We comment on proposals to amend the Due Process Handbook

30 Nov, 2010

Deloitte has submitted a comment letter on the IFRS Foundation Trustees' Invitation to Comment, The Annual Improvements Process: Proposals to amend the Due Process Handbook for the IASB.

We support the efforts to enhance the process for making improvements to IFRSs, including amendments to IFRSs to clarify guidance and wording or to correct unintended consequences, conflicts or oversights. We think that the criteria proposed in the Consultation Document are appropriate when identifying discrete issues in IFRSs that need to be resolved. However, we recommend that the remit of the IFRS Interpretations Committee be broadened so it can prepare draft amendments to IFRSs (including Implementation Guidance) to help ensure that urgent or emerging accounting issues are identified and addressed in a timely and efficient manner. Click to Download our Comment Letter (PDF 57k). All of our past comment letters are here.

We comment on Draft IFRIC Interpretation DI/2010/1

30 Nov, 2010

Deloitte has submitted a comment letter on Draft IFRIC Interpretation DI/2010/1 Stripping Costs in the Production Phase of a Surface Mine.

The IFRS Interpretations Committee has reached the conclusion that costs associated with a stripping campaign' should be accounted for as an additional component of an existing asset, and that this component should be written down over the reserves that directly benefit from the campaign.

We do not support the finalisation of this draft Interpretation. Much of the current apparent diversity in practice tends to be due to the underlying physical differences in mines and we are not convinced that the current practice produces results that are sufficiently inappropriate to warrant the publication of a final interpretation. We are also concerned about the Committee attempting to address specific issues on extractive activities on a piecemeal basis rather than through the IASB project. Click to Download our Comment Letter (PDF 90k). All of our past comment letters are here.

Updated convergence report and IASB work plan

30 Nov, 2010

The International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) have published an updated Progress report on their convergence efforts.

The International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) have published an updated Progress report on their convergence efforts.

The report provides an update on progress under the Memorandum of Understanding between the IASB and FASB on the convergence of IFRSs and US generally accepted accounting principles (US GAAP) and confirms many of the decisions made at recent meetings of the boards.

The report confirms a target completion date of June 2011 or earlier for the following priority projects:

  • joint projects on financial instruments, revenue recognition, leases, the presentation of other comprehensive income, and fair value measurement
  • IASB projects on consolidation and insurance contracts.

In order to meet the June 2011 deadline, consideration of a number of other projects has been deferred until after June 2011, or timetables extended. This includes four joint projects, the investment company aspects of the consolidation project, and a number of independent projects of both boards.

The IASB has updated its Work Plan to reflect the above changes and provide more detail of the expected timing of pronouncements. A summary of the expected timing under the revised work plan is provided below (all pronouncements are finalised standards, unless otherwise noted):

Pronouncements expected by the end of calendar 2010

Pronouncements expected in the first quarter of 2011

Pronouncements expected in the second quarter of 2011

Projects deferred to after June 2011

  • Joint projects deferred as noted in the progress report - financial statement presentation (comprehensive project), financial statements with characteristics of equity, emissions trading schemes, conceptual framework (reporting entity)
  • Other projects - liabilities (replacement for IAS 37), income taxes, rate-regulated activities, extractive activities, common control, earnings per share, government grants and intangible assets.

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IFRS Foundation translations update

29 Nov, 2010

The IFRS Foundation has announced the publication of the following translations:

  • Armenian and Simplified Chinese translations of the IFRS for SMEs. The translations can be accessed via the IASB's IFRS for SMEs webpage. You will need to be a registered user to access the translation. Registration is free of charge.
  • Japanese translation of the Request for Views on Effective Dates and Transition Methods that was published in English by the IASB in October 2010. The Request for Views in English, French and Japanese can be accessed here.
  • Japanese translation of the Staff Draft of Exposure Draft IFRS X: Financial Statement Presentation that was published in English by the IASB on 1 July 2010. The Staff Draft can be accessed via the IASB's Staff Draft webpage.
  • Japanese translation of A Briefing for Chief Executives, Audit Committees & Boards of Directors 2010 that was published in English by the IASB in August 2010. Available for free for eIFRS subscribers, available to purchase from the IASB's web shop.
  • Spanish translations of DisclosuresTransfers of Financial Assets (Amendments to IFRS 7) and the Conceptual Framework for Financial Reporting 2010, on the IASB's New and revised standards webpage (eIFRS subscribers only).


