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June

New edition of IFRSs in your pocket

29 Jun 2011

We have published the tenth edition of our popular guide to IFRSs — IFRSs In Your Pocket 2011.

This 134-page guide includes information about:
  • The IASB organisation — its structure, membership, due process, contact information, and a chronology
  • Use of IFRSs around the world, including updates on Europe, United States, Canada and elsewhere in the Americas, and Asia-Pacific
  • Recent pronouncements - those which are effective and those which can be early adopted
  • Summaries of current Standards and related Interpretations, as well as the Conceptual Framework for Financial Reporting and the Preface to IFRSs
  • IASB agenda projects and active research topics
  • IFRS Interpretations Committee current agenda topics
  • Other useful IASB-related information

We are pleased to grant permission for accounting educators and students to print copies of the PDF file for educational purposes. Please contact your local Deloitte practice office to request a printed copy.

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Latest batch of editorial corrections to IFRSs released by the IASB

29 Jun 2011

The IASB has posted to its website a new batch of Editorial Corrections to IFRSs.

This batch makes editorial corrections and changes to IFRS for SMEs (issued July 2009), Conceptual Framework for Financial Reporting (issued September 2010), Bound Volume (Red Book) 2011, Bound Volume (Blue Book) 2011, IFRS 10 Consolidated Financial Statements (issued May 2011), IFRS 11 Joint Arrangements (issued May 2011), IAS 19 Employee Benefits (issued June 2011) and Presentation of Items of Other Comprehensive Income (issued June 2011).
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UK ASB tentatively revises forthcoming differential reporting framework

28 Jun 2011

As part of its ongoing redeliberations, the UK Accounting Standards Board (ASB) has tentatively agreed to a number of amendments to its proposed revised differential reporting framework, to reduce its impacts on certain entities and extend its proposed application date.

As part of its ongoing redeliberations, the UK Accounting Standards Board (ASB) has tentatively agreed to a number of amendments to its proposed revised differential reporting framework, to reduce its impacts on certain entities and extend its proposed application date.

The ASB published its published its proposals for the future of financial reporting in the UK and Republic of Ireland in October 2010 (see our earlier story). The Exposure Drafts set out proposals for a three-tier reporting framework, with the aim of balancing the needs of preparers and users of accounts.

At its meeting held on 16 June 2011, the ASB made the following tentative decisions:

  • To remove from FRED 43 Application of Financial reporting Requirements and FRED 44 Financial Reporting Standard for Medium-sized Entities (FRSME), the requirement for publicly accountable entities to prepare accounts under EU-adopted IFRS. As a consequence the application of EU-adopted IFRS will not be extended beyond the current requirements in law. This measure will particularly assist certain charities that would otherwise be captured as having "public accountability"
  • To change the principles for amending the IFRS for SMEs in developing the FRSME (to be applied by all entities other than those required to comply with EU-adopted IFRS and small companies), to permit or require accounting options that exist in current UK and Republic of Ireland Financial Reporting Standards at the transition date that align with EU-adopted IFRS
  • To defer the proposed effective date of the proposals to 1 January 2014 (instead of 1 July 2013), to allow time for the creation of a new exposure draft of the FRSME.

Click for the ASB meeting summary (link to the UK Financial Reporting Council website).

Agenda for IFRS Foundation Trustees meetings

28 Jun 2011

The IFRS Foundation Trustees will meet in New York on Wednesday and Thursday, 13 and 14 July 2011. The tentative agenda is shown below.

Agenda for the IFRS Foundation Meetings
Wednesday and Thursday, 13 and 14 July 2011
Wednesday 13 July (13:00-14:15)
  • Meeting with IFRS Foundation Monitoring Board
    • Discussion of governance and strategy reviews
    • Update on due process oversight, convergence work and IFRS use throughout the world
Thursday 14 July (09:00-12:00)
  • Report of the Due Process Oversight Committee
  • Report from the IASB Chair
  • Update on the IFRS for SMEs
  • Report of the IFRS Advisory Council Chair
  • Report of the Executive Committee on the status of the Strategy Review

XBRL taxonomy for sustainability reporting to be developed

27 Jun 2011

Deloitte and the Global Reporting Initiative (GRI) have announced a collaboration to work on a new eXtensible Business Reporting Language (XBRL) taxonomy for sustainability reporting.

The new XBRL taxonomy will enable organisations to deliver sustainability information in XBRL format, with the objective of enabling stakeholders to organise and access sustainability information in a much quicker and easier way. As with XBRL for financial reporting, the use of 'tagged' data will hopefully improve the quality and integrity of sustainability performance data, allowing investors, auditors and other report users to access and compare sustainability information without the need for excessive manual work.

