Financial Instruments: Applying IAS 32 and IAS 39

NEW BOOK FROM DELOITTE TOUCHE TOHMATSU: FINANCIAL INSTRUMENTS: APPLYING IAS 32 AND IAS 39 Summaries, Guidance, Examples, and US GAAP Comparisons
	No accounting issue generates as much emotion as measuring financial instruments at fair value - not pooling, not stock compensation. No accounting issue is as complex. And no accounting issue is as pervasive. Every enterprise has financial instruments - perhaps just cash and receivables and payables, but frequently investments, long-term debt, and derivatives. For many companies, financial instruments are the majority of their balance sheet - and this is true not only for the obvious entities like banks and insurance and leasing companies but also for many service and commercial enterprises and holding companies. IAS 39 was IASC's most difficult standard. It was preceded by three exposure drafts and an issues paper that contained additional proposals. It took 10 years to develop.
IAS 39 is a radical standard for many companies: It calls for mark-to-market for many financial instruments. It puts all derivatives on the balance sheet and marks them to market. It sets out for when a transfer of financial assets is a sale and when it's just a collateralised borrowing. And - for the first time - it puts discipline in hedge accounting. It took effect in 2001. Roughly 7,000 listed companies in Europe will be switching to IAS/IFRS in 2005 and will be applying IAS 39 for the first time. When IAS 39 was issued in December 1998, IASC knew that implementation would be even more difficult than developing the standard. They created a special IAS 39 Implementation Guidance Committee (IGC) charged with developing interpretations and guidance. In less than three years, the IGC issued around 250 guidance questions and answers - that's eight times the number of Interpretations that the SIC issued on all of the other IAS put together. Deloitte Touche Tohmatsu is in a very unique position with regard to IAS 39. The chairman of IASC during the development of IAS 39, Stig Enevoldsen, is a partner in our Copenhagen office and heads our Copehagen IAS Centre of Excellence. John T. Smith, the IGC chairman, former IASC Board member, and now IASB Board Member, is a partner in our US practice and heads up the firm's global financial instruments group. And Paul Pacter, the IASC project manager and author of IAS 39, is technical director of our IAS Global Office. Together, John and his staff and Paul have developed clear and comprehensive guidance on IAS 39. The book is nearly 250 pages in length and contains: 164 Questions and Answers, 151 Examples (many with journal entries), 52 US GAAP Comparisons, Comprehensive summaries of IAS 39 and its companion disclosure standard, IAS 32. These are linked back to the IAS 32 and IAS 39 paragraphs. When it was originally issued late last year, we restricted distribution of the book to staff and clients. In response to many requests, we are now making it available without charge to all. Click to Download the Deloitte IAS 39 Book (PDF 1,933k). Because the file is large, if you are using a modem you are likely to see a white screen for a minute or two -- be patient.

NEW BOOK FROM DELOITTE TOUCHE TOHMATSU:
FINANCIAL INSTRUMENTS:
APPLYING IAS 32 AND IAS 39
Summaries, Guidance, Examples, and US GAAP Comparisons

No accounting issue generates as much emotion as measuring financial instruments at fair value - not pooling, not stock compensation. No accounting issue is as complex.

And no accounting issue is as pervasive. Every enterprise has financial instruments - perhaps just cash and receivables and payables, but frequently investments, long-term debt, and derivatives. For many companies, financial instruments are the majority of their balance sheet - and this is true not only for the obvious entities like banks and insurance and leasing companies but also for many service and commercial enterprises and holding companies.

IAS 39 was IASC's most difficult standard. It was preceded by three exposure drafts and an issues paper that contained additional proposals. It took 10 years to develop.

IAS 39 is a radical standard for many companies:

It calls for mark-to-market for many financial instruments.
It puts all derivatives on the balance sheet and marks them to market.
It sets out for when a transfer of financial assets is a sale and when it's just a collateralised borrowing.
And - for the first time - it puts discipline in hedge accounting.

It took effect in 2001. Roughly 7,000 listed companies in Europe will be switching to IAS/IFRS in 2005 and will be applying IAS 39 for the first time.

When IAS 39 was issued in December 1998, IASC knew that implementation would be even more difficult than developing the standard. They created a special IAS 39 Implementation Guidance Committee (IGC) charged with developing interpretations and guidance. In less than three years, the IGC issued around 250 guidance questions and answers - that's eight times the number of Interpretations that the SIC issued on all of the other IAS put together.

Deloitte Touche Tohmatsu is in a very unique position with regard to IAS 39. The chairman of IASC during the development of IAS 39, Stig Enevoldsen, is a partner in our Copenhagen office and heads our Copehagen IAS Centre of Excellence. John T. Smith, the IGC chairman, former IASC Board member, and now IASB Board Member, is a partner in our US practice and heads up the firm's global financial instruments group. And Paul Pacter, the IASC project manager and author of IAS 39, is technical director of our IAS Global Office.

Together, John and his staff and Paul have developed clear and comprehensive guidance on IAS 39. The book is nearly 250 pages in length and contains:

164 Questions and Answers,
151 Examples (many with journal entries),
52 US GAAP Comparisons,
Comprehensive summaries of IAS 39 and its companion disclosure standard, IAS 32.

These are linked back to the IAS 32 and IAS 39 paragraphs.

When it was originally issued late last year, we restricted distribution of the book to staff and clients. In response to many requests, we are now making it available without charge to all. Click to Download the Deloitte IAS 39 Book (PDF 1,933k). Because the file is large, if you are using a modem you are likely to see a white screen for a minute or two -- be patient.