IFRS compliance questionnaire for 2010

28 Nov, 2010

Deloitte's IFRS Global Office has published our IFRS Compliance Questionnaire for 2010.

This 329-page questionnaire summarises the recognition and measurement requirements in IFRSs issued on or before 30 September 2010. It may be used to assist in considering compliance with those pronouncements. It is not a substitute for your understanding of such pronouncements and the exercise of your judgment. Users of the questionnaire are presumed to have a thorough understanding of the pronouncements and should refer to the text of the pronouncements, as necessary, in considering particular items in this questionnaire. The items in this questionnaire are referenced to the applicable sections of the IFRSs. Click to download:

A PDF version of this questionnaire will be available in a few weeks. There is a permanent link on our Model Financial Statements Page.

This questionnaire does not address the requirements of IFRSs as regards presentation and disclosure – please refer to Deloitte's separate IFRS Presentation and Disclosure Checklist for 2010.

This questionnaire is suitable for use in assessing recognition and measurement in financial statements prepared in accordance with IFRSs for periods beginning on 1 January 2010. It is not generally appropriate for use for earlier accounting periods – please refer to previous versions of this questionnaire on our Model Financial Statements Page.

We comment on ED/2010/12

26 Nov, 2010

Deloitte has submitted a comment letter on Exposure Draft ED/2010/12 Severe Hyperinflation – Proposed Amendments to IFRS 1.

The amendment proposes guidance on how an entity should resume presenting financial statements in accordance with International Financial Reporting Standards (IFRSs) after a period when the entity was unable to comply with IFRSs because its functional currency was subject to severe hyperinflation. According to the proposed amendment an entity that has been subject to severe hyperinflation would be allowed to measure assets and liabilities at fair value and use that fair value as the deemed cost of those assets and liabilities in the opening IFRS statement of financial position.

Although we do not object to the proposed amendments, we would have preferred the Board not to take up this narrow issue given the Board's time and agenda. Since there seem to be many more issues that we believe should be addressed, we recommend consideration of a comprehensive review of IAS 29 post-2011 (see excerpt below). Click to Download our Comment Letter (PDF 10k). All of our past comment letters are here.

We would have preferred the Board not to take up this narrow that is relevant only for a particular jurisdiction at a time when the Board is under tremendous pressure to complete many of its major projects by June 2011. [...] Our experience indicates that jurisdictions are struggling with applying many aspects of IAS 29 Financial Reporting in Hyperinflationary Economies in its current form. Therefore, we recommend that the Board considers including a comprehensive review of IAS 29 in its post-2011 agenda.

Trustees extend comment period for strategy review

26 Nov, 2010

On 5 November, the Trustees of the IFRS Foundation, the oversight body of the International Accounting Standards Board (IASB), published a first-stage consultation document designed to solicit input on the strategy of the IFRS Foundation as it enters its second decade.

Comments were originally expected until 31 December (see our prior news story on this issue).

Today, the IFRS Foundation Trustees extended the deadline for comments on their public consultation paper on the strategy review they are undertaking. The new deadline is 24 February 2011. The extension responds to requests from stakeholders for more time to consider and respond to the questions raised in the paper.

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The Bruce Column — Changing the thinking on hedging

26 Nov, 2010

When people talk about how IFRS has become so complex that laymen, (including Sir David Tweedie's oft-quoted but mythical Aunt Agatha), have no chance of understanding them people are most often referring to the issue of financial instruments.

And in that world hedge accounting, for all its innocuous and rural title, bulks large. The official IASB summary of where they are in the development of their thinking on hedge accounting may give simplify hedge accounting as its primary mission under the heading of "broad direction" but anyone who has sat in on a group of people discussing the topic know that, for all the erudition of those involved, they might as well be talking in Mandarin Chinese or some long-lost language recently rediscovered during an archaeological dig.

