 1 November 2008 as any reclassifications made on or after this date can only take effect from the date of the reclassification.
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29 October 2008: Six US groups urge the SEC to provide more fair value guidance
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The leaders of six US business organisations have written a joint letter to the Securities and Exchange Commission asking that "the SEC issue elaboration on the use of judgment in fair value accounting". The letter states that the lack of guidance in this area "has the potential to cloud transparency". The letter was written by leaders of the US Chamber of Commerce Center for Capital Markets Competitiveness, Financial Services Roundtable, Property Casual Insurers Association of America, American Council of Life Insurers, Mortgage Bankers Association, and American Insurance Association.
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We would respectfully request that the SEC formally elaborate on the use of judgment in the application of FAS 157. This elaboration, by the SEC should include principles-based guidance for the transparent disclosures needed by investors when judgment is exercised. The elaboration will provide the clarity needed by management to appropriately value assets in inactive markets, and give investors the transparent information needed to make informed decisions.
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Click to Download the Letter (PDF 93k).
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29 October 2008: New Global IFRS and Offerings Services newsletter
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We have posted Deloitte's US Reporting Newsletter for Non-US Based Companies – includes news through 10 October 2008 (PDF 169k). The newsletter is developed by Deloitte's Global IFRS and Offerings Services (GIOS) team – Deloitte practitioners assisting non-US companies and non-US practice office engagement teams in applying US GAAP and IFRSs and in complying with the SEC's financial reporting rules. The GIOS Newsletter is an update on relevant GAAP, regulatory, and other matters, webcasts, and publications, with hyperlinks to source material. Past GIOS Newsletters are Here.
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In the October 2008 issue of the GIOS newsletter
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IFRS Matters
- FASB and IASB Update The MOU
- IASB Proposes Amendments to IFRS 1
- IASB Issues Draft Document on Fair Valuation of Financial Instruments in Inactive Markets
- IASB Proposes Amendments to Discontinued Operations Standard
- IFAC Issues Exposure Draft of IPSAS 5 on Borrowing Costs
- Tips on Applying IFRS Share Based Payments
Regulatory Matters
- SEC Approves PCAOB's New Rules on Evaluating Financial Statement Consistency
- SEC Advises Registrants to Further Explain Fair Value in MD&A
- SEC Updates EDGAR
US GAAP Matters
- FASB Issues Exposure Documents on Amendments to Statement 140 and Interpretation No. 46(R)
- FASB Issues Final FSP on Disclosures About Credit Derivatives and Certain Guarantees
- Clarification on Fair Value Accounting
- FASB Issues Proposed FSP on Discontinued Operations
- FASB Delays Contingencies Project
- FASB Issues Exposure Drafts on Going Concern and Subsequent Events
- FASB Updates Codification for Insurance Industry
- EITF Meeting Highlights
- The Impact of the New Economic Stabilization Act on Investments' Impairment
- SEC Clarifies Accounting for Bank Support of Money Market Funds
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29 October 2008: Taiwan begins study of adopting IFRS
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On 28 October 2008, the Taiwan Financial Supervisory Commission announced that it will form a task force to study the adoption of IFRSs in Taiwan. The task force will consist of government officials and representatives of the Taiwan Stock Exchange, OTC, Big 4 accounting firms, CPA associations, and the Accounting Research and Development Foundation. Adoption details such as the time table and the extent (public company or private company, consolidated or separate financial statements, etc) will be discussed and determined by the task force. |
29 October 2008: EC asks IASB to amend IAS 39
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The European Commission has written to the IASB asking the IASB to amend or interpret IAS 39 to ensure that the following three specific matters are addressed in time for year-end 2008 financial reports:
- Financial assets presently classified as fair-value-through-profit-or-loss using the Fair Value Option can be classified into other categories and not measured at fair value, for the same reasons, and under the same conditions as the assets reclassified out of the held-for-trading category.
- Clarification on whether synthetic collateralised debt obligations (CDOs) include embedded credit derivatives. Currently, IAS 39 is interpreted as requiring separation and fair value measurement for such embedded credit derivatives, whereas US GAAP does not require an embedded derivative to be recognised separately.
- Adjustments to impairment rules applicable to available-for-sale (AFS) interest-bearing financial assets, so that AFS would be treated the same way as loans and receivables and held-to-maturity debt instruments, The effect of such a change would be to keep a portion of the fair value decline on AFS in equity rather than recognising it in profit or loss as IAS 39 currently requires.
An annex to the letter also asks for a fourth change – allowing reversal of impairment losses not only for debt securities but also for equity instruments. The Commission's Letter (PDF 249k) also states that:
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Recent developments raise broader issues related to the role of fair value accounting for financial instruments which we intend to explore further with all stakeholders as a matter of urgency. This issue should also be comprehensively addressed in the context of ongoing IASB projects. There may be a need to adjust the timetable of ongoing projects to reflect the immediate needs of the current crisis.
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29 October 2008: FAF urges SEC not to overturn FAS 157
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Robert E Denham, Chairman of the US Financial Accounting Foundation, under which the FASB operates, has written to US SEC Chairman Christopher Cox urging the SEC to reject appeals it has received to overturn or suspend the FASB Statement 157 on fair value measurements and related FASB fair value guidance. Mr Denham notes that the US Congress considered but rejected a similar call for suspension of FAS 157 when it adopted the Emergency Economic Stabilization Act. Here is Mr Denham's Letter to Chairman Cox (PDF 504k). An excerpt:
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We acknowledge that the current financial crisis is testing the limits of investor confidence. We also acknowledge that extreme measures are being taken on many fronts to restore and stabilize investor confidence. However, we believe that action by the SEC to overturn a FASB standard, in the present context of enhanced investor concern about transparency of financial information relating to financial institutions and political pressure from some industry interest groups seeking to reduce transparency, will exacerbate investors' concerns about the reliability of financial information and further erode market conditions.
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28 October 2008: Statement on fair value from French regulators
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Four French accounting and regulatory authorities have issued a joint recommendation to address the accounting treatment of certain financial instruments that can 'no longer be reliably priced on the market because of the ongoing turmoil'. Essentially, the group supports the guidance recently provided by the IASB and FASB in this regard. The four French authorities are the national accounting board (Conseil national de la comptabilité), securities regulator (Autorité des marchés financiers), banking supervisor (Commission bancaire) and insurance oversight authority (Autorité de contrôle des assurances et des mutuelles). Click to download the Statement of French Authorities (English) (PDF 44k) and French Language Version (PDF 51k).
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28 October 2008: Details of US SEC mark-to-market roundtable
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The US Securities and Exchange Commission has announced the expected panelists for its 29 October 2008 roundtable on mark-to-market accounting. The roundtable will take place at the SEC's headquarters in Washington D.C. from 9:00am to 1:00pm, and will be webcast. It will begin with opening remarks from SEC Chairman Christopher Cox followed by two roundtable panels. The panel discussions will focus on:
- Usefulness of mark-to-market accounting to investors and regulators.
- Potential market behavior effects from mark-to-market accounting.
- Whether aspects of current accounting standards can be improved, and how?
IASB Vice Chairman Thomas Jones will participate in both panel discussions as an observer, as will representatives of the FASB and several other organisations. The roundtables will provide input to the SEC as part of a Congressionally mandated study pursuant to the Emergency Economic Stabilization Act of 2008. Click for:
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28 October 2008: Preparers will meet with IASB
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A group of financial statement preparers will meet with representatives of the IASB on 11 November 2008 at the IASB's offices in London, 10:00am to 16:30pm. The purpose of this Global Preparers Forum is to provide input into concepts and proposals that the IASB is developing and offer advice to the IASB on the practical implications of its intended proposals for preparers of financial statements. The meeting is open to public observation. Agenda topics are:
- IASB work plan and activities
- Financial statement presentation
- Revenue recognition
- Impact of the credit crunch on IFRS
- Consolidation
- ED on IFRS 7 – disclosures re liquidity risk and fair value measurement guidance hierarchy
- Impairment of available-for-sale financial instruments
- Future IASB activity
- Derecognition
- Post retirement benefits – initial constituency views and IASB thinking
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27 October 2008: IFRS compliance and disclosure checklists in Korean
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Deloitte (Korea) has translated into Korean the Deloitte 2007 IFRS Compliance Questionnaire and 2007 IFRS Presentation and Disclosure Checklist. 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. Click for:
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27 October 2008: Newsletter on IAS 39 reclassifications in French
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On 13 October 2008, the IASB published Amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures. The changes to IAS 39 permit an entity to reclassify non-derivative financial assets out of the 'fair value through profit or loss' (FVTPL) and 'available-for-sale' (AFS) categories in limited circumstances. Such reclassifications will trigger additional disclosure requirements. Deloitte (Canada) has published the French translation of our IAS Plus Newsletter explaining the changes. Click to download:
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27 October 2008: UK FRC statement on development of standards
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The United Kingdom Financial Reporting Council (FRC) has issued a Statement on Development of Accounting Standards (PDF 15k) expressing support for the independence of the IASB. The statement was prompted by views expressed recently about the IASB's standards requiring fair value measurements of certain debt securities and loans. An excerpt:
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The FRC believes that the most appropriate standards are developed when standard setters are able to exercise independent judgment, relying on their skills and experience and supported by effective consultation with market participants and other stakeholders. That has been the position in the UK since 1990, with the establishment of the Accounting Standards Board (ASB), and the FRC believes it is equally appropriate for the development of standards for use globally.
The FRC therefore believes that it is important that the responsibility for the setting of accounting standards remains with the relevant standard-setters. We support the IASB in its role as the standard setter for listed companies in the EU and elsewhere, including financial institutions, many of which raise capital from international investors.
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26 October 2008: Deloitte Alert on money market funds
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As a result of recent market events, a number of 'money market funds' (mutual funds that invest primarily or exclusively in short-term debt securities designed to maintain a constant monetary value) have incurred losses on their investments. Some of these funds have experienced declines in fair value as a result of deterioration in the creditworthiness of their assets, general illiquidity conditions, or both, and redemptions by investors have increased. Accordingly, some funds have been forced to liquidate their assets, impose limits on redemptions, or obtain support from related entities. This Financial Reporting Alert 08-17 (PDF 47k) from Deloitte (United States) addresses the investor's accounting for money market funds that were appropriately classified as cash equivalents and that have subsequently imposed restrictions on redemptions or have been frozen. Accounting considerations discussed include balance sheet classification, measurement, and classification in the statement of cash flows. |
26 October 2008: FSF follow-up on recommendations
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The Financial Stability Forum (FSF) has published a report assessing the implementation, to date, of the recommendations in their 7 April 2008 Report on Enhancing Market and Institutional Resilience. The FSF is a global organisation of regulators and central bankers. That report analysed the causes and weaknesses that have produced the recent turmoil in financial markets worldwide and made recommendations for correcting those weaknesses, including several for the IASB. Those recommendations addressed, among other things, accounting and disclosure standards and guidance for off-balance sheet vehicles and for valuations. The new implementation report, titled
Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience: Follow-up on Implementation (PDF 161k) reviews the progress of the IASB and the FASB on off-balance sheet vehicles on pages 16-17 and on valuations on pages 17-19. |
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Regarding valuations, the FSF implementation report states:
The FSF acknowledges the significant efforts of accounting standards setters, and urges them to accelerate their work to enhance and converge their guidance on the valuation of instruments in inactive markets.