In related news, the Professional Accountants in Business (PAIB) Committee of the International Federation of Accountants (IFAC) and ISACA (the organisation responsible for developing international information systems auditing and control standards) have recently published Leveraging XBRL for Value in Organizations. This publication provides guidance on how to leverage the value of XBRL through effective implementation. It includes discussion of non-financial reporting, noting the inherent ability of XBRL to communicate a wide array of types of data, which supports a range of key performance indicators (KPIs) for performance and sustainability reporting (including reporting under the GRI guidelines).

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Agenda for July 2011 IFRS Interpretations Committee meeting

27 Jun 2011

The IFRS Interpretations Committee will meet at the IASB's offices in London on Thursday and Friday 7 and 8 July 2011. The meeting is open to the public and will be webcast.

The tentative agenda is shown below.
Agenda for the Interpretations Committee Meeting
Thursday and Friday, 7 and 8 July 2011
Thursday 7 July (10:00h-17:30h)
  • Introduction
  • IAS 16 – Accounting for production phase stripping costs in the mining industry
  • Review of tentative agenda decisions from the May meeting
    • IAS 16 Property, Plant and Equipment – Cost of testing asset - element of cost
    • IAS 19 Employee Benefits – Defined contribution plans with vesting conditions
  • Items for Continuing Consideration
    • IAS 37 Provisions, Contingent Liabilities and Contingent Assets and IFRIC 6 Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment – Use of IFRIC 6 by analogy
  • New items for initial consideration
    • IFRS 3 Business Combinations – Business combinations involving newly formed entities: factors affecting identification of the acquirer
    • IFRS 3 Business Combinations – Common control transactions
    • IAS 27 Consolidated and Separate Financial Statements – Group reorganisations in separate financial statements
    • IFRS 3 Business Combinations – Definitions of a business
Friday 8 July (09:00h-10:45h)
  • New items for initial consideration (continued)
    • IFRS 8 Operating Segments – Aggregation of operating segments and identification of the chief operating decision maker
    • IFRS 11 Joint Arrangements – Acquisition of an interest in a joint operation
  • Administrative session – Committee work in progress

 

The IAS Plus Interviews – Sir David Tweedie, outgoing IASB Chairman

24 Jun 2011

After ten years working to bring harmony and order in world financial reporting, Sir David Tweedie is standing down as Chair of the IASB. In a special interview with Robert Bruce for IAS Plus, Sir David Tweedie talks about his achievements, his battles, and his hopes for the future.

Sir David Tweedie is an awkward individual. He has many other qualities. He is humorous, astute, charming and thoughtful as well. But the default setting is very often just simple awkward. Who else would find that presiding over the International Accounting Standards Board, (IASB), for the last time in his decade of chairing the organisation he would feel impelled to put himself down as a dissention for only the second time in his chairmanship? And he was in a minority of three as well. But he felt it was important so he went ahead and did it. There is still something in him of the Scottish rugby enthusiast who revels in a disputed penalty kick in the last minute of a match.

He is stepping down after over twenty years of trying to bring order to financial reporting and get that order embedded around the world. The first decade was spent as Chairman of the UK Accounting Standards Board. He was brought in at a time when chaos and corporate disorder were the name of the game. He spent his ten years diligently bringing everyone to heel. Then he was made Chairman of the IASB to try and do something similar to financial reporting around the world. And his decade has been extraordinary. When you talk to observers and colleagues about the achievements of the IASB the sort of phrase which comes into the conversation is: 'no one would in their wildest dreams would have expected us to achieve this'. From a more or less standing start some 120 countries now follow International Financial Reporting Standards, (IFRS). The G20 has the attainment of a global reporting language as one of its stated goals. Only the US still stands outside and it is widely expected to decide upon a route towards joining in later this year. This is why, when you ask Tweedie what the best time in his Chairmanship was he answers: 'The best is still to come and that will be when the Americans say: 'Yes'".

To understand the scale of what has been achieved it is important to go back to the context at the outset. 'Our role isn't what I thought it was going to be' says Tweedie. 'I thought our job was really to write particular standards, so if the Australians wanted a leasing standard they could take that one, if the French were short of a revenue recognition standard they could take our revenue recognition standard. Instead of which we have become the standard-setter for the world and our role changed at that point. So the last ten years has been fixing what we inherited while selling the global vision. We're almost there. It's not quite there. The American decision is critical because that will influence Japan, which will influence China, which will influence India'.

