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31 March 2009: IASB proposes a new income tax standard
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The IASB has invited comment an exposure draft proposing to replace IAS 12 Income Taxes with a new standard. The proposed standard (set out in ED/2009/2 Income Tax) retains the basic IAS 12 approach to accounting for income tax, known as the temporary difference approach. The objective of that approach is to recognise now the future tax consequences of past events and transactions, rather than waiting until the tax is payable or recoverable. Although the proposed standard retains the same principle, the IASB proposes to remove most of the exceptions in IAS 12, to simplify the accounting and strengthen the principle in the standard. In addition, the IASB proposes a changed structure for the standard that will make it easier to use. Comments on the exposure draft are due by 31 July 2009. The proposal also more closely aligns international standards with FASB Statement 109 Accounting for Income Taxes. Click for IASB Press Release on Income Tax (PDF 101k).
Proposals to change IAS 12 include:
- A new definition of tax basis: 'the measurement under applicable substantively enacted tax law of an asset, liability, or other item'.
- Tax basis determined assuming recovery of the carrying amount of the asset by sale, rather than management expectation of sale or use.
- Deferred tax not recognised on initial recognition of an asset or liability whose recovery or settlement will have no effect on taxable profit.
- Revised definitions of tax credit and investment tax credit.
- On initial measurement, assets and liabilities that have tax bases different from their initial carrying amounts are disaggregated into (a) an asset or liability excluding entity-specific tax effects and (b) any entity-specific tax advantage or disadvantage. An entity would recognise and measure the former in accordance with IFRSs and recognise a deferred tax asset or liability for any resulting temporary difference between the carrying amount and the tax basis. If the consideration paid or received differs from the total recognised amounts of the acquired assets and liabilities (including deferred tax), an entity recognises the difference as an allowance against, or premium on, the deferred tax asset or liability.
- The exception from recognising a deferred tax asset or liability arising from investments in subsidiaries, branches, associates and joint ventures will be restricted to investments in foreign subsidiaries, joint ventures or branches (no exception for associates).
- Deferred tax assets would be recognised in full, with a valuation allowance to reduce the carrying amount to the highest amount that is more likely than not to be realisable. This is the FASB SFAS 109 approach. Under IAS 12 currently these are netted.
- Uncertainty would be reflected by measuring current and deferred tax assets and liabilities using the probability-weighted average amounts of possible outcomes assuming that the tax authorities will examine the amounts reported to them by the entity and have full knowledge of all relevant information.
- Where different tax rates apply to distributed and undistributed profits, current and deferred tax assets and liabilities would reflect the entity's expectations of future distributions.
- Income tax expense would be allocated to the components of comprehensive income and equity using a SFAS 109 approach.
- Deferred tax assets and liabilities would be classified as either current or non-current based on how the related non-tax asset or liability is classified. This would amend IAS 1, which currently treats all deferred tax to be classified as non-current.
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31 March 2009: IASB issues derecognition exposure draft
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The IASB has invited comment an exposure draft of proposals to improve the IAS 39 requirements for derecognition of financial instruments. Derecognition means removing a financial instrument from an entity's financial statements. This occurs if the entity no longer controls a financial asset or no longer has an obligation to settle a financial liability. The IASB is also proposing to enhance the disclosures currently in IFRS 7, especially in situations where an entity continues to have an ongoing involvement in a financial asset that would be derecognised under the proposals. The derecognition exposure draft (ED/2009/3 Derecognition) is part of the IASB's comprehensive review of off-balance sheet activities; in December 2008, the IASB published ED 10 on Consolidation to tighten the requirements for identifying which entities a company controls, and therefore consolidates. The IASB will hold public roundtables to seek wider views on its derecognition and consolidation proposals (dates to be announced). Comments on the derecognition exposure draft are due by 31 July 2009. Click for IASB Press Release on Derecognition (PDF 22k).
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Brief summary of the proposals:
The proposed amendments would replace the approach to derecognition of financial assets in IAS 39 with an approach that is similar in that
- (a) it uses the same criteria for when a transferred part of a financial asset qualifies to be assessed for derecognition (with some additional guidance to address known application issues);
- (b) it uses a test of control (although unlike IAS 39 that test has primacy); and
- (c) many of the derecognition outcomes will be similar (the notable exceptions being transfers, such as repurchase agreements, involving readily obtainable financial assets).
However, the proposed approach is different from IAS 39 in that it does not combine elements of several derecognition concepts but rather focuses on a single element (control). As a result, unlike IAS 39, the proposed approach does not have:
- (a) a test to evaluate the extent of risks and rewards retained;
- (b) specific pass-through requirements; or
- (c) a requirement for a transferor (in a transfer that fails derecognition) to recognise and measure a financial asset to the extent of its continuing involvement.
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31 March 2009: 2008 IFRS compliance questionnaire in Spanish
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Deloitte Colombia has translated into Spanish the IFRS Compliance Questionnaire for 2008. The questionnaire summarises the recognition and measurement requirements in IFRSs at 31 October 2008, to assist in considering compliance with those pronouncements. It is not a substitute for your understanding of such pronouncements and the exercise of your judgment. Users of the questionnaire are presumed to have a thorough understanding of the pronouncements and should refer to the text of the pronouncements, as necessary, in considering particular items in this questionnaire. The items in this questionnaire are referenced to the applicable sections of the IFRSs. Click to download:
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31 March 2009: Heads Up on IASB-FASB leases discussion paper
31 March 2009: Deloitte Canada Countdown IFRS transition newsletters
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Deloitte Canada has published the March 2009 issue of their Countdown IFRS transition newsletter, to discuss practical issues Canadian companies are facing in IFRS transition as well as to provide an update on recent IFRS events. Articles in this issue include:
- IFRS disclosures in management discussion and analysis (MD&A)
- The 'Real Deal' – implementation of the financial instruments standards
- Deloitte IFRS publications and events
- International Round-up
Click below for:
You will find more information about financial reporting in Canada on our Canada Page.
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31 March 2009: Comment deadline – Financial Crisis Advisory Group
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We remind you that comments are due on 2 April 2009 on Request for Input from the Financial Crisis Advisory Group (FCAG). FCAG is seeking responses to a set of questions to assist the FCAG in discussing accounting and reporting matters related to the financial crisis and making recommendations thereon to the IASB and the FASB.
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31 March 2009: Introduction to IFRSs (Danish)
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Deloitte Denmark has published IFRS – Introduction to International Financial Reporting Standards (Introduktion til de internationale regnskabsstandarder). This 314-page book, in the Danish language, summarises each IFRS/IAS together with relevant interpretations (IFRIC/SIC) as well as the main differences between IFRS and Danish GAAP. The publication also includes a short introduction to key factors in a successful conversion to IFRSs as well as helpful checklists on key differences between IFRSs and Danish GAAP and on Danish accounting rules that must be applied even if the company is reporting under IFRSs. Click here to download IFRS - Introduction to International Financial Reporting Standards in Danish (PDF 5.015mb). To order a printed copy (ISBN: 978-87-89152-00-4) please send an email to ifrs-publikationer @ deloitte.dk.
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28 March 2009: New IAS 34 Interim reporting guide and checklist
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Deloitte's IFRS Global Office has published an updated 76-page guide to IAS 34 Interim Financial Reporting, as well as a checklist of the requirements of IAS 34 formatted to allow the recording of a review of interim financial statements, with a place to indicate yes/no/not-applicable for each item.
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27 March 2009: New IAESB education handbook
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The International Accounting Education Standards Board (IAESB) has released the 2009 edition of its Handbook of International Education Pronouncements. The Handbook contains the IAESB's eight International Education Standards (IESs), including the IAESB Framework for International Education Pronouncements and Introduction to International Education Standards, as well as three International Education Practice Statements. The handbook can be downloaded free of charge in PDF format from the IFAC Online Bookstore www.ifac.org/store. Printed copies can be ordered now for shipment in early April.
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27 March 2009: Stay Tuned Online – IFRS and UK GAAP updates
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The Deloitte London IFRS Centre of Excellence is running a series of hour-long Internet-based financial reporting updates, aimed at helping finance teams keep up to speed with IFRS and other financial reporting issues. Each update lasts no more than an hour, and sessions are held three times a year, approximately at the end of March, July and November. We intend to make a recording of each session available on IAS Plus for a period of at least four months from the date of the presentation. The topics covered in the 26 March 2009 Stay Tuned Online IFRS and UK GAAP Update:
- latest developments in IFRSs
- three current IASB projects: consolidation, revenue recognition, leases
- IFRIC 17 Distributions of Non-cash Assets to Owners
- IFRIC 18 Transfers of Assets from Customers
- going concern and liquidity risk
- UK developments
To access the recording Click Here. There's a permanent link on our UK Country Page.
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26 March 2009: IFRIC 12 on service concessions endorsed for use in the EU
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The European Commission has endorsed IFRIC 12 Service Concession Arrangements for use in the European Union. In doing so, however, the mandatory effective date was changed from annual periods beginning on or after 1 January 2008 in IFRIC 12 to an entity's first financial year starting after 29 March 2009 in the EU-endorsed version, but with earlier adoption permitted. The endorsed version was published in the Official Journal of 26 March 2009 (PDF 73k).
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26 March 2009: CESR publishes summaries of IFRS enforcement decisions
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The Committee of European Securities Regulators (CESR) has published its fifth batch of extracts from its confidential database of enforcement decisions taken by EU national enforcers of financial information. From time to time, CESR publishes extracts of selected decisions as a source of information to foster appropriate and consistent application of IFRSs in the EU. Topics covered in batch #5 of CESR's extracts:
- Reclassification [the October 2008 reclassification amendment to IAS 39]
- Share based payment – fair value of employee share purchase plans
- Consolidation and control [also discontinued operations]
- Control by agreement
- Business combinations – reverse acquisitions
- Equity instruments [minority put options re financial liability]
- Equity instruments, preference shares [fair presentation override rejected]
Click to download this and earlier decision summaries:
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26 March 2009: Progress toward IFRSs in Taiwan
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In our News Story of 28 October 2008, we reported that the Taiwan Financial Supervisory Commission (FSC) announced that it would form a task force to study the adoption of IFRSs in Taiwan. Adoption details such as the timetable and the scope of applicability would be discussed and recommended by the task force. Since making that announcement the FSC has formed four task forces, dealing separately with:
- Translation of IFRSs
- IFRS implementation issues
- Regulation and governance issues
- IFRS promotion and training
Translation pre-work is now under way under the auspices of the standard-setter Accounting Research and Development Foundation. The Taiwan Stock Exchange (TSE) has taken the lead in IFRS implementation issues and has posted a large amount of IFRS-related information on its Website, though only in Chinese. GreTai Securities Market (Taiwan's over-the-counter market) is leading IFRS promotion and training. Jointly, the TSE and GreTai are sponsoring a series of seminars to promote the implementation of IFRSs. A decision on when IFRSs might be made mandatory has not yet been made, though it is expected to be around 2012 to 2014. The FSC is expect to announce a roadmap fairly soon.
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26 March 2009: IFRSs in Argentina starting 2011
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On 20 March 2009, the Federación Argentina de Consejos Profesionales de Ciencias Económicas (FACPCE), which is the national accounting standard setter in Argentina, approved the adoption of the IFRSs for the preparation and presentation of financial statements of entities whose debt or equity instruments are traded in a public securities market. FACPCE's Resolution – Resolución Técnica No 26: Adopción de las NIIF del IASB (PDF 64k) – states that the IFRSs issued by the International Accounting Standards Board (IASB), in the oficial Spanish translation issued by the IASB, must be applied – no local adaptations. As a consequence of this Resolution, entities whose securities do not trade in public markets will be permitted to use IFRSs if they choose to do so. The Resolution must be approved by the Comisión Nacional de Valores (CNV, the National Securities Comission), which is expected to do so in the second quarter of 2009. After approval by the CNV, the Resolution will be effective for financial statements for fiscal years starting on 1 January 2011 and for the interim financial statements of those fiscal years. The Resolution would adopt existing IFRSs, but it includes a commitment to adopt all future changes to IFRSs by future Resolutions.
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25 March 2009: New Chinese language IFRS website from Deloitte Taiwan
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Deloitte Taiwan has launched a new Chinese-language IFRS website www.deloitte.com.tw/ifrs/. The content includes IFRS-related news, newsletters, and articles. Parts of the site are still under development, including summaries of each Standard and Interpretation. In October 2008, the Taiwan Financial Supervisory Commission announced that it will form a task force to study the adoption of IFRSs in Taiwan. Adoption details such as the timetable and scope (public company or private company, consolidated or separate financial statements, etc) will be addressed by the task force.
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25 March 2009: European discussion paper on performance reporting
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EFRAG and the national standard-setters of Denmark, France, Germany, Italy, Poland, Spain, Sweden, and the UK have published a Discussion Paper on Performance Reporting (PDF 972k) under the PAAinE initiative. Broadly defined, performance is the relationship of the income and expenses of an entity. Traditionally entities reported their performance in an income statement. Under IAS 1(2007), entities report performance either in a single statement of comprehensive income (with a subtotal for traditional profit or loss) or in two statements, an income statement and a statement of comprehensive income. IAS 1 allows flexibility in formats of, and groupings and subtotals in, those statements. The IASB and the FASB have a joint Project on Financial Statement Presentation that encompasses performance reporting. In October 2008, they published a Discussion Paper proposing the structure and format of an entity's financial statements. The new PAAinE discussion paper acknowledges the joint IASB-FASB project but notes that:
There are a number of fundamental issues about the presentation of financial performance information that that discussion paper does not address. Those issues include:
- should the net income line be retained?
