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A Guide through IFRS 2012 ('Green Book') is now available

20 Sep 2012

The IFRS Foundation has announced that 'A Guide through IFRS 2012' is now available. This volume (nicknamed the 'Green Book') includes the full text of the Standards and Interpretations and accompanying documents (such as the Basis for Conclusions) issued by the IASB as of 1 July 2012 with extensive cross-references and other annotations. This edition does not contain documents that are being replaced or superseded but remain applicable if a reporting entity chooses not to adopt the newer versions early.

The new requirements since 1 July 2011 include:

The Green Book can be purchased for £90 plus shipping for the two book set (academic, developing country, and volume discounts apply). Click for more information and ordering details.

Notes from the September IFRS Interpretations Committee meeting

20 Sep 2012

Deloitte observer notes are now available from the IFRS Interpretations Committee meeting held in London on 18 and 19 September 2012. In its active project on contingent pricing of property, plant and equipment and intangible assets, the Committee discussed several models developed by the staff and the question of how closely a model should be tied to the leases project model that is not yet finalised. The discussions will be continued at a future meeting. The Committee also confirmed its tentative decisions published in the May IFRIC Update and discussed a number of other issues.

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

Tuesday, 18 September 2012 (10:00-17:15)


Active Committee Projects

Items for continuing consideration

Review of tentative agenda decisions published in May IFRIC Update

Wednesday, 19 September 2012 (09:00-12:15)

New items for initial consideration

Administrative session

Click here to go to the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

New IFAC Policy Position Paper stresses that governments and politicians must continue to strive for global solutions

20 Sep 2012

The International Federation of Accountants (IFAC) issued Policy Position Paper 6, 'Global Regulatory Convergence and the Accountancy Profession', stressing that continued efforts to sustain global regulatory convergence are critical for the evolution of a sound, global financial system.

IFAC believes that the global public interest is best served by consistent global adoption and implementation of high-quality, internationally accepted financial reporting, auditing, assurance, public sector accounting, accounting education, and ethics standards (including independence requirements for auditors), and by use of these standards for reporting financial information for capital and debt markets.

The Policy Paper lists six benefits of global convergence:

  • improved comparability of financial information,
  • reduced effects of systematic risks,
  • reduced information costs,
  • less opportunities for regulatory arbitrage,
  • basis for a global regulatory system,
  • additional benefits for developing and emerging countries.

However, the paper also lists challenges and impediments. While acknowledging that countries are different, IFAC warns that adding additional requirements or implementing "carve outs" on a national level undermines global convergence. IFAC fears for a continued momentum to seek global outcomes if putting national interests before global solutions becomes a tendency. The paper states:


Progress toward global solutions risks being derailed: (i) by inconsistent and/or unilateral decision making, including reforms that have extra-territorial impacts; and (ii) by politicians taking a national - rather than global - view of critical economic issues.

The new Policy Position Paper is available through the corresponding press release on the IFAC website.

European Parliament committee approves proposals on country-by-country reporting and on reducing bureaucracy for smaller EU firms

19 Sep 2012

In its 18 September 2012 meeting, the European Parliament committee on legal affairs (JURI) approved a package of proposals imposing on large companies extracting oil, gas and minerals and loggers of primary forests a new obligation to provide full details on their payments to national governments. It also endorsed changes to existing EU accounting legislation aimed at reducing bureaucracy for smaller EU firms.

Both proposals were made in the connection of the European Commission's proposals for fostering more growth in Europe which involve changes to the Accounting Directives and the Transparency Directive. The proposals were originally published in October 2011.

The proposal on country-by-country reporting would require large extractive companies dealing with oil, gas and minerals to disclose full information on their payments to national governments, on a country-by-country and project-by-project basis. Similar rules were adopted by the United States Securities and Exchange Commission (SEC) in August 2012, and indeed, many European member states had warned not to adopt strict country-by-country reporting until the United States had made a similar move.