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26 October 2008: Agenda for 6 November 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 November 2008 (one day only) 10:00am to 17:30pm. The meeting is open to the public and will be webcast. The tentative agenda is shown below.
Thursday 6 November 2008, London
- Introduction, including minutes of previous meeting
- D24 Customer Contributions – Redeliberations
- Compliance Costs for REACH (European Commission Regulation Concerning the
Registration, Evaluation, Authorisation and Restriction of Chemicals)
- Customer-related Intangible Assets
- Review of Tentative Agenda Decisions published in September 2008 IFRIC Update
- IAS 39: – Restricted securities
- IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction
– Application to prepaid employer's contribution reserve
- Staff Recommendations for Tentative Agenda Decision
- Regulatory assets and liabilities
- IAS 32 – Classification of puttable and perpetual instruments
- IAS 28 Associates – Potential effect of IFRS 3 and IAS 27 (as revised in 2008) on equity method accounting
- IAS 39 – Derecognition
- Fair Value Measurement of Financial Instruments in Inactive Markets – Determining the Discount Rate
- Administrative Session
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25 October 2008: Canadian Alert – impact of the credit crisis
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Deloitte (Canada) has published Understanding Recent Issues under Canadian GAAP, US GAAP, and IFRS Relating to the Credit Crisis and the Potential Impact on Canadian Companies in both English and French. The objective of these Financial Reporting Alerts is to summarise the most significant developments in Canada, the US, and at the IASB and to provide an overview of the major considerations for Canadian Corporations and the implications for senior management, audit committees, and boards.
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Comprendre les faits récents dans le cadre des PCGR du Canada, des PCGR des États-Unis, et des IFRS dans le contexte de la crise du crédit et de ses retombées éventuelles sur les sociétés canadiennes.
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Click to download:
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25 October 2008: Deloitte research – Global economic outlook 4Q08
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This latest Deloitte Research global economic outlook report highlights the three waves of events and the subsequent policy responses that have produced the financial crisis of the past year. The study also provides our historical perspective on what has transpired when, as with the US housing market, asset price bubbles exploded in other countries. The successes and failures of different policy responses provide a useful comparison with which to judge current events. Aside from the financial crisis, the report also focuses on a critical issue that has been shadowed by the financial crisis: the price of oil. We offer some scenarios as to what might happen next and consider the economic and business consequences of persistently high petroleum prices. We also examine the outlook for inflation in both developed and emerging countries. In addition, we look at the impact of exchange rate policy in emerging markets. Finally, our global economists provide outlooks for the economies of the United States, United Kingdom, Eurozone, Russia, India, China, Japan, and Brazil. Click to Download the Report (PDF 2,765k). |
24 October 2008: US PCAOB priorities for 2009
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The US Public Company Accounting Oversight Board (PCAOB) held its annual meeting with its Standing Advisory Council on 22-23 October 2008. At the meeting, the PCAOB chairman presented the Board's plans and priorities for 2009. Click to download the PCAOB Report (PDF 31k).
PCAOB priorities for 2009 include:
- Completing proposed auditing standards:
- Risk Assessment (seven new standards, see our news story of 22 October 2008).
- Engagement Quality Review
- Projects on new or revised standards on:
- Fair value measurements and specialists (very high priority, concept release before the end of 2008)
- Confirmations
- Related parties
- Guidance for auditors of smaller companies relating to AS No. 5 (internal control audits)
- Action plan for review of interim standards (AICPA standards that PCAOB adopted when it was formed)
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24 October 2008: Study of goodwill impairment disclosures under IFRS
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The United Kingdom Financial Reporting Council (FRC), under which the Accounting Standards Board operates, has published a Review of Goodwill Impairment Disclosures made by a sample of 32 UK listed companies using IFRSs. The companies were chosen because they have large amounts of goodwill. IAS 36 requires an annual impairment assessment and disclosure of the key assumptions and the approach adopted to make those assumptions when using valuation models to check that goodwill does not need to be written down. You can Download the Report from the FRC Website (PDF 134k). Here are a few highlights:
All companies in the sample gave disclosures about their approach to impairment testing of goodwill. However, the level of supporting detail varied greatly:
- For many companies, the disclosures were more generic than specific in nature. Only a minority of companies provided information that was directly relevant to their business. The report describes over half of the company reports as 'boiler plate – rather uninformative'.
- Narrative information about the way in which key assumptions are identified and quantified tended to be vague. In many cases there was a generalised statement to the effect that past experience was modified based on management's expectations for the future.
- Only a minority of the companies surveyed provided information by cash generating unit ('CGU'), even where significant amounts of goodwill were allocated to more than one CGU.
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24 October 2008: IOSCO statement on accounting standards
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The Technical Committee of the International Organization of Securities Commissions (IOSCO) has issued a statement reaffirming its commitment to the development and enforcement of high quality accounting standards and to the independence of accounting standard setters. Click to download the IOSCO Statement PDF 39k). Here is an excerpt:
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Accounting standards for public companies must provide clear, accurate and useful information to investors to allow them to make informed investment decisions. Furtherance of this goal promotes investor confidence in financial statements and capital markets. We strongly support accounting standards that afford investors transparency, maintain market integrity, facilitate capital formation and are consistent with financial stability.
The job of developing and maintaining high quality standards that provide transparency to investors relies to a critical extent on independent accounting standards setters. In this connection, we support the International Accounting Standards Board (IASB) and Financial Accounting Standards Board's (FASB) announced joint action to address issues related to the credit crisis pursuant to an accelerated due process. We welcome their willingness to seek input from all stakeholders and applaud their efforts to work together, with speed and rigor, in identifying high quality global solutions.
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24 October 2008: 14 IASB pronouncements await EU endorsement
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The European Financial Reporting Advisory Group (EFRAG) 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 23 October 2008 (PDF 89k). Currently, there are 14 IASB pronouncements are awaiting European Commission endorsement for use in Europe (including 5 awaiting EFRAG advice and 9 awaiting an ARC recommendation), as follows:
- IFRS 1 and IAS 27 Cost of an Investment in a Subsidiary, Jointly-Controlled Entity, or Associate
- IFRS 2 Share-based Payment: Vesting Conditions and Cancellations
- IFRS 3 Business Combinations (2008)
- IAS 1 Presentation of Financial Statements (revised September 2007)
- IAS 23 Borrowing Costs (revised March 2007)
- IAS 27 Consolidated and Separate Financial Statements (2008)
- IAS 32 and IAS 1 Amendments for Puttable Instruments and Obligations Arising on Liquidation
- IAS 39 Amendments for Eligible Hedged Items
- 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
- IFRIC 15 Agreements for the Construction of Real Estate
- IFRIC 16 Hedges of a Net Investment in a Foreign Operation
- Improvements to IFRSs – 2007 (affects various standards)
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23 October 2008: Notes from joint IASB-FASB meeting 20-21 October
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The International Accounting Standards Board and the US Financial Accounting Standards Board held a joint meeting at the FASB's offices in Norwalk, Connecticut USA, on Monday and Tuesday 20-21 October 2008. Click here to go to the Preliminary and Unofficial Notes taken by Deloitte observers at the meeting. |
22 October 2008: CEBS-CESR-CEIOPS joint statement on accounting
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The Committee of European Banking Supervisors (CEBS), the Committee of European Securities Regulators (CESR) and the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) have published a Joint Statement (PDF 24k) on recent developments in accounting. The statement emphasises that accounting standard-setting for European public entities is the responsibility of the IASB. The three committees praise the IASB's rapid responses to fair value measurements, financial instruments disclosures, and other credit crisis issues. Regarding fair value measurements, the joint statement notes:
EU preparers, auditors and other stakeholders should take note of the IASB staff position on this SEC-FASB clarification on fair value accounting issued on 2 October 2008 which was also confirmed by the IASB in its press release on 14 October 2008. It should be highlighted that the IASB staff has reviewed that clarification and considers it consistent with IAS 39. In particular, the three committees take note and support that the clarification addresses among other issues the following topics:
- Management's internal assumptions. The use of management estimates that incorporate current market participant expectations of future cash flows, and include appropriate risk premiums is acceptable, when an active market for a security does not exist.
- Use of market quotes (eg, broker quotes or information from a pricing service) when assessing the mix of information available to measure fair value. Broker quotes may be an input when measuring fair value, but are not necessarily determinative if an active market does not exist for the security.
- The results of disorderly transactions are not determinative when measuring fair value. Distressed or forced liquidation sales are not orderly transactions. Determining whether a particular transaction is forced or disorderly requires judgement.
- Transactions in an inactive market can affect fair value measurements, they may be inputs when measuring fair value, but would likely not be determinative. The determination of whether a market is active or not requires judgement.
The three committees encourage preparers and auditors to follow this IASB staff position immediately as requested by the ECOFIN at its meeting held on 7 October 2008.
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22 October 2008: Newsletter on reclassification of financial assets
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On 13 October 2008, the IASB published Amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures. The amendments are a response to calls from constituents, particularly within the European Union, to create a 'level playing field' with US GAAP regarding the ability to reclassify
financial assets. The changes to IAS 39 permit an entity to reclassify non-derivative financial assets out of the 'fair value through profit or loss' (FVTPL) and 'available-for-sale' (AFS) categories in limited circumstances. Such reclassifications will trigger additional disclosure requirements. The effective date of the amendments is 1 July 2008 (which is before the date of issue). The IFRS Global Office of Deloitte has published a special edition IAS Plus Newsletter:
Amendments to IAS 39 & IFRS 7 – Reclassification of Financial Assets (PDF 193k) explaining the changes. [This link is to an updated version of the IAS Plus Newsletter issued on 30 October 2008 following some clarifications of the effective date by the IASB. See our news story of 30 October 2008.] You will find all Past IAS Plus Newsletters Here. You can sign up for Free Subscription by Email. |
22 October 2008: IFRSs in the power and utilities industry
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Deloitte (United States) has organised an online Power & Utilities IFRS Webcast Series to help executives in those industries understand the implications of IFRS and how to address the associated changes. Deloitte's Power & Utilities IFRS Webcast series will provide an in-depth look at conversion issues that utility companies must consider. The topics and times/dates of scheduled webcasts are listed below. Click here for Full Information about the Webcasts including links for registration.