- (if it should be retained), what should the basis be for determining whether something is within net income or outside net income?
- what role should recycling have in performance reporting?
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The PAAinE paper observes that 'there is a clear need for one or more key lines to provide a basis for communication to the market and as a starting point for analysis and comparison'. The paper discusses the attributes such a key line needs to have if it is to fulfil this purpose. 'It is therefore important that items of income, expense, gains, and losses are disaggregated, grouped, and aggregated in a way that ensures that the most useful key lines are presented.' The paper notes that whether recycling is needed also depends on the aggregation/disaggregation model used. The final chapters of the paper discuss various disaggregation models. EFRAG invites comments on the paper by 30 September 2009.
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25 March 2009: IASC Foundation publishes briefing for chief executives
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The IASC Foundation has published the 2009 edition of IFRSs–A Briefing for Chief Executives, Audit Committees and Boards of Directors. These briefing notes provide summaries of all IFRSs issued at 1 January 2009 in non-technical language. It's specially prepared for senior non-financial executives, members of audit committees, company directors and others who want a broad overview of IFRSs and of the business implications of implementing them. Printed copies may be purchased from the IASCF Online Shop http://buy.iasb.org for £19 plus postage, with discounts available for academics/students, middle income and low income countries, and for multiple copies. The IASCF has mailed printed copies to its comprehensive subscribers. An electronic PDF version is available to eIFRS and comprehensive subscribers.
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25 March 2009: Chinese translations of newsletters on recent amendments to IFRSs
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Deloitte China has published Chinese translations of two IAS Plus Update newsletters on recent amendments to IFRSs:
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25 March 2009: FEE views on dynamic loan loss provisioning
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FEE, the Federation of European Accountants, has published a policy statement on dynamic loan loss provisioning for financial instruments. FEE's main messages are:
- If regulators allow entities to set up a dynamic provision for regulatory purposes, then part of non-distributable reserves in equity in the general purpose financial statements could be allocated as a buffer with proper note disclosures that the amount is determined in the prudential returns (by the regulatory rules);
- FEE is not supportive of any form of dynamic provisioning in general purpose financial statements affecting net assets or performance measures of the reporting entity;
- FEE encourages the IASB to provide further educative guidance and explanation as to how to conservatively apply IAS 39 for incurred losses since the incurred loss model is not equally applied by users in various territories;
- Any more fundamental change of general purpose financial reporting should be subject to in depth discussions and consultation, and the full due process would need to be followed;
- Any changes to financial reporting should be made at a global level to IFRSs to support comparability and maintain a level playing field.
Click to download the FEE Policy Statement: Dynamic Provisioning for Financial Instruments (PDF 270k)
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25 March 2009: IASB-FASB credit crisis update
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The International Accounting Standards Board and the US Financial Accounting Standards Board have announced further steps in response to the global financial crisis following their joint board meeting held in London on 23 and 24 March 2009. Building on work underway, the two boards have agreed to work jointly and expeditiously towards common standards that deal with off-balance sheet activity and the accounting for financial instruments. They will also work towards analysing loan loss accounting within the financial instruments project. Click for Joint Press Release (PDF 50k).
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25 March 2009: EFRAG TEG appointments
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The Supervisory Board of the European Financial Reporting Advisory Group (EFRAG) has approved the re-appointment. for one-year terms ending 31 March 2010, of the six members of the Technical Expert Group (TEG) up for rotation (marked with * below). It has also appointed a new member, Professor Araceli Mora, for two years. Here is the composition of the TEG as of 1 April 2009:
Voting members:
- Stig Enevoldsen, Auditor, Denmark - EFRAG TEG Chair
- Francoise Flores, Industry, France - EFRAG TEG Vice-Chair
- Mike Ashley*, Auditor, member of the UK ASB
- Alan Dangerfield*, Industry, Switzerland
- Catherine Guttmann*, Insurance Advisor, France
- Roberto Monachino, Banking specialist, Italy
- Araceli Mora, Professor, Spain
- Hans Schoen*, former Auditor, The Netherlands
- Thomas Seeberg*, Industry, Germany
- Anna Sirocka, Auditor, Poland
- Michael Starkie*, Industry, UK
- Carsten Zielke, User, Germany
Non-voting members:
- Liesel Knorr – German Accounting Standards Board
- Jean-Francois Lepetit – French CNC (standard setter)
- Ian Mackintosh – UK Accounting Standards Board
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25 March 2009: CEBS finds no improvement in bank transparency
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A study by the Committee of European Banking Supervisors (CEBS) about banks' transparenct about exposures affected by the financial crisis concludes that the 'disclosures made by 19 banks in their last quarter (4Q) and preliminary year-end (YE) reports do not show significant improvements compared to the information provided in the 2008 interim results'. There is still 'room for improvement' in qualitative disclosures about business models and risk management. And the study found that quantitative disclosures by some banks were 'somewhat less detailed than previously'. Click to Download the Report (PDF 125k).
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25 March 2009: Notes from day 2 of the IASB-FASB joint meeting
24 March 2009: Model IFRS financial statements for 2008 in German
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Deloitte (Germany) has published IFRS Musterkonzernabschluss Dezember 2008 – Model IFRS Financial Statements for 2008 in the German language (PDF 3,832k, 154 pages). Each item in the financial statements is cross-referenced to the relevant source in IFRSs. New for 2008 is the inclusion of IFRIC 11 through 14 and the reclassification amendment to IAS 39 and IFRS 7. Segment information is presented in two ways – using IFRS 8 (permitted but not mandatory for 2008) and using IAS 14 (must be followed if IFRS 8 is not elected). Pronouncements not yet endorsed in the European Union are identified. There are permanent links on our Model Financial Statements Page and on our Germany Page. Yesterday, we posted the German language IFRS Presentation and Disclosure Checklist for 2008.
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24 March 2009: Updated summary of IFRIC agenda rejections
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We have updated our Summary of Issues Not Added to IFRIC's Agenda to reflect the IFRIC's final decisions at its March 2009 meeting not to add the following topics to its agenda. Our summary now includes nearly 150 issues:
- IFRS 3: Customer-related intangible assets
- IAS 28: Potential effect of revised IFRS 3 and IAS 27 on the equity method
- IAS 32: Classification of puttable and perpetual instruments
- IAS 37 and IAS 38: Regulatory assets and liabilities
- IAS 39: Two derecognition issues
- IAS 39: Determining the discount rate for fair value measurements of financial instruments in inactive markets
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24 March 2009: Notes from day 1 of the IASB-FASB joint meeting
23 March 2009: New page for first-time adopters of IFRSs
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Many jurisdictions have announced plans to adopt IFRSs for the first time in the next few years, including Brazil, Canada, Chile, India, Japan, Korea, Malaysia, Mexico, Pakistan, and Sri Lanka, and it's under consideration in Argentina, Taiwan, and the United States. IAS Plus already has many resources aimed at first-time adopters of IFRSs. These resources are scattered on various pages of IAS Plus. We have created a new Page of IFRS Resources for First-time Adopters – bringing together a broad range of English-language resources that address issues relating specifically to first-time adoption of IFRSs. We have put a permanent link to this page on our Home Page in the column at the left under the heading 'Resources'.
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23 March 2009: Strategic choices in converting to IFRSs
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Deloitte (Canada) has published Strategic Choices on the Conversion to IFRS. This booklet identifies a broad range of issues that companies should consider – many of which are beyond accounting – in developing their plan for conversion to IFRSs. In Canada all publicly accountable profit-oriented enterprises must adopt IFRSs starting in 2011.
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23 March 2009: New checklist of standard-setting activities in Canada
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We have added a section to our Canada page with links to a Checklist of Standard-setting Activities in Canada. This checklist is a monthly newsletter from Deloitte (Canada) that briefly describes new rules and standards that affect financial reporting from Canadian standard-setters and regulators. This newsletter briefly describes those pronouncements and other regulatory and professional developments and indicates their effective date, transition application, and entities affected. There are hyperlinks to underlying details. We have posted the February 2009 issue:
We will continue to post new checklists as they are issued.
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23 March 2009: Heads Up on FASB's proposed fair value FSPs
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Deloitte (United States) has published an issue of the Heads Up newsletter dealing with FASB's two proposed Staff Positions (FSPs) dealing with guidance on fair value measurement and impairments of certain investments in debt and equity securities. The IASB has issued a Request for Views on the two FASB proposals. Click to Download the Heads Up Newsletter (PDF 118k), which is titled Guidance Proposed on Inactive Markets, Distressed Transactions, and Other-Than-Temporary Impairments.
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23 March 2009: Malta adopts special standard for small companies
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Malta has amended its Companies Act to adopt General Accounting Principles for Smaller Entities (GAPSE), a special standard that can be used by entities that meet several criteria, such as fewer than 250 employees, assets below €17.5 million, revenue below €35 million, not publicly traded, and not financial institutions. Since 1995, all limited liability companies in Malta, irrespective of size, have been required to prepare annual financial statements in accordance with IFRSs (IFRS as adopted by the EU for accounting periods commencing on or after 1 January 2008). Over the years this requirement was considered as becoming increasingly onerous for local smaller entities, and hence the initiative of the Malta Institute of Accountants to draw up GAPSE. GAPSE allows a historical cost option for all assets and liabilities but allows alternative measurement bases in particular circumstances. It contains significantly reduced disclosure requirements compared to IFRSs. We have updated our table of Use of IFRSs by Jurisdiction.
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23 March 2009: We do not support IASB's proposed consolidation model
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Deloitte has submitted a Letter of Comment (PDF 219k) on the IASB's exposure draft of Consolidated Financial Statements. We have reservations about the proposed new consolidation model and believe it requires rethinking and re-exposure. However we support immediate improvements to consolidation-related disclosures.
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The principles underlying the consolidation model proposed in the ED are not well established and the guidance within the ED is ambiguous and inconsistent in a number of
fundamental areas, not least of which in the failure to distinguish between 'power to control' and 'ability to control'. Without a clear definition of control, the resulting Standard will be difficult to interpret and apply on a consistent basis. As a consequence, the financial statements of groups will be less, not more, comparable and understandable. We do not believe that the ED in its current form is an improvement on existing IFRSs.
It is crucial that the Board responds on a timely basis to the global financial crisis and the recommendations of the Financial Stability Forum. We therefore believe that improved disclosure requirements should be issued as swiftly as possible. We are providing comments on specific aspects of the proposed disclosure requirements later in this letter. However, further work, including appropriate field testing, is required to adequately address concerns about the consolidation model itself. Once the results of such additional work has been analysed, we believe that the consolidation Standard should be re-exposed.
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All of our past letters of comment are Here.
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23 March 2009: European Council comments on IFRSs and IASB
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The European Council (the heads of state or government of the European Union member states) met in Brussels on 19-20 March 2009. The Report of the Meeting (PDF 216k) includes the following comments on IFRSs and the IASB:
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The magnitude and the underlying causes of the ongoing global financial and economic crisis demonstrate the need to reshape macroeconomic global management and the regulatory
framework for financial markets. Prudential rules, crisis management arrangements and the supervisory framework must be strengthened at the national, European and global levels.
Financial regulations should dampen rather than amplify economic cycles. The European Council urges the FSF, Basel Committee on Banking Supervision and Commission to accelerate their work and to swiftly submit appropriate recommendations. This should be complemented with a strong EU initiative in reviewing international accounting standards....
Improve prudential rules and accounting standards to mitigate their pro-cyclical effects and enhance the accountability of the International Accounting Standard Board, by further
reforming its governance and mandate.
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23 March 2009: IFRS presentation and disclosure checklist in German
23 March 2009: Agenda project pages updated
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We have updated the following pages on IAS Plus to reflect the discussions and decisions at the IASB's March 2009 meeting:
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22 March 2009: Reply to NY CPAs 'serious doubts' about IFRSs
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In its response to the SEC's proposed Roadmap, the New York State Society of Certified Public Accountants (NYSSCPA) argued against requiring US companies registered with the SEC to use IFRSs at this time. The NYSSCPA is the largest state CPA society in the United States. The NYSSCPA favoured, at a minimum, further SEC study or, as an alternative, vigorous efforts to converge FASB standards and IFRSs. One of the concerns expressed by the NYSSCPA was:
| 'Questions about the IASB's ability to weather political pressures raise serious doubts about its ability to issue high quality standards.' |
In support of that assertion, the NYSSCPA cited one example – the IASB's amendment of IAS 39 regarding Reclassifications of Financial Assets. Professor Stephen Zeff, co-author of Financial Reporting and Global Capital Markets – A History of the International Accounting Standards Committee 1973-2000, responded to the NYSSCPA as follows:
| 'Who has ever argued that, since the launch of U.S. standard setting in 1939, the setting of U.S. accounting standards has not been frequently influenced by such self-interests and politics? Who are we to avow that U.S. accounting standards have all been precisely as the standard setters (currently the FASB) preferred them to be, free of political interference?' |
Prof. Zeff's reply cites ten major examples of political interference in the United States, and he points out that his article titled 'The Evolution of U.S. GAAP: The Political Forces Behind Professional Standards published in two parts in the January and February 2005 issues of the NYSSCPA's own magazine, The CPA Journal, identifies many others. Prof Zeff concludes:
| 'Why, then, should the Society raise a "concern" about one or two instances so far of political interference in the IASB's standard setting? |
Click for:
*Posted with the kind permission of Prof Zeff.
