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Upcoming NSS, WSS and AOSSG meetings

31 Aug 2011

Several meetings of groups of standard setters in the field of accounting and financial reporting who support the IASB in the development of a single set of high quality international accounting standards are coming up in autumn.

The National Standard Setters (NSS) are meeting in Vienna on 12 and 13 September 2011. The NSS is a grouping of national accounting standard-setters from around the world, plus other organisations that have a close involvement in financial reporting issues. An agenda for this meeting is not publicly available. For topics discussed during the last meeting and likely to be continued at the upcoming meeting please see the report from the March 2011 NSS meeting.

The World Standard Setters (WSS) are meeting in London on 15 and 16 September 2011. The WSS meeting offers a forum for the NSS to exchange views with the IASB. On the agenda (PDF 192k, link to IASB website) are updates on new standards and staff drafts, the future agenda of the IASB and post-implementation reviews. The WSS meeting also offers an opportunity for regional groups of standard setters to draw the IASB's attention to developments in the Asia and Oceanian region, Africa and Latin America.

The AOSSG (Asian-Oceanian Standard-Setters Group) will hold its third annual meeting in Melbourne on 23 and 24 November 2011. The tentative agenda for the meeting indicates the meeting will consider a range of topics, including a 'vision paper', IASB projects such as financial instruments, revenue, leases and insurance contracts, and other topics such as Islamic finance and agriculture. Click for more information about the meeting (link to AOSSG website).

IFRS Foundation publishes IFRS Taxonomy 'common-practice' enhancements

31 Aug 2011

The IFRS Foundation has published IFRS Taxonomy 2011 interim release: common-practice concepts.

This interim release enhances the IFRS Taxonomy by providing common-practice extensions for the face of financial statements, to reduce the work load of preparers filing electronically.

In June 2011, the IASB published for public comment an exposure draft of the IFRS Taxonomy 2011 interim release: common-practice concepts which contained supplementary tags that reflected disclosures which were commonly reported by entities in their IFRS financial statements.

Click for IFRS Foundation announcement (link to IASB website). More information about XBRL is available on our XBRL page.

EPRA releases updated Best Practices Recommendations for reporting by property companies

30 Aug 2011

The European Public Real Estate Association (EPRA) has today released its latest set of Best Practices Recommendations (BPR). These recommendations set out additional performance measures and supplementary information to be presented in the annual reports of public real estate companies, with the aim of making the financial statements of these companies clearer, more transparent and comparable across Europe.

The EPRA BPR sets out a number of recommendations for public real estate companies, all of which are designed to enhance the comparability of their annual reports. It recommends that:

  • All companies should present a summary table showing standard 'EPRA Performance Measures', as well as detailed supporting calculations for these measures.
  • All companies should apply the IAS 40 fair value model in accounting for their investment properties, using external valuers to obtain these values.
  • All companies should present information on the nature of their property portfolios, significant properties owned and like-for-like rental growth.
  • All companies include certain information regarding their strategy and board members in their narrative reports.


Performance Measures

The EPRA Performance Measures table is made up of the following items:

EPRA Performance MeasureDescription
EPRA Earnings

Recurring earnings from core operational activities.


Net Asset Value adjusted to include properties and other investment interests at fair value and to exclude certain items not expected to crystallise in a long-term investment property business model.


EPRA NAV adjusted to include the fair values of (i) financial instruments, (ii) debt and (iii) deferred taxes.

EPRA Net Initial Yield (NIY)

Annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the market value of the property, increased with (estimated) purchasers’ costs.

EPRA ‘topped-up’ NIY

This measure incorporates an adjustment to the EPRA NIY in respect of the expiration of rent-free periods (or other unexpired lease incentives such as discounted rent periods and step rents).

EPRA Vacancy Rate

Estimated Market Rental Value (ERV) of vacant space divided by ERV of the whole portfolio.

