OCTOBER 2011

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Please remember that publications to which this page has links may be out of date because of new or changed IFRSs or other reasons.

31 October 2011: Israel and US regulators enter into a cooperative agreement

The Israel Securities Authority (ISA) and the Public Company Accounting Oversight Board of the United States (PCAOB) have entered into a cooperative agreement. The cooperative agreement for the exchange of confidential information will enhance the supervisory oversight of auditors and accounting firms performing in both jurisdictions. PCAOB Chairman James R. Doty commented that, "With the significant presence of Israeli companies on U.S. exchanges, this agreement with the Israel Securities Authority will better protect U.S. investors. It is an important achievement in expanding our cooperative agreements into the Middle East, and I hope that other regulators elsewhere will soon follow."

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28 October 2011: IFRS compliance, presentation and disclosure checklist for 2011

Deloitte's IFRS Global Office has published the IFRS Compliance, Presentation and Disclosure Checklist for 2011. The checklist summarises the recognition, measurement, presentation and disclosure requirements set out in IFRSs in issue as of 30 June 2011.

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28 October 2011: Investor webcast by the IASB and the CFA Institute

An investor webcast by the IASB and the CFA Institute will be held on 9 November 2011. The IASB and the CFA Institute will discuss the IASB's first public agenda consultation, how the Board will decide what should be on its agenda and why investor input is crucial in that process.

Full details of the webcast are provided below:

    Topic: Setting the IASB's Agenda for the Next Decade: Investor Update and Input Opportunity
    Date and time: Wednesday, 9 November 2011
    3:00pm GMT, which is 10:00am ET
    More information and registration: Click Here

28 October 2011: New Zealand to consider ways to reduce excessive disclosures under IFRSs

The New Zealand Accounting Standards Board (NZASB) is to consider a short-term action plan to encourage the reduction of excessive disclosures at its upcoming meeting on 2 November 2011.

A staff paper to be considered at the meeting discusses the NZASB's response to the report Losing the excess baggage: reducing disclosures in financial statements to what's important issued by The Institute of Chartered Accountants of Scotland (ICAS) and the New Zealand Institute of Chartered Accountants (NZICA) in July 2011. The paper notes that "although the project was commissioned by the IASB, with the expectation that it would be exposed for comment, it appears that the IASB is unlikely to take any action before it considers comments on its Agenda Consultation 2011."

The staff paper explores the options available to ensure any advice or guidance issued by the NZASB is of sufficient standing that not only preparers but also auditors and regulators will consider that it is persuasive, whilst at the same time ensuring New Zealand's ongoing compliance with IFRSs in relation to for-profit entities. The paper discusses the options of a domestic New Zealand standard or Interpretation, an explanatory guide or an informal communication such as a communiqué.

The staff paper recommends the NZASB issue an explanatory guide, which would not have any legal status but which would provide guidance on applying the materiality concept in relation to disclosures. The guidance would be based on the recommendations in the ICAS-NZICA report that users of IFRSs should consider separately (i) whether an item is material and (ii) whether individual pieces of information are material such that they warrant disclosure in the additional notes. Consideration would be given to individual pieces of information relating to material items, as well as information that does not relate to specific items but is required for the financial statements to meet the objective of financial reporting. It would not extend to the removal of various IFRS disclosures identified for possible removal in the report.

This New Zealand development gives additional impetus to global calls for disclosure relief in financial reporting.

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28 October 2011: Q&A report from recent Deloitte global financial reporting Dbriefs webcast

On 18 October 2011, a Deloitte Dbriefs webcast on global financial reporting was held, entitled IFRS: Important Developments. A 'Q&A Report' has been published containing a summary of audience questions submitted during the live webcast, together with suggested responses. Topics covered in the report include the IASB's projects on hedge accounting, revenue recognition, offsetting and investment entities, and the IASB's agenda consultation.

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27 October 2011: Remarks by IASB Chairman Hans Hoogervorst at the IFRS Conference: Latin America and the Caribbean

On 27 October 2011, IASB Chairman Hans Hoogervorst addressed the IFRS Conference: Latin America and the Caribbean, in Sao Paulo, Brazil. In his speech, he discussed the prospects for global accounting standards, Latin American adoption of IFRS, and the agenda and priorities of the IASB.

In regards to the prospects for global accounting standards, Chairman Hoogervorst commented that global accounting standards are needed to protect investors in a global financial market. He said that while IFRSs is now required or permitted to be used in many countries, there are a few important jurisdictions that have not adopted IFRSs, such as the United States, Japan, India and China. However, he believes its not a matter of "if" these jurisdictions will move to IFRSs, but of "when" and "how" it will occur.

Next on Latin American adoption of IFRS, Hoogervorst commented that full adoption of IFRSs is the right step to take and noted Brazil as "a textbook example of how to adopt". By accepting IFRSs fully "Brazilian companies are able to raise capital on markets across Asia, Europe and the Americas—including the United States. . . . The risk premium associated with unfamiliar financial reporting requirements is eliminated, thus reducing the cost of capital and attracting greater inward investment."

In conclusion, Hoogervorst discussed the future agenda and the four immediate priorities of the IASB in the coming year. First, the remaining convergence projects with the FASB need to be completed. He mentions that there will be revised proposals for both leasing and revenue recognition in the months ahead with the goal of completing these projects in 2012. He also mentions that the boards are working on a joint approach to financial instruments and insurance contracts. Second, the chairman gave a brief remark on the development of the IASB's post-convergence agenda, specifically the agenda consultation process aimed to solicit feedback to the IASB. The third priority of the IASB is to get the remaining jurisdictions to adopt IFRSs. Lastly, he says the IASB will work with those impacted by the IASB's work and "ensure that they have a sense of ownership and respect for the product that we are developing for investors globally."

Click for the speech transcript (PDF 361k, link to IASB website).

27 October 2011: French ANC proposes simplification of accounting obligations for small listed companies in Europe



 In accordance with the European Regulation No 1606/2002 the application of IFRSs is mandatory in the consolidated financial statements of all listed companies irrespective of their size. The French national standard setter Autorité des Normes Comptables (ANC) has now published a proposal for the simplification of the accounting requirements for small listed companies.

The ANC claims that the application of full IFRSs is often burdensome for small listed companies. Therefore, it would be preferable to adapt their accounting obligations to their size, without either diminishing the quality of the reporting or introducing a new set of accounting principles. Thus, the ANC is not suggesting to introduce a set of accounting standards such as the IFRS for SMEs which is, moreover, designed for unlisted entities. This would, according to the ANC, deprive small listed companies of the benefit of a single set of internationally recognised accounting standards, namely full IFRS.

The ANC sees a viable alternative in the simplification of the existing accounting framework. Two ways of simplifying IFRSs for small listed companies are suggested:

  1. Reduce the volume of the notes by simplifying the current disclosure requirements under IFRSs.
  2. Facilitate the preparation and improve the readability and relevance of the notes to the financial statements by offering an illustrative set of simplified financial statements.

The ANC makes detailed suggestions as to where disclosure requirements can be simplified and has compiled an illustrative set of financial statements.

Please click for (all links to ANC website):

  • ANC press release:
  • ANC proposal with details simplification suggestions and illustrative financial statements:

27 October 2011: Initial organisations participating in integrated reporting pilot announced

The International Integrated Reporting Committee (IIRC) has announced that over 40 companies from around the world have been chosen as the initial participants in the IIRC Pilot Programme Programme, with further participants expected.

The Pilot Programme is designed to run over a two year period and will involve a group of organisations who will work as a peer group network, exchanging knowledge and sharing experiences and participating in the development of the International Integrated Reporting Framework envisaged in the IIRC's Discussion Paper Towards Integrated Reporting – Communicating Value in the 21st Century (see our earlier story). The initial participants in the programme include a variety of organisations from many geographical regions. Deloitte is represented in the initial group of organisations.

