Newsletter on IASB-FASB convergence

30 Jun, 2010

Deloitte's IFRS Global Office has published an IFRS in Focus Newsletter – IASB and FASB modify convergence strategy.

This newsletter describes the modified convergence strategy and updated work plan of the IASB and FASB. The IASB and FASB have modified their convergence strategy in response to concerns about constituents' ability to provide comments on the large number of proposals that were expected to be published during the second quarter 2010. All of our past IFRS in Focus newsletters are Here.


Limited-scope ED on fair value measurement

30 Jun, 2010

The IASB has issued an exposure draft (ED) 'Measurement Uncertainty Analysis Disclosure for Fair Value Measurements' proposing relatively minor amendments to the proposals in its May 2009 ED on fair value measurement.

The May 2009 ED proposed a three-level fair value hierarchy that categorises observable and non-observable market data used as inputs for fair value measurements. Under that hierarchy, Level 3 inputs are 'unobservable inputs' used for the fair value measurement of assets or liabilities for which market data are not available. Required disclosures would include a 'measurement uncertainty analysis' (sometimes called a 'sensitivity analysis'). The newly proposed amendments would enhance the original proposal by requiring the measurement uncertainty analysis disclosure to reflect the interdependencies between unobservable inputs used to measure fair value in Level 3. Comment Deadline is 7 September 2010. Click for IASB Press Release (PDF 101k). The US FASB has also issued a similar exposure draft, Fair Value Measurements and Disclosures (Topic 820): Amendments for Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, relating to the measurement uncertainty analysis disclosure. Presented below are the IASB's key conclusions to date on fair value measurement, based on the May 2009 ED and subsequent redeliberations and decisions.

Goal of the IASB's fair value measurement project:

The goal of the project is to define fair value, establish a framework for measuring fair value, and require disclosures about fair value measurements. However, it would not change the circumstances in which assets, liabilities, equity, and disclosure items must be measured at fair value under IFRSs.

IASB conclusions to date on fair value measurement:

  • Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price).
  • In the absence of an actual transaction at the measurement date, a fair value measurement assumes that a transaction takes place at that date in the principal (or most advantageous) market for the asset or liability.
  • Fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined using the assumptions that market participants would use when pricing the asset or liability, including assumptions about risk. As a result, a fair value measurement does not consider an entity's intention to hold an asset or to settle or otherwise fulfil a liability.
  • For a non-financial asset, fair valuation presumes the asset is used at its highest and best use.
  • To increase consistency and comparability in fair value measurements and related disclosures, the IASB would establish a fair value hierarchy that prioritises into three levels the inputs to valuation techniques used to measure fair value, giving the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs):
    • Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
    • Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability.
    • Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs would be used to measure fair value to the extent that relevant observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. However, the fair value measurement objective remains the same – an exit price from the perspective of a market participant who holds the asset or owes the liability at the measurement date. Therefore, unobservable inputs should reflect the assumptions that market participants would use when pricing the asset or liability, including assumptions about risk.


EFRAG consultation on its proactive work in Europe

30 Jun, 2010

Following the publication of its new Strategy for European Proactive Financial Reporting Activities earlier this month, the European Financial Reporting Advisory Group (EFRAG) has now launched a public Consultation on Proactive Work.

EFRAG's proactive work is intended to influence future standard-setting developments by engaging with European constituents and providing timely and effective input to the early phases of the IASB's work. Currently, EFRAG is working among others on projects concerning corporate income tax, business combinations under common control and a disclosure framework. Possible future projects include:
  • European perspective on development of post implementation reviews (Post-implementation review policy)
  • European input to the IASB's post- implementation review of IFRS 3 Business Combinations
  • European Input to the IASB's post-implementation review of IFRS 8 Operating Segments
  • Post-implementation review of IFRIC 12 Service Concession Arrangements
  • Government grants
  • Understanding the decision environments of users of the financial report
  • Application of IFRS to individual financial statements
  • Performance reporting — Phase 3
  • Share-based payments
The public consultation closes on 30 September 2010.
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CEBS publishes two follow-up reports on its assessment of banks' disclosures

30 Jun, 2010

The Committee of European Banking Supervisors (CEBS) has published Assessment of banks' transparencyin their 2009 audited annual reports and Follow-up review of banks' transparency in their 2009 Pillar 3 reports. In its press release, CEBS states that "This work reflects CEBS's ongoing interest in the banks' disclosure of the impact of the crisis on their activities and financial situation."

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Agenda for 8-9 July 2010 Interpretations Committee meeting

30 Jun, 2010

The IFRS Interpretations Committee will meet at the IASB's offices in London on Thursday and Friday 8 and 9 July 2010 (morning only on 9 July).

You can access the agenda on our 8-9 July 2011 Interpretations Committee meeting page. We will also post Deloitte observer notes on this page as they are available.