These are all measures of performance in areas which property investment companies commonly discuss in their annual report but for which there is either no guidance in accounting standards (yields, vacancy rates) or a common desire to adjust the statutory measures (EPS, NAV).  The aim of the EPRA BPR is to introduce consistency across companies in the way in which these measures are calculated and presented, to aid comparability.

The BPR also contains comprehensive guidance on how each of the measures should be calculated and sets out tables of the calculations that should be provided for complete transparency.


Investment property measurement

IAS 40 Investment Property allows companies a choice between accounting for investment property at fair value and at cost.  The BPR recommends that all public companies should apply the fair value method and obtain valuations from external valuers, prepared in accordance with International Valuation Standards at least annually, something which is not specifically required by IAS 40.  It also recommends that the basis of the valuers fees should be disclosed, along with either a summary of the valuer’s report or a table which reconciles the amounts provided by the valuers to the amounts included in the financial statements.


Portfolio details

The BPR recommends that companies should include extensive information on their property portfolios either as part of their narrative report or in an exhibit, so that investors can understand the characteristics of the underlying assets and the effect of portfolio changes on the company's performance. This information includes:

  • Details of the company's property portfolio, presented by appropriate sub-portfolios, and with separate analysis of investment assets and development assets; and
  • Growth in like-for-like net rental income.


Other recommendations

The BPR also includes additional recommendations around information which companies should include in their narrative reports, including information on the company's strategy and details of the qualifications of the directors.

The EPRA BPR can be downloaded as a pdf here (link to EPRA website)

FASB and EFRAG co-operate on disclosure framework project

29 Aug 2011

The Financial Accounting Standards Board (FASB) and European Financial Reporting Advisory Group (EFRAG) have formally agreed to work together on their respective projects to develop a disclosure framework, with a view to creating a consistent framework for both United States and international GAAP.

FASB added a disclosure framework project to its agenda in 2009 with the goal of establishing an overarching framework intended to make financial statement disclosures more effective, coordinated, and less redundant. EFRAG is undertaking a 'pro-active' project on disclosures with the objective of making disclosures more relevant for users but at the same time ensure that only useful information is prepared and disclosed. In May 2010, EFRAG appointed an Advisory Panel chaired by former EFRAG chairman Stig Enevoldsen to provide advice and input to the project.

A possible co-operation between FASB and EFRAG was first indicated in the agenda papers for the June meeting of EFRAG's Technical Experts Group (TEG).

At an education session held on the FASB project on 3 August 2011, the FASB agreed to allowing the FASB staff to co-operate with EFRAG staff by leveraging resources and sharing information towards the development of a Discussion Paper on the topic. Discussion in the education session considered the level of involvement of FASB itself (i.e. should it be more than just staff interaction) and what the possible outputs might be (e.g. a joint document, a converged 'core', or some other approach). The education session also covered issues such as the boundaries of financial reporting, the usefulness of disclosures to users and the concept of 'materiality' in the context of disclosures.

At its meeting held on 24 August 2011, the FASB approved a proposed decision process as a starting point for developing its overall disclosure framework. The process consists of a list of questions designed to formalise the FASB's method for identifying (1) needed disclosures and (2) useful disclosure information for consideration in future standard setting. The FASB also indicated that the framework, once finalised, may be used to evaluate (and potentially change) existing disclosure requirements. The FASB expects to issue a discussion paper on the project early next year.

In addition to working with EFRAG, FASB staff also plan to work with the U.S. Securities Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) to explore whether the application of materiality to disclosures of financial information can be clarified.

Improving the framework for disclosures has been a consistent theme in recent times. The IASB is also considering a project on disclosures, and in July received a report from the New Zealand and Scottish standard setters on possible disclosure improvements to IFRSs. In April 2011, the Accounting Standards Board (ASB) of the United Kingdom Financial Reporting Council (FRC) published a report Cutting Clutter: Combating clutter in annual reports. The International Integrated Reporting Committee (IIRC) is also seeking to simplify and streamline various aspects of reporting through its integrated reporting initiative, for which a Discussion Paper is expected in the coming months.

