Due process oversight

31 May, 2011

The IASB has uploaded to its site an article on the due process, which defines how the IASB goes about its work and discharges its responsibilities to act in the public interest at all times.

Financial journalist Robert Bruce, who is also the regular resident commentator for IAS Plus, has interviewed David Sidwell, the chairman of the IASB's Due Process Oversight Committee.

Click for Robert Bruce's Due process oversight (link to IASB website).

Change to meeting agenda for current IASB meeting

31 May, 2011

The agenda for the special IASB meeting in London on 31 May — 2 June 2011 has been changed.

Today's session on Leases has been removed from the agenda and the session on Revenue recognition has been brought forward. The meeting now ends at 4:00pm (London time).

A revised summary of the agenda for the meeting can be found here.

OECD updates its Guidelines for Multinational Enterprises, includes disclosure

30 May, 2011

The Organisation for Economic Co-operation and Development (OECD) has published a 2011 update to its Guidelines for Multinational Enterprises.

The Guidelines were last updated in 2000 and include recommendations for responsible business conduct that 42 adhering governments encourage their enterprises to observe wherever they operate.

The 2011 update includes specific consideration of the need for entities to comply with disclosure requirements, both from a financial and non-financial perspective. An extract from the guidelines follows:

General policies

The Principles call on the board of the parent entity to ensure the strategic guidance of the enterprise, the effective monitoring of management and to be accountable to the enterprise and to the shareholders, while taking into account the interests of stakeholders. In undertaking these responsibilities, the board needs to ensure the integrity of the enterprise's accounting and financial reporting systems, including independent audit, appropriate control systems, in particular, risk management, and financial and operational control, and compliance with the law and relevant standards. ...


Enterprises should apply high quality standards for accounting, and financial as well as non-financial disclosure, including environmental and social reporting where they exist. The standards or policies under which information is compiled and published should be reported. An annual audit should be conducted by an independent, competent and qualified auditor in order to provide an external and objective assurance to the board and shareholders that the financial statements fairly represent the financial position and performance of the enterprise in all material respects.

Disclosure is addressed in two areas. The first set of disclosure recommendations calls for timely and accurate disclosure on all material matters regarding the corporation, including the financial situation, performance, ownership and governance of the company. ... The Guidelines also encourage a second set of disclosure or communication practices in areas where reporting standards are still evolving such as, for example, social, environmental and risk reporting. This is particularly the case with greenhouse gas emissions, as the scope of their monitoring is expanding to cover direct and indirect, current and future, corporate and product emissions; biodiversity is another example.

Click for more information (link to OECD website).

Latest batch of editorial corrections to IFRSs released by the IASB

30 May, 2011

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

This batch makes editorial corrections and changes to 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) and IFRS 13 Fair Value Measurement (issued May 2011).
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IFRS Foundation financing

30 May, 2011

The IASB has uploaded to its site an article on the financing of IFRS Foundation.

Financial journalist Robert Bruce, who is also the regular resident commentator for IAS Plus, discusses the need for the IFRS Foundation to raise effective and sufficient funding but at the same time ensure its independence is not impaired.

Click for Robert Bruce's IFRS Foundation financing (link to IASB website).

FEE issues guide on sustainability reporting frameworks

29 May, 2011

The Sustainability Group of the Federation of European Accountants (FEE) has issued a guide to commonly used sustainability reporting guidance documents when considering the identification and use of environmental, social and governance (ESG) indicators.

The guidance documents selected by the FEE were based on relevance, involvement of European accountancy national institutions, international applicability, and range of technical observations at the international level. Due to a lack of consistency between the documents, FEE suggests a need to find a common methodology on how to use the various documents. In order to reduce the risk of missing material and relevant key performance indicators when deciding what information should be reported, FEE recommends an entity should use the following criteria: relevance, materiality, consistency and reliability.

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Change to meeting agenda for upcoming IASB meeting

26 May, 2011

The agenda for the special IASB meeting in London on 31 May – 2 June 2011 has been changed.

The IASB only session on Asset and Liability Offsetting on Thursday 2 June has been removed from the agenda and the meeting time shortened to end at 4:30pm (London time).

A revised summary of the agenda for the meeting can be found here.

IIRC to publish Discussion Paper on Integrated Reporting in June

25 May, 2011

The International Integrated Reporting Committee (IIRC) met in New York on Friday 13th May 2011. At the meeting, the IIRC reviewed a draft Discussion Paper on Integrated Reporting which is due to be published for public consultation in June.

