This report analyses key issues arising from the differentiated nature of financial regulation in the international banking, insurance, and securities sectors. It also addresses gaps arising from the scope of financial regulation as it relates to different financial activities, with a particular focus on certain unregulated or lightly regulated entities or activities. The Joint Forum prepared this report at the request of the G-20 to help identify potential areas where systemic risks may not be fully captured in the current regulatory framework and to make recommendations on needed improvements to strengthen regulation of the financial system.

Annex 2 of the report (Fundamental Analysis of the Objectives of Financial Regulation) states: The objective of customer or stakeholder protection is not equivalent to the objective to reduce systemic risks. On the one hand, protecting customers may help to reduce systemic risk by for instance preserving market liquidity, while on the other this might increase systemic risks by undermining market discipline. To have financial supervisors put more emphasis on the objective of systemic risk reduction, the G-20 recommends in its 2009 report on Sound Regulation and Strengthening Transparency that 'as a supplement to their core mandate, the mandates of all national financial regulators, central banks, and oversight authorities, and of all international financial bodies and standard setters (IASB, BCBS, IAIS and IOSCO) should take account of financial system stability'.

Participants were auditors from smaller registered public accounting firms. At those Forums, the staff of the Division of Corporation Finance of the Securities and Exchange Commission reviewed common financial reporting issues facing smaller issuers that they have identified during their staff reviews of filings for smaller public companies. Click to download the SEC Staff Slide Presentation (PDF 267k) summarising some of the issues they have noted. Other SEC information for small businesses may be found here on the SEC's Website.

 

To give an example, in November 2009 the IASB issued IFRS 9 Financial Instruments with an effective date of 1 January 2013. This new IFRS, together with its copious amendments to other IFRSs, will be consolidated in the 2010 Bound Volume (the Red Book), as it was issued before 1 January 2010. It will not be included in the new Blue Book, as its effective date means that it is not required for annual reporting periods beginning on 1 January 2010.

The IASB expects to release the Blue Book – titled Consolidated Without Early Application – around 20 January 2010. They expect to have a facility for placing orders for this volume shortly on IASB's Website.

 

Mr Barnier has prepared written responses (PDF 156k) to questions posted in advance by the committees. His comments on accounting include:

In the area of financial information, one of my priorities will be the adoption by all of our partners, including the United States, of high-quality global accounting standards, in line with the recommendations of the G20. I would also like to improve the governance of the IASB significantly. As regards SMEs, I would like to put forward an ambitious proposal for the modernisation of accounting regulations. Lastly, with regard to the statutory audit of accounts, my priorities will be to enhance international cooperation in order to enable mutual recognition of supervisory systems in respect of [auditors], and potential adoption of the international [auditing] standards (ISA).

The paper is intended to help clarify the meaning of particular terms used by policy-makers, banks, regulators, accountants, and others in respect of bank provisioning and reserving, "since there is not yet a common understanding of what these terms are meant to cover". The paper is also intended to assist the readers of the recently issued joint EFRAG/FEE paper Impairment of Financial Assets: The Expected Loss Model (see IAS Plus News Story of 10 Dec 2009) by providing background information and an outline of the key terms of the various approaches and models that are currently being debated. FEE's announcement also notes that the paper "may also help to better understand the current discussions on impairment in relation to the proposals of the International Accounting Standards Board (IASB) for the impairment of financial assets". Click for:

• FEE Paper on Bank Provisioning and Reserving (PDF 1,245k)
• FEE Press Release (PDF 35k)

 

Regarding IFRSs, the Report of the Meeting (PDF 42k) states:

Strengthening accounting standards. As requested by the G20 Leaders, the FSB continues to monitor progress in implementing G20 and FSB recommendations for improved, converged accounting standards. FSB members welcomed the IASB's plan to continue its enhanced technical dialogue with prudential authorities and market regulators on financial institution reporting issues, and to conclude its full review of the financial instruments standard by the end of this year.