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Overview of the Impact of IFRS on Power & Utilities
Date: Friday, 7 November 2008
Time: 1 p.m. - 2:30 p.m. EST
International Accounting Standards (IAS) 32 and 39, and Energy Transacting
Date: Friday, 14 November 2008
Time: 1 p.m. - 2:30 p.m. EST
IAS 12 - Income Taxes
Date: Friday, 21 November 2008
Time: 1 p.m. - 2:30 p.m. EST
IAS 16 - Property, Plant and Equipment
Date: Friday, 12 December 2008
Time: 1 p.m. - 2:30 p.m. EST
Regulatory Assets and Regulatory Liabilities
Date: Friday, 19 December 2008
Time: 1 p.m. - 2:30 p.m. EST
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22 October 2008: Webcast – Benefits of IFRS for US companies
22 October 2008: PCAOB proposes standards for assessing audit risk
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The US Public Company Accounting Oversight Board, which sets the standards for audits of companies registered with the SEC, has proposed a suite of seven new auditing standards related to the auditor's assessment of and responses to risk. The proposed standards would supersede the Board's interim auditing standards related to audit risk and materiality, audit planning and supervision, consideration of internal control in an audit of financial statements, audit evidence, and performing tests of accounts and disclosures before year end. Click to download:
The proposed risk assessment standards are as follows:
- Audit Risk in an Audit of Financial Statements. This proposed standard describes the components of audit risk and the auditor's responsibilities for reducing audit risk to an appropriately low level in order to obtain reasonable assurance in an audit of financial statements.
- Audit Planning and Supervision. This proposed standard describes the auditor's responsibilities for planning the audit, including assessing matters that are important to the audit, and establishing an appropriate audit strategy and audit plan. The proposed standard also describes the responsibilities of the engagement partner and other engagement team members for supervising and reviewing the work of the engagement team.
- Identifying and Assessing Risks of Material Misstatement. This proposed standard describes the auditor's responsibilities for identifying and assessing risks of material misstatement. The risk assessment process discussed in the proposed standard includes information-gathering procedures to identify risks (e.g., obtaining an understanding of the company, its environment, and its internal control) and analysis of the identified risks.
- The Auditor's Responses to the Risks of Material Misstatement. This proposed standard sets forth the auditor's responsibilities for responding to the risks of material misstatement in the general conduct of the audit and specific audit procedures.
- Evaluating Audit Results. This proposed standard describes the auditor's responsibilities regarding the process of evaluating the results of the audit in order to form the opinion(s) to be presented in the auditor's report. This process includes evaluating uncorrected misstatements and control deficiencies identified during the audit.
- Consideration of Materiality in Planning and Performing an Audit. This proposed standard sets forth the auditor's responsibilities for applying the concept of materiality, as described by the federal securities laws, in planning the audit and determining the scope of the audit procedures.
- Audit Evidence. This proposed standard sets forth the auditor's responsibilities regarding designing and applying audit procedures to obtain sufficient appropriate evidence to support the opinion(s) in the auditor's report. In particular, it discusses the principles for determining the sufficiency and appropriateness of audit evidence.
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21 October 2008: Global tax implications of IFRSs in Spanish
21 October 2008: Joint letter to US SEC supporting fair value measurements
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On 15 October 2008 the Center for Audit Quality, CFA Institute, Consumer Federation of America, and the Council of Institutional Investors issued a Joint Letter to US SEC Chairman Christopher Cox (PDF 60k) urging the SEC not to override the fair value guidance recently issued by the Financial Accounting Standards Board, FSP FAS 157-3 Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active (FSP). The letter states:
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A move by the SEC to suspend fair value accounting would be a disservice to the capital markets, would be inconsistent with the views of investors, would harm the credibility and independence of the standards setting process, and would run counter to fundamental notice and comment principles. With third quarter financial statements now in process and year-end 2008 imminent, such a change could jeopardize already-fragile investor confidence.
No one disputes that these are trying economic times. However, the current crisis of liquidity, credit, and confidence was not caused by fair value accounting; rather, sound accounting principles helped expose the problem. Fair value accounting with robust disclosures provides more accurate, timely, and comparable information to investors than amounts that would be reported under other alternative accounting approaches.
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Click to go to our comprehensive page of Credit Crunch Information.
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21 October 2008: EC meeting on IAS 39
20 October 2008: US SEC to hold roundtable on mark-to-market
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The US Securities and Exchange Commission will host the first of two roundtables on 'mark-to-market' accounting and current market conditions on 29 October 2008, at 9:00 am EDT. The roundtables will provide input to the SEC as part of a Congressionally mandated study pursuant to the Emergency Economic Stabilization Act of 2008. The date and time of the second roundtable will be announced at a later date. The roundtable will consist of two panels. The first panel will discuss the interaction between mark-to-market accounting for financial institutions and the current economic situation. The second panel will focus on potential improvements to the current accounting model and implications of possible changes. The panels will include investors, accountants, standard setters, regulators, business leaders, and other interested parties. Representatives from the FASB, IASB, and PCAOB will be present as observers. The panel discussions will focus on:
- The effects of mark-to-market accounting on financial reporting by financial institutions.
- Potential market behavior effects from mark-to-market accounting.
- The usefulness of mark-to-market accounting to investors and regulators.
- Aspects of the current accounting standards that can be improved.
Click for SEC Press Release (PDF 48k).
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19 October 2008: Credit crisis audit considerations
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The US Public Company Accounting Oversight Board will meet with its Standing Advisory Group on 22-23 October 2008 in Washington. One of the issues that the advisory group will discuss is audit considerations relating to the current economic environment. The agenda paper for this topic discusses possible considerations in upcoming audits, including: |
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- Fair value measurements
- Other than temporary impairment
- Credit derivatives
- Going concern
- Pensions/other postretirement benefits
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- Receivables
- Inventory
- Other asset impairments
- Disclosures
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Click to download the agenda paper for this topic: Emerging Issue - Audit Considerations in the Current Economic Environment (PDF 177k).
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19 October 2008: Agenda project pages updated for October meeting
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We have updated the following agenda project pages to reflect the discussions and decisions at the 13-17 October 2008 meeting of the International Accounting Standards Board.
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18 October 2008: Notes from day 5 of the October 2008 IASB meeting
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The International Accounting Standards Board held its regular October 2008 meeting at the IASB's offices, 30 Cannon Street, London on Monday to Friday 13-17 October 2008. The meeting was open to public observation and was being webcast. Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the meeting. |
18 October 2008: Joint IASB-FASB advisory group on credit crisis
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The International Accounting Standards Board and the US Financial Accounting Standards Board (FASB) will create a global advisory group of regulators, preparers, auditors, investors, and other users of financial statements to help ensure that reporting issues arising from the global economic crisis are considered in an internationally co-ordinated manner. The two Boards will be Meeting jointly on 20 and 21 October, at which time they will discuss the initial topics for the advisory group to consider. Click for Press Release (PDF 100k). |
17 October 2008: Keidanren wants IFRSs in Japan
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Nippon Keidanren (the Japan Business Federation) has issued a Statement on the Future Directions of Accounting Standards in Japan (PDF 23k) in which they urge the adoption of IFRSs in Japan. The Keidanren proposes that IFRSs be required in the consolidated financial statements of listed companies after a three-year phase-in period. Unlisted companies, and those listed companies that do not prepare consolidated financial statements, would be permitted to use IFRSs. The Keidanren statement points out that Japan is 'the only country among the major capital markets which has not officially announced the adoption of IFRS'.
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Excerpt from Statement by the Keidanren – Proposal Towards Adopting IFRS:
A. Publish a Roadmap Including Adoption of IFRS
Having had the U.S. announcement this year, Japan became the only country among the major capital markets, which has not officially announced the adoption of IFRS. Some of the Japanese companies have already begun the study of IFRS preparing for future adoption. Japan should accelerate the discussion of the future direction of accounting standards and set out a concrete Roadmap as soon as possible, indicating the adoption of IFRS. It is important to mention in the Roadmap the necessary conditions in adopting IFRS, such as, checking the direction of discussions of mid-long term projects at the IASB, adequate governance of the IASB, and progress in the ASBJ-IASB convergence project.
B. Scope of Application of IFRS
For the near term, it is appropriate to permit the use of IFRS for listed companies as an option. In the future, because we think it is necessary to have a single set of accounting standards, for the purpose of securing reliability and convenience for the investors, Japan should require all listed companies to apply IFRS for preparing their financial statements. In that case, there should be, at least, three years of preparation period. It is also important make decisions taking into account to maintain and heighten Japan's international presence.
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17 October 2008: Notes from day 4 of the October 2008 IASB meeting
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The International Accounting Standards Board is holding its regular October 2008 meeting at the IASB's offices, 30 Cannon Street, London on Monday to Friday 13-17 October 2008. The meeting is open to public observation and is being webcast. Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the meeting. |
16 October 2008: Notes from day 3 of the October 2008 IASB meeting
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The International Accounting Standards Board is holding its regular October 2008 meeting at the IASB's offices, 30 Cannon Street, London on Monday to Friday 13-17 October 2008. The meeting is open to public observation and is being webcast. Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the meeting. |
16 October 2008: Discussion Paper on financial statement presentation
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The IASB and the US FASB have jointly published for comment a Discussion Paper (DP) Preliminary Views on Financial Statement Presentation. The goal of the project is to create a standard that requires entities to organise financial statements in a manner that clearly communicates an integrated financial picture of the entity. The project is about how best to portray assets, liabilities, income, expense, cash flows and related information in financial statements. It is not
about how those items are recognised or measured. The boards propose the following two objectives for financial statement presentation:
- Cohesiveness. Formatting the information in financial statements so that a reader can follow the flow of information through the various statements
- Disaggregation. Separating information that responds differently to economic events
To achieve these main objectives the boards have developed a principle-based format that is presented in the discussion paper and is visualised below:
Statement of
Financial Position | Statement of
Comprehensive Income | Statement of
Cash Flows |
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Business
- Operating assets and liabilities
- Investing assets and liabilities
| Business
- Operating income and expenses
- Investing income and expenses
| Business
- Operating cash flows
- Investing cash flows
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Financing
- Financing assets
- Financing liabilities
| Financing
- Financing asset income
- Financing liability expenses
| Financing
- Financing asset cash flows
- Financing liability cash flows
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| Income taxes | Income taxes
on continuing operations (business
and financing) |
Income taxes |
| Discontinued operations | Discontinued operations
net of tax |
Discontinued operations |
| | Other comprehensive income,
net of tax | |
| Equity | | Equity |
The Comment Deadline is 14 April 2009. Click for Press Release (PDF 43k). The IASB's goal is to issue an exposure draft of proposed revisions to IAS 1 by 2010.
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16 October 2008: EC Declaration on IAS 39 and IFRS 7
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In our news story immediately below, we noted that the European Commission has Approved (PDF 47k), for use in Europe, the IASB's recent Reclassification Amendment to IAS 39 and IFRS 7. That approval was preceded by an extended discussion of a number of financial instruments accounting matters by the EC's Accounting Regulatory Committee (ARC, which met on 15 October 2008), by EU G8 Heads of State (who met on 4 October 2008), and by the ECOFIN (the Eurogroup and EU Economic and Finance Ministers Council, who met on 6-7 October 2008). It was also preceded by an EFRAG Recommendation and several related speeches by EC President Jose Manual Barroso
(Speech #1, Speech #2, and Speech #3). Here are links to the various ARC documents:
Concurrent with the Commission's decision to approve the IAS 39 reclassification amendment, the Commission also made the following public declaration:
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COMMISSION DECLARATION
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Given the turbulence in financial markets, the Commission will continue to closely monitor all accounting issues that could impact on the stability of financial institutions and financial markets and will keep under constant review the implementation of IAS 39 and IFRS 7.