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21 March 2009: IASB request for views on FASB proposals
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The IASB has published a request for views on proposals from the US Financial Accounting Standards Board (FASB) that deal with guidance on fair value measurement and impairments of financial instruments. Both of FASB's proposals are in the form of draft Staff Positions (FSPs) and are intended to provide additional application guidance on fair value measurement and to amend the impairment requirements for certain investments in debt and equity securities. The proposals are:
Though the proposed FSPs are a direct response to US-specific requests, the IASB believes that (in the light of its commitment to work jointly with the FASB to address issues arising from the financial crisis) it would be useful to seek the views of interested parties on the FASB's proposed FSPs before deciding whether to publish formal proposals for public comment. Any proposed changes in IFRSs will be subject to due process. You can Download the IASB Request for Views (PDF 61k) from the IASB website. The IASB would like to receive any views by 20 April 2009 by email to iasb @ iasb.org.
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21 March 2009: EITF Snapshot for March 2009
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We have posted the March 2009 edition of EITF Snapshot (PDF 84k)
summarising the 19 March 2009 meeting of FASB's Emerging Issues Task Force. EITF Snapshot, published by Deloitte & Touche LLP (USA), enables readers to identify relevant topics and to understand quickly the meeting's outcome. Past issues can be downloaded Here. This EITF Snapshot covers the following issue discussed by the EITF at the meeting:
- Issue 08-1 Revenue Arrangements With Multiple Deliverables – Tentative conclusion reached
- Issue 08-9 Milestone Method of Revenue Recognition – Consensus-for-exposure
- Issue 09-1 Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance – Consensus-for-exposure
- Issue 09-2 Research and Development Assets Acquired in an Asset Acquisition – Tentative conclusions reached
- Issue 09-3 Applicability of SOP 97-2 to Certain Arrangements That Include Software Elements – Tentative conclusions reached
Initial EITF consensuses (known as 'consensuses-for-exposure') are exposed for a comment period after ratification by the FASB. At its first scheduled meeting after the comment period, the EITF considers comments received and, as warranted, affirms its consensuses-for-exposure as final consensuses. Those consensuses are then provided to the Board for final ratification.
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21 March 2009: UK Financial Reporting Faculty
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The new Financial Reporting Faculty, launched by the Institute of Chartered Accountants in England and Wales in December 2008, has recruited its first 1,000 members. The Faculty, chaired by Deloitte partner Andy Simmonds, is open to all and offers free access to eIFRS, the ability to create and comment on topical issues through a blog platform, and substantial IFRS resources including a Standards Tracker which monitors and hotlinks to different versions of IFRS standards. More information at the Faculty Website.
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21 March 2009: Notes from day 5 of the March 2009 IASB meeting
20 March 2009: Notes from day 4 of the March 2009 IASB meeting
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The IASB is holding its March 2009 meeting at its offices in London from Monday through Friday, 16 to 20 March 2009. Among the key decisions on day 4 were:
- The IFRS for NPAEs will be issued without re-exposure, with 13 Board members indicating that they will vote affirmatively and one Board member indicating an intention to dissent.
- The IASB will not issue the FASB draft FSP FASB 157-e for comment; nor will it delay the issue of the ED on fair value measurement so that they can discuss it. The draft FSP and the IASB's activities related to it will be referred to in the Invitation to Comment.
Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the Meeting. |
19 March 2009: IASB publishes preliminary views on leases
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The International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) have published, for comment, a discussion paper (DP) Leases: Preliminary Views. Comments are requested by 17 July 2009. The DP is available on the 'Open for Comment' Section of the IASB Website. In the DP the IASB and the FASB propose a possible new model for lease accounting. The model is based on the principle that all leases give rise to liabilities for future rental payments and assets (the right to use the leased asset) that should be recognised in an entity's statement of financial position. Below are a few of the boards' preliminary views in the DP. Click for IASB Press Release (PDF 61k).
| Lessee Accounting |
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Recognition principle. For all leases, the lessee will recognise:
- an asset representing its right to use the leased item for the lease term (the 'right-of-use' asset)
- a liability for its obligation to pay rentals.
Components of a lease contract. A lessee would not recognise the components of a lease contract separately (such as options to renew, purchase options, contingent rental arrangements or residual value guarantees). Instead, the lessee would recognise:
- a single right-of-use asset that includes rights acquired under options; and
- a single obligation to pay rentals that includes obligations arising under contingent rental arrangements and residual value guarantees.
Measurement of the liability. The lessee's obligation to pay rentals should be measured initially at the present value of the lease payments (including a probability-weighted estimate of contingent rentals) discounted using the lessee's incremental borrowing rate. Subsequent measurement would be on an amortised cost basis.
Measurement of the asset. The lessee's right-of-use asset should be measured initially at cost. Cost equals the present value of the lease payments over most likely lease term (which might include renewal periods) discounted using the lessee's incremental borrowing rate. The lessee should amortise the right-of-use asset over the shorter of the most likely lease term and the economic life of the leased item.
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The discussion paper deals mainly with lessee accounting. However, it also describes some of the issues that will need to be addressed in a future proposed standard on lessor accounting.
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19 March 2009: New accounting alert from Deloitte New Zealand
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Deloitte New Zealand has published a What's New Alert (PDF 127k) that reviews all of the new and revised pronouncements that either are to be applied for the first time at 31 March 2009, or which may be early adopted at that date. The Alert also summarises a current exposure draft that may be approved with retrospective effective dates before an entity's financial statements for 31 March 2009 are authorised for issue. The Alert identifies two 'big picture issues' for March 2009:
- The impact of the 'credit crunch' on financial reporting, including such areas as fair value and impairment, classification of debt as current or non-current, foreign exchange exposures, and associated disclosure requirements.
- Whether piecemeal early adoption of the standards comprising 'the next wave of IFRS' should be considered, or left to a 'big bang' for 2009/10 periods. These include new or revised standards on segment reporting, borrowing costs, financial statement presentation, share-based payment, business combinations, and consolidated and separate financial statements.
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19 March 2009: Notes from day 3 of the March 2009 IASB meeting
18 March 2009: CEBS report on valuations of financial instruments
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The Committee of European Banking Supervisors
(CEBS) has published a report titled Assessment of Measures Taken with Respect to the Issues raised in the CEBS June 2008 Valuation Report (PDF 257k) evaluating the measures taken by the IASB and by banks 'to improve the valuation of complex and illiquid financial instruments with the aim to enhance the quality and the comparability of banks' financial statements'. With respect to measures taken by the IASB, the report concludes that:
- as a priority, the IASB should aim to address wider valuation-related issues such as impairment measurement of available-for-sale assets, treatment of Day 1 profits and losses and the determination of the effect of own credit risk and related disclosures;
- it should further clarify particular aspects of fair value measurement guidance; and
- clarifications should also be provided regarding all aspects of the reclassification of instruments containing embedded derivatives.
CEBS intends to review European banks' 2008 preliminary year-end financial reports and publish a report, by the end of March 2009, on the transparency of its accounting and adequacy of disclosures.
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18 March 2009: Fair value measurement added to IASB agenda
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The IASB has added to its meeting agenda for Thursday 19 March 2009 the topic of Fair Value Measurement. The Board will discuss how it wants to proceed with the draft IFRS on fair value measurements in view of the proposed FSP FAS 157-e Determining Whether a Market is Not Active and a Transaction is Not Distressed, published by the FASB on 17 March 2009 (see our news story immediately below).
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18 March 2009: FASB issues two mark-to-market proposals
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The US Financial Accounting Standards Board published for comment the two proposed FASB Staff Positions (FSPs) on fair value measurements and impairments of financial instruments that we mentioned in our News Story of 17 March 2009. Comment deadline on both is 1 April 2009. The IASB discussed drafts of these proposals at its Meeting Yesterday.
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18 March 2009: European consultation agenda includes mark-to-market
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The European Commission has begun a consultation on the improvement of supervision for the European financial services sector. As a first step, the Commission is inviting comments (due by 10 April 2009) on the Report of the High-level Group on Financial Supervision in the EU chaired by Jacques de Larosiere. The Commission has already endorsed the key principles in the report and intends to put forward, in June, a detailed plan for revising the European supervisory architecture. In the autumn, the Commission intends to bring forward legislative proposals on the new supervisory framework. Click for:
The report makes the following recommendation with respect to accounting:
Recommendation 4: With respect to accounting rules the Group considers that a wider reflection on the mark-to-market principle is needed and in particular recommends that:
- expeditious solutions should be found to the remaining accounting issues concerning complex products;
- accounting standards should not bias business models, promote pro-cyclical behaviour or discourage long-term investment;
- the IASB and other accounting standard setters should clarify and agree on a common, transparent methodology for the valuation of assets in illiquid markets where mark-to-market cannot be applied;
- the IASB further opens its standard-setting process to the regulatory, supervisory and business communities;
- the oversight and governance structure of the IASB be strengthened.
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In support of the recommendation, the report states:
The mark-to-market principle
73) The crisis has brought into relief the difficulty to apply the mark-to-market principle in certain market conditions as well as the strong pro-cyclical impact that this principle can have. The Group considers that a wide reflection is needed on the mark-to-market principle. Whilst in general this principle makes sense, there may be specific conditions where this principle should not apply because it can mislead investors and distort managers' policies.
74) It is particularly important that banks can retain the possibility to keep assets, accounted for amortised cost at historical or original fair value (corrected, of course, for future impairments), over a long period in the banking book - which does not mean that banks should have the discretion to switch assets at will from the banking to the trading book.
The swift October 2008 decision by the EU to modify IAS-39, thereby introducing more flexibility as well as convergence with US GAAP, is to be commended. It is irrelevant to mark-to-market, on a daily basis, assets that are intended to be held and managed on a long-term horizon provided that they are reasonably matched by financing.
75) Differences between business models must also be taken into account. For example, intermediation of credit and liquidity requires disclosure and transparency but not necessarily mark-to-market rules which, while being appropriate for investment banks and trading activities, are not consistent with the traditional loan activity and the policy of holding long term investments. Long-term economic value should be central to any valuation method: it may be based, for instance, on an assessment of the future cash flows deriving from the security as long as there is an explicit minimum holding period and as long as the cash flows can be considered as sustainable over a long period.
76) Another matter to be addressed relates to situations where assets can no longer be marked to market because there is no active market for the assets concerned. Financial institutions in such circumstances have no other solution than to use internal modelling processes. The quality and adequacy of these processes should of course be assessed by auditors. The
methodologies used should be transparent. Furthermore internal modelling processes should also be overseen by the level 3 committees, in order to ensure consistency and avoid competitive distortions.
77) To ensure convergence of accounting practices and a level playing-field at the global level, it should be the role of the International Accounting Standard Board (IASB) to foster the emergence of a consensus as to where and how the mark-to-market principle should apply – and where it should not. The IASB must, to this end, open itself up more to the views of the regulatory, supervisory and business communities. This should be coupled with developing a far more responsive, open, accountable and balanced governance structure. If such a consensus does not emerge, it should be the role of the international community to set limits to the application of the mark-to-market principle.
78) The valuation of impaired assets is now at the centre of the political debate. It is of crucial importance that valuation of these assets is carried-out on the basis of common methodologies at international level. The Group encourages all parties to arrive at a solution which will minimise competition distortions and costs for taxpayers. If there are widely variant solutions – market uncertainty will not be improved.
79) Regarding the issue of pro-cyclicality, as a matter of principle, the accounting system should be neutral and not be allowed to change business models – which it has been doing in the past by 'incentivising' banks to act short term. The public good of financial stability must be embedded in accounting standard setting. This would be facilitated if the
regulatory community would have a permanent seat in the IASB (see chapter on global repair).
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18 March 2009: Comment deadline on consolidation ED
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We remind you that comments are due on 20 March 2009 on the IASB's exposure draft Exposure Draft 10: Consolidated Financial Statements, which was issued on 18 December 2008. The exposure draft would strengthen and improve the requirements for identifying which entities a company controls and, therefore, must include in its consolidated financial statements.
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18 March 2009: Notes from day 2 of the March 2009 IASB meeting
17 March 2009: Two FASB proposals would ease mark-to-market
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At its meeting yesterday, the US Financial Accounting Standards Board agreed to propose two modifications to the US mark-to-market requirements for financial instruments:
- Determining when a market for an asset or a liability is not active and determining when a transaction is not distressed. The Board decided to provide additional guidance to help an entity determine whether a market for an asset is not active and when a price for a transaction is not distressed. The Board Meeting Handout (PDF 108k) describes the proposed model the Board agreed to. The model would require 'significant judgement'.