At the same time, the committee does not want to overburden smaller EU firms. Therefore, the the requirements will not be extended to small and medium sized entities (SMEs). Klaus-Heiner Lehne, the chairman of JURI, said: "We have to take care that we do not overload the reporting requirements with unnecessary information that proves useless in the end", and went on to indicate that the unanimous vote showed that the European Commission's course of reducing the accounting burden for SMEs was also a clear vote against "any attempt to introduce International Financial Reporting Standards (IRFS [sic]) for SMEs" that would "rather provide a platform for accounting tricks than a basis for accurate financial statements" anyway.

Please click for JURI press release on the European Parliament's website.

Growth of the Islamic finance industry leads to need for better disclosures

19 Sep 2012

The Islamic Financial Services Board (IFSB) has posted to its website a report from a high-level roundtable on 'Disclosure Requirements for Islamic Capital Market Products' organised by the IFSB, the International Organisation of Securities Commissions (IOSCO) and the Securities Commission Malaysia. The roundtable was to be a first step towards the development of international regulatory standards and best practices relating to disclosure requirements for Islamic capital market products.

The Islamic capital market has expanded rapidly over the last years and cross-border financing and investment are on the increase. They have outpaced the development of robust regulatory and disclosure practices. The roundtable therefore discussed the need to achieve improved and better converged disclosure requirements across jurisdictions to achieve greater transparency and comparability leading to better investor protection and to a healthy and sustainable growth and a reliable regulation of the Islamic capital market.

All participants agreed that this issue is best addressed from a cross-jurisdictional perspective and the hope is that the collaboration between IFSB and IOSCO will facilitate a process leading to a set of practices that could be harmonised or mutually agreed upon. The participants also discussed the risks and challenges arising from inadequate disclosures in the area of Sukuk and Islamic Collective Investment Schemes and identified potential approaches that could be adopted by the standard setters.

Please click for the report from the roundtable on the IFSB website and more information on Islamic accounting on IAS Plus.

Agenda for September 2012 IASB meeting

18 Sep 2012

The IASB is meeting in London on 24-28 September 2012 and has publicly released the agenda for the meeting. The IASB will hold a number of IASB-only and education sessions in addition to joint meetings with the FASB. Discussions include insurance contracts, revenue recognition, rate regulated activities, classification and measurement, macro hedge accounting, IAS 41, the Conceptual Framework, investment entities, impairment, an IFRIC update, IFRS 11, IAS 28/IFRS 10, and annual improvements.

The full agenda for the meeting, dated 18 September 2012, can be found here.  We will post any updates to the agenda, and our Deloitte observer notes from the meeting, on this page as they are available.

Speech by Hans Hoogervorst on the concept of prudence

18 Sep 2012

On 18 September 2012, the IASB Chairman Hans Hoogervorst addressed the Federation of European Accountants (FEE) Conference on Corporate Reporting of the Future in Brussels, Belgium. His speech entitled 'The Concept of Prudence: dead or alive?' discussed the use of judgment in financial reporting and how increased objectivity (while still exercising caution) has improved accounting standards since the Concept of Prudence was removed from the Conceptual Framework.

The IASB Chairman started his speech by discussing the future of corporate reporting, which he sees as integrated reporting — the inter-dependent topics of sustainability, the environment, social issues, and financial reporting. He talked about resolving issues within financial reporting during the next phase of the revision of the IASB's Conceptual Framework.

Mr Hoogervorst went on to note that financial reporting is far from an exact science and is highly dependent on judgement. He provided the definition of Prudence from the previous version of the Conceptual Framework (which was a characteristic of Reliability which is now called Faithful Representation):

The Framework said that Prudence was the inclusion of a degree of caution in the exercise of the judgements needed in making the estimates required under conditions of uncertainty, such that assets or income are not overstated and liabilities or expenses are not understated.

Mr. Hoogervorst noted that there is nothing wrong with this definition, but cautioned against the use of excessive conservatism, noting two problems:

  • During an economic upturn, profits are artificially depressed and investors might miss out on a good investment opportunity.
  • During an economic downturn, hidden reserves can be used to artificially increase an entity's earnings. Profits are overstated, masking the deterioration of the entity's performance.

He stated that the Concept of Prudence was removed when talks began with the FASB on convergence, because US GAAP did not have a definition of prudence. The IASB also felt that the idea "if in doubt, be cautious" was still engrained in its standards and that the neutrality of financial reporting was stressed by leaving out the definition of prudence.