The Commission will continue to work intensively with all stakeholders and will organise a meeting within the next few days* to consider other possible issues under IAS 39 and IFRS 7. The Commission will, in particular, review the issue of the fair value option, embedded derivatives, insurance questions, and any other issues in IAS 39 and IFRS 7 of concern, and requests the IASB and CESR to begin work immediately in order to find appropriate solutions in the public interest taking into account an appropriate level of transparency. The Commission will propose further amendments to IAS 39 and IFRS 7, by all legal means if necessary, by the end of October.
The Commission also considers that an in depth reflection is needed on fair value accounting, including possible procyclicality effects. The newly formed EFC group on procyclicality could be one avenue for taking forward this question expeditiously.
The Commission takes note that Member States want to have an in depth reflection on the standard-setting process.
*IAS Plus comment: This meeting is set for Tuesday 21 October 2008.
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16 October 2008: EC endorses IAS 39 reclassification amendment
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The European Commission has approved, for use in Europe, the IASB's recent Amendment to IAS 39 and IFRS 7 permitting reclassification of some financial instruments out of the fair-value-through-profit-or-loss category and out of the available-for-sale category. The amendments introduce into IFRSs the same possibility of reclassifications that is already permitted under US GAAP. The Commission's endorsement has been published in the Official Journal of the European Union as Regulation (EC) No 1004/2008 (PDF 47k). |
16 October 2008: Buckle Up (On the Road to IFRS in the US)
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Deloitte (United States) has published Buckle Up (On the Road to IFRS). International Financial Reporting Standards have quickly become a priority for US companies now that the Securities and Exchange Commission (SEC) has proposed an IFRS road map and rules changes. This book, the eleventh in our 'Straight Talk' series, helps executives understand the implications of IFRS and their role in addressing the associated changes. The publication also offers practical suggestions to help companies navigate through these important issues. "Today's decisions will determine the direction and speed of your transition. It can be a smooth ride, but could also become a roller coaster or a train wreck." Click to download Buckle Up (On the Road to IFRS) (PDF 3,661k). |
16 October 2008: Deloitte Alert on fair value of perpetual preferred
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Deloitte (United States) has published a Financial Reporting Alert on SEC Issues Letter Clarifying Other-Than-Temporary Impairment Guidance for Perpetual Preferred Securities. The SEC letter is mentioned in our news story immediately below. Click to download Deloitte Financial Reporting Alert 08-16 (PDF 28k). Note: This Alert was revised 18 October 2008.
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15 October 2008: SEC guidance on fair value of perpetual preferred
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The Office of the Chief Accountant (OCA) of the US SEC has written to FASB Chairman Robert H Herz about how to assess declines in fair value for perpetual preferred securities (PPS). US GAAP measures impairment differently for debt and equity instruments – some would say more rigorously for equity than for debt. The OCA notes that although PPS have 'debt-like characteristics', they are classified as equity because they are not redeemable. The letter states that:
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OCA, after consultation with and concurrence of the FASB staff', has concluded that it would not object to an issuer, in assessing impairment of PPS, applying an impairment model (including an anticipated recovery period) similar to a debt security provided there has been no evidence of a deterioration in credit of the issuer (for example, a decline in the cash flows from holding the investment or a downgrade of the rating of the security below investment grade) until this matter can be addressed further by the FASB.
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Concurrent with sending the letter, the SEC has asked the FASB to address this and related issues. Click to Download the SEC Letter (PDF 99k).
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15 October 2008: IASB ED on financial instruments disclosures
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The IASB has issued an exposure draft of proposed amendments to IFRS 7 Financial Instruments: Disclosures. The proposals form part of the IASB's response to the credit crisis and follow recommendations of the Financial Stability Forum, which had the support of the Group of Seven (G-7) Finance Ministers. The proposals also reflect discussions by the IASB's Expert Advisory Panel on measuring and disclosing fair values of financial instruments when markets are no longer active. The ED, titled Improving Disclosures about Financial Instruments, may be downloaded without charge from the IASB's Website. The comment letter deadline is 15 December 2008 with a proposed effective date of 1 July 2009. Click for Press Release (PDF 93k).
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The exposure draft proposes the following changes to IFRS 7:
Fair value disclosures
- Introduction of a three level hierarchy when disclosing fair values (comparable to the US SFAS 157 hierarchy)
- Reconciliations of balances for fair values measured without using observable market inputs
- Reconciliations of movements between the levels (including reasons)
Liquidity risk disclosures
- Clarification of scope of which instruments are to be included
- Disclosure of liquidity risk for derivative financial liabilities based on risk management of the entity
- Disclosure of expected remaining maturities of non-derivative financial liabilities if the entity manages risk in that way
- Enhance relationship between quantitative and qualitative disclosures of liquidity risk
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15 October 2008: Implications of US Economic Stabilization Act
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Deloitte & Touche LLP (United States) has published an edition of the Heads Up newsletter that summarises the key provisions of the US Emergency Economic Stabilization Act of 2008 and discusses the accounting, tax, and business issues raised by the Act that may require consideration in the upcoming weeks. Click to Download this Issue of Heads Up (PDF 210k).
Among the accounting considerations discussed in the newsletter are:
- Assessment of 'other-than-temporary impairment (OTTI)'
- Classification of financial assets and liabilities as HTM or OTTI
- Recognition of interest income and impairment of beneficial interests
- Accounting by creditors for impairment of loans
- Accounting by mortgage banking institutions
- Measurement of fair value
- Warrants and liability/equity classification
- Guarantee accounting
- Modifications of loans held in QSPEs
- Compensation 'clawback' considerations
- Income tax accounting
- Disclosure adequacy
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15 October 2008: EU is developing an 'accounting proposal'
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On 14 October 2008, José Manuel Durão Barroso, President of the European Commission, spoke at a press conference in advance of the two-day meeting of the European Council (heads of state of the 27 EU member states) that will be held on 15-16 October 2008. His remarks focused on the EU's response to the global financial crisis. He noted, among other things, that today the Accounting Regulatory Committee will be considering a procedure for 'modifying accounting rules'. Click to Download Mr Barroso's Remarks (PDF 74k). The nature of the procedure or modifications is not indicated, but several press reports refer to possible relaxation of the fair value measurement rules for financial instruments. An excerpt:
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We have now reached a comprehensive agreement and a detailed programme for the Euro area and the EU as a whole. A programme to restore liquidity. A programme to recapitalise banks and to protect savers and taxpayers. A programme to lay the foundations of recovery and future sustainability....
We have accelerated the procedure for modifying accounting rules. This will prevent healthy assets being undervalued. It will ensure EU companies are not at a competitive disadvantage with companies based in other jurisdictions. The Accounting Regulatory Committee will approve our proposal tomorrow, on Wednesday.
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Also on 14 October 2008 (yesterday), the European Commission published FAQs on Europe's Response to the Financial Crisis (PDF 98k). The FAQ states:
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The Commission has already launched fast-track procedures to adjust accounting rules in order to be sure that assets are not undervalued, confidence is not unnecessarily undermined and EU financial institutions not disadvantaged vis-à-vis their international competitors. Provided Member States and the European Parliament approve these changes quickly, this will allow the rules to be applied for the third quarter, from 1 July 2008.
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15 October 2008: Notes from day 2 of the October 2008 IASB meeting
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The International Accounting Standards Board is holding its regular October 2008 meeting at the IASB's offices, 30 Cannon Street, London on Monday to Friday 13-17 October 2008. The meeting is open to public observation and is being webcast. Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the meeting. |
14 October 2008: Change to tomorrow's IASB meeting agenda
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Fair value measurement has been moved from Friday 17 October 2008 to Wednesday 15 October 2008. The revised meeting agenda is Here. |
14 October 2008: Deloitte Alert on other-than-temporary impairments
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Deloitte (United States) has published a Financial Reporting Alert on The Impact of the Emergency Economic
Stabilization Act on the Assessment of Other-Than-Temporary Impairments. The Act became law on 3 October 2008. Deloitte Financial Reporting Alert 08-15 (PDF 27k) points out that impairment assessments are made as of the financial reporting date. The Alert states that 'the enactment of the Act on 3 October 2008 may not affect an entity's assessment, as of a prior reporting date, of its intent to hold an impaired security until forecasted recovery'.
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14 October 2008: EFRAG supports IAS 39 reclassification changes
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The European Financial Reporting Advisory Group has recommended that the European Commission adopt the amendments to IAS 39 and IFRS 7, approved by the IASB yesterday, that permit Reclassification of some financial instruments out of the fair-value-through-profit-or-loss category and out of the available-for-sale category. Click for EFRAG Endorsement Advice (PDF 61k). |
14 October 2008: IASB update on applying fair value in inactive markets
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The International Accounting Standards Board has published a Press Release (PDF 161k) updating its work to consider the application of fair value when markets become inactive. In the update, IASB Chairman Sir David Tweedie states:
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"This press release says two things. First, that guidance within IFRSs is already clear that distress sales should not be included in fair value measurement. Secondly, that recent guidance from the FASB is consistent with the findings of our own expert panel on illiquid markets. |
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14 October 2008: Barroso says EU will 'adjust EU accounting rules'
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On 13 October 2008, José Manuel Durão Barroso, President of the European Commission, spoke at a summit of national parliamentary leaders in Brussels. In his remarks, he reported on a 'historic summit of the Eurogroup at the highest political level in Paris' held on the previous day. "Our unanimous message yesterday was one of commitment to act together in a decisive and coordinated way in order to restore confidence and proper functioning of the financial system...." Mr Barroso indicated that "we will this week adjust EU accounting rules in order to be sure that EU financial institutions are not disadvantaged vis-à-vis their competitors in the United States". Click to Download Mr Barroso's Remarks. |
14 October 2008: EBF and Business Europe urge fair value changes
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The European Banking Federation and Business Europe have issued a Joint Statement on Financial Market Turmoil (PDF 193k). One of the recommendations in the statement relates to fair value measurements:
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The pro-cyclical nature of fair value measurement of financial assets appears to have worsened the impact of the crisis on financial and non-financial corporations. It is vital that accounting standard-setters take up the issue and seriously consider amending fair value accounting rules for assets in markets where liquidity suddenly disappears.
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14 October 2008: US bankers ask SEC to override FASB fair value guidance
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The American Bankers Association (ABA) yesterday sent a Letter to US SEC Chairman Cox (PDF 263k) requesting that the SEC immediately take the following steps:
- Override FSP FAS 157-3 and replace it with guidance that clarifies that fair value in illiquid markets does not include forced or distressed sales. [Click here for Information about FSP 157 -3]
- Provide guidance on 'other than temporary impairment' as requested in ABA's letters to the SEC and the FASB
- Suspend the proposal on accounting for securitizations
- Suspend work by accounting standard setters on any projects that would require fair value in any future accounting standards pending Congressional review of the study mandated by the Emergency Economic Stabilization Act
The ABA's letter also notes that "yesterday 15 European countries moved to make the types of accounting changes ABA has been advocating, but that FASB on Friday, as a practical matter, failed to implement".