- Other-than-temporary impairments. The Board discussed proposed changes to the guidance for other-than-temporary impairments. Currently, an entity is required to assess whether it has the intent and ability to hold a debt instrument to recovery in determining whether an impairment is other than temporary. The proposed FSP would change that guidance as follows:
- If the entity intends to sell the instrument or it is more likely than not that it will be required to sell the instrument before recovering its cost basis, the entire impairment loss would be recognised in profit or loss as an other-than-temporary impairment.
- If the entity does not intend to sell the security and it is not likely that the entity will be required to sell the instrument before recovering its cost basis, only the portion of the impairment loss representing credit losses would be recognised in profit or loss. The balance of the impairment loss would be recognised as a charge to other comprehensive income. For most debt instruments, an entity would determine the impairment charge representing credit losses by using its best estimate of the impairment amount arising from an increase in the credit risk associated with the specific instrument. The impairment recognised in other comprehensive income would be amortised over the remaining life of a debt instrument prospectively. That amortisation would be recognised in other comprehensive income with an offset to the asset and would not affect profit or loss.
For both topics, the changes will be exposed as proposed FASB Staff Positions, comment deadline 1 April 2009, and would be effective for interim and annual periods ending after 15 March 2009. The proposed FSPs would be applied prospectively. The Board expects to discuss the comments it receives at its meeting on 2 April 2009.
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17 March 2009: Notes from day 1 of the March 2009 IASB meeting
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The IASB is holding its March 2009 meeting at its offices in London from Monday through Friday, 16 to 20 March 2009. Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the Meeting. Among other things, the Board agreed to:
- Amend IFRIC 9 Reassessment of Embedded Derivatives to exclude contracts with embedded derivatives acquired in a combination of entities or businesses under common control or the formation of a joint venture.
- Amend IFRIC 16 Hedges of a Net Investment in a Foreign Operation to allow entities to designate as a hedging instrument in a hedge of a net investment in a foreign operation an instrument that is held by the foreign operation that is being hedged.
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17 March 2009: FASB webcast on revenue recognition proposals
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The US Financial Accounting Standards Board will hold a live online webcast to discuss the joint IASB-FASB discussion paper (DP) Preliminary Views on Revenue Recognition in Contracts with Customers. The DP was published in December 2008. Comment deadline is 19 June 2009. The webcast will include an overview of the preliminary views of the FASB and the IASB from various perspectives. The webcast is free of charge, and viewers will be able to email questions to panelists during the event. An archive of the webcast will be put on FASB's website for access by the public. Details:
- Title of webcast: A Proposed Approach for the Recognition of Revenue
- Date and time: 27 March 2009, 1:00 PM to 2:00 PM (US EDT)
- Panelists: Kenny Bement, FASB project manager; Mark LaMonte, Senior Vice President, at Moody's Investors Service; Kevin McBride, Accounting Policy Controller, Intel Corporation; and Jeff Slate, partner with Ernst & Young, LLP. Moderator is FASB member Leslie Seidman,
- To register for the live or archived webcast: Click Here
- Information about the revenue recognition discussion paper: IAS Plus Revenue Recognition Page
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16 March 2009: 12 IFRSs 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 16 March 2009 (PDF 133k). Currently, 12 IASB pronouncements are awaiting European Commission endorsement for use in Europe, as follows:
Standards
- IFRS 1 First-time Adoption of IFRS – Restructured standard (2008)
- IFRS 3 Business Combinations (2008)
Interpretations
- IFRIC 12 Service Concession Arrangements
- IFRIC 15 Agreements for the Construction of Real Estate
- IFRIC 16 Hedges of a Net Investment in a Foreign Operation
- IFRIC 17 Distributions of Non-cash Assets to Owners
- IFRIC 18 Transfers of Assets from Customers
Amendments
- IAS 27 Consolidated and Separate Financial Statements (2008)
- IAS 39 Amendments for Eligible Hedged Items
- IAS 39 Amendments for Reclassification of Financial Assets
- IFRS 7 Amendment – Improving Disclosures About Financial Instruments
- IFRIC 9 and IAS 39 Amendment – Embedded Derivatives
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16 March 2009: IASCF trustees will meet 1-2 April in London
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The Trustees of the IASC Foundation, under which the IASB operates, will meet on Wednesday and Thursday, 1-2 April 2009, at the Crowne Plaza London - The City, 19 New Bridge Street, London EC4V 6DB. The portion of the meeting open to public observation begins at 10:45am on 1 April and continues for the rest of that day and for the morning of 2 April. The agenda for the public session is as follows:
London, 1-2 April 2009 (Public Session)
Wednesday 1 April 2009 (10:45 to 18:00)
- Review of IASB Work Programme (morning)
- Meeting with the Monitoring Board (afternoon)
Thursday 2 April 2009 (8:30am to Noon)
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14 March 2009: Deloitte Canada IFRS transition newsletter
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Deloitte Canada has published a special March 2009 issue of their Countdown newsletter on IFRS transition in Canada. This special edition provides a summary of the Exposure Draft Adopting IFRSs in Canada, II released on 12 March by the Canadian Accounting Standards Board (AcSB). This is the second IFRS-specific exposure draft released by AcSB and builds on the April 2008 exposure draft. Topics covered include:
- Incorporation of IFRSs into the Handbook
- Proposed definition of a publicly accountable enterprise
- Confirmation of the effective date of IFRSs
- Exposure of new introductory material for the Handbook
- Exposure of changes to IFRSs since the 2007 bound volume (which was exposed in ED I)
- IFRS 1 First-time Adoption of IFRSs
- Emerging Issues Committee (EIC) Abstracts
The comment period ends on 15 May 2009. The regular monthly issue of Countdown will be published later in March. Click below for:
Here are the two AcSB exposure drafts themselves:
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14 March 2009: FAF and FASB tell SEC to wait on IFRSs in USA
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The Financial Accounting Foundation, oversight body of the US Financial Accounting Standards Board, and the FASB have submitted a letter of comment on the US SEC's Roadmap for the Potential Use of Financial Statements Prepared In Accordance With International Financial Reporting Standards (IFRS) by U.S. Issuers. The Roadmap identifies several milestones that, if achieved, could lead to the required use of IFRS by US public companies in 2014, with optional use for some large companies as early as 2010. The FAF response to the SEC's proposed roadmap to IFRS in the United States is, essentially, perhaps in the future, but not yet – more study is needed. Even the optional early use of IFRS by large listed companies should not be permitted. The FAF and FASB question whether, at this point, IFRSs are 'high quality, sufficiently comprehensive, and workable for the U.S. environment'.
Here is an excerpt:
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In summary, while the FAF and the FASB continue to support strongly the ultimate goal of a single set of high-quality global accounting standards as part of a global financial reporting system, in our view, additional study is needed to better identify, understand, and evaluate the strengths, weaknesses, costs, and benefits of possible approaches the U.S. should take in moving toward that goal.
Thus, we reiterate our support for a study that would have as its focus a thorough analysis of the
issues identified by the SEC in the Roadmap as well as the issues outlined in this letter. Ideally,
the study would establish criteria to use in evaluating alternative paths toward the desired end,
consistent with a framework such as is embodied in the recent GAO report on financial
regulation.
We note that given the complexity and magnitude of the issues involved, the study may not yield
clear answers and that any decision about the path forward will involve tradeoffs. However, the
point of the study is to reduce uncertainty as much as possible so as to ensure that the ultimate
decision represents an effective path forward to achieving high-quality, internationally
comparable financial information that capital providers find useful for decision making in global
capital markets.
Finally, in this increasingly interconnected financial world, all investors, regardless of country,
benefit from high-quality financial information. Thus, as the SEC thoughtfully considers the
issues raised by the Roadmap and by the public debate generated through the comment process,
we remain committed to continuing to work closely with the IASB to improve both U.S. GAAP
and IFRS and to eliminate differences between them. We believe these joint efforts will improve
the quality of the standards and the comparability of financial information globally and will
advance the efforts toward a single set of high-quality global accounting standards.
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14 March 2009: IAS Plus Newsletters on recent amendments to IFRSs
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Deloitte's IFRS Global Office has published two IAS Plus Update Newsletters on recent amendments to IFRSs:
Past issues of all IAS Plus newsletters are Here.
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13 March 2009: Revised agenda for March 2009 IASB meeting
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The IASB has released a revised agenda for its March 2009 meeting (below). The session on Annual Improvements to IFRSs (previously scheduled for Tuesday 17 March) will now take place at 17:00h on Monday 16 March. Also, Financial Instruments Update has been added to the agenda on Tuesday morning 17 March. Further, representatives of the Board will meet with representatives of the European Financial Reporting Advisory Group on Monday 16 March from 11:00 to 13:00.
IASB Board Meeting Agenda
16-20 March 2009, London |
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Monday 16 March 2009
- Annual Improvements 2009
- IFRIC 9 Reassessment of Embedded Derivatives – Scope of IFRS 3 (as revised in 2008)
- IFRIC 16 Hedges of a Net Investment in a Foreign Operation – Amendment to the restriction on the entity that can hold hedging instruments
- IAS 39 Financial Instruments: Recognition and Measurement – Scope exemption for business combination contracts
Tuesday 17 March 2009
Wednesday 18 March 2009
Thursday 19 March 2009
Friday 20 March 2009 (morning only)
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13 March 2009: Coming soon – IFRS e-Learning in Spanish
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We are pleased to provide this early announcement that, within the next several months, Deloitte will be launching a Spanish version of the IFRS e-Learning site. The site will initially include Spanish versions of approximately 20 of the existing IFRS e-Learning modules, with the remaining modules being added as translation is completed. All will be publicly available without charge, in the public interest, accessible from IAS Plus. We already have a comprehensive page of Resources in Spanish.
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Es un placer anunciar anticipadamente que dentro de unos meses Deloitte lanzará la versión en español de la plataforma de formación IFRS e-Learning. La plataforma incluirá inicialmente las versiones en español de aproximadamente 20 de los módulos de IFRS e-Learning, siendo los restantes módulos añadidos cuando la traducción esté finalizada. Todo el material estará disponible y será de acceso gratuito, al ser de interés público, accesible a través de lAS Plus. Se dispone ya de una página con exhaustivo Material en Español.
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13 March 2009: IASB and ASBJ representatives meet
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Representatives of the Accounting Standards Board of Japan (ASBJ) and the International Accounting Standards Board (IASB) met in Tokyo on 11-12 March 2009 to discuss convergence of Japanese GAAP and IFRSs. Among other things, the discussion covered the Draft Interim Report Application of International Financial Reporting Standards in Japan issued in February 2009 by the Planning and Coordination Committee of the Business Accounting Council regarding potential use of IFRSs by listed companies in Japan. The Draft Interim Report proposes that some listed companies could be permitted to use IFRS on a voluntary basis from the fiscal year ending 31 March 2010, with a decision on broader, mandatory use made in 2012. Click for:
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13 March 2009: FASB chairman's comments on mark-to-market
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FASB Chairman Robert H Herz testified on 12 March 2009 about mark-to-market accounting for financial instruments before the U.S. House of Representatives Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises. Mr Herz stressed the importance of unbiased accounting standards to capital market investors. Click for:
Here is an excerpt from Mr Herz's testimony:
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While sound and transparent reporting can have economic consequences, including potentially leading to procyclical
behavior, it is not the role of accounting standard setters or general-purpose external reporting to try to dampen or counter such effects. Highlighting and exposing the deteriorating financial condition of a financial institution can result in investors deciding to sell their stock in the entity, in lenders refusing to lend to it, to the company trying to
shed problem assets, and to regulators and the capital markets recognizing that the institution may be in danger of failing and need additional capital....
The fact that fair value measures have been difficult to determine for some illiquid instruments is not a cause of current problems, but rather a symptom of the many problems that have contributed to the global crisis, including lax and fraudulent lending, excess leverage, the creation of complex and risky investments through securitization and derivatives, the global distribution of such investments across rapidly growing unregulated and opaque markets that lack a proper infrastructure for clearing mechanisms and price discovery, faulty ratings, and the absence of appropriate risk management and valuation processes at many financial institutions. Many of the complaints about fair value also seem to arise in the context of its impact on capital adequacy. As previously noted, while the consideration of the impact of fair value accounting on bank regulatory capital is a very important issue, it is beyond the purview of the FASB.
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12 March 2009: Three Deloitte IFRS newsletters in Spanish
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Deloitte (Colombia) has published the Spanish translations of the following three newsletters:
Newsletter on Revenue Recognition Discussion Paper
Newsletter on IFRIC 18 Transfers of Assets from Customers
Global IFRS and Offerings Services Newsletter
These and other Spanish resources are on our Pagina de Recursos en Español.
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12 March 2009: IFRS on embedded derivatives on reclassification
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The IASB has amended IFRIC 9 and IAS 39 to clarify the accounting treatment of embedded derivatives for entities that make use of the Reclassification Amendment issued by the IASB in October 2008. The reclassification amendment allows entities to reclassify particular financial instruments out of the 'fair value through profit or loss' category in specific circumstances. These amendments to IFRIC 9 and IAS 39 clarify that on reclassification of a financial asset out of the 'fair value through profit or loss' category, all embedded derivatives in the reclassified instrument have to be assessed and, if necessary, separately accounted for in financial statements. The amendments apply retrospectively and are effective for annual periods ending on or after 30 June 2009. Click for the IASB Press Release (PDF 22k).