Click for:


UK Government and FRC publish discussion paper on reducing the financial reporting burdens for micro-entities

28 Aug 2011

The UK Department for Business, Innovation and Skills (BIS) and the Financial Reporting Council (FRC) have published a discussion paper with proposals to simplify the financial and corporate reporting requirements for the smallest businesses.

Small and medium sized entities (SMEs) feel that laws and regulations, and accounting and auditing standards governing business have become very much more complex in an attempt to address a world where businesses at the top end of the corporate sector have become larger and more diverse, and their activities increasingly complex. Complying with all these requirements is burdensome, costly and of little added little value to SMEs, to their stakeholders, or to other users.

The BIS and FRC's discussion paper seeks views on the development of a new reporting regime that

  • fulfils certain minimum requirements,
  • aligns financial reporting requirements with tax requirements, and
  • reduces or removes inconsistencies in the current requirements.

The discussion paper is available here (link to BIS website); comments are requested by 30 October 2011. The FRC has published a press release on the discussion paper (link to FRC website).

In a similar vein, the European Commission had proposed in February 2009 to allow Member States to exempt very small entities from the requirements of the 4th Directive. After a long period of negotiations, the European Parliament is currently considering the agreement on proposals reached by the Council of Ministers on 30 May 2011.

Deloitte comment letter on EFRAG discussion paper

26 Aug 2011

Deloitte's IFRS Global Office has submitted a letter of comment to the European Financial Reporting Advisory Group (EFRAG) on its Discussion Paper Considering the Effects of Accounting Standards.

The comment letter highlights Deloitte's views on the contribution the discussion paper has in the methodology for effects analyses development as it relates to the IFRS Foundations Trustees' Strategy Review. The following is an excerpt from the letter:

We agree with the principle that effects analysis should be an element of the standard-setting process throughout the life cycle of a standard-setting project, including post-implementation reviews. We do not think that the same level of detail is necessary at each stage of a project and think that different procedures might be employed at different stages. . . . The methodology employed must be scalable, and the extent of effects analysis must be appropriate to the project in question (i.e., effects analysis should be proportional). Furthermore, we think that the principle of subsidiarity should apply. Consequently, effects analyses should be conducted by the IASB in conjunction with national or regional agencies with an interest in financial reporting.

In addition, we think the EFRAG should 1) collect and assimilate the responses, 2) identify the key findings, and 3) make recommendations to the IFRS Foundation Trustees' Due Process Oversight Committee.

Click to Download our Comment Letter on EFRAG's Discussion Paper Considering the Effects of Accounting Standards (PDF 104k). All of our past comment letters are here.

Study explores the political dimensions of IFRS adoption

25 Aug 2011

A recent paper from Harvard Business School explores the international political dynamics of how countries approach the adoption of International Financial Reporting Standards (IFRS).

The draft working paper, The international politics of IFRS harmonization, draws on field studies in Canada, China and India to derive a 'framework' to analyse how international politics can shape a specific country's strategies with IFRS adoption. Whilst international politics is not the only or even the deciding element in understanding the growth of IFRS, the author of the paper argues it is likely to be important.

The paper outlines two principal dimensions that can be used to characterise the response by a specific jurisdiction to IFRS:

  • proximity to existing political powers at the IASB
  • the jurisdiction's own potential political power at the IASB.

Jurisdictions are classified as either 'high' or 'low' in each dimension, which then produces a matrix of predicted responses to IFRS. The table below summarises these outcomes, along with cited examples of countries falling in each category:

25 August 2011

The paper explores the major political challenges for the IASB, the way forward for the IASB and the theoretical implications of the international political dynamics of IFRS harmonisation. In particular, the paper explores the interplay between the current debates around 'convergence versus adoption' and the IASB's expanding geographical diversity away from its traditional European power base to include emerging powers such as China. In addition, the paper argues restructuring the IASB's structure to include fewer Americans may temper enthusiasm for IFRS in the United States, which ironically may make IFRS less attractive worldwide.

