March

Notes from the March IASB meeting

22 Mar, 2012

The IASB held its regular monthly meeting on 20-21 March 2012 in London, part of it a joint meeting with the FASB. We have posted Deloitte observer notes from some sessions held on Tuesday and Wednesday, covering post-implementation reviews, effective dates, macro hedge accounting, and a review of the efficiency and effectiveness of the IFRS Interpretations Committee.

Click through for direct access to the notes:

Tuesday, 20 March 2012

Wednesday, 21 March 2012

* Notes from the insurance sessions held on Tuesday and Wednesday will be posted soon.

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

EFRAG to hold additional outreach meetings on proactive discussion papers

22 Mar, 2012

The European Financial Reporting Advisory Group (EFRAG) announced additional outreach meetings on 17 April 2012 in Amsterdam and 18 April 2012 in Vienna regarding discussion papers 'Accounting for business combinations under common control' and 'Improving the Financial Reporting of Income Tax'.

The Amsterdam meeting (discussing only the discussion paper related to income tax) will be hosted by EFRAG and the UK and Dutch Accounting Standards Boards. The Vienna meeting will be hosted by EFRAG, the UK Accounting Standard Board, the Austrian Accounting Standard Board and the Italian standard setter (Organismo Italiano di Contabilità, OIC).

As noted in our earlier story, the meetings are designed to gather feedback from users on the topics developed in the discussion papers. The feedback will then be used by the EFRAG, and the accounting standard setters in future work with the IASB that relates to income taxes and business combinations under common control. Registration is requested by 23 March 2012 for the Amsterdam meeting and 29 March 2012 for the Vienna meeting.

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Deloitte comment letter on amendments to IFRS 10

22 Mar, 2012

Deloitte's IFRS Global Office has submitted a letter of comment to the International Accounting Standards Board (IASB) on its Exposure Draft ED/2011/7 – Transition Guidance – Proposed amendments to IFRS 10.

In the comment letter, we express our agreement with most of the proposed amendments to IFRS 10 Consolidated Financial Statements, but also note that further guidance would be beneficial for certain aspects of the adjustments required by paragraphs C4 and C4A.

Click for a full summary and our comment letter on the amendments to IFRS 10 exposure draft.

Deloitte comment letter on amendments to IFRS 10

22 Mar, 2012

Deloitte's IFRS Global Office has submitted a letter of comment to the International Accounting Standards Board (IASB) on its Exposure Draft ED/2011/7 – Transition Guidance – Proposed amendments to IFRS 10.

In the comment letter, we express our agreement with most of the proposed amendments to IFRS 10 Consolidated Financial Statements, but also note that further guidance would be beneficial for certain aspects of the adjustments required by paragraphs C4 and C4A.

Click for a full summary and our comment letter on the amendments to IFRS 10 exposure draft.

EFRAG invites companies to participate in a study of IFRS 10 and the consolidation of special purpose entities

22 Mar, 2012

The European Financial Reporting Advisory Group (EFRAG) invites companies to participate in a supplementary study on the impact of IFRS 10 on the consolidation of SPEs.

This study will be included in the impact analysis of the EU Commission to IFRS 10 – regardless of the endorsement advice from EFRAG. It will illustrate the impact of IFRS 10 Consolidated Financial Statements on the scope of the consolidation of SPEs. EFRAG will carry out this study in close cooperation with European national standard setters.

Click for EFRAG press release (link to EFRAG website) for more information, including how to participate in the supplementary study.

IASB schedules additional education session in April 2012

21 Mar, 2012

The IASB has tentatively scheduled an additional meeting to be held 11-13 April 2012. The meeting has been designated an education session but the specific topics to be discussed have not yet been announced.

The final dates and times for the meeting at not known as this stage. The meeting precedes the regular April meeting which is scheduled for 16-20 April 2012.

We will post the agenda for the education session meeting, and any other information about the meeting, as it becomes available.

Updated EFRAG 'endorsement status report'

21 Mar, 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.

Since the last report, the recent amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards in relation to government loans has been added to the report, with final endorsement of the amendment expected in the fourth quarter of 2012.

Click to download the Endorsement Status Report as of 19 March 2012.

You can always find the endorsement status report here.

IFAC reiterates its call for global adoption of IPSAS by governments

20 Mar, 2012

The latest Policy Position Paper from the International Federation of Accountants (IFAC) renews its call for governments to apply accrual accounting principles in light of ongoing sovereign debt issues, and in particular, to adopt International Public Sector Accounting Standards (IPSASs).

IFAC Policy Position Paper 4, Public Sector Financial Management Transparency and Accountability: The Use of International Public Sector Accounting Standards, sets out IFAC’s view that governments around the world must provide clear and comprehensive information regarding the financial consequences of economic, political, and social decisions, in order to protect the public as well as investors in government bonds.