The IIRC has not widely publicised the expected contents of the Discussion Paper at this stage. However, at a Australian Business Reporting Leaders Forum (BRLF) meeting held in Sydney on 11 April 2011, Paul Druckman (Co-chair of the IIRC Working Group and Chairman of the Executive Board of HRH The Prince of Wales Accounting for Sustainability (A4S) project) provided an update on the draft Discussion Paper which had been debated at an IIRC working group meeting in London in April

The minutes from the BRLF meeting (link to the Australian Society for Knowledge Economics website) outlined the current thinking which included, that at that time:

  • Integrated reporting is still evolving; it will require changes in behaviour and a change in the reporting regime. It is a new way of thinking and reporting against short, medium and long term strategic objectives
  • Integrated reporting is not combined reporting (of financial statements and corporate social responsibility reports), or additional. It is a new and integrated report
  • The objective is to publish the Discussion Paper in June for public comment, and Exposure Draft in 2012, and potentially a Standard in 2013 (subject to IIRC ongoing Governance debate)
  • In addition, it is expected that a pilot program will run in parallel to trial aspects of the proposed framework over two years – to ensure it is pragmatic and doable.

The IIRC is working towards presenting an integrated reporting proposal to the G20 later in 2011.

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The Bruce Column — Stretching standard time

23 May, 2011

Standard-setting activity has been positively thundering along.

The great batch of five new standards just published is compelling evidence of this. The fair value measurement achievement was probably the greatest. The glare of publicity and discussion made it the focus of attention. But they still managed to deliver a good converged standard. But the question remaining is whether it will succeed in the long run, and whether the convergence programme can provide further results. Sir David Tweedie retires at the end of June. And now the agenda has changed. The new plan talks of final standards on financial instruments: impairment, hedge accounting and asset and liability offsetting by the third quarter of the year; final standards on leases, revenue recognition and insurance contracts by the fourth quarter, and so on. There are only seven months of the year to go, less if you factor in the bureaucratic side of getting a standard out.

We are back to the central problem of convergence. The difficulty of completing a convergence programme is, frankly, the specific difficulty of convergence itself. Best intentions can be signalled early in the process. People can work all the hours there are. But good arguments on both sides and the difficulties they create may still remain, however much people urge convergence all round. This is the problem that the IASB and FASB have had since the outset of their convergence programme. It creates expectations that different standards on the same topic can be harmonised and brought together. But deadlines are what you fall over.

Part of the problem has been the steady realisation during the programme of how much needed to be done not so much to sort out differences but to raise the quality. As the IASB Chairman, Sir David Tweedie, said last month in an assessment of the nine years so far of the convergence programme, if the standards were 'complex or out of date there was no point in trying to converge them otherwise we would just get a complex out-of-date converged standard when what we should really do is write a better standard'.

And there, in a nutshell, is the problem. Pulling two sides of the standards together was just as likely to result in something which compounded the problem as it was to provide enlightenment and simplicity. Much better to use the experience gained to make something new, effective and useful. Where this works everyone is better off. As Sir David went on to say: 'The two sets of standards are much closer together and frankly IFRSs are much better quality than they would have been otherwise'.

In the same interview Sir David's counterpart at the US FASB picked up on this point. Leslie Seidman stressed that there had been 'very significant convergence efforts'. But it was what was left which may require time to become elastic. 'What we have got left', she said, 'is a few priority projects including leasing, revenue recognition, financial instruments and insurance, and that is what we have been focusing on'.

But those four projects have already consumed a huge amount of work, (no one who has witnessed the marathon board meetings and the hours worked by the project staff will dispute the adjective huge), and outreach and consultation. But equally no one suggests we are in sight of a conclusion or, in the case of the more intractable issues, a solution. The original deadline for much of this work was the end of June this year, which coincidentally is also the point when Sir David's decade of tenure as Chairman comes to an end.

Instead the deadlines are being steadily pushed back. But the interesting point is that they are not simply being pushed back because the technical issues are taking longer to sort out. There is another issue. As the Investment Management Association made clear in a response made earlier this year: 'The focus on convergence at all costs consumed resources that could have been used in the development of high quality standards'.

This is what is new. And this is why even the rest of 2011 may not be enough to complete this work. Quality should now be the watchword. And quality does not come about simply through upping the workload. It also depends on thought and feedback. Leslie Seidman said as much back in the April interview: 'The quality of standards remains of the utmost importance'. And Sir David emphasised the point. 'What we have done', he said, 'and I think this is a big change in standard-setting over the past couple of years, is we have gone out deliberately to get high quality input in addition to that required by our due process. This extensive outreach is something that hadn't been done to the extent that it is now. We get constant input, and we test these ideas as we finalise the standards'.

So as we watch the programme unfold with the re-deliberation on ideas on, for example, leasing, insurance and impairment, we should not be surprised if the deadline for completion slips further and further back. What is needed is the sort of quality which will ensure stability and consistency in an issued standard. The key is still time. But it is the future longevity and the shelf life of the standard, not the time it takes to produce, to which people will be looking most closely.

Robert Bruce
May 2011

Related links



Strategy Review comment letters analysis

23 May, 2011

The Trustees of the IFRS Foundation, the oversight body of the International Accounting Standards Board (IASB), have posted to their website a summary strategy review response analysis.

The paper analyses the feedback received in response to the Foundation's public consultation paper Status of Trustees' Strategy Review, which was issued on 5 November 2010. It is based on an analysis of respondents' comment letters and follows the summary document that was published in April. The deadline for comment letters on the summary document is 25 July 2011.
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Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.