More information about the programme and the entities involved is available on our sustainability reporting page. Click for IIRC press release (link to IIRC website).

26 October 2011: Colombia issues proposal paper on IFRS convergence

In October 2011, the Consejo Técnico de la Contaduría Pública de Colombia (CTCP, Technical Council of Public Accountants in Colombia) published a proposal paper "Propuesta de normas de contabilidad e información financiera para la convergencia hacia Estándares Internacionales" (Proposed standards of accounting and financial reporting for convergence with International Standards). The proposal paper represents another step toward Colombian convergence with IFRS, focusing on voluntary application by entities in 'Group 1' (public interest entities) and 'Group 2' (large and medium companies without public accountability).

The proposal builds on the ‘Strategic Direction’ published in 2010. The main aspects of the proposal are:

  1. Early voluntary application of IFRS full (group 1) or IFRS for SMEs (group 2)
  2. Expected timing of convergence with international standards:
    1. 31/12/2011: Proposed standards (in Spanish) published on CPTC website for public consultation (based on the official Spanish translation as at 1 January 2010)
    2. 31/03/2012: Issuance of final standards (IFRSs) by Colombian regulatory authorities
    3. 31/12/2012: Date of transition for Colombian entities in accordance with IFRS 1
    4. 31/12/2013: Financial statements published under current Colombian standards and in accordance with IFRS (pro-forma, without comparatives)
    5. 31/12/2014: First IFRS financial statements published with comparatives, and subject to audit.
  3. The proposal paper seeks input on four specific questions (Deloitte translation):
    • The Standards and Interpretations listed in the proposal paper have been developed by the IASB for universal application. Do you think that regardless of this fact, one or more standards and interpretations or part of them, contain requirements that would be ineffective or inappropriate if applied in Colombia? Is your answer is yes, please select the aspects or circumstances that make them unsuitable for Colombian entities.
    • The CPTC proposes that the Colombian regulatory authorities issue principles, standards, interpretations and guidelines for accounting and financial reporting. Do you consider it necessary to issue interpretations and/or additional guidance above that issued by IASB, or for an understanding the application of an IFRS or IAS? Please specify the standard and the particular issue where there is the need for additional implementation guidance or interpretation.
    • Are additional exceptions to those provided in IFRS 1 for the first application of international accounting standards required by Colombian entities? If your answer is yes, please specify the required additional exceptions and explain why the exception is necessary.
    • Do you believe any of the standards or interpretations issued by the IASB may be contrary to any provision of law in Colombia? If your answer is yes, please select the aspects or topics that might be contrary to Columbian statutory provisions and provide an alternative proposal (with technical support) as to how they might be rectified.

Comments are due by 31 March 2012.

Click for Propuesta de normas de contabilidad e información financiera para la convergencia hacia Estándares Internacionales (PDF 1,405k, in Spanish).

26 October 2011: IAASB begins post-implementation review of clarified auditing standards

The International Auditing and Assurance Standards Board (IAASB) has released a plan for a post-implementation review of the clarified International Standards on Auditing (ISAs).

The post-implementation review is the second phase of the IAASB's efforts to monitor the implementation of these standards, following the release of a progress report in November 2010. The primary objective post-implementation review is to gather information about the use of the clarified ISAs to assist the IAASB to determine what, if any, changes are needed:

  • in order to increase the consistency of practitioners' understanding of the ISAs
  • for the revised ISAs covered by the review to achieve the IAASB's goals in revising them in an efficient and effective manner.

The review is focused on whether the clarified ISAs are being consistently understood and implemented in a way that achieves the IAASB's goals in revising and redrafting them, rather than revisiting whether the clarified ISAs need to be further enhanced to achieve audit quality (although any such changes identified during the review will be considered by the IAASB).

The IAASB aims to gather information during 2012, summarise the information received in early 2013, and present the findings at the June 2013 IAASB meeting for discussion. This timing will assist the IAASB in determining its priorities for 2014 and its next three year strategic planning cycle (2015–2017).

Input for the purpose of the review is requested by the IAASB no later than 31 October 2012. Click for IAASB press release (link to IFAC website).

26 October 2011: Special IASB meetings in early November

 Following the joint meeting of the IASB and the ASBJ on 31 October - 1 November, the IASB will hold a special IASB meeting of the afternoon of 1 November 2001 (13:00-15:00). The topic to be discussed is Leases. There will also be a special IASB meeting on 7 November 2011. An agenda has not yet been announced.

26 October 2011: European Commission presents package of measures to support entrepreneurship and responsible business

 A responsible approach to business means more, and more sustainable, economic growth. This is why the European Commission has presented a package of measures to support entrepreneurship and responsible business.

First, the Social Business Initiative is intended to help this emerging sector to fulfil its unexploited potential. This is complemented by an ambitious strategy for Corporate Social Responsibility to generate a higher level of trust and consumer confidence and improve companies' contribution to society's well-being. Both initiatives reinforce Commission efforts to engage with the private sector on social and environmental issues, especially relevant in times of public budget constraints.

The Commission is also proposing to improve transparency and promote sustainable business among multinationals. Mining and forestry companies would have to be more open about taxes, royalties and bonuses paid worldwide.

Finally, the Commission is proposing to simplify accounting rules for SMEs, potentially saving them up to €1.7 billion per year. The proposals would also reduce burdensome reporting obligations for listed companies, including SMEs, adding further to cost savings.

The proposals for revising the Accounting Directives and the Transparency Directive will now be passed on to the European Parliament and the EU's Council of Ministers for adoption. The Communication on Social Entrepreneurship forms the starting point for a number of legislative and non-legislative initiatives that are to be rolled out over the next two years. There will be a first opportunity to discuss them with stakeholders at the Conference on Social Economy and Social Business hosted by the Commission on 18 November 2011 in Brussels.

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25 October 2011: Remarks by FASB Chairman Leslie Seidman to the NASBA

On 24 October 2011, FASB Chairman Leslie Seidman gave a speech to the National Association of State Boards of Accountancy (NASBA) on her personal views regarding three subjects. The subjects were 1) convergence status between the IASB and FASB; 2) IFRS incorporation and 'condorsement'; and 3) the current stance on private companies standard-setting.

Regarding the convergence project, Chairman Seidman commented on the progress made by the FASB and IASB on converged standards on business combinations, stock compensation, nonmonetary exchanges, fair value measurements, and comprehensive income. She noted that the remaining priority issues (revenue recognition, leasing, and financial instruments) will be resolved under the Memorandum of Understanding. She mentions that both the exposure drafts on revenue recognition and leases will be 're-exposed' for quality control purposes which consequentially will add to the timeline. On financial instruments, she says, "impairment is the most important issue that we should be working on in response to the financial crisis . . . we are developing an approach based on expected losses, rather than probable, incurred losses, which will reduce the barriers to timely loss recognition."

In addition, Chairman Seidman addresses the issue of IFRS incorporation in the United States. She comments that the FASB has "supported the goal of developing high-quality, comparable, global accounting standards." She outlines three key points to recognise as standard setters work on comparable global standards. The points are: 1) the United States has a set of high-quality accounting standards; 2) "U.S. investors, preparers, auditors, users of financial statements, and other stakeholders want to have a strong, clear and effective voice in the standard setting process"; 3) a shift to an international standard must maintain or improve upon the U.S. accounting standard.

Seidman also commented on the SEC staff's paper on "condorsement" noting four positive aspects. She believes "condorsement" shows: 1) U.S. support for the development of global accounting standards; 2) a practical approach of retaining the label "U.S. GAAP"; 3) some level of U.S. involvement when creating a new standard; and 4) a gradual approach to dealing with the remaining differences between U.S. GAAP and IFRS.