There were two early changes. IOSCO, the stock market's regulator, announced that the standards inherited by the IASB weren't fit for international purpose. And after a few months the European Commission decided that IFRS would become mandatory for listed companies in Europe from 2005. The roller-coaster ride which started then is still running. But both the IOSCO and the European decisions changed things drastically.

'What we didn't expect was to be the world standard setter and that changed almost instantly with the EC decision', he says. 'But then we were faced with the IOSCO position on the existing standards which they said weren't fit for purpose. They were broadly fit but not as an international set. So we had to fix them and so it was a process of working through the standards to knock them into shape, which took about four years. It was horrible. We didn't like it. There were not a lot of conceptual ideas in it. It was just – "this doesn't make sense, take these four paragraphs out and slot these ones in"'. This work included a patching-up of the standard on financial instruments, a growing area of extraordinary complexity as the financial world did ever more creative things with them. 'With IAS 39 all we could do was tinker', he says. 'We couldn't do much, but tinkering actually made everyone think we had written the thing and we got all the flack for that'. And then came the Memorandum of Understanding with the US authorities to speed the possibility of removing the need for non-US companies to produce a reconciliation statement with the US GAAP rules produced by the US standard-setter, FASB. This grew into the process of convergence between IFRS and US GAAP, which still continues. Hard and unproductive though the work often felt, it did move the process into a truly global arena.

And this is partly why, when Tweedie came to the end of his decade there was frustration that all of the programme insisted upon by the G20 and the needs of the convergence programme had not been knocked on the head before he handed over the Chairmanship to the incoming Hans Hoogervorst, his successor.

'It was frustrating in a way, there were certain things that I knew we couldn't finish', he says. 'It would have been nice to have finished them. But you have to walk away. That is life. We almost got revenue recognition and leases done. We decided to re-expose revenue recognition, not that we had to technically, but it is one of these standards that is all encompassing. It is going to delay the thing for a bit but I don't think there will be many changes. It is more a quality control check. The only problem is if the process becomes a precedent and then everything has to be exposed once you finish it. We have never done that before. If that does happen, then every project adds a year'.

Tweedie espouses the simple and direct life. 'Even if there is a division simply just view position A, and view position B. Then pick one'. Unfortunately life is not that simple. In his farewell words to his last Board meeting Tweedie pointed out that they had been working on the convergence project since 2002 and were still at it. He joked about Winston Churchill's observation about Americans. 'They always come to the right answer', quoted Tweedie, 'but only after they have tried everything else'.

This has particular resonance in the international context. Tweedie's view is that countries need to sign up to the whole deal and if they don't like the whole deal then they need to get inside the IASB decision-making process and influence it. 'Ultimately you've got to make a choice and they have got to accept that choice. Take India, for example. They say: "Well, we want IFRS but we want 10 carve-outs. And the argument I put to them is do you think what you are doing is an improvement for your country or is it not. And if it is not, then just stay with your own standards. But if it is, then you have to do what we have to do when we sign off on a standard individually. And in almost every standard we put out there is something in it you really dislike. But on the other hand you have to look at it and say, on balance, is it better than the one it's replacing, and if it is, our rules are that you must sign for it. And I think countries have got to do that as well. You may not like some of our standards but you are taking the lot. Then work from the inside to try and get it changed. With the new standards we will review them after two years anyway so if you can get enough support then, when the agenda comes up, get it changed'.

But the world really awaits the decision of the US regulator, the SEC, to provide some kind of green light to a programme which would lead to the US, eventually, joining with the rest of the world in using IFRS. Like so many issues in the world of accounting the problem is not a technical one. It is a cultural one.

'I think the idea of American exceptionalism dies hard', he says. 'America doesn't hand things over to international bodies very easily. And I think the SEC has a difficult decision. It quite clearly believes in global standards and you get someone like Tim Geithner who will say that financial reform globally is impossible unless we get the accounting architecture sorted out and Jean-Claude Trichet said the same thing. They accepted that we ought to have one set of standards at the G20. The problem I think they have is that a lot of American companies focused on domestic clients and they say "why change, this is going to cost me money. I'm used to our system so why should we do it"'.

So it comes down to the political niceties. 'My personal view is that they are more likely to say yes than no, as a consequence of saying no is to question the value of the last nine years of convergence work. The agenda has been slanted towards getting them in'.

