In the comment letter, the ESMA noted its serious concern about permitting the use of IFRS for SMEs for financial institutions. The letter asks that the current requirements not be changed and for the IASB to continue to prohibit all financial institutions from using IFRS for SMEs. The ESMA expressed its belief that every financial institutions should be publicly accountable, regardless of size.

We cannot support an approach that permits financial institutions to use simplified accounting standards, which cannot appropriately reflect their business. . . . [W]e feel there is no room for an adequate application of IFRS for SMEs to financial institutions without compromising the objectives of financial reporting, in particular the objectives to provide decision-useful information.

Please click for:

• ESMA comment letter (link to ESMA website)
• Deloitte's recent comment letter on IFRS for SMEs

In the speech, given in his personal capacity, Mr Wright explores the future structure of the global economy, outlining the likelihood of a "major global expansion of market based financing and securities markets" because "they are needed for economic development which is powering ahead in Asia, parts of Latin America and beginning also in Africa".  He cited as examples Brazil, India, China, Indonesia, Singapore, Hong Kong, Russia, Turkey and Mexico, all of which which are expected to have substantially bigger markets in the near future than today.

Noting that whereas in the current global environment there may "only a few big capital markets, with varying levels of compliance and interpretations of global rules", Mr Wright continued that "[adding] in another 10 big capital markets, or more, in the near future so that the matrix of big markets and interpretations is 15 by 15, or more" means a serious need to "change our global regulatory institutions".

Mr Wright suggests three alternatives on how to handle these challenges:

• "law of the jungle and survival of the fittest"
• the "status quo" of today which involves "loose forms of cooperation, hope for the best, best efforts and of course prayer"
• global institutional framework, probably established by International Treaty, that has some enforcement authority, binding disputes settlement and sanctioning possibilities

In the context of these options, Mr Wright perhaps unsurprisingly suggests a global institutional framework is the best solution.  He explained the role of such an arrangement "would not be to try to enforce a one-size-fits-all harmonized set of rules – but rather to ensure and, if necessary legally require, that the basic globally agreed policy principles are properly implemented by all jurisdictions who are signatories to the Treaty arrangements".

In implementing such a change in global regulatory arrangements, Mr Wright pointed out the importance of involving emerging economies before focusing on the special ability of the United States to "lead a movement" in a window of 5-10 years before "the U.S.’ relative share of global financial markets is set to decline significantly, and naturally its influence as well".

Explaining this concept further, Mr Wright alluded to IFRS in explaining:

I believe most of the world would be prepared to consider work on such a project – and I believe, with or without the U.S – it will eventually happen like with the International Financial Reporting Standards or IFRS. Isolationists will no doubt plead what they always plead. They will argue, with their 19th century logic, that the U.S. will be better off alone, not sharing any sovereignty. Perhaps they will continue to believe that in 15-20 years’ time the world will be composed of disconnected, independent islands – the biggest of which can project its views on others. But surely that is the past and a denial of globalization. To repeat the new emerging world will have very soon many big, interconnected capital markets. There will be many more sharks in the pond with far more influence.

Mr Wrights comments have also been echoed by other regulators and observers.  For instance, Steven Maijoor (Chair, European Securities and Markets Authority, ESMA) has recently commented on need for consistent application of IFRS around the globe.  Mr Maijoor noted in a more recent speech (link to ESMA website) that "IOSCO will play an increasing role in... global co-ordination and convergence".

Click for full text of Mr Wright's speech (link to IOSCO website).

The 28-page report discusses the benefits of a global set of standards and assesses the state of IFRS now, ten years after launching the project. The report also controversially calls for an end to the formal convergence projects between the IASB and FASB within months, not years.

Convergence has served its purpose, and there is little desire on either side to continue with it. For existing projects, the IASB should only proceed to a converged solution where that is attainable in the short term, and without jeopardising the quality of the outcome. . . . In our view, it is much better henceforth that the two boards go ahead and issue their own separate, distinct standards — aligned where possible — rather than muddle through and issue a weakened compromise solution, or simply do nothing.

The ICAEW believes that the IASB should continue to work with the FASB — ensuring that the US is still represented on the Monitoring Board, as Trustees and as IASB Board members — but the IASB should not put reaching an agreement with the United States ahead of developing timely, quality solutions and improvements to international standards that are "urgently needed" for the many other jurisdictions that have already adopted IFRS.

Perhaps now is the time for the IASB to focus its attention squarely on the needs of the 100 plus jurisdictions that to some degree have officially adopted its standards, and who currently do not always feel that their voices are adequately heard, and on working to encourage those countries that have moved their standards close to IFRS — notably China — to take the final steps towards full IFRS reporting.

The ICAEW report also presents many recommendations for the future success of the IASB and IFRS, including:

• Calling on the G20 to (1) adopt IFRS or align their domestic standards as closely as possible, (2) allow optional use of IFRS in their capital markets by all listed companies, and (3) take on their proportionate shares of funding the IFRS Foundation.
• Establishing a dedicated research capacity and an effective feedback mechanism to issue standards that are widely accepted and can cope with the different and evolving business models and economic systems that exist around the world.
• Develop a strategy for enforcing standards — calling on regulators around the world to work more closely together to ensure enforcement is consistent.