In conclusion, Seidman commented on progress made to the issue of standard-setting for private companies. She believes the proposed Private Company plan, which creates a new Private Company Council whose role will be to "identify, propose, deliberate, and formally vote on specific exceptions or modifications to U.S. GAAP for private companies," will complement the FASB efforts in addressing private companies' issues. The creation of a "separate standard-setting board for private companies under the auspices of the FAF was one of the recommendations made earlier this year by the Blue-Ribbon Panel on Standard Setting for Private Companies."

Click for the speech transcript (PDF 352k, link to FASB website).

25 October 2011: EFRAG Update with summaries for the late September conference call and the October EFRAG TEG meeting

The European Financial Reporting Advisory Group (EFRAG) has released the October 2011 issue of its EFRAG Update newsletter. On 26 September 2011, EFRAG held a meeting by public conference call. The EFRAG TEG meeting was held 12 to 14 October 2011. A highlight of the meeting was the finalised endorsement advice to the European Commission on the Amendments to IAS 1 and IAS 19.

Click for the EFRAG Update (PDF 182k, link to EFRAG website). Links to earlier issues are available here.

25 October 2011: Proposed amended requirements for breaches of the Code of Ethics for Professional Accountants

The International Ethics Standards Board for Accountants (IESBA) has released for comment Proposed Changes to the Code of Ethics for Professional Accountants Related to Provisions Addressing a Breach of a Requirement of the Code.

The proposals result from a project the IESBA agreed to undertake in response to a letter submitted to the IESBA by the International Organization of Securities Commissions (IOSCO) in response to an IESBA Exposure Draft issued in July 2008, which proposed new drafting conventions for the Code of Ethics for Professional Accountants (the Code).

The exposure draft proposes:

  • to introduce a modified requirement that a professional accountant take whatever actions that might be available as soon as possible to satisfactorily address the consequences of a breach of a provision of the Code and to determine whether to report the breach to those who may have been affected by the breach
  • in relation to independence requirements for audits, to require a firm to determine whether termination of the audit engagement is necessary or whether action can be taken to satisfactorily address the consequences of a breach such that the firm can still issue an audit opinion
  • to require documentation of all identified breaches, the actions taken with respect to the breaches, and all matters discussed with those charged with governance and, if applicable, with relevant regulators.

The IESBA proposes that the changes be effective for breaches identified on and after 1 January 2013.

The Consultation Paper is open for public comment until 23 January 2012. Click for IESBA press release (link to IFAC website).

24 October 2011: Agenda for November 2011 IFRS Interpretations Committee meeting

The IFRS Interpretations Committee will meet at the IASB's offices in London on Thursday and Friday 3 and 4 November 2011. The meeting is open to the public and will be webcast. The tentative agenda is shown below.
Agenda for the Interpretations Committee Meeting
Thursday and Friday, 3 and 4 November 2011

Thursday 3 November (10:00h-17:30h)
  • Introduction
  • Active Committee Projects
    • IAS 37 Provisions, Contingent Liabilities and Contingent Assets and IFRIC 6 Liabilities arising from Participating in a Specific Market—Waste Electrical and Electronic Equipment
      • Use of IFRIC 6 by analogy
    • IAS 32 Financial Instruments: Presentation
      • Put options written over non-controlling interests
  • Review of Tentative Agenda Decisions published in September IFRIC Update
    • IAS 12 Income Taxes
      • Clarification of circumstances in which presumption of manner of recovery of investment property can be rebutted
      • Recognition of deferred tax for single assets in a corporate entity
  • Items for Continuing Consideration
    • IFRIC 15 Agreements for the Construction of Real Estate
      • Clarification of continuous transfer
    • IFRS 3 Business Combinations
      • Definition of a business
    • IAS 7 Statement of Cash Flows
      • Classification of cash payments for deferred and contingent consideration
Friday 4 November (09:00h-15:30h)
  • Items for continuing consideration (continued)
    • IFRS 11 Joint Arrangements
      • Acquisition of interest in joint operation
    • IAS 28 Investments in Associates
      • Share of other changes in equity
  • New items for initial consideration
    • IFRIC 12 Service Concession Arrangements
      • Payments to operate
      • Classification of cash flows for construction
    • IAS 38 Intangible Assets
      • Clarification on the application of amortisation method
    • IAS 19 Employee Benefits
      • Classification of payments to encourage early retirement
    • IAS 33 Earnings per Share
      • Non-cumulative pref dividends — EPS calculation
  • Administrative Session
    • Committee work in progress

24 October 2011: EFRAG issues endorsement advice on amendments to IAS 1 and IAS 19

The European Financial Reporting Advisory Group (EFRAG) has submitted to the European Commission its Endorsement Advice Letters and Effects Study Reports on the amendments to IAS 1 and IAS 19 published in June 2011. EFRAG supports the amendments.

Please click for EFRAG press release on IAS 1 and EFRAG press release on IAS 19 (both links to EFRAG website); links to the endorsement letters are provided in the press releases.

EFRAG has updated its endorsement status update accordingly (PDF 47k, link to EFRAG website).

24 October 2011: IPSASB consults on the reporting of service performance information

The International Public Sector Accounting Standards Board (IPSASB) has published Consultation Paper Reporting Service Performance Information, which aims to present a principles-based approach to developing a consistent framework for public sector entities to improve the consistency and comparability of service performance information across jurisdictions and between entities.

The Consultation Paper proposed framework includes information on the scope of the service performance information reported, the public sector entity's objectives, the achievement of those objectives, and a narrative discussion of the achievement of all the objectives. The Consultation Paper also proposes a standardised service performance information terminology and working definitions to enhance users’ understanding of service performance information reported as outlined in the proposed framework.

The Consultation Paper is open for public comment until 15 March 2012. Click for IPSASB press release (link to IFAC website).

23 October 2011: Notes from the October IASB meeting

The IASB's regular monthly meeting was held on 19-20 October 2011 in Norwalk, CT, USA, part of it a joint meeting with the FASB. We have posted additional Deloitte observer notes from the meeting (click through for direct access to the notes):

Wednesday, 19 October 2011 (other sessions)

  • Leases (IASB-FASB)
    • Receivable and residual approach
    • Variable lease payments and the measurement of the residual asset
    • Presentation statement of comprehensive income
    • Fair value requirement for lease receivables held for sale
    • Lessee transition
    • Lessor transition

Thursday, 20 October 2011

  • Financial Instruments – Impairment (IASB-FASB)
    • Relative credit risk approach
    • Transferring out of Bucket 1
    • Disclosures
    • Next steps
  • Insurance Contracts (IASB-FASB)
    • Scope – Fixed fee service contracts
    • Presentation – Statement of financial position (SoFP)
    • Eligibility criteria for the Premium Allocation Approach (PAA)

Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers for the entire meeting.

22 October 2011: Business Accounting Council of Japan continued its discussion over IFRS

Following on from the meeting on 25 August 2011, the Business Accounting Council of Japan (BAC) met on 17 October for the third time to move discussions on IFRS forward. During his opening remarks, the Japanese Minister for Financial Services mentioned his meeting with the chairman of the IASB from early October and requested BAC members to continue discussions around 11 specific items presented at the previous meeting (see our earlier story). Among these items, JFSA presented a discussion paper on 1) overall design of accounting standards/disclosure system in Japan and 2) analysis of foreign situations/diplomatic policy and international demand. The six-page paper included an analysis as well as six discussion points such as a) consideration points for future deliberation in light of changing financial/economic environment after the financial crisis, b) need for a strategic deliberation with diverse options in mind, watching situations in other countries, c) past and future approach/strategy with regard to the IASB activities and positioning of Japan, d) roles of multiple stakeholders in Japan to implement national strategy, e) matters to be covered in the planned research visit to foreign countries, and f) other matters such as international developments to be considered. Members expressed their views around topics individually. The discussions on this topic would be carried forward to the next meeting. The next meeting is expected to take place in November, it will also cover the second discussion paper distributed by the JFSA focusing on relationship between consolidated financial statement reporting regime to separate financial statement reporting system in light of local laws and regulations as well as Japan’s past experience of permitting US GAAP and IFRS only in the consolidated financial statement.