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14 October 2008: Heads Up on fair value measurement in inactive markets
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The latest edition of the Heads Up newsletter from Deloitte & Touche LLP (United States) discusses the FASB's recently released Staff Position (FSP) No. FAS 157-3 Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active. The FSP addresses concerns raised by preparers of financial statements regarding measuring fair value in the current turbulent financial markets. Click to Download this Issue of Heads Up (PDF 146k). |
14 October 2008: IASB amends IAS 39 to permit some reclassifications
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The IASB has issued amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures that would permit reclassification of some financial instruments out of the fair-value-through-profit-or-loss category and out of the available-for-sale category. The amendments introduce into IFRSs the same possibility of reclassifications that is already permitted under US GAAP in rare circumstances. The amendments are effective 1 July 2008. Click for IASB Press Release (PDF 168k). |
14 October 2008: Notes from day 1 of the October 2008 IASB
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The International Accounting Standards Board is holding its regular October 2008 meeting at the IASB's offices, 30 Cannon Street, London on Monday to Friday 13-17 October 2008. The meeting is open to public observation and is being webcast. Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the meeting. |
13 October 2008: IAS Plus newsletter on proposed amendments to IFRS 5
13 October 2008: IAS Plus newsletter on proposed amendments to IFRS 1
13 October 2008: SIX Swiss Exchange areas of focus and updated IFRS circular
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The SIX Swiss Exchange (formerly known as SWX) has released its Annual Communiqué (PDF 59k) identifying the areas on which they intend to focus in their regulatory reviews of annual financial reports for 2008 of SIX Swiss Exchange listed companies. The areas of focus will be:
- Measurement and disclosure of financial instruments (IAS 39/IFRS 7)
- Impairment of assets (IAS 36)
- Assets and obligations relating to employee benefit plans (IAS 19/IFRIC 14)
- Non-current assets held for sale and discontinued operations (IFRS 5)
Further, the SIX Swiss Exchange has updated its Admission Board Circular Nr. 6 (PDF 167k), which identifies IFRS issues that have led to discussions with or actions against issuers in the past.
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13 October 2008: Deloitte will sponsor IFRS 2008/09 conference
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Deloitte will be the main sponsor of IFRS 2008/9 Strategic Direction and Practical Interpretation, a conference that will be held in London on Wednesday 12 November 2008. Speakers at this annual conference include IASB Chairman Sir David Tweedie (opening keynote address and open dialogue) and Deloitte partners Ken Wild and Veronica Poole. Topics that will be covered include an analyst's view of financial reporting priorities; FSF recommendations on risk disclosures, valuations, and off balance sheet vehicles; the professional practice view of IFRSs; valuations in light of the credit crunch; the year ahead for IFRSs; implications of IFRSs for directors and auditors; complexity of standards; and IFRSs and regulation. For more information and to view the agenda go to www.iflr.com/ifrs08. |
13 October 2008: ICAS study on implementation of IFRSs in UK, Italy, Ireland
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The Institute of Chartered Accountants of Scotland has published a comparative study of The Implementation of IFRS in the UK, Italy and Ireland. The study examines:
- the resultant changes in financial reporting, in terms of the additional disclosures and the impact of IFRSs on profit and equity;
- the costs involved in implementation of IFRSs;
- the most problematic international accounting standards for adopters; and
- the usefulness of the resulting IFRS information from the perspective of preparers and users.
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ICAS hopes that the study will aid companies implementing international standards in the future. Both the full report and an executive summary may be downloaded from the ICAS website:
12 October 2008: European Parliament resolution on IASCF Constitution Review
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On 9 October 2008, the European Parliament adopted a Resolution on the IASCF Review of the Constitution, Public Accountability, and Composition of the IASB (PDF 25k). Among other things, the Parliament:
- 'Expresses doubts as regards the desirability of setting up the Monitoring Group at this stage, before the second phase of the consultation process of the review of the governance of the IASB is launched'
- Calls for the Monitoring Group, if established, 'to be involved in setting the agenda for the IASB'
- 'Deplores the fact that Parliament was not consulted about the establishment of an International Accounting Advisory Group'
- Seeks 'political accountability' of members of the Monitoring Group
- Believes that membership of the Monitoring Group should be permitted 'only after a commitment to introduce IFRS as the domestic standard'. [IAS Plus comment: Two of the proposed Monitoring Group members, the commissioner of the Japan Financial Services Agency and the chair of the US SEC, would not be eligible under this criterion]
- 'Calls for a memorandum of understanding to be concluded between Parliament, the Council and the Commission so as to define the conditions of association of the legislators with the work of the monitoring group, if such a group is established at this stage'
- 'Instructs its President to forward this resolution to the Council, the Commission, the European Central Bank, and the Committee of European Securities Regulators and the governments and parliaments of the Member States'
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12 October 2008: Notes from the October 2008 IASC Foundation Trustees' meeting
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The Trustees of the IASC Foundation (IASCF), under which the IASB operates, met in Beijing, China in public session on 9 October 2008. Click here do download the Notes Taken by Deloitte Observers at the Meeting (PDF 78k). A few key items:
- Trustees had been expected to consider the comments received to Phase 1 of the Constitution Review – relating to the proposed Monitoring Group and the size and composition of the IASB. However, the analysis of comments was not yet complete, and discussion was deferred.
- Regarding Phase 2 of the Constitution Review, Trustees agreed to publish a consultation document inviting comment on which issues should be addressed in Phase 2, for a 120-day comment period, without waiting for completion of Phase 1. The detailed notes downloadable above identify some of the issues that will be proposed for inclusion.
- Trustees issued a Press Release (PDF 179k) expressing their unanimous support for the approach that the IASB Announced on 3 October 2008 to accelerate its response to the credit crisis, including suspension of normal due process to eliminate certain differences with US GAAP.
- Trustees approved an update to the IASB Due Process Handbook.
- The report of the IASB Chairman was divided into two main sections: (a) IASB response to the credit crisis and (b) updating of the IASB-FASB Memorandum of Understanding. Response to the credit crisis will include 'very fast-track' amendments on:
- consolidation,
- derecognition,
- financial instruments disclosures, and
- reclassifications out of fair value through P&L.
- Trustees received a report on the IFRS for Private Entities (SMEs) and expressed strong support for the project.
- Trustees decided that whether the IASB should establish formal cooperative relationships with bodies that set standards other than accounting standard should be an issue in Phase 2 of the Constitution Review, though Trustees' initial reactions were negative.
- Regarding funding, £14 million of funding for 2008 has been raised out of a budget of £16 million. Due to the current global credit crisis, there is a risk of loss of funding to IASCF of approximately £500,000 due to attrition of donors.
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12 October 2008: AICPA staff release technical Q&A on liquidity restrictions
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The staff of the American Institute of CPAs has issued a new nonauthoritative Technical Practice Aid (TPA) addressing the potential accounting and auditing implications when a fund or its trustee imposes restrictions on a nongovernmental entity's ability to withdraw its balance in a money market fund or other short term investment vehicle. The TPA covers balance sheet classification, disclosures, debt covenants, subsequent events and going-concern considerations, among other things. You can Download the TPA (PDF 29k) from the AICPA's website. Click for all of our Credit Crunch Information. |
11 October 2008: FASB guidance on FV of financial instruments in inactive markets
11 October 2008: IASB will meet with EFRAG representatives on 13 October
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Representatives of the International Accounting Standards Board and the European Financial Reporting Advisory Group (EFRAG) will meet in public session on Monday 13 October 2008, 14.00 to 16.00h at the IASB's offices in London. Topics to be discussed are presented below.
Meeting of Representatives of the IASB and EFRAG
13 October 2008, London
- Credit Crisis
- Fair value measurement
- Disclosures
- Consolidations
- Derecognition
- Distinguishing equity from liabilities
- Financial Statement Presentation
- The IASB/FASB project
- Update on PAAinE project
- IASC Foundation Trustees meeting
- Update on other PAAinE (Proactive Accounting Activities in Europe) work
- Pensions
- Possible new projects
- IASB/FASB Memorandum of Understanding
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10 October 2008: FASB issues two convergence exposure drafts
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The US Financial Accounting Standards Board has issued two separate but related Exposure Drafts for public comment. The two proposed FASB Statements, Going Concern and Subsequent Events, would:
- incorporate accounting guidance that originated as auditing standards into the body of authoritative literature issued by the FASB, and
- converge US GAAP generally accepted accounting principles and International Financial Reporting Standards.
Including this guidance in authoritative accounting literature as well as in auditing standards emphasizes that accounting and reporting are the primary responsibility of an entity and its management, not its auditor. Click for Press Release (PDF 20k).
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10 October 2008: Commissioner McCreevy urges easing accounting rules for banks
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In remarks before a plenary session of the European Parliament in Brussels on 8 October 2008, Charlie McCreevy, the European Commissioner for Internal Market and Services, urged the IASB to ease accounting rules for banks under IFRSs. He said that banks should be allowed to transfer assets out of fair value through profit or loss ('trading book') into an amortised-cost-with-impairment model ('banking book') on the same basis as US GAAP allows. Under the US GAAP model, such transfers are 'rare', and the fair value at date of transfer becomes the 'deemed cost' going forward. Several news reports have suggested that Mr McCreevy proposed that the transfers should result in a bank retrospectively restating the investments back to their original historical cost at acquisition, with a corresponding increase in the bank's capital. But this is not indicated in Mr McCreevy's Prepared Remarks (PDF 72k). Here is an excerpt:
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In addition we are urgently putting changes to our accounting rules to ensure Banks in the EU can avail of the same flexibility that is offered to banks in the US. Namely this will provide the option for individual banks if they want to move assets from their trading books to their banking books. This is a comitology measure which I hope the Parliament will be able to give its agreement as a matter of urgency. In the meantime I would hope that national supervisors would apply these new provisions already so that banks, who wished to, could avail of this new possibility for their third quarter results. In addition there is the IASB's acceptance of the US SEC's clarification of the use of fair value accounting when there is no active market information. This is also highly relevant for banks and should be used for third quarter reporting.
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9 October 2008: Trustees support IASB's accelerated steps on the credit crisis
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At their meeting in Beijing today, the Trustees of the IASC Foundation announced their unanimous support for the approach that the International Accounting Standards Board Announced on 3 October 2008 to accelerate its response to the credit crisis. Under this approach, the IASB will seek appropriate language to eliminate any differences in how International Financial Reporting Standards and US GAAP address the issue of reclassification of financial instruments. The Trustees support the IASB's intention to complete this work by the end of next week. Click for IASC Foundation Press Release (PDF 179k). An excerpt:
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In reaching this common view, the Trustees emphasised that they do not and would not take positions on the specific technical content of IFRSs; the Trustees therefore reaffirmed their commitment to preserving the independence of the IASB's standard-setting process. With more than 100 countries now using IFRSs, the Trustees highlighted the fact that any weakening of the IASB's independence would be likely to reduce transparency, potentially lead to a weakening of standards worldwide, and would ultimately undermine investor confidence at a fragile time for the world's markets.
