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December 2017

Managing the public balance sheet

Dec 15, 2017

In December 2017, the Institute of Chartered Accountants in England (ICAEW) published a new policy insight in the better government series – Managing the Public Balance Sheet.

This Policy Insight aims to help public officials understand what is in their Balance Sheets. The value of the information about different sorts of assets and liabilities and how some governments around the world are using it to support more effective policy making. In particular to help government ask the right questions to make the most of their financial information, for example:

  • What assets do they have and are they getting the best use out of them?
  • Should government’s increase or decrease investment?
  • What are their liabilities and how are they going to settle or service them?
  • Could refinancing offer opportunities to save money?
  • How fast are liabilities increasing relative to income and could heir growth be slowed?
  • What is the long term impact of decisions with financial consequences beyond the next year?
  • This policy insight draws on the balance sheet information published in the UK’s Whole of Government Accounts and financial reports published by the Australian, Canadian, French, German and New Zealand governments to highlight areas where better balance sheet management can help governments to use resources more effectively.

Review the announcement and publication on the ICAEW's website.

New Trustees of the IFRS Foundation appointed, Chair Michel Prada continues in his post for the time being

Dec 14, 2017

On December 14, 2017, the IFRS Foundation announced that it has appointed seven new Trustees, but that the identification of a successor of the Chair of the Trustees has taken longer than anticipated and therefore Michel Prada has agreed to remain in place until the appointment process is completed.

The following seven new Trustees have been appointed for three-year terms beginning on January 1, 2018:

  • Dame Colette Bowe
  • Larry Leva
  • Michel Madelain
  • Ross McInnes
  • Vinod Rai
  • Lucrezia Reichlin
  • Teresa Ko

In addition, Sheila Fraser’s term as Vice-Chair has been extended until December 2019, and Takafumi Sato replaces Ronald Arculli as the second vice-chair from January 1, 2018, following Mr. Arculli’s retirement as a Trustee at the end of 2017.

Review the press release on the IASB's website.

Preparer’s guide to the IFRS Taxonomy

Dec 14, 2017

On December 14, 2017, the IFRS Foundation released "Using the IFRS Taxonomy—A preparer’s guide" to help companies understand the IFRS Taxonomy content.

The IFRS Foundation points out that the IFRS Taxonomy facilitates the digital creation and consumption of financial information and improves investors’ access to financial information by listing and defining specific codes, or elements, that can be used to tag items of data.

For the years 2017-2021 the IASB has chosen "Better communication" as its central theme, and in addition to the primary financial statements project and the disclosure initiative this also includes the IFRS Taxonomy. This guide is therefore intended to support the use of the IFRS Taxonomy around the world by regulators, companies and other users of financial information.

Review the press release and guide on the IASB's website.

Report from EFRAG's fair value conference

Dec 05, 2017

On December 5, 2017, the European Financial Reporting Advisory Group (EFRAG) hosted a half-day event on the use of fair value in financial reporting in Brussels. We have put together a short report on the speeches and presentations at the conference.

EFRAG Board President Jean-Paul Gauzès welcomed speakers, presenters, panelists, and participants from the standard-setting, regulatory, investor, preparer, and academic worlds to the well-attended exchange of views regarding theoretical and practical aspects of fair value reporting, a topic “that encourages much debate”.

Keynote speaker was Sir David Tweedie, Chairman of the Board of Trustees of the International Valuation Standards Council (IVSC) and former Chairman of the IASB, who spoke on “Valuation experts and accountants: working together”. He noted that valuations undertaken in accordance with generally accepted principles are central to financial stability and for financial reporting under IFRS and US GAAP and that poor valuation practice was identified as a significant contributor to the 2008 financial crisis with a particular focus on financial instruments. Accordingly, the example chosen by Sir David to illustrate problems that need to be solved between valuation and reporting centered around financial instruments. He noted that IAS 39, IFRS 9, and IFRS 13 are not very specific on valuation principles and that regulators have observed huge variation in the valuation of financial instruments. Sir David also pointed at the conflicting approaches between accounting standards and current view of market practitioners.

The next agenda item was a presentation that looked at the theory behind fair value accounting and especially the merits and limitations of fair value in financial reporting. Prof. Mauro Bini noted that including more current estimates of the future in assets and liabilities enhances income’s predictive ability. However, he also noted that historical cost accounting is an anchor for developing forecasts and asked whether fair value can serve for this purpose equally well. He then noted aspects such as an entity’s business model and the question of relevance versus reliability. Prof. Bini concluded that reliability costs of fair value accounting are high and that the net economic benefits of adopting fair value are low, a conclusion afterwards discussed by a panel that included as panelist IASB member Prof. Ann Tarca and Alain Deckers, Head of the Unit "Accounting and Financial Reporting" at the European Commission.

