July

IVSC explores extractive industry valuations

19 Jul, 2012

The International Valuation Standards Council (IVSC) has formally launched a new project designed to provide greater valuation guidance to the mining, oil and gas industries. In a Discussion Paper being distributed to industry participants, the IVSC is seeking input on the form and scope of valuation guidance needed in the extractive industries, and consults on current practice on the types of assets being recognised and valued, valuation methodologies employed, and the recognition of intangible assets and goodwill in practice.

The IVSC had previously issued Guidance Note 14 The Valuation of Properties in the Extractive Industries (GN 14).  However, this guidance was not included in the revamped valuation standards issued in July 2011 on the basis of the outdated IFRS standards referenced in the guidance, the IASB's project on extractive activities and a number of valuation issues that were causing difficulty in the sector that were not referenced in GN14.

Some of the topics discussed in the Discussion Paper include:

  • Whether combined standards and guidance for extractive industries are appropriate, or whether separate pronouncements for mining and for oil and gas should be produced
  • Whether the project should focus just on the valuation of reserves and resources or should it extend to other assets employed in the industry and to entire businesses in the sector (noting the interdependence of a) reserves and resources, b) capital
    equipment for extraction, c) infrastructure for extraction and, d) intangible assets employed in extraction)
  • Identifying the valuation methods most commonly used for valuing producing reserves, reserves undergoing development and reserves or resources subject to exploration, and the inputs and approaches used in each of the market approach, discounted cash flow approach and cost approach
  • Identifying intangible assets that are customarily separately identified and valued for acquisition accounting under IFRS 3 Business Combinations (or any similar accounting requirement) or in transactions between entities in the extractive industries  - including what value (if any) is attributed to components of goodwill, and whether intellectual property is separately recognised and measured.

The IVSC is seeking comments on the Discussion Paper by 20 October 2012.  Click for:

Notes from the July IASB meeting

18 Jul, 2012

The IASB's July meeting was held in London on 16-20 July 2012, some of it a joint meeting with the FASB. We have posted Deloitte observer notes from the sessions on investment entities, due process, financial instruments: macro hedging, leases, IAS 28: Application of equity method when an associate/joint venture’s equity changes outside of comprehensive income, and an education session on revenue recognition.

Click through for direct access to the notes:

Monday, 16 July 2012

Tuesday, 17 July 2012

Wednesday, 18 July 2012

Meeting notes from the other sessions during the meeting will be posted soon.

You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

IASB and EFRAG issue high level summary of their July 2012 meeting

18 Jul, 2012

The International Accounting Standards Board (IASB) and the European Financial Reporting Advisory Group (EFRAG) met on 16 July 2012. During the meeting, the IASB and EFRAG discussed ongoing projects related to the IASB's current work programme, proposed revisions to the IASB's Due Process handbook, post-implementation reviews of IFRS 8 and IFRS 3, and future cooperation between the two organisations.

A high level summary of the meeting is available on the EFRAG's web site. Also, an audio recording of the meeting is available on the IASB web site.

EFRAG and ASB publish position paper and feedback statement on the effects of accounting standards

17 Jul, 2012

The European Financial Reporting Advisory Group (EFRAG) and the Accounting Standards Board (the ASB) of the FRC have jointly published Position Paper ‘Considering the Effects of Accounting Standards’ and its related Feedback Statement. The Position Paper signifies the final positions of the EFRAG and ASB following the consultation period of Discussion Paper 'Considering the Effects of Accounting Standards'.

The Position paper is geared towards helping standard setters implement 'effect analysis' in the standard setting process. The goal is to enhance the transparency of due process and to increase the accountability and credibility of the standard setter. The Position paper recommends four steps to use when performing effect analysis. The four steps are:

Step 1:
Formulate the entire plan of effect analysis, explaining the intended outcomes at the agenda setting stage;

Step 2:
Encourage input on anticipated effects when due process documents are issued;

Step 3:
Document a summary of inputs from stakeholders by collecting all evidence received, and make the document publicly available; and

Step 4:
Measure actual effects during the process of post-implementation reviews.