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9 October 2008: CICA statement on fair value accounting for investments
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The Canadian Institute of Chartered Accountants has issued a Statement on Fair Value Accounting by Paul Cherry, Chair, Canadian Accounting Standards Board. Mr Cherry's message is, in a nutshell, fair value measurement of financial instruments reflects the reality in the marketplace today. Historical cost does not. Don't blame accounting for telling it like it is. Click to Download the Statement (PDF 38k). Here is an excerpt:
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Generally Accepted Accounting Principles require many investments in stocks and bonds to be measured at fair value. Investments carried at cost must be assessed for impairment at the time of reporting and, if determined to be impaired, must be written down to their estimated fair value as at the balance sheet date. Basically, Canadian companies are being asked to make a realistic estimate of the holding's fair value as at the balance sheet date and then clearly explain to investors how that figure was determined. In determining a holding's fair value, companies must estimate the price that market participants would sell for, or buy at, in an active liquid market, if there were one.
In times of financial crisis, it is natural to ask: 'What went wrong?' Some people blame the current crisis on the increased use of fair value accounting for financial instruments. Yes, measuring fair value in turbulent times can be very difficult, but the huge swings in market prices reflect the reality of the marketplace. Do we really want financial statements based on management's guess as to what market prices might be in 'normal' conditions at some point in the future? There is a growing realization that the accounting requirements are not to blame. Fair value accounting tells investors and the public 'the way it is'.
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9 October 2008: SEC begins study of 'mark-to-market' accounting
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The US Securities and Exchange Commission has announced details of its study on 'mark-to-market' (fair value) accounting by financial institutions, as required by Section 133 of the Emergency Economic Stabilization Act of 2008. The study is to be completed by 2 January 2009, in consultation with the Secretary of the Treasury and the Board of Governors of the Federal Reserve System. The study will focus on:
- The effects of such accounting standards on a financial institution's balance sheet
- The impacts of such accounting on bank failures in 2008
- The impact of such standards on the quality of financial information available to investors
- The process used by the Financial Accounting Standards Board in developing accounting standards
- The advisability and feasibility of modifications to such standards
- Alternative accounting standards to those provided in [Financial Accounting Standards Board] Statement Number 157
James Kroeker, Deputy Chief Accountant at the SEC, will be staff director for the study. Before joining the SEC, Mr Kroeker was a partner at Deloitte and Touche, LLP. The SEC intends to schedule public roundtables to obtain input into the study from investors, accountants, standard setters, business leaders, and other interested parties. Click for SEC Press Release (PDF 26k).
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9 October 2008: Heads Up on meeting of FASB's Valuation Resource Group
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The latest edition of the Heads Up newsletter from Deloitte & Touche LLP (United States) summarises nine issues discussed at the 23 September 2008 meeting of FASB's Valuation Resource Group (VRG). FASB established the VRG to provide the FASB staff with information about implementation issues regarding fair value measurements used in financial reporting and the alternative viewpoints associated with those implementation issues. Click to Download this Issue of Heads Up (PDF 135k). There is an archive of past issues of Heads Up Here.
The nine issues the VRG discussed are:
- VRG Issue No. 2008-11: IASB's Expert Advisory Panel White Paper
- VRG Issue No. 2008-12: Fair Value Disclosure
- VRG Issue No. 2008-13: Observable Versus Unobservable Inputs
- VRG Issue No. 2008-14: Fair Value Measurement of Liabilities Under Statement 157
- VRG Issue No. 2008-15: Allocation of In-Use Valuation to Individual Unit of Account
- VRG Issue No. 2008-16: Fair Value of Accounts Receivables, Accounts Payable, and Accrued Liabilities in a Business Combination
- VRG Issue No. 2008-17: Identification and Allocation of Market Participant Synergies
- VRG Issue No. 2008-18: Fair Value of a Noncontrolling Interest and a Previously Held Equity Interest
- VRG Issue No. 2008-19: Impact of Valuing Contingent Liabilities Under FAS 141(R) — Gross Versus Net Analysis
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8 October 2008: Additional ECOFIN conclusions on accounting
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Our story immediately below reports on a conclusion that the Eurogroup and EU Economic and Finance Ministers Council (ECOFIN) reached on accounting valuation issues at its meeting in Luxembourg on 6 and 7 October 2008. ECOFIN has also published another set of conclusions titled Immediate Responses to Financial Turmoil (PDF 116k) that addresses, among many other things, several financial instruments accounting issues. Specifically, ECOFIN makes recommendations on mark-to-market valuation rules and reclassification rules for financial instruments:
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We underline the necessity of avoiding any distortion of treatment between US and European banks due to differences in accounting rules. We take note of the flexibility in the application of mark to market valuation under IFRS as outlined in recent guidance from the IASB. Ecofin strongly recommends that supervisors and auditors in the EU apply this new guidance immediately. We also consider that the issue of asset reclassification must be resolved quickly. To this end, we urge the IASB and the FASB to work together on this issue and welcome the readiness of the Commission to bring forward appropriate measures as soon as possible. We expect this issue to be solved by the end of the month, with the objective to implement as of the third quarter, in accordance with the relevant procedures.
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8 October 2008: ECOFIN conclusions on accounting valuations
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Our News Story of 7 October noted that the Eurogroup and EU Economic and Finance Ministers Council (ECOFIN) would be discussing accounting valuation issues at its meeting in Luxembourg on 6 and 7 October 2008. ECOFIN has adopted a broad range of Conclusions on a Coordinated EU Response to the Economic Slowdown (PDF 143k). Here is the conclusion on asset valuation:
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On asset valuation, revised standards are urgently awaited from the International Accounting
Standards Board; otherwise, persistent concern about the accounting treatment of assets will
continue to undermine investor confidence.
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8 October 2008: Accounting Roundup – third quarter 2008 review
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We have posted Accounting Roundup: Third Quarter in Review–2008 (PDF 1,221k, 56 pages), prepared by the Accounting Standards and Communications Group of Deloitte LLP (USA). This newsletter provides brief descriptions of pronouncements affecting accounting, financial reporting, and corporate governance issued during 3Q-2008 by standard setters and regulators including FASB, EITF, AICPA, SEC, FASAB, PCAOB, GASB, IASB, and IFRIC. This quarterly review consists of articles, adapted as necessary, from issues of Accounting Roundup published in July and August 2008, as well as new articles for the month of September. There's also information about upcoming Dbriefs Webcasts. You will find past issues Here. International and IFRS-related developments covered in this edition of Accounting Roundup are:
- IASB Issues Additional Guidance on Hedge Accounting
- IFRIC Issues Interpretation on Construction of Real Estate
- IFRIC Issues Interpretation on Hedges of a Net Investment in a Foreign Operation
- IASB Issues Proposed Amendments to IAS 33 on Earnings per Share
- IASB Issues Proposed Amendments to Eight IFRSs
- IASB Issues Exposure Draft on Discontinued Operations
- IASB Issues Exposure Draft on IFRS 1 Exemptions
- IFAC Reissues Auditing Standard on Related Parties
- IFAC Issues Exposure Draft of IPSAS 5 on Borrowing Costs
- IFAC Issues Proposal on Code of Ethics for Accountants
- IASC Foundation Issues Discussion Document on Constitution Review
- IASB Issues Draft Document From Expert Advisory Panel
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8 October 2008: AICPA launches new IFRS newsletter
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The American Institute of Certified Public Accountants has launched a new monthly newsletter on IFRSs called IFRS Report. IFRS Report includes brief summaries of articles from a wide range of publications and other resources and provides links back to the original sources. You can Subscribe Here free of charge by providing a valid email address.
The first issue, published on 2 October 2008, covers the following topics:
IFRS Update
- Foundation publishes guide to XBRL version of IFRS
- US accountants intrigued by, wary of IFRS
- IFRS shift will be challenging, rewarding
International Watch
- European politicians urge changes to fair-value accounting rules
- US move makes Japan reconsider adopting IFRS
Market Highlights
- Senate approves rescue plan; House expected to vote again
Regulatory Developments
- SEC issues clarifications of fair-value rules
- IASB to discuss fair-value, off-balance-sheet accounting
IFRS at work
- BYU accounting program prepares for shift to IFRS
AICPA News
- Discuss IFRS with your peers through IFRS blog
- Call for volunteers to work on convergence of international accounting standards
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7 October 2008: ECOFIN agenda includes accounting valuations
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The Eurogroup and EU Economic and Finance Ministers Council (ECOFIN) is meeting in Luxembourg on 6 and 7 October 2008. The Agenda (PDF 115k) includes discussion of accounting valuation issues:
Financial stability and financial supervision
Ministers will continue discussions which took place at the Informal ECOFIN of Nice of 12-13 September 2008 on Financial Stability and Financial supervision. They will be looking at the need for a full and timely implementation of the October 2007 roadmap, and in particular the need to pursue the work to improve transparency in the banking sector and to make swift progress on accounting valuation at international level.
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7 October 2008: Deloitte Alert on credit market turmoil
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Deloitte (United States) has published a Financial Reporting Alert on Potential Counterparty Default and Other Accounting Considerations Related to the Credit-Market Turmoil. Deloitte Financial Reporting Alert 08-14 (PDF 70k) addresses the impact that recent market events, such as the bankruptcy of Lehman Brothers Holdings Inc. and the credit-standing deterioration of other financial institutions, may have on an entity's financial statements. This alert focuses on the following:
- The impact of possible counterparty default on an entity's derivative contracts that are (1) designated as hedging instruments in cash flow or fair value hedging relationships and/or (2) accounted for under the normal purchases and normal sales exception criteria defined in Statement 133,1 as amended.
- Other accounting considerations associated with counterparty default (or potential default), highlighted in Appendix A of the Alert.
- Other accounting considerations arising from the current turmoil in the credit markets, highlighted in Appendix B of the Alert.
Although this Alert highlights a number of items preparers and auditors should consider, it is neither a comprehensive checklist nor a complete analysis. Organizations should consider their own facts and circumstances and monitor ongoing developments to determine the impact of market conditions on their financial statements. Consultation with independent accountants also may be advisable in certain circumstances.
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7 October 2008: IAASB alert on fair value accounting estimates
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The staff of the International Auditing and Assurance Standards Board (IAASB) has released an audit practice alert Challenges in Auditing Fair Value Accounting Estimates in the Current Market Environment. The alert was developed following consultation with the IAASB's Task Force on Fair Value Auditing Guidance, which is considering the need for new or modified guidance in light of current marketplace issues. The purpose of the alert is to highlight areas within the International Standards on Auditing (ISAs) that are particularly relevant in the audit of fair value accounting estimates in times of market uncertainty. The practice alert may downloaded free of charge from the IFAC Website.
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7 October 2008: 19-point plan emerges from EU G8 heads of state summit
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The heads of state of the four EU G8 member states (France, Britain, Germany and Italy) met on 4 October 2008 at the Elysee Palace in Paris in a 'mini-summit' on global financial problems. The four national leaders were joined by the head of the European Central Bank and the President of the European Commission. At the end of the meeting, the leaders issued a 19-Point Plan (PDF 102k) with recommendations on various matters discussed at their meeting. Point number nine dealt with accounting:
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9. We will ensure that European financial institutions are not disadvantaged vis-à-vis their international competitors in terms of accounting rules and of their interpretation. In this regard, European financial institutions should be given the same rules to reclassify financial instruments from the trading book to the banking book including those already held or issued. We urge the IASB and the FASB to work quickly together on this issue in accordance with their recent announcement. We also welcome the readiness of the Commission to bring forward appropriate measures as soon as possible. This issue must be resolved by the end of the month.