The topics discussed were as follows (click through to access detailed Deloitte observer notes for each topic):

 

THURSDAY 7 JANUARY 2010 (10:00-18:15)

Introduction

Active Committee projects

• IAS 16 – Accounting for production phase stripping costs in the mining industry
• IFRS 2 – Vesting and non-vesting conditions

Review of tentative agenda decisions published in November 2009 IFRIC Update

• IAS 38 – Amortisation method
• IFRS 2 – Contingent manner of settlement
• IAS 27 – Presentation of comparatives when applying the 'pooling of interests' method
• IAS 27 – Combined financial statements and redefined reporting entities
• IAS 18 – Receipt of a dividend of treasury shares
• IFRS 4 and IAS 32 – Scope issue for investments in REITs
• IAS 32 – 'Fixed for fixed' condition

Annual improvements – Deliberation of comments received

• IFRS 1 – Revaluation basis as deemed cost
• IAS 27 – Impairment of investments in subsidiaries, jointly controlled entities and associates in the separate financial statements of the investor
• IFRS 3 – Measurement of non-controlling interests
• IFRS 3 – Transition requirements for contingent consideration from a business combination that occurred before the effective date of the revised IFRS
• IFRS 7 – Disclosures about the nature and extent of risks arising from financial instruments
• IAS 28 – Partial use of fair value for measurement of associates
• IAS 34 – Significant events and transactions
• Remaining issues from August 2008 Annual Improvements ED

 

FRIDAY 8 JANUARY 2010 (09:00-12:30)

Staff recommendations for tentative agenda decisions

• IFRS 8 and IAS 36 – Transition provisions for IFRS 8 amendment
• IAS 21 – Determination of functional currency of investment holding company
• IAS 32 – Debt/equity classification of instruments with obligation to deliver cash at the discretion of shareholders
• IFRS 1 – Accounting for costs included in self-constructed assets on transition
• IAS 39 – Unit of account for forward contracts with volumetric optionality

Administrative session

 

Click to go to the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

Specific topics will include:

• Themes and highlights from the December SEC/AICPA Conference
• Recent developments related to US registrants' adoption of IFRSs
• Regulatory views on disclosures related to goodwill impairments and non-GAAP measures
• Comprehensive updates around the latest financial reporting developments

Details about the webcast:

• Title: Year-End Reporting Issues: An Update on Current Issues and Items on the Horizon
• Date and time: 13 January 2010, 2:00pm to 3:30pm US Eastern Standard Time (New York time)
• Click here for More Information and Registration

 

The Board will not meet on Friday. The meeting will be open to public observation and will be webcast. Presented below is the agenda for the meeting.

IASB Board Meeting Agenda18-21 January 2010, London

Monday 18 January 2010 – Joint meeting with FASB (13:00-19:00pm London time) Fair Value Measurement Revenue Recognition Financial Instruments with the Characteristics of Equity Tuesday 19 January 2010 – Joint meeting with FASB (08:00-18:45pm London time) Insurance Contracts Financial Statement Presentation Consolidation Replacement of IAS 39: Hedge Accounting Wednesday 20 January 2010 – Joint meeting with FASB until 12:45pm (08:00-16:30pm London time) Joint Meeting: Leases Replacement of IAS 39: Classification and Measurement – Financial Liabilities IASB Meeting: Financial Statement Presentation Derecognition of Financial Instruments Leases Thursday 21 January 2010 (08:30-14:15pm London time) IFRIC Update Amendment to IFRS 1 – Exemption from Comparative IFRS 7 Disclosures IFRS 5: Discontinued Operations Post-employment Benefits

The update reflects the endorsement of the amendment to IAS 32 on classification of rights issues (see our article from 28 December). Click to download the Endorsement Status Report as of 7 January 2010 (PDF 119k).

The following seven IASB pronouncements await EC endorsement:

Standards IFRS 9 Financial Instruments Interpretations Amendment to IFRIC 14 Prepayments of a Minimum Funding Requirement IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments Amendments Improvements to IFRSs (issued 16 April 2009) Amendments to IFRS 2 Group Cash-settled Share-based Payment Transactions Amendments to IFRS 1 Additional Exemptions for First-time Adopters IAS 24 Revised Related Party Disclosures