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12 March 2009: We have concerns about related party proposals
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Deloitte has submitted a Letter of Comment (PDF 186k) on the IASB's exposure draft (ED) on Relationships with the State (Proposed amendments to IAS 24). The ED proposes to simplify the disclosure requirements that apply to state-controlled entities under the existing IAS 24 Related Party Disclosures. An excerpt from our letter:
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We agree that state-controlled entities may have difficulties in identifying all entities controlled, jointly controlled or significantly influenced by the same state. However, we are concerned that the proposed exemption as set out in the 2008 exposure draft is too broad. In addition, we have a number of concerns in relation to the revised definition of a related party.
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All of our past letters of comment are Here.
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11 March 2009: Witnesses at tomorrow's US Congress MTM hearing
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In our News Story of 8 March 2009 we reported that the US House of Representatives Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises will hold a hearing on 12 March 2009 on mark-to-market (MTM) accounting for financial instruments. The Subcommittee has now Announced the list of witnesses, which will include FASB Chairman Robert H. Herz:
Panel 1
- Mr. James Kroeker, Acting Chief Accountant, U.S. Securities and Exchange Commission
- Mr. Robert Herz, Chairman, Financial Accounting Standards Board
- Mr. Kevin Bailey, Deputy Comptroller for Regulatory Policy, Office of the Comptroller of the Currency
Panel 2
- Mr. Jeff Mahoney, General Counsel, Council of Institutional Investors
- Ms. Cindy Fornelli, Executive Director, Center for Audit Quality
- Mr. Thomas Bailey, Chairman, Pennsylvania Association of Community Bankers, and President and Chief Executive Officer, Brentwood Bank
- Mr. Lee Cotton, Past President, Commercial Mortgage Securitization Association
- Ms. Tanya Beder, Chairman, SBCC Group
- Mr. Robert D. McTeer, Distinguished Fellow, National Center for Policy Analysis
- The Honorable William Isaac, Chairman, The Secura Group of LECG (former chairman of the Federal Deposit Insurance Corp)
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11 March 2009: Comment deadline on related party ED
11 March 2009: CEBS invites comments on financial reporting
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The Committee of European Banking Supervisors (CEBS) has invited comments on proposed amendments to the Guidelines on Financial Reporting (FINREP). Comments are due 10 June 2009. CEBS will hold a public hearing on 27 May 2009 at its offices in London. The original FINREP was issued in December 2005 with the goals of increasing the comparability of financial information reported to different supervisors within the EU, increasing the cost-effectiveness of supervision across the EU, reducing reporting burden on cross-border credit institutions, and removing a potential obstacle to financial market integration. CEBS is proposing to amend FINREP to 'streamline financial reporting and achieve a greater degree of harmonisation'. Click for CEBS Press Release (PDF 20k). Information about the current version of FINREP may be found in our July 2007 Europe News.
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11 March 2009: Financial Crisis Advisory Group seeks input
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The Financial Crisis Advisory Group (FCAG) is seeking written input from constituents in the form of responses to seven questions, to assist the FCAG in discussing accounting and reporting matters related to the global financial crisis and making recommendations thereon to the IASB and the US FASB. The two boards established the FCAG to advise them about the role of accounting during the crisis and potential changes. The questions and procedures for submitting views may be found on IASB's Website and FASB's Website. Comment deadline is Thursday 2 April 2009. The FCAG has already met three times, and notes taken by Deloitte observers at those meetings may be found on our Credit Crunch Page.
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11 March 2009: Agenda for 23-24 March IASB-FASB joint meeting
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The International Accounting Standards Board will hold a joint meeting with the US Financial Accounting Standards Board on Monday and Tuesday, 23-24 March 2009, at the Crowne Plaza, London - The City Hotel, 19 New Bridge Street, London, EC4V 6DB. The meeting is open to public observation. Presented below is the agenda for the meeting.
IASB and FASB Joint Board Meeting Agenda
23-24 March 2009, London |
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Monday 23 March 2009 (afternoon only)
- Work Plan Review – Discussion of both Boards' work plans
- Financial Statement Presentation
- Consolidation and Derecognition
Tuesday 24 March 2009
- Financial Instruments – Comprehensive new standard
- Conceptual Framework
- Provisioning
- Fair value measurement
- Financial instruments with the characteristics of equity
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11 March 2009: Accounting legislation introduced in US Congress
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Proposed legislation – titled the Federal Accounting Oversight Board Act of 2009 and numbered as HR 1349 – has been introduced in the United States House of Representatives. The bill would establish a Federal Accounting Oversight Board (FAOB) that would be required to approve and oversee accounting principles and standards for the purposes of the financial reporting requirements of Federal financial regulatory agencies. The bill has been referred to the House Committee on Financial Services, which must decide whether to send it to the floor of the House for general debate and could amend it before doing so. Under the proposal, the FAOB would consist of five members:
- The Chairman of the Board of Governors of the Federal Reserve System (who would serve as FAOB chairman)
- The Secretary of the Treasury
- The Chairman of the Securities and Exchange Commission
- The Chairman of the Federal Deposit Insurance Corporation
- The Chairman of the Public Company Accounting Oversight Board
Click to Download HR 1349 as Introduced (PDF 178k). Here is the link to the Webpage to Follow Progress of the Bill. Below is an excerpt from the bill.
In approving and overseeing such accounting principles and standards, the FAOB shall consider –
- (A) the extent to which accounting principles and standards create systemic risk exposure for
- (i) the United States public;
- (ii) the United States financial markets; and
- (iii) global financial markets;
- (B) the extent to which various accounting principles and standards resolve questions concerning liquid and illiquid instruments;
- (C) whether certain accounting principles and standards should apply to distressed markets differently than well-functioning markets;
- (D) the balance between investors' need to know a value of a company or financial institution's balance sheet at any given time versus financial regulators' responsibility to examine a company or financial institution's capital and value on both a liquidation and going concern basis;
- (E) the accuracy and transparency of financial statements;
- (F) the ability of investors and regulators to accurately judge the current and long term financial condition of companies and financial institutions from their financial statements;
- (G) the need for accounting principles and standards to take into account the need for financial institutions to maintain adequate reserves to cover expected losses from assets held by such institution;
- (H) the extent to which accounting principles and standards can improve the usefulness of financial reporting by focusing on the characteristics of relevance and reliability and on the qualities of comparability and consistency;
- (I) the extent to which such principles and standards can be kept current to reflect changes in methods of doing business and changes in the economic environment; and
- (J) any other factors that the FAOB considers appropriate.
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11 March 2009: 11 IFRSs 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 6 March 2009 (PDF 131k). Currently, there are 11 IASB pronouncements are awaiting European Commission endorsement for use in Europe, as follows:
Standards
- IFRS 1 First-time Adoption of IFRS – Restructured standard (2008)
- IFRS 3 Business Combinations (2008)
Interpretations
- IFRIC 12 Service Concession Arrangements
- IFRIC 15 Agreements for the Construction of Real Estate
- IFRIC 16 Hedges of a Net Investment in a Foreign Operation
- IFRIC 17 Distributions of Non-cash Assets to Owners
- IFRIC 18 Transfers of Assets from Customers
Amendments
- IAS 27 Consolidated and Separate Financial Statements (2008)
- IAS 39 Amendments for Eligible Hedged Items
- IAS 39 Amendments for Reclassification of Financial Assets
- IFRS 7 Amendment – Improving Disclosures About Financial Instruments
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11 March 2009: New IFRS insurance accounting newsletter
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Deloitte (United Kingdom) has launched a new monthly newsletter focussing on the joint IASB and FASB project to develop a new global financial reporting standard for insurance. The IASB's project was begun by its predecessor, the IASC, and continued by the IASB. The IASB's first output was IFRS 4 Insurance Contracts – an interim standard, issued in 2004, aimed mainly at first-time adopters of IFRSs, with guidance on how existing IFRSs should be applied to insurance contracts. Since then, the IASB has been working on a new, comprehensive standard, with a discussion paper published in May 2007. In October 2008, the FASB decided to join in the IASB's insurance contracts project, with the goal of a single global insurance accounting standard. The goal is to publish an exposure draft for comment in the second half of 2009 and a final standard in 2011. The new Deloitte monthly newsletter will provide an update on progress being made by the IASB and FASB in their joint project. Click to download Issue #1 of the Insurance Accounting Newsletter (PDF 244k). We will include permanent links to download all issues of the newsletter on the IAS Plus Insurance Project Page.
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10 March 2009: 2009 Bound Volume is now available
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The IASB has published International Financial Reporting Standards 2009 Bound Volume in both printed and electronic formats. BV2009 presents in a single volume the latest authoritative version of IFRSs, including Interpretations and supporting documents – illustrative examples, implementation guidance, bases for conclusions, and dissenting views – as issued by the IASB at 1 January 2009. It also includes the IASC Foundation Constitution, the IASB Framework for the Preparation and Presentation of Financial Statements, the Preface to IFRSs, the Due Process Handbooks for the IASB and IFRIC, an updated glossary of terms, and a comprehensive index - 2,855 pages in all.
- Printed version. Printed copies of the 2009 IFRS Bound Volume (ISBN 978-1-905590-90-2) may be purchased from the IASB Web Shop for £60 each plus shipping cost. Discounts are available for academics/students, middle income and low income countries and for multiple copies. The IASB has already mailed printed copies to its Comprehensive Subscribers
- Electronic version. Electronic files of the 2009 IFRS Bound Volume are available in the eIFRS Online Subscriber Area of the IASB's website for access by both Comprehensive and eIFRS subscribers. The files can be viewed in HTML or PDF formats.
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9 March 2009: IASB 'Global Preparers Forum' on 26 March 2009
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The IASB will meet with representatives of companies that use IFRSs at a Global Preparers Forum on
Thursday 26 March 2009 from 10:00am to 16:30pm at the Board's offices, 30 Cannon Street, London. The purpose of the 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.
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Agenda for the Global Preparers Forum, 26 March 2009 |
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Morning (10:00-12:30):
Afternoon (13:15-16:30):
- IASB work plan
- Feedback on comment letters received for recent projects
- Specific jurisdiction developments (European Union/US/Asia)
- Credit crunch impact on IFRS
- Lessons to be learnt from 2008 calendar year end financial reporting
- Financial instruments December 2008 developments
- Impairment practicalities
- Dynamic provisioning
- Consolidated financial statements ED10
- Post retirement benefits
- Leasing
- Revenue recognition
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8 March 2009: US Congress is examining 'mark-to-market accounting'
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The US House of Representatives Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises will hold a hearing next week on mark-to-market accounting for financial instruments. The hearing will take place on 12 March 2009 beginning at 10:00am in Washington. The hearing notice states the purpose of the hearing as follows:
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To examine the mark-to-market accounting rules that many contend have exacerbated the current troubles in the financial industry and in the broader economy. The standard requires companies to value assets they hold at current market values. For assets that are frozen and have a diminished current market value but may recover value in the future, the standard has proven problematic. Companies are then forced to write-down billions in assets, which can lead to further write-downs elsewhere.
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In announcing the hearing, Congressman Paul E. Kanjorski, chairman of the subcommittee said:
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Illiquid markets have resulted in great difficulty in valuing sizable assets. Some have therefore complained about fair value accounting and sought to eliminate it. While companies need stability, investors still need accurate information. We therefore cannot allow for fantasy accounting that wishes away bad assets by merely concealing them. As a result, we will seek at this hearing to engage in a constructive, thoughtful conversation with a diverse range of viewpoints aimed at identifying fair-minded, incremental, and achievable fixes to this problem. In short, I want to find a way – within the existing independent standard-setting structure – to still provide investors with the information needed to make effective decisions without continuing to impose undue burdens on financial institutions. Each of our anticipated witnesses will have the opportunity to contribute as we all pursue consensus solutions together to this thorny, contentious issue.
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Click for the Hearing Notice (PDF 91k). The list of witnesses and prepared statements and testimony will be Available Here. In a Press Conference (PDF 161k) on 5 March 2009, Representative Barney Frank, chairman of the Committee on Financial Services, responded to a question on whether the Congress should act to suspend mark-to-market accounting as follows:
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I do not think it is a good idea for Congress to legislate accounting. You know, there is a principle that, if you think a subject should not be dealt with to some extent politically, you should not ask 535 politicians to decide it.
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8 March 2009: US concerns about 'incurred loss' provisioning
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In his remarks on Loan Loss Provisioning and Pro-cyclicality (PDF 35k) before the Institute of International Bankers on 2 March 2009, US Comptroller of the Currency John C. Dugan expresses concern about accounting standards that require banks to limit their loan loss provisions to 'incurred' losses rather than 'expected' losses. As a result, in Mr Dugan's view, 'loan loss provisioning has become decidedly pro-cyclical, magnifying the impact of the downturn'. Here is an excerpt from his remarks:
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Current accounting standards for loan loss provisioning, both here and abroad, are based on the so-called 'incurred loss' model. Under this model, a bank can reserve against a loan loss through a provision to the loan loss reserve only if that loss has been 'incurred', which means a loss that is probable and can be reasonably estimated. To meet that standard, banks have to document why a loss is probable and reasonably estimable, and the easiest way to do that is to refer to historical loss rates and the bank's own prior loss experience with the type of asset in question. Unfortunately, using historical loss rates to justify significant provisions becomes more difficult in a prolonged period of benign economic conditions when loss rates decline. Indeed, the longer the benign period, the harder it is to use acceptable documentation based on history and recent experience to justify significant provisioning. When bankers were unable to produce such acceptable historical documentation, auditors began to lean on them either to reduce provisions, or, in some circumstances, to take the extreme step of reducing the loan loss reserve by releasing so-called 'negative provisions' that counted as earnings.