The next session of the BAC has not been formally scheduled. Research visits by certain BAC members are planned later in 2011.

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21 October 2011: EFRAG and OIC issue discussion paper on business combinations under common control

The European Financial Reporting Advisory Group (EFRAG) and the Organismo Italiano di Contabilità (OIC) have published Discussion Paper Accounting for Business Combinations under Common Control.

The discussion paper aims to start a debate on business combinations under common control (BCUCC) and how it should be reflected in financial statements. Currently, there are multiple methods used in applying BCUCC, the discussion paper takes the first step to analyse the issues from having multiple methods. The discussion paper also notes that "there is no 'ideal' accounting approach" but goes into three different ways of looking at the problem. Comments are due by 30 April 2012.

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21 October 2011: Deloitte comment letter on exposure draft on the mandatory effective date of IFRS 9

Deloitte's IFRS Global Office has submitted a letter of comment to the International Accounting Standards Board (IASB) on its Exposure Draft ED 2011/3 Mandatory Effective Date of IFRS 9.

In the comment letter, we agree with the views of the exposure draft that deferral of the mandatory effective date of IFRS 9 is necessary due to the level of uncertainty revolving around the IFRS 9 project's timeline. In addition, we agree that limited relief from restating comparatives for entities early applying in a period beginning before 1 January 2012 should not be extended. The following is an excerpt from the letter:

We support the restatement of comparative information whenever this is practicable and provides valuable information to users. However, we note that the basis for restating comparatives as described in IFRS 9(2010):7.2.1 is limited retrospective application as it only restates those items that continue to be recognised at the date of initial application (being the start of the first reporting period in which the entity applies IFRS 9). This results in comparative information being a mix of IAS 39 (for items derecognised before the date of initial application) and IFRS 9 (for items still recognised at that date). In addition, we note that the transitional requirements of IFRS 1 are not aligned with those for existing IFRS preparers as they require the classification of a first time adopter’s financial items to be based on conditions existing at the date of transition to IFRSs.

We also question whether is its appropriate for many different versions of IFRS 9 to be applied well after the Standard has been updated. We prefer that an early adopter of IFRS 9 apply the latest version of the Standard issued at the beginning of its earliest comparative period, which we believe will reduce the confusion for users trying to determine which version of the Standard an entity should apply.

Click to Download our Comment Letter on Exposure Draft ED 2011/3 — Mandatory Effective Date of IFRS 9 (PDF 28k). All of our past comment letters are here.

21 October 2011: ESMA Activity Report on IFRS enforcement 2010

 The European Securities and Markets Authority (ESMA) has published the second annual activity report on monitoring enforcement of International Financial Reporting Standards (IFRS) in Europe.

European issuers of financial information have developed significant experience in IFRS accounting which is reflected in the quality of their financial reporting which has improved year on year. Nevertheless, there is still room for improvement. The report finds that even though the disclosure of the possible impact of risks and uncertainties faced by the issuers regarding judgements and estimates used in the preparation of financial information has gained importance in the current economic climate boiler-plate disclosures are still widely used.

Among the recurring issues identified by European enforcers are financial instruments, impairment of non-financial assets, operating segments, share-based payments, non-current assets held for sale and discontinued operations, investments in associates, and revenue recognition.

The report is available on the ESMA website (PDF 128k); it is accompanied by a press release (PDF 32k).

21 October 2011: EFRAG celebrates 10th anniversary

 The European Financial Reporting Advisory Group (EFRAG) celebrated its 10th anniversary in 2011. On 13 October, a seminar was held reflecting on past milestones, achievements and signalling future challenges that EFRAG is likely to face.

EFRAG has compiled a summary of the seminar – EFRAG: PAST - PRESENT - FUTURE (PDF 506k, link to EFRAG website) – offering insights about the genesis and history of EFRAG and the challenges EFRAG is facing in the coming years.

On IAS Plus, we also offer an Interview with Stig Enevoldsen, Chairman of EFRAG from 2004 until 2010, and a Robert Bruce column Ten Years of EFRAG Achievement.

21 October 2011: Notes from the October IASB meeting

The IASB's regular monthly meeting was held on 19-20 October 2011 in Norwalk, CT, USA, part of it a joint meeting with the FASB. We have posted Deloitte observer notes from most of the sessions held on the first day of the meeting (click through for direct access to the notes):

Wednesday, 19 October 2011 (other sessions)

  • Annual Improvements (IASB only)
    • IFRS 13 Fair value measurement – Short-term receivables and payables issue
    • IFRS 3 Business combinations – Contingent consideration guidance issue
  • Fair Value Measurement (IASB-FASB)
    • Proposed plan for developing educational material
    • Comments from members of the boards
  • Revenue Recognition (IASB-FASB)
    • Disclosures in Interim Reporting Periods

Notes from the session on Leases will be posted soon.

Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers for the entire meeting.

21 October 2011: IPSASB requests comment on long-term sustainability of public sector finances proposals

The International Public Sector Accounting Standards Board (IPSASB) has published Exposure Draft (ED) 46 Recommended Practice Guideline, which is designed to provide good practice guidelines on reporting on the long-term fiscal sustainability of a public sector entity.

The IPSASB notes that the sovereign debt crisis has emphasised the significance of the fiscal condition of governments and other public sector entities to the global economy. There have been heightened concerns about the ability of governments to meet debt servicing obligations and the extent to which they can maintain current policies and meet current and future obligations related to entitlement programs, without raising taxes and contributions or increasing debt to unsustainable levels.

The exposure draft proposes the disclosure of projections of inflows and outflows of resources over the longer term, together with narrative explanations of the main risks facing governments and other public sector entities. This information is designed to permit users of general purpose financial reports of public sector entities to assess the extent to which current policies are sustainable, as complimentary information to the financial statements.

The Recommend Practice Guideline, if finalised, would not be an International Public Sector Accounting Standard (IPSAS) and therefore an entity would not required to comply with it in order to comply with IPSASs.

The ED is open for public comment until 29 February 2012. Click for IPSASB press release (link to IFAC website).

20 October 2011: IASB publishes proposed amendment to IFRS 1

The IASB has published Exposure Draft ED/2011/5 Government Loans (Proposed amendments to IFRS 1) for public comment. The proposed amendment addresses how a first-time adopter would account for a government loan with a below-market rate of interest when transitioning to IFRSs. In addition, the proposed amendment adds an exception to the retrospective application of IFRS, which would then provide the same relief to first-time adopters granted to existing preparers of IFRS financial statements when the requirement was incorporated into IAS 20 in 2008. Comments are due by 5 January 2012.

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19 October 2011: IASB issues new Interpretation on waste removal costs in surface mining

The IASB has issued IFRIC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine (IFRIC 20). The Interpretation clarifies the requirements for accounting for stripping costs associated with waste removal in surface mining, including when production stripping costs should be recognised as an asset, how the asset is initially recognised, and subsequent measurement.