The ICAEW's full report, The Future of IFRS, is available on the ICAEW website.

This volume (nicknamed the 'Blue Book') contains all official pronouncements that are mandatory on 1 January 2013. It does not include IFRSs with an effective date after 1 January 2013. The Blue Book sells for £65 plus shipping (academic, developing country, and volume discounts apply). The publication can be purchased through the IASB web store.

The discussion paper published in June 2012 was intended to be a starting point to enhance thought-leadership on the future evolution of audit committees within Europe. To foster the debate, FEE is now offering the conference on 'How to improve Audit Committees further?'.

This high level conference will bring European decision makers and relevant stakeholders including audit committee members, auditors, investors and regulators together to discuss further improvements of the functioning of audit committees. Stimulating closer cooperation throughout the audit engagement, especially the exchange of high quality information between audit committees and the external auditor, is thought to be of great benefit to the company and to the external auditor. To this extent, and considering that one or more members of an audit committee are often trained accountants, FEE is aiming at enlarging and widening the debate.

The conference is free of charge. However, as places are limited, attendance is upon invitation only. Should you be interested in attending, FEE invites you to submit your interest indicating your name, title and organisation by sending an email to Iryna.deSmedt@fee.be

The full agenda for the meeting, as of 6 December 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.

Among the misconceptions FEE makes out that were either already introduced with the EC's proposals or crystallized in the ensuing debate is the believe that accounting and auditing are mere burdens and should be reduced as far as possible. FEE states:

Accounting and auditing are not “administrative burdens” but essential tools to enable managers to manage, investors to invest and enterprises to trade, grow and create wealth and employment; accounting and auditing also have a public interest dimension by contributing to improving the functioning of markets and enhancing corporate governance, transparency and stability.

FEE also warns of the excessive focus that has been given to country-by-country reporting. Although FEE welcomes initiatives to increase transparency in this area the statement encourages the parties involved "to redirect their attention and focus on key accounting issues that are essential for the establishment of a robust and long-lasting European accounting framework".

The Policy Statement also considers general matters related to accounting that should be discussed further. Among these are disclosures, the use of fair value accounting and a possibility for member states to permit the use of the IFRS for SMEs.

Please click for access to the Policy Statement on the FEE website.

In its draft comment paper, EFRAG highlights the initiative taken by the Autorité des normes comptables (ANC), noting that the French standard setter revived the debate on emissions trading schemes in May 2012, when it issued the discussion paper Accounting for Emissions Trading Schemes Reflecting Companies’ Business Models. Since IFRIC 3 Emission Rights was withdrawn in July 2005 and the project deferred in November 2010, discussion of specific guidance on the topic has stalled and resulted in diverging practices on the accounting of assets and liabilities arising from participation in an Emission Trading Scheme.

Using the ANC's discussion paper as a starting point, EFRAG's draft comment letter analyzes specific aspects of emissions trading schemes and poses questions to constituents, with the expectation that comments received will help shape the EFRAG recommendation to the IASB on specific accounting guidance on emissions rights.

Please click for the following documents on the EFRAG website:

• EFRAG press release
• EFRAG draft comment paper
  

Comments are invited by 30 April 2013.

Details of the changes are:

• Financial instruments — general hedge accounting - target date for issue of this section of IFRS 9 Financial Instruments is now the first quarter of 2013 (previously last quarter of 2012)
• Financial instruments - Limited reconsideration of IFRS 9 - new process step of redeliberations expected in the second quarter of 2013 (the exposure draft was issued on 28 November 2012 and is open for comment until 28 March 2013)
• Annual improvements 2012-2014 - following the publication of the proposals for the 2011-2013 cycle of improvements, introduction of new project for the next cycle, with a target date for an exposure draft of the third quarter of 2013 (reverting to the usual cycle timing)
• IAS 16/IAS 38 — acceptable methods of depreciation and amortisation - introduction of a target date for the proposed amendments in the third quarter of 2013
• Post-implementation review - IFRS 3 Business Combinations - clarification that the initiation of the review will be in the first or second quarter of 2013 (previously no earlier than the first quarter of 2013).

In addition, the IASB has introduced a new format for the presentation of its work plan, implementing a new tabbed format for display of its various projects.  The 'research projects' tab lists a number of projects which are not currently being actively pursued by the IASB.

Due process documents expected before the end of 2012

The following due process documents are expected to be issued by the end of 2012 (this includes those items already noted above in some cases):

• Exposure drafts
  • IFRS 10/IAS 28 - Sales or contributions of assets between an investor and its associate/joint venture
  • IFRS 11 - Acquisition of an interest in a joint operation
• Other documents
  • Agenda consultation feedback statement.

Click for IASB work plan as of 4 December 2012 (link to IASB website). We have updated our project pages to reflect the updated work plan and other known developments.