Needless to say, banking supervisors, loving loan loss reserves as we do, did not like that result.
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8 March 2009: Agenda for 17-20 March 2009 IASB meeting
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The International Accounting Standards Board will hold its regular March 2009 meeting at the IASB's offices, 30 Cannon Street, London on Tuesday to Friday 17-20 March 2009. The meeting is open to public observation and is being webcast. Presented below is the agenda for the meeting. The Board will also hold a joint meeting with the US Financial Accounting Standards Board on Monday and Tuesday 23-24 March 2009 (agenda not yet released).
IASB Board Meeting Agenda
17-20 March 2009, London |
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Tuesday 17 March 2009
- Annual Improvements 2009
- IFRIC 9 Reassessment of Embedded Derivatives – Scope of IFRS 3 (as revised in 2008)
- IFRIC 16 Hedges of a Net Investment in a Foreign Operation – Amendment to the restriction on the entity that can hold hedging instruments
- IAS 39 Financial Instruments: Recognition and Measurement – Scope exemption for business combination contracts
- Revenue Recognition – Measurement issues
Wednesday 18 March 2009
Thursday 19 March 2009
Friday 20 March 2009 (morning only)
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7 March 2009: Global IFRS and Offerings Services newsletter
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We have posted Deloitte's US Reporting Newsletter for Non-US Based Companies February 2009 Edition – includes news through 15 February 2009 (PDF 241k). 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 this issue of the GIOS newsletter:
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IFRS Matters
- IFRS Matters
- IASB Proposes New Consolidation Standard
- IFRIC Issues Interpretation on Customer Contributions
- IASC Foundation Publishes 2009 IFRS XBRL Taxonomy for Public Comment
- IASB Re-exposes Proposed Standard on Related Parties
- Tips on Applying IFRS
- IFRS Tools
US GAAP Matters
- EITF Meeting Highlights
- FASB Issues Proposed Derivatives Implementation Guidance
- SEC Approves Revisions to Modernize Oil and Gas Reporting Requirements
- CAQ Issues White Paper on Loan Modifications
- FASB Issues Proposed FSP on Interim Disclosures About Fair Value of Financial Instruments
- AICPA Issues Draft Issues Paper on Alternative Investments
- AICPA Issues TPA on Prospective Unlocking
- SEC Issues Report on 21st Century Disclosure Initiatives
- SEC Extends Comment Period on IFRS Roadmap for U.S. Issuers
- The 'SEC Speaks in 2009' Conference
- SEC Issues Financial Reporting Manual
- Valuation Resource Group Discusses Four Topics at February 5 Meeting
- New Publication on SEC Comment Letters to Domestic Registrants
Regulatory Matters
- SEC Provides Temporary Exemptions for Eligible Credit Default Swaps
- SEC Issues Final Rule on Disclosures and Prospectus Delivery for Certain Mutual Funds
- SEC Issues Final XBRL Rule
Other Matters
- COSO, PCAOB, and CAQ Address Internal Controls
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7 March 2009: Third meeting of Financial Crisis Advisory Group
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The Financial Crisis Advisory Group (FCAG) was established by the IASB and US FASB in response to the recent global financial crisis. Its purpose is to advise both Boards about the role of accounting during the crisis and potential changes. The FCAG held its third meeting in New York on 5 March 2009. Presented below are the preliminary and unofficial notes taken by a Deloitte observer at the meeting. For related information please see our Credit Crunch Page.
IASB-FASB Financial Crisis Advisory Group Meeting
5 March 2009 |
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The Chairman of the FCAG, Harvey J. Goldschmid, kicked off the meeting by informing the panelists and observers that FCAG is looking for feedback from the community on certain questions/topics to discuss during its next meeting in London, scheduled for 20 April 2009. FCAG expects to post these questions/topics on its website www.fasb.org/fcag/index.shtml on Monday. The members of the FCAG discussed various topics, including issues that could not be discussed due to time constraint, during its previous meeting in February 2009. Noted below are highlights of the issues discussed.
Dynamic Provisioning
Chairman Goldschmid noted that this is probably the most important issue the group will discuss today. The discussion on this topic was centered on the discussion paper prepared by the FCAG. Highlights of this discussion paper were attached as Appendix A to the meeting handouts, which can be obtained from the FCAG's website www.fasb.org/fcag/fcag_mtg_handouts.shtml.
Certain members noted that the concept of dynamic provisioning has similar connotations as the incurred loss model, and the concept is based on actual losses statistically estimated over time. In addition, certain members also pointed out that the concept of dynamic provisioning is a regulatory rather than an accounting issue, and changing the accounting to meet regulatory requirements could have an adverse impact, leading to more cyclicality.
Members also pointed out that the current incurred loss model is broken since it does not recognise losses at the 'right time' and whether a new model, such as the current value model, would be a better depiction of economic reality.
Many panelists agreed with the general concept of dynamic provisioning. Mr. Leisenring stated that any discussion of dynamic provisioning should start with defining the term. Mr. Herz indicated that standard-setter concerns include insuring that there is objective methodology in determining reserves under dynamic provisioning. The group agreed that the FASB, IASB, and the Basel Committee of Banking Supervisors will create a working group to study the various issues/questions raised on dynamic provisioning, including looking at the appropriate provisioning method (that is, incurred loss, expected loss, dynamic provisioning, or fair value). In addition, it was also noted that this new working group would provide recommendations on the appropriate model by the end of this year.
Improvement and Simplification of Accounting and Reporting of Financial Instruments
Mr. Herz provided an update on Financial Instruments: Improvements to Recognition and Measurement, a joint project of the IASB and FASB. Mr. Herz noted that the Boards were looking for input from this group to help determine the objective of this joint project. Mr. Herz and fellow Board member, Ms. Seidman also pointed out that the Boards don't have the luxury of three to five years, which is a typical timeframe for major projects.
Members generally agreed with Mr. Herz's view regarding the timing of the proposed project and noted that the key to this joint project is to converge and simplify the accounting models for financial instruments.
The group discussed that moving to a full fair value model would pose significant challenges, and consistent with recommendations of the SEC MTM Report (released on 30 December 2008 in response to a congressionally mandated study), any move to a full fair value model should not be done without addressing exiting practice issues. Members discussed the benefits and potential downfall of having two models (for example, fair value and expected loss). The group generally agreed that given the nature and complex nature of financial instruments, achieving simplification would not be without its challenges. Therefore, the group agreed that consistency and convergence should be the focus. Further, the panelists agreed that this topic/issue be added to the list of items the new working group (being formed by the IASB, FASB and Basel Committee) would address.
Recognition of Gains/Losses Related to Entity's Own Indebtedness in Fair Value Measurement of Liabilities
The panel discussed the pros and cons of recording gains (or losses) in fair value measurements of liabilities due to a change in entities own indebtedness. The general consensus of the group was that gains (or losses) may be recognised in the fair value measurement of liabilities, if (a) the change in indebtedness was for a specific issuer, (b) such gains (or losses) were realisable, and (c) appropriately disclosed. The panelist discussed that for gains (or losses) to be realizable, the standard setters would have to establish certain criteria that should be met (for example, an entity has adequate cash to buy back debt and the counterparty is willing to sell it back, etc.).
Additional Guidance on Fair Value Measurements
The co-chairs of the FCAG highlighted the additional short-term projects undertaken by the FASB to address the application and disclosure guidance of FASB Statement No. 157. These projects include (a) application guidance on determining when a market for an asset or a liability is active or inactive; determining when a transaction is distressed; and applying fair value to interests in alternative investments, such as hedge funds and private equity funds, and (b) improving disclosures about fair value measurements, which will consider requiring additional disclosures on such matters as sensitivities of measurements to key inputs and transfers of items between the fair value measurement levels.
The panelists also discussed the need for regulatory action in building sound markets and noted that some of the problems we are facing today are due to opaque markets for unregulated financial instruments.
Off-Balance Sheet Items
The members discussed the FASB and IASB consolidation and derecognition project. The panelists stated that the complex structures created in the market place which were accounted for off-balance sheet were the key cause of the financial crisis. They encouraged the Boards to reach a common ground, which may include enhanced disclosures. The panel decided to discuss this topic in further detail during the April 20 meeting.
Governance and Due Process
The panelists agreed that the independence of the standard setters is vital to ensuring an unbiased and transparent standard setting process. The members agreed that even during emergency standard setting, consultation with constituents should be essential. However, they applauded the efforts taken by the FAF and IASCF and the establishment of the Monitoring Board.
This summary is based on notes taken by observers at the FCAG meeting and should not be regarded as an official or final summary.
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6 March 2009: IFRSs from a financial analyst's viewpoint
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The cover story of the Winter 2009 issue of The Investment Professional presents a range of viewpoints – primarily those of professional investors and analysts – on the benefits and shortcomings of requiring IFRSs for all US SEC registrants. The Investment Professional is the quarterly journal of The New York Society of Security Analysts, Inc (NYSSA). The article, The Hard Sell – SEC in a Quandary over Its Push for IFRS (PDF 551k), is copyright 2009 by NYSSA and is posted on IAS Plus with their kind permission. Here is a brief excerpt:
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The seemingly unstoppable juggernaut of US IFRS adoption has collided with the global financial crisis, one of the few barriers that may be capable of derailing the rush to a single international accounting standard. Adoption of IFRS in the US is now far from a given, and even the roadmap published by the US Securities and Exchange Commission in November 2008 has the potential to be sidetracked or possibly abandoned now that President Obama's administration has taken office....
From a philosophical standpoint, at the heart of the debate over IFRS adoption is the question of whether a global accounting standard is either feasible or desirable. Politically, IFRS is entangled in a change of administration in the US and the inevitable tug of war between corporations and standard setters over specific rules promulgated by the IASB. Economically speaking, the important issues involve tax questions, the costs involved in a transition to IFRS, and whether a global accounting standard will ultimately be more transparent and more valuable to investors and stakeholders.
Any mandate that would force publicly traded companies to adopt IFRS has implications far beyond technical accounting issues – the shift would virtually affect a company's entire operation. Investors need to get a handle on what the impact will be, how particular companies will handle the transition, and how their IFRS financial statements will diverge from their US GAAP statements.
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6 March 2009: Notes from the March 2009 IFRIC meeting
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The International Financial Reporting Interpretations Committee (IFRIC) met at the IASB's offices in London on Thursday 5 March 2009 (one day only). Presented below are the preliminary and unofficial notes taken by Deloitte observers at the meeting.
Notes from the IFRIC Meeting
5 March 2009 |
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 Update on IFRIC Projects Since November 2008 Meeting
The last IFRIC meeting was held in November 2008. The January 2009 IFRIC meeting was cancelled due to the small number of agenda items for discussion. Since the November 2008 IFRIC meeting, the Board and staff have taken several actions to progress in-process IFRIC related issues and to address a few new issues the Board felt required immediate attention. These are:
- IFRIC 9 – proposed consequential amendment to exclude from its scope embedded derivatives in contracts under common control and in the formation of joint ventures. The amendment to IFRIC 9 is expected to be finalised at the IASB meeting in March 2009.
- IFRIC 9 – reclassification of assets amendment. The amendment to IFRIC 9 was discussed during the February 2009 IASB meeting.
- IFRIC 14 – proposal to amend IFRIC 14 to eliminate an unintended consequence that arises from some voluntary prepayments to a defined benefit plan that is subject to a minimum funding requirement. The IFRIC 14 amendment was discussed by the IFRIC in a later session - refer to the notes below with regards to the tentative agenda decisions.
- IFRIC 16 – proposed amendment to remove the restriction which does not permit hedge accounting if the hedging instrument is held by the foreign operation that is being hedged.
- IFRIC 18 – approval of interpretation. The IASB approved IFRIC 18 Transfers of Assets from Customers at its January 2009 meeting.
Compliance Costs for REACH (European Commission Regulation Concerning the
Registration, Evaluation, Authorisation and Restriction of Chemicals)
At its November 2008 meeting, the IFRIC decided not to add this issue to its agenda.
The IFRIC directed the staff to identify the rights an entity acquires under REACH and the characteristics of REACH compliance costs that require an Interpretation. This information would permit the IFRIC to determine whether it can specify an appropriate scope for this project and, therefore, whether it should be added to the agenda.
The purpose of the discussion at the March 2009 IFRIC meeting is to decide whether this issue meets the criteria for being added to the IFRIC agenda.
The staff provided an analysis as to whether REACH costs meet intangible assets recognition criteria.
Identifiability
The staff believe that registration is a legal right as it is provided under EU law by an authority and, therefore, registration satisfies the identifiability criteria.
