March

Notes from Special 11 March Joint IASB-FASB meeting

12 Mar, 2010

The IASB and FASB held a special joint meeting at the IASB's offices in London on Thursday, 11 March 2010. Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the meeting.

Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the meeting.

Conceptual Framework ED on reporting entity

11 Mar, 2010

The IASB and the US Financial Accounting Standards Board (FASB) have published for public comment an exposure draft (ED) on the reporting entity concept.

The proposals form part of a Joint Project to develop a common and improved conceptual framework that provides the basis for developing future accounting standards. The boards published a discussion paper on the Reporting Entity Conceptin May 2008. Respondents broadly supported the boards' preliminary views. In response to those comments the ED proposes what a reporting entity is and when an entity controls another entity. A summary is below:

What is a reporting entity?

A reporting entity is a circumscribed area of economic activities whose financial information has the potential to be useful to existing and potential equity investors, lenders and other creditors who cannot directly obtain the information they need in making decisions about providing resources to the entity and in assessing whether the management and the governing board of that entity have made efficient and effective use of the resources provided.

When does one entity control another entity (resulting in a combined reporting entity)?

An entity controls another entity when it has the power to direct the activities of that other entity to generate benefits for (or limit losses to) itself. If an entity that controls one or more entities prepares financial reports, it should present consolidated financial statements.

Can a portion of an entity be a reporting entity?

A portion of an entity could qualify as a reporting entity if the economic activities of that portion can be distinguished objectively from the rest of the entity and financial information about that portion of the entity has the potential to be useful in making decisions about providing resources to that portion of the entity.

Comments on the ED are invited by 16 July 2010.

 

UK FSA warns of an 'accounting mismatch'

10 Mar, 2010

The United Kingdom's Financial Services Authority (FSA, the banking and securities regulator) has published a report Financial Risk Outlook 2010.

The report cautions financial institutions that 'accounting mismatches' have the potential to report profits in a deteriorating economy – which the FSA is predicting. This could happen because accounting allows asset-backed securities to be measured at amortised cost while related credit default swaps are measured at fair value through profit or loss. FSA reminds financial institutions to be clear in their disclosures about this.

The future evolution of risks may be misinterpreted due to accounting mismatches. Accounting mismatches created by the different treatment of trading books and banking books create the danger that the future evolution of risks will not be clearly understood and communicated. Prior to the crisis, many banks and investment banks executed negative basis trades, holding asset-backed securities (ABS) and buying CDS [credit default swap] protection against them. Both parts of the trade were initially held in the trading book. Subsequently, some banks have – under permitted accounting treatment – transferred the ABS to the banking book, while leaving the CDS in the trading book. Under this treatment, any future deterioration in the economy, with a resulting widening of credit spreads, will deliver an immediate profit in trading books, with ABS values unchanged in the banking books, until actual default leads to impairment of assets.

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Possible exemption of EU micros from financial reporting

10 Mar, 2010

The European Parliament has voted to exempt very small companies ('micro-entities') from the existing EU-wide laws that require them to prepare annual financial statements.

The Parliament's action still must be approved by the EU Council before it becomes law. If approved, it would then be up to each EU Member State to grant such exemptions. Parliament's resolution also calls for a general revision of the 4th and 7th Company Law Directives in 2010. Currently, about 7.2 million EU companies are subject to reporting rules under EU accounting directives. Of those, 5.4 million (around 75%) are 'micro-entities' primarily engaged in business at local or regional level, with little or no cross-border activity. Click for EU Parliament Press Release (PDF 109k).

IASB webcast on presenting comprehensive income

10 Mar, 2010

On 15 March and again on 19 March 2010, the IASB will host live webcasts on the Board's deliberations about the presentation of items in Other Comprehensive Income.

The two webcasts are identical. The second one will be held on a different day to fit around the Board meeting schedule that week. There is no charge to participate, but registration is required. Participants will have an opportunity to submit written questions during the webcast.
  • Webcast Topic: Presentation of items in Other Comprehensive Income
  • Date and Time:
    • Monday, 15 March 2010, 10:00-11:00am London time, and again on
    • Friday, 19 March 2010 15:30-16:30pm London time
  • IAS Plus Project Page: Comprehensive Income.

 

Updated EFRAG 'endorsement status report'

09 Mar, 2010

At its meeting on 4 March 2010 the European Commission's Accounting Regulatory Committee (ARC) voted to recommend endorsement of four IFRSs: the revised IAS 24, amendments to IFRIC 14 on prepayments of a minimum funding requirement, IFRIC 19, and the amendment to IFRS 1 on a limited IFRS 7 disclosure exemption.

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 9 March 2010 (PDF 120k). Currently, eight IASB pronouncements await endorsement action. You can always find the endorsement status report Here.

 

Deloitte study of half-yearly reporting in the UK

09 Mar, 2010

Deloitte (United Kingdom) has published Measuring by Halves, a survey of half-yearly financial reporting in 2009 by 130 listed companies in the United Kingdom.

The survey focuses on compliance with the requirements of IAS 34 Interim Financial Reporting and with the half-yearly reporting requirements in the Disclosure and Transparency Rules (DTR) contained in the Financial Services Authority Handbook.
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The Hundred Group and IASB debate IAS 37

08 Mar, 2010

On 5 March 2010 Deloitte hosted a live webcast between The Hundred Group of Finance Directors in the United Kingdom and the IASB on the future of accounting for liabilities under IFRSs.

The IASB is in the final stages of a project to revise IAS 37. The original exposure draft (ED) was published for comment in July 2005. In January 2010, the IASB published another ED limited to the proposed revisions on measurement of liabilities, but on 22 February 2010 also put up on its website a 'working draft' of the revised IAS 37 standard in its entirety to enable interested parties to see the revised measurement guidance in the context of the proposed new IFRS. The comment period is until the 12th April. As part of its outreach activities, in this webcast with The Hundred Group, the IASB discusses all aspects of the proposed new IFRS.
The Hundred Group has written to the IASB to request full re-exposure and, failing that, an extension of the comment period on the current proposals since it is nearly five years since the original ED was published. Like many commentators the Hundred Group was critical of both the recognition and the measurement aspects of the proposals. Asking questions on behalf of The Hundred Group was representatives of three companies: Severn Trent, Tate & Lyle, and Tomkins plc. From the IASB, IASB member Bob Garnett responded to the questions and was joined by Joan Brown, the Project Manager for this project. The webcast was hosted by Veronica Poole, Deloitte Global IFRS Leader–Technical and Mark Smith, Vice-Chair of the Financial Reporting Committee of The Hundred Group.
A recording of the webcast is available Here. If you are prompted, the Passcode is 831344.

 

Study of new financial reporting models

08 Mar, 2010

The Financial Reporting Faculty of the Institute of Chartered Accountants in England and Wales (ICAEW) has published Developments in New Reporting Models.

This report argues that business reporting has to change to reflect changes in business, in information technology, and in users' needs. This is a perpetual process. Therefore, the debate on the future of business reporting therefore needs to be reframed – not as a stark choice between an old model and a new one – but in terms of the need for continuing evolutionary improvements. Click to download: The report is copyright by ICAEW and is posted on IAS Plus with the kind permission of the ICAEW Financial Reporting Faculty.

 

Agenda for March 2010 IASB meeting

08 Mar, 2010

The IASB will hold its March 2010 regular monthly meeting at its offices in London on Monday to Friday, 15 to 19 March 2010. Portions of the meeting are joint meetings with FASB.

You can access the agenda on our March 2010 IASB meeting page.  We will also post Deloitte observer notes on this page as they are available.

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