Key requirements of IFRIC 20 include:

  • Stripping activity costs which provide improved access to ore are recognised as a non-current 'stripping activity asset' when certain criteria are met. This means an entity cannot immediately expense stripping costs, nor adopt a standard costing approach (sometimes referred to as a 'stripping ratio' approach) based on total expected costs to be incurred over the life of the mine
  • Normal ongoing operational stripping activities are accounted for in accordance with IAS 2 Inventories
  • When the costs of the stripping activity asset and the inventory produced are not separately identifiable, production stripping costs are allocated between the inventory produced and the stripping activity asset by using an allocation basis that is based on a relevant production measure
  • The stripping activity asset is accounted for as an addition to, or as an enhancement of, an existing asset and classified as tangible or intangible according to the nature of the existing asset of which it forms part
  • The stripping activity asset is initially measured at cost and subsequently carried at cost or its revalued amount less depreciation or amortisation and impairment losses
  • A stripping activity asset is depreciated or amortised on a systematic basis, over the expected useful life of the identified component of the ore body that becomes more accessible as a result of the stripping activity. The units of production method is used unless another method is more appropriate.

Entities will need to consider carefully the identification of the ore body or component of ore body to which capitalised costs relate as this will determine how the asset is depreciated.

IFRIC 20 is effective for annual periods beginning on or after 1 January 2013, with early application permitted.

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18 October 2011: IFRS Foundation's translations update

The IFRS Foundation has announced the publication of the following translations:

  • Albanian translation of the IFRS for SMEs Basis for Conclusions, Illustrative Financial Statements, Presentation and Disclosure Checklist. The translations can be accessed via the IASB's IFRS for SMEs webpage. You will need to be a registered user to access the translation. Registration is free of charge.
  • French translation of IFRS 13 Fair Value Measurement and IAS 19 Employee Benefits as issued in English by the IASB in May and June 2011 respectively. The French translations are available on the French New and Revised Standards page (eIFRS subscribers only).
  • Spanish translation of the Basis for Conclusions and Illustrative Examples for IFRS 11 and IFRS 12, as issued in English by the IASB in May 2011. The Spanish translations are available on the Spanish New and Revised Standards page (eIFRS subscribers only).

18 October 2011: Consultation on the future role of the UK Financial Reporting Council
A consultation proposing the refocusing and streamlining of the United Kingdom Financial Reporting Council (FRC) was launched today by the UK Department for Business, Innovation and Skills (BIS) and the FRC.

The aim of the reforms is to create an FRC that is clearer about its role and purpose, narrowing its focus to areas of greatest concern to the operation of the capital markets and reinforcing its independence. The consultation also proposes replacing the FRC's existing seven operating bodies with two Board Committees – one focusing on Codes and Standards, the other on Conduct.

Please click for the FRC press release and access to the consultation (all links to FRC website). Responses to the consultation are invited by 10 January 2012.

18 October 2011: European Outreach Meetings on the IASB Agenda Consultation – all dates and places confirmed
As reported earlier, the European Financial Reporting Advisory Group (EFRAG) will organise outreach events on the IASB consultation on its future work programme published in July 2011.

All dates and places have now been confirmed. Of special interest is the joint EFRAG and European Commission European Outreach Event on Friday 25 November. For further information on all events please go to the outreach project page on the EFRAG's website. Registration information is available in the invitation for each meeting.

18 October 2011: G20 finance ministers focus on global economic risks, reaffirm commitment to global standards

The G20 Finance Ministers and Central Bank Governors met in Paris, France on 14-15 October 2011. The meeting was focused on "heightened tensions and significant downside risks for the global economy that need to be addressed decisively to restore confidence, financial stability and growth".

The communiqué released outlines various responses and reforms in the financial sector, including in relation to over the counter (OTC) derivatives, Basel reforms on banking regulation and reducing over-reliance on external credit ratings. The communiqué also notes the reaffirming of the "objective to achieve a single set of high quality global accounting standards", without providing any documented deadlines for achieving the objective.

The full communiqué is available on the G20 website.

18 October 2011: German translation of the 2011 'Red Book'

The IASB has announced the availability of a German translation of the 2011 International Financial Reporting Standards ('Red Book'). The Red Book contains the official pronouncements issued by the IASB as at 1 January 2011 and includes IFRSs with an effective date after 1 January 2011, but not the IFRSs they will replace.

The two volume set is available for purchase for €89. Click for more information (link to IASB website, details in German).

18 October 2011: IASB updates June 2011 editorial corrections to IFRSs

The IASB has posted to its website a revised version of the batch of Editorial Corrections to IFRSs originally issued on 29 June 2011. This batch makes editorial corrections and changes to IFRS for SMEs (issued July 2009), Conceptual Framework for Financial Reporting (issued September 2010), Bound Volume (Red Book) 2011, Bound Volume (Blue Book) 2011, IFRS 10 Consolidated Financial Statements (issued May 2011), IFRS 11 Joint Arrangements (issued May 2011), IAS 19 Employee Benefits (issued June 2011) and Presentation of Items of Other Comprehensive Income (issued June 2011).

17 October 2011: EBA publishes follow-up review of banks' transparency in their 2010 Pillar 3 reports

 The European Banking Authority (EBA) has published its follow-up review of bank’s transparency in their 2010 Pillar 3 reports.

This report continues a body of work carried out on an annual basis since 2008 by the predecessor of the European Banking Authority (EBA), the Committee of European Banking Supervisors (CEBS). Pillar 3 reports are of special interest because of the interaction between Pillar 3 and IFRS 7 requirements. EBA hopes to initiate a discussion on this issue.

Overall, EBA finds "that banks have made efforts to improve their disclosures and to convey their risk profile in a comprehensive way to market participants." However, the report also finds that some of the findings from the last report published in June 2010 remain valid.

Please click for (all links to EBA website):

17 October 2011: Ethics standards board finalises priorities

The International Ethics Standards Board for Accountants (IESBA) has released its 2011-2012 IESBA Strategy and Work Plan, which sets the direction and priorities for the activities of the IESBA.

The work plan, which has been approved by IESBA, the IESBA Consultative Advisory Group, and the Public Interest Oversight Board (PIOB), contains the following priorities:

  • Development of standards. The IESBA intends to progress projects on inadvertent violations of the Code of Ethics for Professional Accountants (Code) (finalised standard expected Q1 2012), conflicts of interest (ED expected Q4 2011) and responding to fraud and illegal acts (ED expected Q4 2011)
  • Adoption and implementation. The IESBA plans to continue to assess what additional material or activities would be useful to support those who are adopting and implementing the Code
  • Convergence. The IESBA will further its objective of achieving convergence of the Code and national standards and regulations by identifying improvements, comparing the Code to standards and regulations of select jurisdictions and increased outreach efforts.

Click for IESBA press release (link to IFAC website).

17 October 2011: UK FRC launches 'Financial Reporting Lab'

The United Kingdom Financial Reporting Council (FRC) has launched a 'Financial Reporting Lab' which aims to bring together companies and investors to identify practical solutions to reporting problems, such as the length and complexity of reports and financial statements.

The Lab is expected to focus on helping quoted UK companies communicate more effectively with investors and analysts. Listed companies from all industries and of all sizes are being invited to participate, along with professional investors and the retail shareholder community.

The priorities of the Lab will be determined primarily by companies and investors. Projects that have been suggested to date include relatively simple improvements to the notes to the financial statements, a review of the effectiveness of elements of narrative reporting and governance information, the potential to revisit the use of websites versus physical reports, and the materiality of specific disclosures.

The establishment of the Lab follows other initiatives such as the United Kingdom Accounting Standards Board report on cutting clutter, the Institute of Chartered Accountants of Scotland (ICAS) and the New Zealand Institute of Chartered Accountants (NZICA) report on reducing disclosures under IFRSs, and the wider call for integrated reporting.

Click for FRC press release (link to UK FRC website).