Control over a resource
The staff is of the view that the capacity of an entity to control the future economic benefits from the registration stems from legal rights provided under EU law by an authority. Once registration is completed the authority cannot arbitrarily withdraw the registration. Third parties do not have free access to the testing data.
Existence of future economic benefits
The staff is of the view that registration would meet the existence of future economic benefits criterion in two ways:
- Future economic benefits result from registration because registration allows the entity to sell or manufacture the substances or products in the EU and generate a stream of future cash inflow. Without the registration, the substances or products can no longer be sold or manufactured in the EU.
- An early registrant receives compensation of costs from later registrants.
The staff is also of the view that future economic benefits would be also assessed by analogy to paragraph 11 of IAS 16 Property, Plant and Equipment. REACH costs have the same characteristics as the assets installed for environmental or safety reasons. Paragraph 11 of IAS 16 states that those assets do not directly increase the future economic benefits but they are recognised as an asset because without them the entity is unable to manufacture and sell chemicals.
At the time when reimbursement of testing costs is made between an early registrant and later registrants, control over a resource criterion and existence of future economic benefits criterion would be no longer met by the amount of reimbursement (not entire amount of the total costs).
Probability that the expected future economic benefits will flow to the entity
The staff is of the view that meeting this criterion would depend on the probability of regulatory approval, and on the ability recover of the costs. Ultimately, assessment of this criterion would be a matter of judgement.
Classification of intangible assets and other recognition criteria
The staff noted that classification of intangible assets and further recognition criteria would depend on the following factors:
- Whether the substances are new substances or existing substances
- Whether testing data are acquired from a former registrant
When new substances are developed and registered, registration costs would be part of the development costs and should be recognised as internally developed intangible assets if they meet all the recognition requirements of IAS 38.57.
The registration cost of an internally generated intangible asset would be the sum of expenditure incurred from the date when the intangible asset first meets the recognition criteria in paragraphs 21, 22 and 57 of IAS 38. The cost of an internally generated intangible asset would comprise all directly attributable costs in accordance with paragraph 66 of IAS 38.
When existing substances are registered, the substances had been already on the market prior to the implementation of REACH regulation. Some guidance produced by major accounting firms indicates some alternative views:
View 1: Those costs should be expensed as incurred as they would represent subsequent development costs of an existing product in accordance with paragraph 20 of IAS 38.
View 2: Those costs should be recognised as internally generated intangible assets if they meet the criteria in paragraphs 21, 22 and 57 of IAS 38.
View 3: Those costs should be recognised as separately acquired intangible assets similar to a product-specific license.
The staff is of the view that the registration costs for existing substances would also meet the asset recognition criterion when taking any views above, that is, even if taking view 1, the costs do not have to be expensed as incurred.
The staff concluded with the view that REACH costs would meet the intangible assets recognition criteria in accordance with IAS 38. The staff is of the view that the issue does not meet the agenda criteria because IAS would provide sufficiently clear intangible asset recognition criteria to apply without developing a specific Interpretation, and they did not expect diversity in practice. The staff proposal for tentative agenda decision wording is outlined in Appendix A to Agenda Paper 3.
The IFRIC members were then asked to provide comment on the staff analysis and conclusions.
One IFRIC member noted that the agenda decision wording could be read such that any cost that preserves an asset is able to be capitalised. In particular the IFRIC member was concerned that the analogy to paragraph 11 of IAS 16 is inappropriate. The concern is that if paragraph 11 of IAS 16 is applied to other kinds of costs by analogy it may be extended to other costs that should, in fact, be expensed.
Another IFRIC member raised the issue that there is some confusion about what the asset is that the IFRIC agenda decision is talking about. Is it a right to do business in a specific jurisdiction? The staff clarified that it is a right attached to a specific substance, rather than a right to do business.
It was further clarified that the asset being referred to is the registration of the substance, not the development of the substance.
Others raised the issue of lack of exclusivity relating to the right. Other IFRIC members noted that they were having difficulty in understanding the asset because the registration doesn't increase economic benefits; rather it just maintains economic benefits. Are assets only those that increase economic benefits, or can they be extended to also include those to maintain economic benefits? One IFRIC member pointed out that if an entity didn't register a substance, then they would have no benefits and they would no longer be permitted to use that substance. Another IFRIC member responded by saying that this goes back to the preservation argument (noted earlier), and she was uncomfortable with this.
One IFRIC member noted that the issue they are really trying to address is whether IAS 38 principles for intangible assets that provide a unique right can be applied to non-unique rights (such as REACH costs). This was a different issue to the one that the staff has addressed in the agenda paper.
The IFRIC made no decision as to whether to take this issue onto the agenda. The staff was directed to do more research on specific registration costs, and to identify generic requirements for such costs, including current practice for other registration costs and circumstances where they would or not would not be capitalised. The staff was also requested to confirm if there was diversity in practice or not.
The results of this additional research will be brought back to the next IFRIC meeting.
Review of Tentative Agenda Decisions published in November 2008 IFRIC Updates
The IFRIC redeliberated its tentative agenda decisions published in the November 2008 IFRIC Update.
IFRS 3 Business Combinations – Customer-related intangible assets
The IFRIC confirmed its view that the issue would best be resolved by the Board and decided to finalise the agenda decision.
IAS 28 Investments in Associates – Potential effect of revised versions of IFRS 3 and IAS 27 on equity method accounting
The IFRIC in November 2008 discussed four issues:
- 1. How the initial carrying value of an equity method investment should be determined
- 2. How an impairment assessment of an underlying indefinite-lived intangible asset of an equity method investment should be performed
- 3. How an equity method investee's issuance of shares should be accounted for
- 4. How to account for a change in an investment from the equity method to the cost method
For issues 2 and 4, the IFRIC agreed in November 2008 not to add the item to the agenda. This decision was confirmed by the IFRIC.
The staff informed the IFRIC that the IASB staff is undertaking a project to address issues raised by constituents arising from the Business Combinations II project. Issues 1 and 3 would be addressed as part of that project. It was explained that some of the issues could end up as IFRICs, as agenda decisions, or as part of the IASB's annual improvements process.
In the light of this the IFRIC decided also not to add issues 1 or 3 to its agenda as they addressed by a concurrent Board project.
Classification of puttable and perpetual instruments under revised IAS 32
The IFRIC confirmed the tentative agenda decision published in the November IFRIC Update subject to minor drafting changes.
Regulatory assets and liabilities
The IFRIC confirmed the tentative agenda decision published in the November IFRIC Update in the light of Board's decision to add a project on regulatory activities to its active agenda.
Derecognition of financial assets
The IFRIC confirmed the tentative agenda decision published in the November IFRIC Update.
IAS 39 Financial Instruments: Recognition and Measurement – Fair value measurement of financial instruments in inactive markets: determining the discount rate
The staff presented revised wording for the tentative agenda decision on the issue as a result of a letter received by, and a meeting held with, the submitter. A majority of the IFRIC members were concerned over the signal the revised wording would send – that the view in the original submission would be sustainable. It was agreed to revert back to most of the original wording, but also to reflect the revised fact pattern.
Staff Recommendations for Tentative Agenda Decision
The IFRIC continued to discuss several agenda requests it received since the November 2008 meeting.
IAS 7 Statement of Cash Flows – Determination of cash equivalents
The staff presented the IFRIC with an issue about the definition of cash equivalent in IAS 7. The submission asked whether money market funds that are readily convertible and subject to only an insignificant risk qualify as cash equivalents.
It was clear that the question was whether an entity had to look through the investment and make sure that all underlying investments meet the definition of a cash equivalent to conclude that the money market fund was a cash equivalent.
The IFRIC had a lively debate on the issue, in particular on the question whether an entity could be required to look at the underlying investments for the assessment. Many were concerned about applying the US SEC guidance staff referred to as a starting point.
The chairman in the end asked the staff to bring back a paper that would suggest a way to bring the IFRS guidance closer to US GAAP, as in this area the standards were deemed to be substantially converged. This might result in an agenda decision or in a proposal to change IAS 7.
IAS 12 Income Taxes – Classification of tonnage taxes
The IFRIC debated a submission that asked for clarification whether tonnage taxes could be seen as income taxes. This is important for the income statement as income taxes are presented separately from other expenses. If tonnage tax was not an income tax it would form part of cost of sales if the income statement was classified by function.
Some IFRIC members were confused what was meant by a tonnage tax and whether it was based on capacity or actual goods transported. Additionally, some wondered whether this tax was in lieu of income taxes or in addition. Many saw tonnage taxes as a kind of income tax. Others noted that the definition of income taxes in IAS 12 requires taxes payable to be based on a net income figure – which was not the case under fact pattern of the submission.
After some debate it was decided not to add the item to the agenda, make clear what was meant by tonnage tax in the submission, that it did not represent an income tax, but to note that preparers were free to add subtotals to separate this tax from other operating expenses.
IAS 16 Property, Plant and Equipment – Disclosure of idle assets and construction in progress
The staff introduced the submission by highlighting that the submitter asked for more disclosures about temporarily idled and under construction property plant and equipment. It was noted that IAS 16 contained disclosure recommendations for this, but that this guidance was not mandatory.
It was clear for most IFRIC members that this was not a request for interpretation, but to change the standard. It was also noted that IAS 1 already requires disclosures about major items that are necessary to understand the financial statements, but that requirement leaves some room for judgement and might not be applied consistently around the world.
The IFRIC decided not to add the issue to its agenda and agreed with the proposed tentative agenda decision wording subject to drafting changes.
IAS 28 Investments in Associates – Venture capital consolidations and partial use of fair value through profit and loss
In the submission guidance was asked for clarifying the application of the scope exemption in IAS 32 for venture capitalists and similar entities. In particular, it was asked whether in a situation where a group h as a venture capital operation that holds an investment in an entity (and has an optional exemption from IAS 28) and also holds shares in that entity via another subsidiary. Would the entity have to assess significant influence based on the total investment and apply the equity method on the investment as a whole?
This triggered a long discussion. Some IFRIC members believed that the whole investment is the unit of account. Others thought that assessing significant influence was separate from applying the equity method (that is, the total investment is considered for assessing influence, but the equity method is applied only to the non-VC portion).
Many IFRIC members considered the wording in IAS 28 as ambiguous and did not concur with the staff view that IAS 28 is clear in requiring assessing the total investment of the group and apply, if required, equity accounting to the whole investment.
It emerged from the debate that the diversity around the table could be indicative for diversity in practice. Most IFRIC members seemed to have sympathy for developing an Interpretation on this issue. Staff was asked to perform further research including an assessment of the IFRIC agenda criteria and to bring back a paper at a later meeting
IAS 39 Financial Instruments: Recognition and Measurement – Participation rights and calculation of the effective interest rate
The staff noted that the submitter had filed a very specific fact pattern, on which basis the staff made the analysis and asked whether the instrument (which participated in the losses of the entity) is subject to AG8 of IAS 39 for non-floating rate instruments.
The staff recommended not to add the issue to the agenda as the guidance in IAS 39.AG8 was applicable and clear. While all IFRIC members seemed to agree with this conclusion, some were concerned over the assumptions made, particularly that the instrument does not contain an embedded derivative. It was agreed to make clear, in the final wording for the tentative agenda decision, that the assumption that the instrument does not contain an embedded derivative is accepted as a fact, and not specifically addressing that issue does not necessarily mean that the IFRIC concurs with this conclusion.
IAS 39 Financial Instruments: Recognition and Measurement – Classification of failed loan syndications
The staff presented the IFRIC with the fact pattern to be analysed. In the submission it was asked how to apply the definitions of categories to loans originated with the intention of syndication where the arranger fails to find sufficient commitments from third parties. The question was whether the surplus kept (that is, the failed part of the syndication) is always classified as held for trading or whether there are circumstances it could be classified as loans and receivables.
The IFRIC concurred with the staff analysis that intention to sell the surplus loan immediately or in the near-term always results in held for trading classification.
It was further noted that the October 2008 amendments to IAS 39 permitted an entity to reclassify under circumstances financial assets out of the held for trading category. It was agreed that the agenda decision should note that fact.
IAS 41 Agriculture – Discount rate assumptions used in fair value calculations
The submission asked how to determine the discount rate to be used when market-determined prices are not available. The staff noted that IAS 41 did provide guidance for these situations.
After brief discussion the IFRIC agreed with the staff proposal not to add the item to its agenda.
IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction – Voluntary prepaid contributions under a minimum funding requirement
The IFRIC decided not to add this issue to its agenda as the Board has already taken the proposed changes to its agenda and hence, the IFRIC criteria for adding it to the agenda were not met anymore.
IAS 38 Intangible Assets – Accounting for sales costs
The submission asked for guidance how to account for initial selling and marketing costs incurred during construction of real estate. After IFRIC 15 was issued, many real estate projects are now in the scope of IAS 18, which contains no guidance on this issue.
The staff recommended not adding the issue to the agenda.
After brief discussion, the IFRIC agreed with the staff recommendation. It was agreed that the final guidance should not emphasise specific Standards for analogising, but should make clear that there is sufficient guidance available on which costs are not eligible for capitalising.