The real impact of the IASB's work is often lost in a miasma of technical arguments. The economic impact, in the wider sense, is sometime obscured by this. Tweedie quotes the relative share of the global equity markets. 'When we started the US share of the global equity markets was 52% and Asia was about 14%', he says. 'Now America is 31%, and Asia's 32%. Europe takes about 30% and hasn't changed much'. This is partly why the US needs IFRS in the long run. And it is also partly why the balance of power in the IFRS world is changing.

'Cumulatively it will reduce the cost of capital', he says. 'There are studies that have shown that in Europe IFRS has reduced it by 47 basis points. That is a huge amount and the more that can be done, the more you end up with more investment and more growth. So we are talking macro-economics. We are not just arguing over what type of lease accounting you have. It's very important that we do that and that's the big global effect'. And it is not confined to the largest companies either. The SME standard has extended the value of IFRS to a mass of smaller companies which now do business right around the world. 'We are hearing from people: "We now understand our suppliers, we understand our subsidiaries and it is better when we get the whole system together". It's an idea whose time has come but it should have come a long time ago really', he says.

Now he hands over the Chairmanship to Hans Hoogervorst, a former Dutch Minister of Finance and securities regulator. They get on well together. Hoogervorst co-chaired the Financial Crisis Advisory Group. He was Chair of IOSCO's technical committee. He may not have an accounting qualification after his name, but he knows the business. I asked Tweedie what advice he had for Hans. 'I don't think you need to give Hans very much advice', he says. 'That's why he is such a good choice. This game is all about change management. You can say it's technical but how far can you go technically? It's pragmatism'.

And in any case the IASB is now a very different organisation to the one Tweedie first joined. We were speaking the morning after the staff had given him a farewell party. ' As I said to the staff last night, I am handing my baby over for adoption', he said. 'But the baby's ten and a half years old now and heading towards teenage years, which need a different form of parenting.'


June 2011

Trustees announcement regarding the IFRS Advisory Council membership

24 Jun 2011

The membership terms for the IFRS Advisory Council are set to expire on December 2011. The Trustees of the IFRS Foundation has announced its plans regarding the future of the IFRS Advisory Council's memberships.

The Trustees have agreed to extend the terms of the Advisory Council leadership. Chair Paul Cherry's term is extended two years, ending on 31 December 2013; vice chair Charles Macek's term is extend three years, ending in December 2014; and vice chair Patrice Marteau's term is extend one year, ending December 2012. In addition, the Trustees have agreed to keep the current representative membership model with some minor modifications. These modifications are (1) inviting regional standard-setting bodies; (2) more participation from academia, other internationally recognised professional bodies interested in financial reporting, and SME community; and (3) greater participation from developing markets and other economies adopting IFRS.

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Proposed professional education standard would remove mandatory university degree entry requirement

23 Jun 2011

The International Accounting Education Standards Board (IAESB) has released for public exposure a proposed revision of International Education Standard (IES) 1, Entry Requirements to a Program of Professional Accounting Education.

The key changes include:

  • making the requirements more inclusive and broader in scope (necessitating a change in the title of IES 1 to Entry Requirements to Professional Accounting Education)
  • adopting a principles-based approach focusing on allowing flexible access to professional accounting education, including removing reference to a recognised university degree programme or its equivalent and instead referring to it as example
  • requiring that the entry level be high enough to provide assurance of an individual's likely success in the programme of professional accounting education, and making relevant information publicly available to help individuals make an informed decision in assessing their own chances of successfully completing professional accounting education
  • providing guidance that IFAC member bodies justify their entry requirements in terms of the competences required to successfully complete professional accounting education.

Comments on the document close on 21 September 2011. Click for IAESB press release (link to the IFAC website).

IASB to discuss mandatory application date of IFRS 9

23 Jun 2011

The IASB has posted a Staff Paper on its website discussing the application date of IFRS 9.

The paper is scheduled to be discussed at the IASB's meeting on 20-22 July 2011.

The IASB stated in the Basis for Conclusions of IFRS 9 that it intended for the mandatory transition to all phases of the IAS 39 replacement project to occur concurrently, and that it may delay the effective date of the IAS 39 replacement project to better align with the effective date of the proposed insurance contracts guidance. Requests to review the mandatory effective date have also been received through the Request for Views and other outreach activities.

The Staff Paper notes the impairment and hedging phases of the project to replace IAS 39 are not yet complete, nor is the insurance project, and the staff recommends that on the basis of current circumstances the IASB should move the mandatory effective date of IFRS 9 to annual periods beginning on or after 1 January 2015. IFRS 9 is currently required to be applied for annual reporting periods beginning on or after 1 January 2013.

The full agenda for the July IASB meeting has not yet been formally announced. Click for access to the Staff Paper (link to the IASB's website).

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