17 October 2011: IFAC updates policy policy statements on regulation and standard setting

The International Federation of Accountants (IFAC) has released revised versions of its Policy Position Papers on the regulation of the accountancy profession and international standard setting.

Policy Position Paper 1, Regulation of the Accountancy Profession, was first issued by IFAC in December 2007. The revised paper includes a new section highlighting the importance of global regulatory convergence, including the adoption and implementation of high-quality standards. IFAC recognises that regulation of the accountancy profession is primarily conducted at a national level. Therefore, in IFAC's view, to achieve international convergence, national regulation should aim to endorse and implement principles, approaches, and obligations outlined in material issued by authoritative international bodies.

Policy Position Paper 3, International Standard Setting in the Public Interest, was issued by IFAC in December 2008. The revised and updated paper describes how current governance arrangements and independent standard-setting boards supported by IFAC operate in the public interest and address the need for legitimacy, transparency, and performance. The paper includes a brief history of IFAC's governance structure (such as the 'IFAC Reforms') and notes that the IFAC Board is considering amendments to the governance process of the International Public Sector Accounting Standards Board (IPSASB), including the possibility of public oversight by the Public Interest Oversight Board (PIOB).

Click for IFAC press release (link to IFAC website).

14 October 2011: AccountAbility names members of its Advisory Council

AccountAbility, the international corporate responsibility organisation, has announced members of its newly formed Advisory Council. This council will "provide strategic guidance and facilitate AccountAbility's mission of advancing corporate responsibility and sustainability by increasing the impact of its standards, shaping a leading research agenda, and delivering transformative service solutions". Members include CEOs, policymakers and thought leaders, including the former US FASB chairman Robert Herz.

Click for AccountAbility announcement (link to AccountAbility website) to see a full list of council members.

14 October 2011: 28th session of UNCTAD's Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting

 The twenty-eighth session of the Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) is currently being held in Geneva. ISAR assists developing countries and economies in transition to implement best practices in corporate transparency and accounting in order to facilitate investment flows and economic development. ISAR's annual sessions regularly involve over 200 government authorities, regulators, standard-setters and academic representatives.

Speeches and presentations at the session included contributions from ACCA, IAESB, IFAC, IFRS Foundation and the World Bank. They are available on this UNCTAD website.

On the eve of ISAR 28, a technical accounting workshop on "Accounting and reporting for financial instruments and application for fair value measurement requirements" was offered. During the workshop experts presented and discussed main provisions, changes and challenges associated with IFRS 13 Fair Value Measurement and IFRS 9 Financial Instruments. Speakers included Deloitte's financial instruments expert Andrew Spooner, Joao Santos from the Financial Instruments Team of the IASB and Gerald Edwards, Senior Advisor Accounting & Auditing Policy of the FSB. All speeches and presentations are available on the UNCTAD webpage dedicated to the workshop.

14 October 2011: Deadline reminder – ED on Improvements to IFRSs

 We remind you that comments on the Exposure Draft: Improvements to IFRSs are due on 21 October 2011. The ED proposes changes to IFRS 1, IAS 1, IAS 16, IAS 32 and IAS 34. If finalised, all of the amendments will be effective for annual periods beginning on or after 1 January 2013.

14 October 2011: IVSC and IPEV seek consistency in private equity valuation standards

The International Valuations Standards Council (IVSC) and the International Private Equity Valuations (IPEV) board have signed a memorandum of understanding (MoU), agreeing to co-operate on valuation standards.

The IVSC recently published new International Valuation Standards (IVS) covering the valuation of a wide range of assets for financial reporting and other purposes. The IPEV issues the International Private Equity and Venture Capital Valuation Guidelines, which were last updated in 2009 and are widely used by private equity managers when estimating the fair value of investments for financial statements and for reports to investors.

Under the MoU, the IVSC and IPEV have agreed to co-operate with a view to ensuring that the IPEV Valuation Guidelines are consistent with the International Valuation Standards and that the IVSC considers the needs of private equity and venture capital investors in its future work plan.

Click for IVSC announcement (link to IVSC website). More information about the IPEV Valuation Guidelines can be found at www.privateequityvaluation.com.

14 October 2011: IFAC releases recommendations for G20

The International Federation of Accountants (IFAC) has provided a series of recommendations for consideration by the G20 at its meeting on 3-4 November 2011 in Cannes, France.

The IFAC submission follows previous submissions by IFAC to the G20 in 2009 and 2010 and encourages the G20 to continue its essential work on addressing important issues arising from the global financial crisis and to meet the commitments made in its communiqués of 2008–2010 and in the reports of its working groups. In IFAC's view, to achieve these aims the G20 must strive for reporting of high-quality, internationally consistent, relevant, and reliable financial and non-financial information by all sectors.

IFAC recommends that the G20 consider the following three objectives:

  • Public sector financial management, transparency, and accountability – including urgent and fundamental work to consider the nature of institutional change to protect the public and investors in government bonds. Key points to be considered include high-quality and timely accrual-based financial reporting by the public sector (which may be achieved through the adoption and implementation of International Public Sector Accounting Standards (IPSASs)), audited financial statements, and budgeting, appropriations, and reporting on the same accrual basis
  • Global regulatory convergence. IFAC recommends the G20 continue its momentum and ambition for regulatory reform and convergence that has been developed during the global financial crisis – recommendations include the adoption and implementation of International Financial Reporting Standards (IFRS), International Standards on Auditing (ISAs), and the auditor independence requirements set out in the Code of Ethics for Professional Accountants across all jurisdictions
  • Development of integrated reporting. IFAC encourages the G20 to support the development and use of integrated reporting, and in particular, the work of the International Integrated Reporting Committee (IIRC) in creating a globally accepted integrated reporting framework.

Click for IFAC announcement (link to IFAC website).

14 October 2011: New research paper on reporting the impacts and reliance on 'ecosystem services'

The Global Reporting Initiative (GRI) has released a research report entitled Approach for reporting on ecosystem services — Incorporating ecosystem services into an organization's performance disclosure.

'Ecosystem services' (ES) is a term used to capture the benefits derived from ecosystems, such as food, pharmaceutical products, timber, soil fertility, pollination, and freshwater.

In cooperation with the United Nations Environment Programme World Conservation Monitoring Centre (UNEP-WCMC) and consultancy CREM, GRI proposes a new approach for developing sustainability reporting indicators to help companies report their impacts and reliance on ecosystem services.

The research publication elaborates on what ecosystem services are, and in which ways organisations interact with them and how to factor ecosystem services into their long term strategy and operations. The publication suggests indicators that organisations could use to assess and report their impacts on ecosystem services, discussing both narrative reporting and performance reporting.

The publication builds on related initiatives around 'natural capital' such as The Economics of Ecosystems and Biodiversity study (TEEB), the World Business Council for Sustainable Development (WBCSD) Corporate Ecosystem Valuation (CEV) Guide and The University of Cambridge Natural Capital Leaders Platform report (issued in June 2011). The GRI publication represents a move towards incorporating ecosystem services information into sustainability reporting and ultimately integrated reporting.

Click for GRI press release (link to GRI website).

13 October 2011: Minutes from the third meeting of the Experts Group on Non-Financial disclosure by Companies

 The European Commission's Expert Group on disclosure of non-financial information by EU companies held its third meeting on 30 September 2011. Minutes from that meeting are now available on the EC's website (PDF 33k).

The discussions of the expert group focused on the nature, content and scope of potential legislation. They were based on a non-paper circulated to the members of the expert group ahead of the meeting and included as Annex 2 to the minutes.

No next meeting is scheduled for the time being, but the Commission may call for another meeting in the future depending on the developments this initiative may make. A legislative proposal on the disclosure of non-financial information by companies is planned for the first half of 2012.