The practice of fair value was the topic of the next presentation “Challenges in using fair value”. After a short discourse into the history of fair value in IFRSs, presenter Henk Oosterhout also turned to the question of relevance versus reliability, noting that relevance is related to a stronger role of financial markets while reliability also means to consider that prices are objective, but values are not. His illustration examples were drawn from the S&P Europe 350 index companies and he noted an increase of the proportion of fair value assets to total assets of listed firms. This required, Mr Oosterhout noted, more voluntary disclosure and better consistency and comparability. He stated that markets generate often more information than assumed, which increased the importance of Management Discussion & Analysis when arguing the often stressed point of increased volatility. Mr Oosterhout’s conclusions were discussed by a panel moderated by Andrew Watchman, EFRAG TEG Chairman and CEO, with Stephen Cooper, analyst and former IASB member, as one of the panelists.

The event concluded with remarks by Filippo Poli, EFRAG Research Director. EFRAG will issue a report summarising the feedback received at the event.

Review the speaker presentations on the EFRAG's website.

Speeches from the annual AICPA conference are now available

Dec 04, 2017

On December 4, 2017, the Securities and Exchange Commission (SEC) released the speeches given at the 2017 AICPA Conference on Current SEC and PCAOB Developments. The conference features speeches by — as well as panel discussions and question-and-answer sessions with — members of the SEC, PCAOB, FASB, and IASB and professionals from various industries.

Prepared remarks by the following speakers are now available:

SEC

  • Wesley R. Bricker, chief accountant, Office of the Chief Accountant.
  • Barry Kanczuker, associate chief accountant, Office of the Chief Accountant.
  • Michal P. Dusza, professional accounting fellow, Office of the Chief Accountant.
  • Michael P. Berrigan, professional accounting fellow, Office of the Chief Accountant.
  • Nigel J. James, associate chief accountant, Office of the Chief Accountant.
  • Robert B. Sledge, professional accounting fellow, Office of the Chief Accountant.
  • Ryan Wolfe, senior associate chief accountant, Office of the Chief Accountant.
  • Joseph R. Epstein, professional accounting fellow, Office of the Chief Accountant.

FASB

PCAOB

CAQ

IASB

Also see our US firm's Heads Up newsletter for highlights from the conference.

Summary of the October 2017 CMAC meeting

Dec 06, 2017

On December 6, 2017, the International Accounting Standards Board (IASB) released a summary of the Capital Markets Advisory Committee (CMAC) meeting which was held in London on October 20, 2017.

The topics discussed at the meeting included:

  • Discussion Paper Disclosure Initiative — Principles of Disclosure:
    • Feedback from investors
    • Areas to prioritize
  • Primary financial statements:
    • Project update
    • Useful subtotals for the presentation of financial performance for banks
  • Post-implementation review of IFRS 13
    • Feedback from investors and recommendations
  • Perceptions of the IFRS Foundation
    • Findings in the reputation research survey report and recommendations

Review the meeting page and the meeting summary on the IASB's website.

The PCAOB’s Initiatives to Bolster Investor Trust in the Audit

Dec 04, 2017

On December 4, 2017, the Public Company Accounting Oversight Board (PCAOB) posted the speech, "The PCAOB’s Initiatives to Bolster Investor Trust in the Audit," delivered by PCAOB Chairman James R. Doty, at the AICPA Conference on Current SEC and PCAOB Developments in Washington.

In his speech, Mr. Doty explains how the audit is the linchpin of the public capital markets, how the PCAOB's programs and initiatives are designed to reestablish the profession's footing solidly in the public interest and how transparency through disclosure is a way for the audit profession to build and deepen trust.

Review the full speech on the PCOAB's website.

Updated IASB work plan — Analysis

Dec 18, 2017

On December 18, 2017, the International Accounting Standards Board (IASB) updated its work plan following its December 2017 meeting. The changes are numerous.

Below is an analysis of all changes made to the work plan since our last analysis on November 17, 2017.

Maintenance projects

Standard-setting projects

  • Conceptual framework — issuance is now expected March 2018 (previously set to Q1 2018).
  • Definition of material (amendments to IAS 1 and IAS 8) — Discussions on feedback of the exposure draft are now expected March 2018 (previously set to February 2018).
  • Rate-regulated activities — a discussion paper or exposure draft is now expected in 2019 (previously set to H1 2018).

Research projects

Other projects

The IASB has also added two new projects to its website as a result of discussions at its December meeting, although these don't show in the work plan yet:

In addition, changes to the work plan due to the issuance of the Annual Improvements to IFRS Standards 2015–2017 include the roll-off of (1) borrowing costs eligible for capitalization, (2) income tax consequences of payments on instruments classified as equity (amendments to IAS 12), and (3) previously held interests in a joint operation (amendments to IFRS 3 and IFRS 11).

The revised IASB work plan is available on the IASB's website.

Video recording of panel discussion with Chairs of IASB, FASB, and AcSB

Dec 12, 2017

On December 12, 2017, the Accounting Standards Board (AcSB) made available a video recording of a panel discussion held at the November 2017 IFRS Conference: Americas. The panel featured Hans Hoogervorst, Russ Golden, and Linda Mezon.

Topics discussed included the global financial reporting landscape, how the world has changed in recent years, the future for US GAAP/IFRS convergence, and how financial accounting fits with a broader reporting framework.

View the video recording of the panel discussion (approx. one hour) on the AcSB's website.

Year in review — 2017

Jan 03, 2018

We've devoted significant resources to bring you comprehensive coverage of all financial reporting matters and other relevant topics and are pleased that our readers appreciate our efforts.

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