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The IASB has already announced that it intends immediately to reconsider the current prohibition in IAS 39 against reclassifying financial instruments (see 'step 3' in our News Story of 4 October 2008)./
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6 October 2008: Guide de Référence sur les IFRS 2008 (IFRSs in your Pocket 2008)
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Deloitte (Canada) has published Guide de Référence sur les IFRS 2008, a translation into French of our popular IFRSs in your Pocket 2008 guide. The content of this 109-page booklet is the same as the English version, which means that it includes information about:
- IASB structure and contact details.
- IASB due process.
- Use of IFRSs around the world, including updates on Europe, Asia, USA, and Canada.
- Summaries of each IASB Standard (through IFRS 3 and the amendment to IAS 27) and Interpretation (through IFRIC 14), as well as the Framework and the Preface to IFRSs.
- Background and current status of all current IASB projects.
- IASC and IASB chronology.
- Update on IFRS-US GAAP convergence.
- Other useful IASB-related information.
Click to download Guide de Référence sur les IFRS 2008 (PDF 593k). Pocket guides in English and other languages are Here. |
6 October 2008: Agenda for 20-21 October 2008 IASB-FASB meeting
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The International Accounting Standards Board will hold a joint meeting with the US Financial Accounting Standards Board at the FASB's offices in Norwalk, Connecticut USA on 20-21 October 2008. Presented below is the agenda for the meeting.
Joint Meeting of the IASB and the FASB
20-21 October 2008, Norwalk, CT USA
Monday 20 October 2008
Tuesday 21 October 2008
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6 October 2008: CESR consultation on equivalence of Indian GAAP and IFRSs
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The Committee of European Securities Regulators (CESR) has issued a Consultation Paper (PDF 508k) on whether Indian GAAP should be deemed equivalent to IFRSs. CESR's tentative conclusion is that the current programme of the Institute of Chartered Accountants of India to converge Indian GAAP with IFRSs, if completed by 2011 as planned, will result in Indian GAAP that is equivalent to IFRSs. Therefore, CESR's proposed recommendation to the Commission is to allow companies currently using Indian GAAP for listing on a European securities market to continue to do so, without reconciliation through 2011 and, if India's convergence plan is achieved, to continue to do so after 2011. Following this consultation, CESR will report its final conclusion to the European Commission, which must make the final equivalence decision. Here is an excerpt from CESR's paper:
On the basis of the information detailed above, CESR has drawn the following conclusions:
- The ICAI has made, in July 2007, a public commitment to adopt International Financial Reporting Standards before 31 December 2011;
- The Indian Government confirmed publicly in May 2008, its intention to achieve convergence with IFRS by 2011;
- The ICAI has noted that it might make modifications to IFRSs to reflect 'Indian conditions' such as requiring additional disclosures, changing some terminology and omitting some options or alternative treatments. However, these changes are expected to be minor and the stated intention of both the ICAI and the Indian Government is
that Indian Accounting Standards will to all intents and purposes be fully IFRS compliant by the end of the program and that Indian issuers will therefore be in a position to make an absolute statement of compliance with IFRS in their notes.; and
- Effective measures are consequently being taken to secure the timely and complete convergence of Indian Accounting Standards to International Financial Reporting Standards by 31 December 2011....
If the Commission were minded to allow Indian issuers to use Indian GAAP when accessing EU markets, CESR recommends the Commission accept Indian GAAP according to article 4 of the Commission Regulation on the mechanism until it is in a position to make a decision under article 2.
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5 October 2008: IFAC rejects simplified audit standards for audits of SMEs
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The International Federation of Accountants (IFAC) has issued a policy position titled IFAC's Support for a Single Set of Auditing Standards: Implications for Audits of Small and Medium-sized Entities. The paper sets out IFAC's view that International Standards on Auditing (ISAs) are designed to be applicable to audits of financial statements of entities of all sizes. "If auditors intend to issue an ISA audit report, they must comply with the ISAs. This enables a consistent level of assurance to be associated with the word 'audit', and allows users to make decisions in the light of a common understanding about the reliability of financial statements.' The paper points out that SMEs have an alternative to obtaining an audit – they may obtain a review of their financial statements rather than an audit. IFAC Media Release (link to IFAC website). |
5 October 2008: Agenda for 13-17 October 2008 IASB meeting REVISED
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The International Accounting Standards Board will hold its regular October 2008 meeting at the IASB's offices, 30 Cannon Street, London on Monday to Friday 13-17 October 2008. The meeting is open to public observation and is being webcast. Presented below is the agenda for the meeting. Please note that on 2 October 2008 the Board held an additional Board meeting. Click here for Our Notes from that Meeting.
13-17 October 2008, London
Monday 13 October 2008
Tuesday 14 October 2008 (afternoon only)
Wednesday 15 October 2008
Thursday 16 October 2008
Friday 17 October 2008
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4 October 2008: IASB announces four planned 'credit crisis' steps
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The IASB has announced the current status of its response to the credit crisis and the next steps it expects to take. In its announcement, the IASB indicated that it 'is closely monitoring developments in the United States and other jurisdictions to avoid unnecessary inconsistencies in accounting treatments under IFRSs and US generally accepted accounting principles (GAAP)'. The IASB's next steps will be in the following areas:
- Ensure consistency of fair value measurement guidance between IFRSs and US GAAP
- Consider the possible impact of the US Emergency Economic Stabilization Act of 2008 and other similar programmes internationally on the valuation of assets and liabilities
- Immediately consider the ability to reclassify financial instruments.
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US GAAP permits entities, in rare circumstances, to reclassify financial instruments that are in the form of securities from their trading portfolio (measured at fair value with changes through the income statement) to 'held to maturity' (measured at amortised cost and subject to testing for impairment). Also US GAAP permits some loans that are not securities to be transferred from Held for Sale (measured at lower of cost or market with changes through the income statement) to Held for Investment (measured at amortised cost and subject to testing for impairment). IAS 39 does not currently permit such transfers. The IASB intends to assess (at its October 2008 Board meeting) any inconsistencies in how IAS 39 and US GAAP practice address the issue of reclassifications and decide whether to eliminate any differences.
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- Be willing to participate in any study on the impact of accounting in the credit crisis
Click for:
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4 October 2008: Final 'bailout bill' includes two fair value measurement sections
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Yesterday, by vote of 263-171, the United States House of Representatives approved the version of the so-called 'Financial Institutions Bailout Bill' (officially the Emergency Economic Stabilization Act of 2008) previously approved by the Senate. President Bush signed it into law. The final bill included the following two sections relating to fair value measurement issues that were noted in our News Story of 29 September 2008:
- Sec. 132. Authority to suspend mark-to-market accounting
Restates the Securities and Exchange Commission's authority to suspend the application of Statement Number 157 of the Financial Accounting Standards Board if the SEC determines that it is in the public interest and protects investors.
- Sec. 133. Study on mark-to-market accounting
Requires the SEC, in consultation with the Federal Reserve and the Treasury, to conduct a study on mark-to-market accounting standards as provided in FAS 157, including its effects on balance sheets, impact on the quality of financial information, and other matters, and to report to Congress within 90 days on its findings.
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4 October 2008: IASB statement on joint SEC-FASB fair value guidance
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In our News Story of 1 October 2008, we reported that the US SEC's Office of the Chief Accountant and the FASB staff jointly issued a press release containing questions and answers aimed at clarifying fair value measurement practices in the current environment. They issued this guidance pending the completion by FASB of additional interpretative guidance about the requirements of FASB Statement No. 157 Fair Value Measurements in illiquid markets. The news story has a link to the SEC-FASB release. The IASB has issued a Press Release (PDF 99k) stating that its staff has reviewed the SEC-FASB release and considers it consistent with IAS 39 Financial Instruments: Recognition and Measurement.
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4 October 2008: SEC will hold roundtable on more transparent disclosures
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The US Securities and Exchange Commission will hold a roundtable to discuss ways to modernise its disclosure system to provide investors with more useful information in a timely manner. The roundtable will be held at the SEC's headquarters in Washington, DC, on 8 October 2008 09:00 to 13:00 (ET). It will be webcast. The roundtable will consist of an open discussion on the Commission's financial disclosure system, including the information needs of investors, public companies, and others and the capabilities of modern information technology to improve transparency and ease of use. The roundtable will be organised as two panels, each consisting of investors, issuers, academics, and other parties with experience with the Commission's financial disclosure system. Click for SEC Announcement (PDF 45k).
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4 October 2008: Notes from 2 October 2008 IASB meeting
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On 2 October 2008, the International Accounting Standards Board held a special Board meeting at its offices in London. That meeting was in addition to the Board's regular meeting that is set for 14-17 October 2008. Because the 2 October meeting was arranged at short notice, some Board members took part via video conferencing facilities. To make allowance for the different time zones involved, the meeting was held in two sessions, morning and afternoon, with the same topics discussed. Click to go to the combined preliminary and unofficial Notes Taken by Deloitte Observers at Both Sessions of the Meeting. |
3 October 2008: CFAs in Europe vote against suspension of fair value standards
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In an overnight poll of CFA Institute members based in the European Union (EU), 79% of the 597 respondents do not support the suspension of fair value measurements for financial instruments under IFRSs. 85% also think that a suspension of fair value standards would further decrease confidence in the European banking system. The CFA Institute polled its EU based members in advance of the summit called by EU and French President Sarkozy to establish a common European position on regulation.
Following the poll, the CFA Institute submitted a letter to President Sarkozy, who is seeking more flexibility in accounting rules. The letter affirms that any weakening of accounting rules will not improve market stability and will further undermine investor confidence. Click for CFA Institute Press Release (PDF 21k), which also includes a copy of the letter to President Sarkozy. Previously, the CFA Institute joint the Center for Audit Quality and the Council of Institutional Investors in issuing a Joint Statement (PDF 19k) "opposing suspension of mark-to-market accounting".
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3 October 2008: FASB proposes fair value guidance in inactive markets
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The US Financial Accounting Standards Board has invited comment on a proposed FASB Staff Position (FSP) that addresses concerns regarding the determination of fair value in markets that are not active. The objective of the guidance in proposed FSP FAS 157-d is to clarify how SFAS 157 applies to determining the fair value of assets and liabilities in inactive markets and to provide an example that illustrates several key principles, including the following:
FAS 157 principles that will be illustrated in the guidance:
- In some cases an entity might determine that observable inputs to a market approach valuation technique require significant adjustment and thus are ultimately considered unobservable or Level 3 inputs. The entity might then conclude that an income approach valuation technique that uses management's internal assumptions about market participants' expectations of cash flows is equally or more representative of fair value. However, regardless of the valuation technique used, entities must include appropriate adjustments that market participants would make for risks, such as nonperformance and liquidity.
- A fair value measurement represents the price at which a transaction would occur between market participants at the measurement date. As discussed in paragraph 30 of Statement 157, in situations in which there is little, if any, market activity for an asset or liability at the measurement date, the fair value measurement objective remains the same, that is, an exit price from the perspective of a market participant.
- Broker quotes or pricing services may be a relevant input when measuring fair value, but not necessarily determinative if an active market does not exist for the security. In weighing a broker quote as an input to fair value, an entity should place less reliance on quotes that do not reflect the result of market transactions.