More information on international developments in integrated reporting is available on our IAS Plus page on integrated and sustainability reporting.

13 October 2011: Study finds the global financial crisis has increased support for IFRSs

 The Association of Chartered Certified Accountants (ACCA) has published a survey showing among other results that the International Financial Reporting Standards (IFRS) are more favourably viewed following the global financial crisis.

163 senior executives from a wide range of industries, including the financial sector, from the US, Europe, the Middle East and Asia took part in the survey that was designed to gauge support for of global standards. The findings were complemented with in-depth interviews with nine executives and investors. According to the study the main results of the survey were:

  • Increasing familiarity with global standards in financial reporting continues to break down resistance to their implementation.
  • The effect of the financial crisis has been to improve perceptions of global standards among investors and issuers.
  • Investors favour global auditing standards.
  • Rising demands from investors and customers for greater disclosure is fuelling an appetite for global standards in non-financial reporting.
  • Executives believe that global standards or benchmarks in corporate governance would encourage more 'long-term' thinking.
  • Although a more distant aspiration, there is a clear recognition of the potential benefits of integrated reporting.

In the foreword to the study, ACCA CEO Helen Brand comments on the results and argues, that they are a clear sign that the US Securities and Exchange Commission should adopt the IFRSs.

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12 October 2011: Japan and US regulators enter into an exchange of letters

The Public Company Accounting Oversight Board of the United States (PCAOB) has entered into a cooperative agreement with the Japan Financial Services Agency (JFSA) and Certified Public Accountants and Auditing Oversight Board (CPAAOB) of Japan. This agreement facilitates "cooperation between the Authorities to the extent permitted by their respective national laws in the oversight, inspections and investigations of auditors subject to the regulatory jurisdictions of both the PCAOB and the JFSA/CPAAOB". Also, the agreement includes provisions governing the sharing of confidential information between the oversight authorities.

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12 October 2011: PCOAB proposes amendments to improve transparency for public company audits

The US Public Company Accounting Oversight Board (PCAOB) has proposed amendments to its standards that are designed to improve transparency in public company audits. The proposed amendments include requirements to disclose the engagement partner's name in the audit report and the PCAOB Annual Report form. The proposal also would require that the audit report contain the names of other accounting firms and other people not employed by the auditor who took part in the audit. Comments on the proposal are due by 9 January 2012.

Click for (all links to PCAOB website):

11 October 2011: Agenda for IFRS Foundation Trustees meeting

The IFRS Foundation Trustees will meet in Paris on Thursday, 13 October 2011. The tentative agenda is shown below. Agenda papers for the meeting are available on the IASB website.

Agenda for the IFRS Foundation Meeting
Thursday, 13 October 2011

Thursday 13 October (09:00-12:00)
  • Report of the IASB Chair
  • Report of the Due Process Oversight Committee
  • Report of the IFRS Advisory Council Chair
  • Report of the Education and Content Services Committee
  • Update on the Strategy Review

11 October 2011: European Outreach Meetings on the IASB Agenda Consultation – additional meetings
As reported earlier, the European Financial Reporting Advisory Group (EFRAG) will organise outreach events on the IASB consultation on its future work programme published in July 2011.

Additional locations and dates for these events have been announced:

  • Copenhagen: Monday 31 October 10.00 hrs
  • Oslo: Tuesday 1 November 12.00 hrs (to be confirmed)
  • Amsterdam: Wednesday 2 November 12.30 hrs
  • Stockholm: Wednesday 9 November
  • Warsaw: Tuesday 15 November (to be confirmed)
  • Brussels (together with the European Commission): Friday 25 November (to be confirmed)

For further information please go to the outreach project page on the EFRAG's website.

10 October 2011: UK ASB welcomes guidance paper on forbearance and impairment provisions

The Financial Services Authority (FSA) recently published a Guidance Paper "Forbearance and Impairment Provisions — Mortgages". The UK Accounting Standards Board (ASB) of the Financial Reporting Council (FRC) has noted that it welcomes the release of this paper, since the ASB believes it is "a contribution towards the continued development of better financial reporting in the UK".

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7 October 2011: AICPA disappointed about FAF decision not to create an independent standard setter for private companies


 As reported earlier, the Financial Accounting Foundation’s Board of Trustees has discarded the Blue-Ribbon Panel's recommendation to create of a new, independent board, to be overseen by the FAF, that would focus on making exceptions and modifications to U.S. GAAP for private companies.

The creation of the Blue-Ribbon Panel in December 2009 had been a joint effort of the FAF and the American Institute of Certified Public Accountants (AICPA). The AICPA is now disappointed that the main recommendation of the report resulting from this joint effort and published in January 2011 was disregarded by the FAF Trustees. In a statement from Barry Melancon, AICPA President and CEO, and Paul Stahlin, AICPA Chair, this disappointment is voiced:

"We are profoundly disappointed that the Financial Accounting Foundation (FAF) is not proposing to create a new independent board to set differences in U.S. GAAP standards, where appropriate, for privately held companies. This was the cornerstone of the Blue Ribbon Panel on Standard Setting for Private Companies' report.

[...]

Unfortunately, FAF's proposal has failed to accept the views of the many voices of the private company constituency asking for a separate board. We don't think the concerns of smaller private companies can be fully appreciated until there is an independent board dedicated and focused solely on the needs of private companies."

Please click for the full text of the statement on the AICPA website.

7 October 2011: Private sector task force final report to G20
The Private Sector Task Force of Regulated Professions and Industries has published a final report, Regulatory Convergence in Financial Professions and Industries, to the deputies of the G20. The report focuses on the private sector's point of view in regards to global regulatory convergence. The report, at the request of the G20 presidency, provides assistance to the G20 in its goal of providing comparability and consistency for investors, regulators, and market participants. It also identifies some of the current gaps in global convergence and provides a method of minimising the systemic risk these gaps may cause.

The Taskforce's report recommends that the G20 maintain its momentum and ambition for global regulatory reform and convergence, in addition to discouraging unilateral national regulatory reforms that are inconsistent with international standards. It also calls for the G20 to encourage and support the development, adoption, and implementation of one set of globally accepted high-quality international standards for each of financial reporting, auditing, valuations, and actuarial services.

6 October 2011: Agenda for the regular October IASB meeting

The IASB's regular monthly meeting is scheduled for 19-20 October 2011 in Norwalk, CT, USA, part of it a joint meeting with the FASB. Set out below is the agenda for the meeting (links are to our project summary for each topic). Times are shown in Eastern Daylight Time (GMT-4).

IASB Board Meeting Agenda
19-20 October 2011, Norwalk, CT, USA

Wednesday, 19 October 2011

IASB Meeting (08:00-09:00)

IASB-FASB Joint Meeting (09:15-16:00)

Thursday, 20 October 2011

IASB-FASB Joint Meeting (08:00-16:15)

6 October 2011: European Outreach Meetings on the IASB Agenda Consultation – locations and dates
As reported earlier, the European Financial Reporting Advisory Group (EFRAG) will organise outreach events on the IASB consultation on its future work programme published in July 2011.

Locations and dates for these events have now been communicated:

  • Frankfurt airport (together with the German DRSC): Friday 7 October 13.00 hrs
  • Copenhagen (together with the Danish FSR): Monday 31 October (to be confirmed)
  • Amsterdam (together with the Dutch DASB): Wednesday 2 November 12.30 hrs
  • Brussels (together with the European Commission): Friday 25 November (to be confirmed)

For further information please go to the outreach project page on the EFRAG's website.

5 October 2011: Hans Hoogervorst addresses AICPA/IFRS Foundation conference


In a recent address at the American Institute of CPAs (AICPA) / IFRS Foundation conference, the IASB chairman, Hans Hoogervorst, discussed the importance of a single set of global accounting standards and the US SEC's impending decision on using IFRSs in the United States.