Click to access the draft working paper (link to SSRN). We have posted this article with the kind permission of the author, Karthik Ramanna.

IASB proposes consolidation exemption for 'investment entities'

25 Aug 2011

The International Accounting Standards Board (IASB) has published Exposure Draft ED/2011/4 'Investment Entities', proposing to define 'investment entities' as a separate type of entity that would be exempt from the consolidation accounting requirements in IFRS 10 'Consolidated Financial Statements'.

The proposals arise from the consultation process around the issue of IFRS 10, where many respondents questioned the usefulness of the financial statements of investment entities if IFRSs continued to require the consolidation of entities that an investment entity controls.

In summary terms, the exposure draft proposes:

  • criteria for an entity to qualify as an 'investment entity' (see below)
  • an investment entity to measure its investments in controlled entities at fair value through profit or loss in accordance with IFRS 9 Financial Instruments (exceptions would apply to investees providing services that relate only to the entity's own investment activities, and investment entities that take control of collateral as a result of defaults related to its investments)
  • additional disclosures to enable users to evaluate the nature and financial effects of its investment activities
  • not to permit a parent of an investment entity to retain fair value accounting applied by its subsidiary, unless the parent itself qualifies as an investment entity, i.e. the parent would consolidate all entities in the group
  • amendments to IAS 28 Investments in Associates and Joint Ventures to require an investment entity to measure its investments in associates and joint ventures at fair value through profit or loss in accordance with IFRS 9 (replacing the concept of 'venture capital organisation, mutual fund, unit trust and similar entities' with 'investment entity')
  • entities which apply the investment entity guidance early would also be required to apply all aspects of IFRS 10, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities and IAS 28 (as amended in 2011).

Proposed 'investment entity' criteria

Under the proposals in ED/2011/4, an investment entity is an entity that meets all of the following criteria:

  • Nature of the investment activity. The entity's only substantive activities are investing in multiple investments for capital appreciation, investment income (such as dividends or interest), or both
  • Business purpose. The entity makes an explicit commitment to its investors that the purpose of the entity is investing to earn capital appreciation, investment income (such as dividends or interest), or both
  • Unit ownership. Ownership in the entity is represented by units of investments, such as shares or partnership interests, to which proportionate shares of net assets are attributed
  • Pooling of funds. The funds of the entity's investors are pooled so that the investors can benefit from professional investment management. The entity has investors that are unrelated to the parent (if any), and in aggregate hold a significant ownership interest in the entity
  • Fair value measurement. Substantially all of the investments of the entity are managed, and their performance is evaluated, on a fair value basis
  • Disclosures. The entity provides financial information about its investment activities to its investors. The entity can be, but does not need to be, a legal entity.

The IASB is undertaking this project jointly with the FASB with the objective of improving existing US GAAP requirements and achieving convergence in the accounting for these types of entities. The FASB is expected to issue equivalent proposals shortly.

Comments on the exposure draft are due by 5 January 2012. Click for:


EFRAG invites companies to participate in the field-testing of the forthcoming revised proposals on Revenue Recognition

25 Aug 2011

The European Financial Reporting Advisory Group (EFRAG), in partnership with European National Standard Setters and in close coordination with the IASB, will conduct field-testing of the revised IASB proposals on revenue recognition, which are expected to be published by the end of September 2011. The purpose of the field-testing is to identify potential implementation and application concerns, and to estimate the effort required to implement and apply the proposals.

Please click for EFRAG press release (link to EFRAG website) and our summary of the decisions to date in the IASB's project on revenue recognition.


New issue of the IASB's Investor Perspectives

24 Aug 2011

In April 2010, the Trustees of the IFRS Foundation and the IASB launched a programme to enhance investors' participation in the development of International Financial Reporting Standards (IFRSs).

One of the enhancements is a newsletter for investors entitled Investor Perspectives. A new edition is now available. Patricia McConnell, an IASB Board member, writes about the changes to pension accounting:

All Investor Perspectives are archived on the IASB's website.

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