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There is more information in the Handout for Observers at the FASB Meeting (PDF 46k) beginning on page 7. The proposed FSP is now posted on FASB's Website. The planned one-week comment period will end on 9 October 2008, and the FASB expects to meet on 10 October 2008 to discuss comments received and vote on final guidance. The guidance would be effective on issuance. Any resulting changes in fair value measurements would be reflected in current profit or loss rather than by restating prior period financial statements.
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3 October 2008: EC President Barroso comments on global financial crisis
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At a press conference in Brussels on 1 October 2008, European Commission President Jose Manuel Barroso
commented on the global financial crisis, including accounting implications: "We must refine the rules on the evaluation of complex assets. This includes adapting our accounting rules to a new situation. In particular if other markets also apply changes, we don't want EU banks in a situation of disadvantage as compared to banks for other markets." He also seemed to support a proposal that has been sent to the European Commission by French President Nicolas Sarkozy to modify or suspend the mark-to-market accounting requirements for some financial assets of banks. Click to:
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3 October 2008: US FAF express concern about legislating accounting standards
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Robert E Denham, chairman of the Financial Accounting Foundation (FAF) under which the FASB operates, has written to the leadership of both houses of the US Congress and to other key US government officials expressing grave concerns about the possibility of legislation that would overturn FASB Statement 157 Fair Value Measurements. The FAF urges Congress to reject proposals that would threaten the independent accounting standard setting process. Click to Download Mr Denham's Letter (PDF 43k). Here is an excerpt:
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We are very concerned about the current efforts of some to legislate the suspension of one of the FASB's standards, Statement 157 on fair value measurements. We believe that any legislative effort to overturn a FASB standard will greatly undermine investor confidence. We believe that once Congress starts setting accounting standards through its political process, the integrity of US accounting standard setting and the credibility of US financial reporting will be greatly compromised.
If Congress sends the message that special interests, through legislation, are able to overturn expert accounting judgement arrived at through an open and thorough due process, necessary and timely improvements in financial reporting will likely become impossible and the best interests of participants in the capital markets will not be served.
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3 October 2008: IAASB issues seven revised International Standards on Auditing
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The International Auditing and Assurance Standards Board (IAASB) has issued seven revised International Standards on Auditing (ISAs). Some of the standards released today have been substantively revised, while others have been redrafted to apply the IAASB's new 'clarity' drafting conventions.
The seven newly revised International Standards on Auditing (ISAs) are:
- ISA 200 (Revised and Redrafted) Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with International Standards on Auditing. This fundamental ISA:
- contains an overview of an audit to aid in understanding its purpose and scope;
- defines the respective authority of the requirements and guidance in ISAs;
- contains the most fundamental requirements for auditors; and
- emphasises the importance of sound and consistent professional judgment by the auditor, and the necessity for sufficient audit evidence to support the auditor's opinion.
- ISA 320 (Revised and Redrafted) Materiality in Planning and Performing an Audit;
- ISA 450 (Revised and Redrafted) Evaluation of Misstatements Identified during the Audit;
- ISA 530 (Redrafted) Audit Sampling;
- ISA 610 (Redrafted) Using the Work of Internal Auditors;
- ISA 705 (Revised and Redrafted) Modifications to the Opinion in the Independent Auditor's Report; and
- ISA 706 (Revised and Redrafted) Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor's Report.
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Click for IFAC Press Release (PDF 24k).
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3 October 2008: EC will propose to exempt 'micros' from Accounting Directives
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Charlie McCreevy, European Commissioner for the Internal Market and Services, has Announced (PDF 83k) that he will propose a Member State option to exempt micro entities from the Fourth and Seventh Council Directives (78/660/EC and 89/349) and also that the Commission will launch a review of the Accounting Directives for small businesses. |
3 October 2008: IFRS in Real Estate from Deloitte USA
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Deloitte (United States) has published IFRS in Real Estate: More Than Just Accounting and Reporting. This publication provides practical industry insights on IFRS for real estate executives and includes useful sections on:
- IFRS challenges and opportunities in the real estate industry
- Implications of IFRS for financial reporting, tax, human resources, mergers and acquisitions, information technology, and treasury
- Key action steps for real estate executives
- Approaches to IFRS conversion
- Key differences between IFRS and US Generally Accepted Accounting Principles for the real estate industry
Click to download IFRS in Real Estate: More than Just Accounting and Reporting (PDF 438k). |
3 October 2008: IASC Foundation publishes Guide through IFRSs
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The IASC Foundation has published A Guide through International Financial Reporting Standards. This large volume (approximately 2,900 pages) provides the complete and up-to-date consolidated text of IFRSs with extensive cross-references and other annotations. It covers all IFRSs and IASs, IFRIC and SIC Interpretations, and IASB-issued supporting documents – illustrative examples, implementation guidance, bases for conclusions, and dissenting opinions – approved by the IASB at 1 July 2008. Other annotations to IFRSs in the Guide include IFRIC agenda decisions and clarifications.
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This Guide identifies the interrelationship between paragraphs and sections of each IFRS and the IASB issued accompanying material. For instance, when reading a particular paragraph or section of IFRSs, the text answers the question: which paragraphs of this IFRS, other IFRSs and accompanying material help me understand this paragraph better? It also provides some explanatory annotations and includes the text of relevant IFRIC agenda decisions.
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2 October 2008: AICPA CAQ has concerns about accounting sections of 'bailout bill'
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The United States Senate has passed (vote 74 to 25) a version of the so-called 'Financial Institutions Bailout Bill' (PDF 596k). The House of Representatives (which previously rejected a version of the bill) will consider a similar bill tomorrow. In our News Story of 29 September 2008, we identified two sections of the House's draft bill that relate to fair value measurement issues:
- Sec. 132. Authority to suspend mark-to-market accounting
- Sec. 133. Study on mark-to-market accounting
Those two sections remain in the version of the bill that the Senate voted on yesterday. On 30 September 2008, the Center for Audit Quality (CAQ) of the American Institute of CPAs (AICPA) sent a Letter to All Members of Congress (PDF 61k) stating that 'proposals advocating suspension of mark-to-market (or fair value) accounting are not in the best interest of investors or the capital markets and should be rejected'. The letter states:
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The principles of mark-to-market accounting are rooted in the fundamental virtue of transparency and are central to informed market decisions and efficient allocation of capital. In our view, investor confidence would be undermined by efforts designed to mask the actual value of financial assets at a given point in time.
It is important to underscore that mark-to-market accounting has contributed positively to revelations about the severity of the economic crisis facing our country's credit markets and certain institutions, but it did not create the economic crisis.
Recently, some have suggested that the Securities and Exchange Commission or the Financial Accounting Standards Board should suspend the application of mark-to-market or fair value accounting or somehow impose a moratorium on mark-to-market requirements for certain financial institutions when preparing financial statements to be used by investors.
Although determining fair values for financial instruments in an illiquid market can be challenging, the best estimate of the prices that would be received for such instruments in orderly transactions occurring at the measurement date remains the most relevant information for investors and policymakers. To lessen the uncertainties about the value of these securities, it is critical that investors continue to have the insight provided by the application of mark-to-market accounting principles.
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Views similar to the CAQ's were expressed publicly by the CFA Institute and the Council of Institutional Investors.
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2 October 2008: EFRAG report – 14 IASB pronouncements await EU endorsement
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The European Financial Reporting Advisory Group (EFRAG) 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 1 October 2008 (PDF 88k). Currently, there are 14 IASB pronouncements that have not yet been endorsed for use in Europe, as follows:
- IFRS 1 and IAS 27 Cost of an Investment in a Subsidiary, Jointly-Controlled Entity, or Associate
- IFRS 2 Share-based Payment: Vesting Conditions and Cancellations
- IFRS 3 Business Combinations (2008)
- IAS 1 Presentation of Financial Statements (revised September 2007)
- IAS 23 Borrowing Costs (revised March 2007)
- IAS 27 Consolidated and Separate Financial Statements (2008)
- IAS 32 and IAS 1 Amendments for Puttable Instruments and Obligations Arising on Liquidation
- IAS 39 Amendments for Eligible Hedged Items
- 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
- IFRIC 15 Agreements for the Construction of Real Estate
- IFRIC 16 Hedges of a Net Investment in a Foreign Operation
- Improvements to IFRSs – 2007 (affects various standards)
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2 October 2008: Deloitte Alert on proposed FASB FSP on FV measurement
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Deloitte (United States) has published an Alert on a proposed FASB Staff Position (FSP) that would amend FASB Statement 157 Fair Value Measurements to provide guidance on measuring fair values (FV) in illiquid markets. Deloitte Financial Reporting Alert 08-12 (PDF 34k) points out that the FSP will not change the measurement principles in FAS 157 but will provide guidance for applying those principles in inactive markets by elaborating on the guidance that the SEC and FASB Issued Jointly on 30 September 2008 (see our Earlier News Story). Examples will be added to FAS 157 on:
- How entities' internal (entity-specific) assumptions should be considered in the measurement of FV for a financial asset when relevant market data does not exist.
- How observable market information in an inactive market affects FV measurements.
- How entities should consider the use of broker quotes or pricing services when assessing the relevance of inputs available to measure FV.
FASB will expose the proposed FSP for comment by the end of this week, with comments due by 9 October 2008. FASB plans to finalise the FSP on 10 October 2008, with an immediate effective date (including for financial statements for periods ending 30 September 2008 that have not yet been issued). Regarding transition, any changes in fair value would be included in an entity's financial results; retrospective application of the guidance to prior periods would be prohibited.
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1 October 2008: Webcast will address tax implications of IFRSs
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Deloitte (Asia-Pacific) will present a webcast on Tax Accounting: The Past, the Present and the Future
from 12:00 noon to 13:00 Hong Kong time (GMT +8) on 11 December 2008. The webcast will focus on three topics:
- Lessons learned during the year since FIN 48 was implemented.
- Other tax accounting updates, including how FIN 48 will impact non-public companies.
- Issues companies should consider as more countries adopt International Financial Reporting Standards.
Click here for More Information and to Register for the Webcast.
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1 October 2008: Joint SEC-FASB guidance on fair value measurements
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The US SEC's Office of the Chief Accountant and the FASB staff have jointly issued a press release containing questions and answers aimed at clarifying fair value measurement practices in the current environment. They issued this guidance pending the completion by FASB of additional interpretative guidance about the requirements of FASB Statement No. 157 Fair Value Measurements in illiquid markets.
The joint press release contains answers to the following questions:
- Can management's internal assumptions (eg, expected cash flows) be used to measure fair value when relevant market evidence does not exist?
- How should the use of 'market' quotes (eg, broker quotes or information from a pricing service) be considered when assessing the mix of information available to measure fair value?
- Are transactions that are determined to be disorderly representative of fair value? When is a distressed (disorderly) sale indicative of fair value?
- Can transactions in an inactive market affect fair value measurements?
- What factors should be considered in determining whether an investment is other-than-temporarily impaired?
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Click for the Joint Press Release (PDF 25k). FASB has announced a change to the Agenda of its 1 October 2008 Meeting to consider a draft FASB Staff Position that would provide additional measurement guidance on FAS 157.
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