Keeping prudence in mind, Mr Hoogervorst said, there is room for further improvement to IFRSs. He noted several specific issues, but admitted that there were no simple solutions to the problems. He discussed several ways the IASB was working to build sufficient caution into its standards.

Mr. Hoogervorst wrapped up his speech by reiterating his opinion that IASB standards must result in information that is as neutral as possible. He noted that the exercise of caution is visible in many of the IASB's standards and remains a critical issue in the development of new standards. He concluded that the Concept of Prudence is "not dead, but alive and kicking indeed".

Please click for the full text of the speech on the IASB's website.

Public and private sector accounting standard differences highlighted

18 Sep 2012

The New Zealand Accounting Standard Board (NZASB) has recently released an exposure draft which explores the practical difficulties in dealing with differences between public sector and private sector accounting standards being set by the IASB and IPSASB. The NZASB acknowledges "there is a risk that the two Boards will develop separate standards that treat like transactions in similar circumstances in quite different ways", which is a significant challenge in maintaining a credible differential reporting framework for various entities.

New Zealand's proposed revised differential reporting regime is being progressively exposed for comment and proposes a 'multi-GAAP' approach.  This includes standards based on IFRS for the for-profit sector (permitting a statement of compliance with IFRS), and standards International Public Sector Accounting Standards (IPSAS) for the public benefit entities (PBEs) in the public sector.

The commentary provided in the exposure draft explores why differences might arise between IFRS and IPSAS, including:

  • Likely differences in the conceptual frameworks used by the IASB and IPSASB reflecting different user needs (see also our earlier article on this topic)
  • Transaction classes which are more prevalent in one sector or the other
  • Lack of clarity about the IPSASB future intentions on convergence with IFRS, particularly in light of significant projects being undertaken by the IASB in areas such as financial instruments and leases
  • The possibility that the IPSASB may prioritise more urgent public sector projects ahead of considering new standards and amendments issued by the IASB.

The New Zealand situation offers an interesting insight into the practical issues arising due to differences between IFRS and IPSAS, particularly as divergence potentially arises over time.

Because of the likely existence of so-called 'mixed groups' containing both for-profit and PBEs, the NZASB exposure draft seeks to address this issue in the New Zealand context.  Ultimately, the exposure draft proposes that the NZASB may depart from IPSAS requirements where necessary to eliminate any "significant unnecessary differences" with IFRS and retain similar requirements across sectors.

With many countries considering the adoption of IPSAS standards, the NZ approach reveals the tensions that can arise.  It provides a strong incentive for the IASB and IPSASB to continue to work towards convergence, with the IPSASB not unnecessarily departing from IFRS - a sentiment echoed by IPSASB board member Ken Warren.  In the longer term, these tensions may potentially raise the question of the most appropriate standard-setting structure for all sectors.

Click for access to the exposure draft (link to New Zealand External Reporting Board website).

Post-implementation review of IFRS 8 - upcoming roundtables and discussions

17 Sep 2012

National standard setters around the world are offering discussion forums in order to collect feedback from stakeholders on the International Accounting Standards Board’s (IASB) Post-implementation Review of IFRS 8. The roundtables are intended to help the standard setters provide input to the IASB's deliberations. We have compiled a new up-to-date overview of roundtables coming up in the near future.

The post-implementation review process for IFRS 8 Operating Segments was initiated in the first quarter of 2012.  A Request for Information Post-implementation Review: IFRS 8 Operating Segments was issued in July 2012, with comments closing on 16 November 2012.  The IASB expects to consider comments received on the Request for Information in the first quarter of 2013.

Upcoming roundtables are offered in:

Some of the roundtables will be conducted in cooperation with staff members of the IASB. The questions in the IASB’s Request for Information (link to IASB website) will provide the structure for all discussion forums.

Agenda for the IASB September education session meeting

13 Sep 2012

The International Accounting Standards Board will be meeting in London on 20 September 2012 for an education session to discuss revenue recognition, insurance contracts and leases.

The agenda, dated 13 September 2012, has been released.

The full agenda for the meeting can be found here.

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.