The related Feedback Statement provides a summary of the main issues respondents had from the January 2011 Discussion Paper 'Considering the Effects of Accounting Standards.'

Click to view (links to EFRAG web site):

Updated EFRAG 'endorsement status report'

17 Jul, 2012

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.

The update reflects the fact that EFRAG has issued a draft endorsement advice regarding the Amendments to IFRS 10, IFRS 11 and IFRS 12 issued on 28 June 2012. Currently, final endorsement of the amendments might be expected in the first quarter of 2013.

Click to download the Endorsement Status Report as of 17 July 2012.

You can find all past endorsement status reports here.

IFRS Foundation Trustees respond to SEC staff IFRS report

15 Jul, 2012

The Trustees of the IFRS Foundation have issued a statement on the publication of a staff report representing the final element of the Work Plan developed by the staff of the US Securities and Exchange Commission (SEC). The statement notes 'regret' that the report is not accompanied by a recommended action plan for the SEC.

In the statement (link to IASB website), Michel Prada, Chairman of the Trustees, noted:

For the benefit of both US and international stakeholders, the Trustees look forward to the SEC resolving the continued uncertainty regarding the US’s commitment to global accounting standards.

Mr Prada acknowledges the challenges IFRS transition may present to United States constituents, but also notes these represent challenges "that other jurisdictions have successfully overcome when completing their own transition to IFRSs".

The SEC staff report notes a number of matters in relation to the governance and activities of the IASB, e.g.:

  • There are a number of areas where IFRS are underdeveloped, e.g. accounting for extractive industries, insurance and rate-regulated industries
  • The IFRS Interpretations Committee could do more to address issues on a timely basis
  • The IASB should consider greater reliance on national standard setters
  • Global application of IFRS could be improved to narrow diversity
  • Continued reliance on the large public accounting firms to provide funds to the IASB.

The SEC staff report acknowledges that the IFRS Foundation has recently undertaken recent reforms in many of these areas.  In the Trustee's statement, Mr Prada states:

The Trustees will carefully study the report in detail and take further steps as necessary. Our initial assessment is that many of the findings are broadly consistent with the conclusions of the Monitoring Board and Trustees’ respective Governance and Strategy Reviews completed earlier in the year, and are already addressed in the work plan for 2012.

The statement also includes comments from Hans Hoogervorst, Chairman of the IASB.  Consistent with recent speeches made by Mr Hoogervorst, he notes the broad adoption of IFRS already evident on a global basis, the calls by the G20 for global accounting standards, and the new agenda for the IASB going forward "as the era of convergence is coming to an end".

Click for IFRS Foundation Trustees statement (link to IASB website).

We will make a more detailed summary of the SEC report available soon on IAS Plus.

Notes from the July IFRS Foundation Trustees meeting

13 Jul, 2012

Deloitte observer notes are now available from the IFRS Foundation Trustees meeting held in Washington D.C. on 12 July 2012. The meeting consisted of a report from Mr Hoogervorst that reviewed the past quarter's major projects, a report on the results of the June IFRS Advisory Council meeting from Mr Cherry, a report from Mr Sidwell of the Due Process Oversight Committee on his Committee activities over the last quarter, and a report from Dr Pacter on IFRS for SME over the past years. In the afternoon there was a joint Monitoring Board and Trustees meeting.

A listing of some of the topics discussed at the meeting follows (click through to access detailed Deloitte observer notes for each topic):

Thursday, 12 July 2012 (10:20-15:00)

IASB and FASB to host webcasts on Leases project

12 Jul, 2012

Webcasts by the IASB and the FASB will be held on Thursday, 19 July 2012 to provide an update on the lessee and lessor accounting proposals, focusing on the decisions reached at the joint board meeting in June 2012. There will be a joint webcast at 4pm UK time and an IASB only webcast at 9am UK time.