Small wonder the hopes for the forthcoming hedge accounting exposure draft are so high. Stripping out the confusions which have gathered, barnacle-like, on the structure can only help. The exposure draft is due to be published imminently and its two main objectives are, the IASB hopes, within reach. At a recent roundtable for members of the UK Hundred Group of Finance Directors and the IASB, facilitated by Deloitte, the IASB associate director on the project, Sue Lloyd, made it clear that the twin goals of simplification and allowing a clearer representation of an organisation's risk management were achievable.

For one thing aligning the accounting much more closely with the risk management policies of an organisation and what it is doing on the hedging front will make it much clearer to the outside world what the business objective of entering into the hedging transaction was in the first place. Companies use derivatives for many reasons. Banks may use them either to mitigate risk or to speculate. Other companies use them mostly to hedge risks. And up until now the mass of rules-based hedge accounting requirements have simply prevented sound economic hedges from being presented fairly. Rules and bright lines, as in many areas of financial reporting, simply distort the true position.

So moving to a principle-based system, however difficult, will help. And getting rid of the 80/125 rule will undoubtedly help. Until now the rule has been that a hedge must be 80% to 125% effective. But, as the IASB agrees, those percentages are completely random. And there were two tests, prospective and retrospective testing. What the exposure draft will say is that organisations have got to align the hedging instrument and the hedged item so there is no bias to being over-hedged or under-hedged. And then report the offset based on the effectiveness.

That alone gets rid of lots of issues and not just the bright lines. It should reduce compliance costs. It will create a better alignment with risk management. And it will allow more hedges to become eligible. It will have far-reaching effects.

And the frequent criticism that it was not possible, as it were, to compare apples and pears when hedging a risk will also be overcome. Now, as long as each component is separately identifiable and reliably measurable, all will be well. This already applied for financial hedges but this amounts to the biggest change for non-financial hedges.

The overall result should broadly cheer corporates, which have always argued that they have not been listened to enough in this field, and leave banks watching all this with interest but knowing that it is the macro-hedging debate in the future that they are eagerly awaiting. And people should like the overall reduction in compliance.

Now all everyone has to do is deal with the exposure draft. It will be published in a few days time. There are only ninety days of exposure and the final standard is expected to be issued before the end of June, just before Sir David Tweedie steps down as Chairman. The ninety days of exposure period will be tight. If simplicity and an alignment of the financials with risk management are to be achieved there is a lot of work for people to do.

Robert Bruce
November 2010

Related links



Stay Tuned Online – IFRS and UK GAAP update

25 Nov, 2010

The Deloitte London IFRS Centre of Excellence is running a series of hour-long Internet-based financial reporting updates, aimed at helping finance teams keep up to speed with IFRSs and other financial reporting issues.

Each update lasts no more than an hour, and sessions are normally held three times a year, approximately at the end of March, July, and November. We intend to make a recording of each session available on IAS Plus for a period of at least four months from the date of the presentation. The topics covered in the November 2010 webcast:
  • The future of UK GAAP and other developments
  • ED/2010/9 Leases
  • BIS and narrative reporting
  • Other IFRS developments

To access the recording click here. There is a permanent link on our UK Country Page.

New financial market supervision system signed into law

25 Nov, 2010

In our news story posted 7 September we reported that the European Parliament, the Council and the European Commission reached a political consensus on the creation of new financial supervisory framework for Europe.

Yesterday, the President of the European Parliament, Jerzy Buzek, and Belgium's State Secretary for European Affairs, Olivier Chastel, formally signed into law the financial supervision package, which will establish new authorities oversee the operation of banks, securities markets and insurance companies, as well as monitoring the build up of risk in the economic system as a whole. The three new regulatory authorities offering direct EU supervision of systemically important financial institutions are the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), and the European Securities and Markets Authority (ESMA).

Click for:

  • Press notice issued by the European Parliament's press service (link to the EP's website).
  • Our earlier story on the new financial supervisory framework for Europe (September 2010).

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