Newsletter on revenue recognition ED

29 Jun, 2010

Deloitte's IFRS Global Office has published an IFRS in Focus Newsletter — IASB Issues Revenue Recognition Exposure Draft.

[Prior to June 2010, these newsletters were titled IAS Plus Update.] The newsletter explains the IASB's 24 June 2010 proposed new standard (jointly with FASB) that would supersede IAS 11 Construction Contracts and IAS 18 Revenue and related interpretations. The core principle proposed in the ED would require an entity to recognise revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to receive in exchange for those goods or services. Click for IFRS in Focus - IASB Issues Revenue Recognition Exposure Draft. All of our past IFRS in Focus and IAS Plus Update newsletters are Here.


G20 reiterates support for global accounting standards

28 Jun, 2010

Following their summit meeting in Toronto on 26-27 June 2010, the leaders of the G20 group of nations have issued a Declaration reaffirming their support for a single set of global accounting standards as a means for strengthening the global financial market infrastructure.

Unlike the G20 leaders' Declaration in September 2009 following their Pittsburgh summit, this new Declaration does not make reference to a June 2011 deadline. The G20 was first organised in the wake of the Asian financial crisis of the late 1990s. With the onset of the global financial crisis in 2008, the G-20 has become the principal forum to lead global efforts to stem the crisis and mitigate its effects. Below is an excerpt from the Declaration following the Toronto summit. Click here to go to our Credit Crunch Page.

Financial Sector Reform

We agreed to strengthen financial market infrastructure by accelerating the implementation of strong measures to improve transparency and regulatory oversight of hedge funds, credit rating agencies and over-the-counter derivatives in an internationally consistent and nondiscriminatory way. We re-emphasized the importance of achieving a single set of high quality improved global accounting standards and the implementation of the FSB's standards for sound compensation.

Accounting Standards

We re-emphasized the importance we place on achieving a single set of high quality improved global accounting standards. We urged the International Accounting Standards Board and the Financial Accounting Standards Board to increase their efforts to complete their convergence project by the end of 2011.

We encouraged the International Accounting Standards Board to further improve the involvement of stakeholders, including outreach to emerging market economies, within the framework of the independent accounting standard setting process

Click for G20 Leaders Declaration (PDF 509k).

Updated EFRAG 'endorsement status report'

27 Jun, 2010

The European Commission has endorsed the IASB's 23 July 2009 Amendments to IFRS 1: Additional Exemptions for First-time Adopters.

Consequently, the European Financial Reporting Advisory Group (EFRAG) has updated its report showing the status of endorsement, under the EU Accounting Regulation, of each IFRS, including standards, interpretations, and amendments. Click to download the Endorsement Status Report as of 25 June 2010 (PDF 118k). Currently, the following six IASB pronouncements await endorsement action:
  • IFRS 9 Financial Instruments
  • Amendment to IFRIC 14 Prepayments of a Minimum Funding Requirement
  • IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
  • Revised IAS 24 Related Party Disclosures
  • Amendment to IFRS 1 Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters
  • Improvements to IFRSs
You can always find the endorsement status report Here.


IFAC urges G-20 to adopt global standards

26 Jun, 2010

The International Federation of Accountants (IFAC) has submitted a Series of Recommendations for consideration by the G-20 at its meeting on 26-27 June 2010 in Toronto, Canada.

The recommendations emphasise the need for greater transparency and accountability in public sector finances and urge the G-20 to support adoption of International Financial Reporting Standards globally. IFAC's recommendations:
  1. The G-20 should strongly encourage all governments to provide greater transparency and accountability in public sector finances.
  2. The G-20 should encourage all governments to provide transparency and greater accountability in respect to stimulus programs and bailout plans designed to alleviate the global financial crisis.
  3. The G-20 should encourage all nations to monitor government debt and liabilities for their true economic implications.
  4. In order to better assess systemic risks in government debt and liabilities on a global level, the G-20 should urge the adoption and implementation of International Public Sector Accounting Standards (IPSASs) in countries throughout the world.
  5. The G-20 should encourage all governments to adopt and implement common global standards not only for public sector accounting, but also for accounting, auditing, and auditor independence.
Regarding recommendation 5 above, IFAC's letter states:

In order to improve the ability of capital markets to work globally, to allow investments to move more efficiently across borders, and to reduce risks and uncertainties in the capital markets, the G-20 should encourage the early 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. This will assist the G-20's goal of strengthening transparency and accountability in the context of financial and capital markets and creating a level playing field in the interpretation and exchange of financial information. Consistent financial information around the world can do much to facilitate cross-border activity and economic and financial stability.

Click here for IFAC's Recommendations for the G-20 Nations (PDF 201k).


IASB has posted its amended work plan

26 Jun, 2010

The IASB has posted on its website its Amended Work Plan and Project Timetable as of 25 June 2010 reflecting the Changes announced on 24 June 2010 and sent to the G20, as well as other changes to IASB-only projects.

We have updated the IAS Plus Agenda Projects Page accordingly.


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