Mr Hoogervorst focused on the possible SEC decision on incorporation of IFRSs. He addressed the concerns of Americans and other nations that haven't formally committed to IFRSs yet:

A decade of joint work to improve and align IFRSs and US GAAP means that both sets of standards have improved and are moving closer together. Each is used within major capital markets. Each has its relative strengths and weaknesses. While I am not dismissing these differences, I am not convinced by the arguments that one set of standards is clearly superior to the other.

A more compelling criticism of IFRSs is that inconsistent application of the standards makes international comparison more difficult. . . . If you do not have a single language, international consistency in financial reporting will always remain an illusion. A major comfort to the United States should be that if you adopt IFRSs the SEC will remain in full control of enforcement.

[I]t would be reasonable that a relatively long transitional period is provided, particularly for smaller publicly traded companies. An option to allow early adoption of IFRSs also seems sensible for those companies that can already see substantial net benefits of IFRSs.

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5 October 2011: New issue of the IASB's Investor Perspectives

In April 2010, the Trustees of the IFRS Foundation and the IASB launched a programme to enhance investors' participation in the development of International Financial Reporting Standards (IFRSs). One of the enhancements is a newsletter for investors entitled Investor Perspectives. A new edition is now available. Paul Pacter, IASB Board member and former webmaster of IAS Plus, explains the IASB's outreach activities:

All Investor Perspectives are archived on the IASB's website.

5 October 2011: Australian standard setter warns about far-reaching impacts of the IASB's Investment Entities ED
The Chairman of the Australian Accounting Standards Board (AASB), Kevin Stevenson, has addressed the public in a media release (link to AASB website) expressing a number of concerns about the proposals in the IASB's Exposure Draft: Investment Entities.

Stevenson admits that this media release is an unusual step, but he feels it is warranted as this draft raises fundamental questions about existing requirements and may have far-reaching impacts.

"In my view it could lead to increased use of off-balance-sheet accounting, see us depart from the concept of control and lead to unjustified changes in requirements accounting for associates and joint ventures. The exposure draft seeks to include in IFRS accounting practices previously used in North America and would be a step back from the universal consolidation model that we have followed. In this regard, I note that three IASB members have expressed alternative views on ED/2011/4."

The AASB has released the IASB's ED as AASB ED 220 in September. Stevenson urges constituents to carefully review the proposals and make their views known to the AASB and the IASB – to answer the question whether this proposed standard is in the interest of Australian reporting and of international reporting.

Comments are due to the AASB by the 30 November 2011 and to the IASB by 5 January 2012.

4 October 2011: EFRAG draft comment letter on the SMEIG Q&As
The European Financial Reporting Advisory Group (EFRAG) has issued its draft comment letter on the SME Implementation Group's five questions and answer documents (Q&A) on draft guidance related to the implementation of the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) published last week.

EFRAG recommends not issuing any of the Q&As since EFRAG is concerned that the SMEIG is not focusing on a limited number of pervasive issues when issuing Q&As, as specified in its terms of reference and operating procedures, but is creating rules in a principle-oriented environment.

The draft comment letter notes that four of the Q&As consider issues on which the requirements of the IFRS for SMEs seem clear, and the answer to the question raised in the last draft Q&A always seems to depend on the SME's specific circumstances and management's professional judgement.

Comments on the letter are invited by 18 November 2011. The draft comment letter can be downloaded via the press release on EFRAG's website.

4 October 2011: FAF discards suggestion to create independent standard setter for private companies


 The Financial Accounting Foundation’s Board of Trustees has issued for comment a Plan to Establish the Private Company Standards Improvement Council.

In January 2011, the 'Blue-Ribbon Panel' addressing how U.S. accounting standards can best meet the needs of users of private company financial statements issued a report of its recommendations to the Financial Accounting Foundation (FAF) Board of Trustees. The recommendations included the creation of a new board, to be overseen by the FAF, that would focus on making exceptions and modifications to U.S. GAAP for private companies. However, the Trustees concluded that creating a separate standard-setting board for private companies would likely lead to the establishment of two separate sets of US accounting standards, a result that seemed not desirable.

The "Private Company Standards Improvement Council" (PCSIC) now called for in the plan would have the authority to identify, propose and vote on specific improvements to US accounting standards for private companies. However, changes would be subject to ratification by the Financial Accounting Standards Board (FASB). Also, the PCSIC chairman, who would be selected and appointed by the Trustees, would be a FASB member. The FASB believes that it is well prepared for this move of the Trustees by having recently appointed a likely candidate for this position as a board member.

In publishing the new plan, the FAF has concluded, as the Blue-Ribbon Panel has done before, that mandating the use of the IFRS for SMEs in the United States is not appropriate at the current time.

Comments on the plan are requested by 14 January 2012.

Please click for (all links to FAF website):

3 October 2011: Audit alert on audit risks in certain emerging markets

The US Public Company Accounting Oversight Board (PCAOB) has issued a Staff Audit Practice Alert to discuss the auditor's responsibilities regarding the risk of fraud when auditing companies with operations in emerging markets.

Staff Audit Practice Alert No. 8 Audit Risks in Certain Emerging Markets discusses examples of conditions that may indicate greater fraud risks, procedures auditors should perform to address fraud risks and other items auditors should consider when performing an audit of an entity with operations in emerging markets.

Click to download PCAOB Staff Audit Practice Alert No. 8 (PDF 113k).

3 October 2011: Hans Hoogervorst addresses Economic and Monetary Affairs (ECON) Committee of the European Parliament

In a recent address to the ECON Committee of European Parliament, the IASB chairman, Hans Hoogervorst, discussed two main topics: the importance of the IASB's relationship with Europe and his observations on the role of accounting standards and the financial crisis. Mr Hoogervorst noted that Europe's adoption of IFRSs in 2005 has led to the IASB becoming the global standard-setter with many countries having followed Europe's by adopting IFRSs. He noted that he is optimistic for a positive decision by the US Securities and Exchange Commission to incorporate IFRSs into US standards, but a negative decision would not stop the progress of IFRS adoption throughout the world, though it would delay it.

In regards to the relationship between accounting standards and the financial crisis, Mr Hoogervorst noted that "in many cases there was insufficient transparency for investors to be fully aware of the risks they were taking". Mr Hoogervorst noted that the accounting profession will need to improve transparency to contribute to the long-term stability of financial markets, and further stated the following:

Transparency does not always paint a pretty picture. Much of the current economic volatility is deep-rooted. The CEO of Deutsche Bank recently said "volatility is the new normality". The days of 'risk-free assets' are long gone, if ever they existed.

If volatility is indeed the new normality, how should accounting standard-setters respond? Should we artificially shield investors from learning of this underlying economic volatility? Or should accountants try to describe, as accurately as possible and with full transparency, this new normality? Most people I speak with believe that financial reporting should tell it how it is, rather than how we would like it to be. If the emperor really has no clothes, then it is the responsibility of financial reporting to say so, no matter how unpopular the truth may be.

There is however one important caveat to this. Asking accountants to describe economic volatility is one thing, but we should be careful that in doing so financial information does not become the source of economic volatility. For that reason the IASB has always remained pragmatic about which measurement techniques to adopt. We know there is no one right answer and therefore we have always employed a mixed measurement approach, combining historic cost with fair value. That is why we have recently completed the reform of our fair value measurement standard that provides new guidance on illiquid markets. It is why we are proceeding with caution in the reform of financial instruments accounting. Our upcoming hedge accounting rules will prevent artificial accounting volatility to companies who hedge their risks. Accounting should not mask volatility, but neither should it be the source of it.

Please click for Hans Hoogervorst speech (link to IASB website).

 



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