The paper notes the following:

 

The type of information required can only be provided through a high-quality, robust, and effective accrual-based financial reporting system, which allows for government assets and liabilities (including debt) to be appropriately recorded, reported, and disclosed — and hence effectively monitored. The most globally accepted high-quality accrual-based financial reporting system is IPSASs. IPSASs provide for the full disclosure of all assets, liabilities, and contingent liabilities, which is vital for assessing the true economic implications of public sector financial management. The disclosure of all liabilities, including long-term obligations (e.g., pension obligations), also may encourage government leaders to make decisions that are driven by matters other than short-term political incentives.

IPSAS are issued by the International Public Sector Accounting Standards Board (IPSASB), which is an independent board of IFAC. A number of global organisations have adopted IPSAS, and a number of countries are considering adoption at the current time.

Click for IFAC press release (link to IFAC website).

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Chungwoo Suh appointed as member of the IASB

19 Mar, 2012

The Trustees of the IFRS Foundation announced the appointment of Chungwoo Suh as a member of the IASB for an initial five-year term from 1 July 2012. The term is renewable for a further three years.

Dr Suh currently serves as an advisor to the Korea Accounting Standards Board (KASB) and is a Professor of Accounting at Kookmin University, Seoul. He served as Chairman of the KASB between 2008 and 2011, during which time he led Korea’s preparations to adopt International Financial Reporting Standards (IFRSs) in full from 2011.

Click for the IASB press release (link to IASB website).

The Bruce Column — Liberating the needle in the haystack

16 Mar, 2012

The focus is back on the problem of clutter seizing up financial reporting. Robert Bruce, our resident regular columnist, peers into the dense debate and suggests some answers.

Some widely-sought objectives seem perpetually elusive. This tends to spur people on to ever greater efforts. But it should also be understood that sometimes the reason the objectives seem elusive is because they are broadly unattainable. Into this category falls the serial desire of accountants around the world to reduce clutter, to make the outputs of financial reporting short and pithy rather than verbose, and to save the huge tracts of forest currently felled for its printing.

It is a debate almost as old as any in the accounting profession. And the Chairman of the IASB, Hans Hoogervorst, has entered the fray. ‘We are suffering from disclosure overload’, he told a conference the other day. And he launched into an examination of what is wrong and what could be done about it. He is the latest in a long line. Some preparers hark back to their youth and wave a copy of their financial statements from bygone years in the air and say how remarkably short a document it now seems to be. The UK Financial Reporting Council, rail at the thinking, or lack of thinking, which has allowed reports and accounts to become ever longer. Last year it even issued a commendably short document unequivocally titled: ‘Cutting Clutter’. Yet the mixture of dense figures and verbiage continues to expand.

Some launch attacks at specific thickets of clutter. Last year a joint initiative from the Scottish and New Zealand accountancy institutes, which Hoogervorst referenced in his recent speech, sought ways of reducing disclosures. It was called: Losing The Excess Baggage – reducing disclosures in financial statements to what’s important’.

Its argument was that people simply didn’t think about whether something should go into a report or not, and that people tended to ignore the relevant paragraph in IAS1 which says that entities do not have to provide disclosures required by an IFRS if the information is not material.

But even if the UK’s FRC insists on the duty of companies and their advisors to think things through and cut the verbiage out there is often very little guidance on the specifics. As one highly respected preparer said in a debate on the Scottish and New Zealand accountancy institutes’ proposals: ‘We have never had a regulator say we should leave something out’.

But, as Hoogervorst said, much of this is due to the inescapable fact that businesses are much more complex now and the financial reporting is there ‘to describe this complexity, not to mask it’.

As the FRC made plain last year it is thinking and behaviours which can make the difference. But in a business environment which knows that sticking to process is what makes life easier the chance of people making real changes are slim. Hoogervorst knows this. And he also knows that concerted rather than individual action is what could make the difference.

‘Not all disclosures provide useful information to investors’, he said. ‘Standard boilerplate responses are more about ticking boxes than helping investors really understand what is going on under the hood of the business. This is an issue that preparers, auditors, regulators and standard-setters will have to tackle together’.

But it will be hard. And with so many different users of financial information it will be impossible to agree on the specifics that need to be tackled. Or as Hoogervorst summed it up: ‘There will be few quick wins. One investor’s disclosure clutter is another investor’s golden nugget of information. Taking information away is never easy’. On the other hand he knows something needs to be shown to be done. The IASB’s agenda consultation made it clear that people still feel the elusive objective of reducing clutter is something they want someone, almost never themselves, to do.

Perhaps they need to clear their mind still further. The language of the debate tends not to reflect the technology everyone uses. It tends to hark back to information printed on paper. A swift move towards clearer information and a lack of clutter for financial statement users would be to use electronic systems like XBRL for the golden nuggets of information. People who dip in and dip out in their information gathering would be able to see the wood for the trees. If you have the technology to identify the needle in the haystack immediately then the size, density and difficulty of the haystack ceases to matter. One person’s clutter might just be another’s treasure.

Robert Bruce
March 2012

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