Details of the webcasts are provided below:

Topic: Leases - lessee and lessor accounting proposals
Date and time: Thursday, 19 July 2012 16:00 GMT+1 and 09:00 GMT+1
More information and registration: Click Here

Click for:

European discussion paper 'Towards a Disclosure Framework for the Notes'

12 Jul, 2012

The European Financial Reporting Advisory Group (EFRAG), the Autorité des Normes Comptables (ANC) in France, and the Financial Reporting Council (FRC) in the United Kingdom have published a discussion paper 'Towards a Disclosure Framework for the Notes' that sets out key principles that are required for an effective disclosure framework.

The desire to reduce the volume of disclosure requirements in International Financial Reporting Standards (IFRSs) is widespread and numerous reports and suggestions have been published on the matter: In April 2011 the Accounting Standards Board (ASB) of the United Kingdom Financial Reporting Council (FRC) published a much noted report Cutting Clutter: Combating clutter in annual reports and in July 2011 the Institute of Chartered Accountants of Scotland (ICAS) and the New Zealand Institute of Chartered Accountants (NZICA) released a report entitled Losing the excess baggage — reducing disclosures in financial statements to what's important that was prepared in response to a request from the IASB and outlines recommendations on which existing IFRS disclosures can be amended, reduced or eliminated.

EFRAG/ANC/FRC have now joined the ranks by publishing Towards a Disclosure Framework for the Notes, however, the European approach is far more comprehensive. The discussion paper does not suggest removing or changing disclosures, it suggests principles for a new framework for disclosures. This step moves the debate about disclosures from a discussion about more or less disclosure to "how to improve the quality of what is disclosed to better serve the objective of financial reporting". As with all of EFRAG's Proactive Work the discussion paper is intended to stimulate debate and to influence future standard-setting developments by providing timely and effective input to early phases of the IASB’s work.

In introducing the problem of the disclosure overload and general deterioration in the quality of notes EFRAG/ANC/FRC make out five reasons for the development:

  • the attempt to increase transparency and compensating for shortcomings of recognition and measurement principles by adding disclosure requirements,
  • increasing complexity of transactions and financial reporting requirements,
  • difficulty of applying materiality judgements to disclosures,
  • a safety thinking of preparers, auditors and regulators that leads to providing as many disclosures as can be thought of, and
  • time pressure in relation to publishing financial statements that prevents careful consideration of disclosures.

According to EFRAG/ANC/FRC, these reasons form a complex set of behaviours that needs to be changed. They need to be tackled comprehensively to ensure the problem is not just relocated between the parties involved. Therefore, they suggests developing a disclosure framework that ensures that disclosure requirements under International Financial Reporting Standards (IFRS) are based on sound principles and yield relevant information for users of financial statements.

In the discussion paper EFRAG/ANC/FRC list five points that need to be considered when developing the framework:

  • the purpose of the notes since this drives what information should be included in the notes in the first place,
  • principles for identifying what information should be included in the notes,
  • the form of disclosure requirements, i.e. detailed disclosure requirements that require specific items to be disclosed or more principle based requirements that require greater judgement and consideration of an entity’s circumstances,
  • materiality considerations so that the only information disclosed is the what is necessary to understanding an entity’s financial performance and position, and
  • key features of effective communication that deal with the way disclosures are organised and presented.

All of these aspects are discussed comprehensively in separate chapters which also offer links to examples provided on the EFRAG website. The discussion paper also includes detailed questions on all matters presented. It can be accessed through the press release on the EFRAG website or directly through this link. Comments are requested by 31 December 2012.

The discussion paper is the result of a project that was carried out in cooperation with the US Financial Accounting Standards Board (FASB). In August 2011, EFRAG and FASB had 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. The FASB has also issued an Invitation to Comment on a suggested disclosure framework.

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