The chairman closed this part of the meeting noting that during the recent months the quality of the submissions had declined and that some of them seemed not clear and/or did not go through an appropriate thought process. The chairman expressed hope that this would change again in the future.
Administrative Session – IFRIC work in progress
The IFRIC coordinator gave a brief update on the progress of IFRIC activities, noting that two Interpretations have been issued since the last meeting and all other items on the list had been discussed at this meeting. The chairman added that any issues for the IFRIC arising from the implementation review of Business Combinations II would be brought to the IFRIC at the May 2009 meeting.
This closed the public session.
This summary is based on notes taken by observers at the IFRIC meeting and should not be regarded as an official or final summary.
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5 March 2009: Revised PCAOB proposal on engagement review
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The US Public Company Accounting Oversight Board (PCAOB) has reproposed for comment an auditing standard on Engagement Quality Review (EQR). This new proposal reflects significant changes to the standard that the PCAOB first proposed on 26 February 2008. The proposed standard provides a framework for an engagement quality reviewer to objectively evaluate the significant judgments made by the audit engagement team and the conclusions reached in forming an overall opinion. Comments are due 20 April 2009. Click for
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5 March 2009: New IVSC board of trustees
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The International Valuation Standards Council (IVSC) has today announced the appointment of a new Board of Trustees, chaired by Michel Prada, formerly chairman of the French securities regulator, the Autorité des Marchés Financiers. The Trustees oversee the work of the International Valuation Standards Board, which develops global standards for performing and reporting on valuations, and the International Valuation Professional Board, which develops professional and educational standards for valuers. Click for IVSC Press Release (PDF 44k).
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5 March 2009: IASB enhances the IFRS 7 financial instruments disclosures
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The IASB has issued Improving Disclosures about Financial Instruments (Amendments to IFRS 7). The amendments require enhanced disclosures about fair value measurements and liquidity risk. Among other things, the new disclosures:
- clarify that the existing IFRS 7 fair value disclosures must be made separately for each class of financial instrument
- add disclosure of any change in the method for determining fair value and the reasons for the change
- establish a three-level hierarchy for making fair value measurements:
- 1. quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
- 2. inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices) (Level 2); and
- 3. inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
- add disclosure, for each fair value measurement in the statement of financial position, of which level in the hierarchy was used and any transfers between levels, with additional disclosures whenever level 3 is used including a measure of sensitivity to a change in input data
- clarify that the current maturity analysis for non-derivative financial instruments should include issued financial guarantee contracts
- add disclosure of a maturity analysis for derivative financial liabilities
Entities are required to apply the amendments for annual periods beginning on or after 1 January 2009, with earlier application permitted. However, an entity will not be required to provide comparative disclosures in the first year of application. Here is the IASB Press Release (PDF 45k).
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5 March 2009: We comment on proposals on IFRICs 9 and 16
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Deloitte has submitted a Letter of Comment (PDF 177k) on the IASB's exposure draft of Post-implementation Revisions to IFRIC Interpretations – Proposed amendments to IFRIC 9 and IFRIC 16. The proposed changes are:
- IFRIC 9: Exclude from the scope of IFRIC 9 embedded derivatives in contracts acquired in combinations of entities or businesses under common control or in the formation of a joint venture.
- IFRIC 16: Allow entities to designate as a hedging instrument in a hedge of a net investment in a foreign operation an instrument that is held by the foreign operation that is being hedged.
We agree with the proposal to amend IFRIC 9 and urge its adoption. At this time, however, we are not ready to support the proposal to amend IFRIC 16 as it is not clear to us what fact pattern the Board has in mind and whether the rationale applies to all situations where the hedging instrument is being held by the foreign operation being hedged. Additionally, we have some concern about the proposed effective date of the IFRIC 16 amendment. All of our past letters of comment are Here.
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4 March 2009: FASB Codification takes effect 1 July 2009
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The US Financial Accounting Standards Board is alerting preparers and auditors of financial reports to a major change affecting U.S. accounting and reporting standards. On 1 July 2009, the FASB Accounting Standards Codification is expected to become the single official source of authoritative, nongovernmental U.S. generally accepted accounting
principles (GAAP):
- Replacement of existing standards. Pending approval by the FASB, after 1 July 2009, only one level of authoritative GAAP will exist, other than guidance issued by the Securities and Exchange Commission (SEC). All other literature will be non-authoritative.
- Subsequent issuance of new standards. There will also be an important change in how standards are issued after the Codification becomes GAAP. The FASB will no longer issue Statements of Financial Accounting Standards, Interpretations, FASB Staff Positions, or EITF Abstracts. Rather, all changes to GAAP, regardless of how they would have been issued currently, will be in the form of Codification Updates.
To explain the forthcoming changes, we have posted a story Major Changes to U.S. GAAP Structure Slated for July 1, 2009 (PDF 37k), published in the December 2008 issue of The FASB Report, with permission from the Financial Accounting Foundation, 401 Merritt 7, Norwalk, Connecticut, USA.
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4 March 2009: Accounting Roundup – February 2009
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We have posted the February 2009 Edition of Accounting Roundup (PDF 234k) published by Deloitte & Touche LLP (United States). The newsletter is now organised by topic rather than by standard-setter. Topics covered in this issue include:
Fair Value Measurements
- Valuation Resource Group Discusses Four Topics at February 5 Meeting
Derivative Instruments and Hedging Activities
- IASB Proposes Amendments to IFRIC Interpretations 9 and 16
Other SEC Matters
- SEC Extends Comment Period on IFRS Roadmap for U.S. Issuers
- SEC Publishes 2008 Annual Report
- SEC Issues New Compliance and Disclosure Interpretations
Other Auditing
- CAQ Reports on Lessons Learned From ICFR in Integrated Audits
- AICPA Proposes Clarifying and Converging SASs
- AICPA Issues Two Standards on Reviewing Interim Financial Information
- GAO Issues Updated Manual on Auditing Information System Controls
Other Developments
- COSO Issues Guidance on Monitoring Internal Control Systems
- GAO Releases Report on Troubled Asset Relief Program
You will find past issues of Accounting Roundup Here.
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4 March 2009: IAASB completes its 'clarity project'
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The International Auditing and Assurance Standards Board (IAASB) has completed its 'clarity project' with the release of the final seven clarified International Standards on Auditing (ISAs). In total, there are now 36 newly updated and clarified ISAs and a clarified International Standard on Quality Control. The IAASB has also created a new Clarity Center on the IAASB Website. Titles of the seven final clarified ISAs are as follows:
- ISA 210 (Redrafted) Agreeing the Terms of Audit Engagements;
- ISA 265 Communicating Deficiencies in Internal Control to Those Charged with Governance and Management;
- ISA 402 (Revised and Redrafted) Audit Considerations Relating to an Entity Using a Service Organization;
- ISA 700 (Redrafted) Forming an Opinion and Reporting on Financial Statements;
- ISA 800 (Revised and Redrafted) Special Considerations - Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks;
- ISA 805 (Revised and Redrafted) Special Considerations - Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement; and
- ISA 810 (Revised and Redrafted) Engagements to Report on Summary Financial Statements.
Click for Press Release (PDF 24k).
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4 March 2009: Updated EU endorsement status report
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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 3 March 2009 (PDF 111k). Currently, there are 10 IASB pronouncements are awaiting European Commission endorsement for use in Europe, as follows:
Standards
- IFRS 1 First-time Adoption of IFRS – Restructured standard (2008)
- IFRS 3 Business Combinations (2008)
Interpretations
- IFRIC 12 Service Concession Arrangements
- IFRIC 15 Agreements for the Construction of Real Estate
- IFRIC 16 Hedges of a Net Investment in a Foreign Operation
- IFRIC 17 Distributions of Non-cash Assets to Owners
- IFRIC 18 Transfers of Assets from Customers
Amendments
- IAS 27 Consolidated and Separate Financial Statements (2008)
- IAS 39 Amendments for Eligible Hedged Items
- IAS 39 Amendments for Reclassification of Financial Assets
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4 March 2009: Brazil, China, India join IOSCO Technical Committee
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The International Organization of Securities Commissions (IOSCO) has expanded its Technical Committee to include the securities regulatory authorities from Brazil, China, and India. IOSCO is the global consortium of securities regulators. The Technical Committee, comprising agencies that regulate some of the world's larger, more developed and internationalised markets, deals with major regulatory issues related to international securities and futures transactions. IFRSs and financial reporting in general are part of the Technical Committee's scope of responsibility. Click for Technical Committee Announcement (PDF 125k).
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3 March 2009: Update on IFRS for NPAEs
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We have posted an article An IFRS for Private Entities (PDF 142k) by Paul Pacter, the IASB's Director of Standards for Non-publicly Accountable Entities and webmaster of IAS Plus. The article is from the February 2009 issue of the International Journal of Disclosure and Governance, is copyright 2009 by Palgrave Macmillan, and has been posted on IAS Plus with their kind permission. The article discusses:
- the IASB's reasons for issuing an IFRS for private entities [the name has been changed to IFRS for Non-publicly Accountable Entities],
- the types of entities at which it is aimed,
- what the IASB proposed in the ED and why,
- what the IASB has not proposed, and why not,
- how the IASB reached the conclusions that it did,
- how the IASB plans to maintain the standard after it is issued,
- comment letter responses to and field testing of the ED,
- the IASB's re-deliberations,
- the remaining steps leading to a final IFRS, and
- plans for training materials.
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2 March 2009: Four comment deadlines in March
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We remind you that comments are due this month on three IASB exposure drafts and on part two of the IASC Foundation constitution review, as follows:
International Accounting Standards Board
International Accounting Standards Committee Foundation
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1 March 2009: EC consults on revisions to Accounting Directives
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The European Commission has invited comments on simplification of the 4th and 7th Company Law Directives for small and medium-sized entities (SMEs), Concurrently the Commission has proposed giving Member States an option to exempt micro-sized SMEs from the 4th Directive altogether (see our News Report of 26 Feb 2009). The current consultation aims at raising issues relating to the modernisation and simplification of the Accounting Directives. The kinds of issues on which comments are requested include:
- Structure of the Directives
- General principles of accounting recognition and measurement
- Size criteria for micros, small, medium, and large entities
- Which financial statements should be required for each category
- Electronic filing
- Financial statement formats
- Footnotes
- Valuation (measurement) issues
- Consolidation requirements
Comments are requested by 30 April 2009. The Commission expects to complete its analysis of the comments and to present proposed revisions to the Directives to the European Parliament by the end of 2009. Click to download the EC Consultation Document (MS Word DOC 561k).
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1 March 2009: EU supervision report criticises IASB
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The 'High-level Group on Financial Supervision in the EU' has published its Report that makes 18 detailed recommendations to strengthen supervision of the EU's financial institutions and markets. The report addresses:
- how to organise the supervision of financial institutions and markets in the EU
- how to strengthen European cooperation on financial stability oversight, early warning, and crisis mechanisms; and
- how EU supervisors should cooperate globally.
Throughout the Report, accounting is cited as one of the causes of the current global financial crisis. The Report urges that the IASB or supervisors set limits on mark-to-market accounting:
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To ensure convergence of accounting practices and a level playing-field at the global level, it should be the role of the International Accounting Standard Board (IASB) to foster the emergence of a consensus as to where and how the mark-to-market principle should apply – and where it should not. The IASB must, to this end, open itself up more to the views of the regulatory, supervisory and business communities. This should be coupled with developing a far more responsive, open, accountable and balanced governance structure. If such a consensus does not emerge, it should be the role of the international community to set limits to the application of the mark-to-market principle.
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The following is Recommendation #4 of the Report:
Recommendation 4: With respect to accounting rules the Group considers that a wider reflection on the mark-to-market principle is needed and in particular recommends that:
- expeditious solutions should be found to the remaining accounting issues concerning complex products;
- accounting standards should not bias business models, promote pro-cyclical behaviour or discourage long-term investment;
- the IASB and other accounting standard setters should clarify and agree on a common, transparent methodology for the valuation of assets in illiquid markets where mark-to-market cannot be applied;
- the IASB further opens its standard-setting process to the regulatory, supervisory and business communities;
- the oversight and governance structure of the IASB be strengthened.
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1 March 2009: FEE does not support EC micro proposal
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On 26 February 2009, the European Commission released a proposal to give EU Member States an option to exempt micro (tiny) entities from the 4th Accounting Directive (see Our News Story). The European Federation of Accountants (FEE) has issued a statement expressing doubt the proposal 'is fit for purpose' and questioning whether it would achieve its objection of reducing burden on small companies. Click to Download the FEE Statement (PDF 41k).
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1 March 2009: Spanish version of the SEC's IFRS Roadmap
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Deloitte (Colombia) has published Hoja de Ruta Para el Uso Potencial de Estados Financieros Preparados de Acuerdo con los Estándares Internacionales de Informatión Financiera, por Parte de los Emisores de los Estados Unidos – which is the Spanish version of the US SEC's Roadmap for the Potential User of Financial Statements Prepared in Accordance with IFRSs by US Issuers. The Roadmap was issued by the SEC on 14 November 2008. The Roadmap sets forth several milestones that, if achieved, could lead to the required use of IFRS by US issuers in 2014. The SEC's deadline for commenting on the Roadmap is 20 April 2009. Click for:
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