July

Consultation on proposals to reform the UK's financial regulatory framework

27 Jul, 2010

The UK Financial Secretary to the Treasury, Mark Hoban MP, launched a government consultation on the implementation of reforms to financial regulation. The plan is to overhaul the system of financial regulation, giving the Bank of England powers over macro prudential regulation, through a newly established Financial Policy Committee (FPC) to avoid a repeat of the financial crisis.

Among the potential macro-prudential tools suggested as additions to the UK's economic policy framework, is forward-looking loss provisioning. The dynamic provisioning system employed by Spain during the financial crisis is offered as a useful practical example. This system links loss provisions to the credit cycle, so banks are forced to hold higher provisions when credit is growing strongly. The IASB has discussed a dynamic provisioning model, but has decided against it in favour of its expected loss model. Click for:

 

Broad agreement on Basel Committee capital and liquidity reform package

27 Jul, 2010

The Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, met on 26 July 2010 to review the Basel Committee's capital and liquidity reform package, reaching broad agreement on the overall design of the package.

Mr Jean-Claude Trichet, President of the European Central Bank and Chairman of the Group of Governors and Heads of Supervision, said that "the agreements reached today are a landmark achievement to strengthen banking sector resilience in a manner that reflects the key lessons of the crisis."

The proposals change the treatment of various accounting balances, including an override of local GAAP in favour of IFRSs in relation to some intangibles. Some IFRS-related extracts from the proposals follow:

Allow IFRS treatment where different from national GAAP (eg software)

A level playing field is established through an option to use IFRS in determining the level of intangible assets if national GAAP results in a wider range of assets (eg certain software assets) being classified as intangible.

Definition of the leverage ratio

For all derivatives (including credit derivatives), apply Basel II netting plus a simple measure of potential future exposure based on the standardised factors of the current exposure method. This ensures that all derivatives are converted in a consistent manner to a "loan equivalent" amount... [This] would also strengthen the treatment of derivatives relative to the purely accounting based measure (and provide a simple way of addressing differences between IFRS and GAAP).

Forward looking provisioning

While capital focuses on unexpected losses, the Committee also has developed a concrete proposal to operationalise the expected loss approach to provisioning proposed by the IASB. The Committee sent a comment letter to the IASB on 30 June 2010 in which it spelled out its proposed approach. The Committee has been in close dialogue with the IASB on this topic.

The Committee is expected to finalise the regulatory buffers before the end of this year. The Governors and Heads of Supervision agreed to finalise the calibration and phase-in arrangements at their meeting in September. Click for:

 

Updated survey on extended use of IFRSs in European Union

26 Jul, 2010

Since 2005, the European Union Accounting Regulation has required that European companies listed in a European securities market must use IFRSs to prepare their consolidated financial statements.

The Regulation gave EU member states the options to:
  • Require or permit IFRSs for unlisted companies
  • Require or permit IFRSs in parent company (unconsolidated) financial statements
  • Permit companies whose only listed securities are debt securities to delay IFRS adoption until 2007
  • Permit companies that are listed on exchanges outside of the EU and that currently prepare their primary financial statements using a non-EU GAAP (in most cases this would be US GAAP) to delay IFRS adoption until 2007.
The European Commission has updated its earlier surveys of EU and EEA member states concerning their decisions regarding the four options above. Click to download the results of the updated survey: Table on Use of IFRS Options 30 EU Member and EEA States (PDF 64k)

EU formally adopts IFRIC 19

26 Jul, 2010

The European Union has published the Commission Regulation (EC) No 662/2010 endorsing IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments.

The Interpretation applies when a debtor extinguishes a liability fully or partly by issuing equity instruments to the creditor. IFRIC 19 addresses only the accounting by the entity that issues the equity instruments; it does not address the accounting by the creditor (lender).

Currently only two IASB pronouncements await endorsement action.

Updated summary of agenda rejections by the Interpretations Committee

24 Jul, 2010

We have updated our Summary of Issues Not Added to the Agenda of the Interpretations Committee to reflect the Committee's final decisions at its May and July 2010 meetings not to add the following topics to its agenda.

Our summary now includes 185 issues:
  • IFRS 1 First-time Adoption of International Financial Reporting Standards – Accounting for costs included in self-constructed assets on transition
  • IFRS 5 Non-current Assets Held for Sale and Discontinued Operations – Reversal of disposal group impairment losses relating to goodwill
  • IAS 1 Presentation of Financial Statements – Going concern disclosure
  • IAS 26 Accounting and Reporting by Retirement Benefit Plans – Valuation of plan assets
  • IAS 39 Financial Instruments: Recognition and Measurement – Impairment of financial assets reclassified from available-for-sale to loans and receivables

 

 

Two new publications from Deloitte

23 Jul, 2010

We've posted two new Deloitte publications dealing with IFRS issues and developments: IFRIC Review and IFRS Alert.

IFRIC Review

IFRIC Review is a new communication that examines matters discussed at the IASB's IFRS Interpretations Committee (IFRIC).

The July edition (PDF 84k) discusses the IFRIC meeting held on 8-9 July 2010.

All issues of IFRIC Review will be available here.

 

IFRS Alert

IFRS Alert highlights important IFRS accounting developments that may require immediate action. This IFRS Alert (PDF 67k) provides an update on potential accounting implications as a result of recent actions taken by the Venezuelan government regarding foreign currency exchange controls.

All IFRS Alerts will be available here.

You can also access all our Deloitte IFRS publications.

 

Notes from day 5 of July 2010 IASB meeting

23 Jul, 2010

The IASB is holding a meeting on 19-23 July 2010 at the IASB's office in London, some of which is a joint meeting with the FASB.

The topics discussed on day 5 were as follows (click through to detailed Deloitte observer notes for that topic): Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers for the entire meeting.

CEBS publishes results of its 2010 EU-wide bank stress tests

23 Jul, 2010

The Committee of European Banking Supervisors (CEBS) published the results of its 'stress tests' of 91 European banks.

CEBS has published the following documents on its website:

Notes from day 3 of July 2010 IASB meeting

22 Jul, 2010

The IASB is holding a meeting on 19-23 July 2010 at the IASB's office in London, some of which is a joint meeting with the FASB.

The topics discussed on day 3 were as follows (click through to detailed Deloitte observer notes for that topic): Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers for the meeting.

 

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.