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2012

ESMA comment letter on IFRS for SMEs

13 Dec 2012

The European Securities and Markets Authority (ESMA) has published to its website a comment letter to the IASB on its comprehensive review of IFRS for SMEs.

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:

IOSCO Secretary General calls for new global regulatory framework

13 Dec 2012

In a speech to The Atlantic Council, Mr David Wright, Secretary General of International Organization of Securities Commissions (IOSCO) has given a frank assessment of the issues surrounding the future of global financial regulation. Mr Wright proffered the option of a "global institutional framework, probably established by International Treaty" and chastised "isolationists" in the United States for "19th century logic" in denying the impacts of globalisation, including indirectly in relation to International Financial Reporting Standards.

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).

ICAEW issues report on the future of IFRS

12 Dec 2012

The Institute of Chartered Accountants in England and Wales (ICAEW) has published a report 'The Future of IFRS' urging the IASB to end its convergence project with the United States' Financial Accounting Standards Board (FASB) and refocus its attention on the jurisdictions that have already adopted IFRS.

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.

The Group of Friends of Paragraph 47 issues its Charter, encourages other governments to join

11 Dec 2012

The Group of Friends of Paragraph 47, formed by the governments of Brazil, Denmark, France and South Africa during the Rio+20 conference in June 2012, has published its Charter. The group is named for paragraph 47 of the outcome document of the conference which acknowledged the importance of corporate sustainability reporting.

In its Charter, the group welcomes the unanimous endorsement of the conference outcome document entitled The future we want, and acknowledges the importance of engagement between governments, the UN and other relevant stakeholders.

The Charter encourages the continuous exchange of experience and best practice on policy and market regulation between governments to promote sustainability reporting. It also maintains that sustainability reporting is relevant globally, and that the needs of developing countries should be given particular attention.

The members have committed to choose the most relevant policy tools applicable to their culture and jurisdiction to further sustainability reporting and to engage with interested stakeholders in open and constructive dialogue. To this end the formation of an ‘international reference group’ that will enable a structured stakeholder engagement process is currently discussed.

In the Charter, the four founding group members expressly invite other governments to join. The Norwegian Government has announced its intention to join the Group.

The Charter is available on the Global Reporting Initiative website. The initiative acts as the group’s secretariat.

2013 IFRS 'Blue Book' now available

07 Dec 2012

Further to our story on 6 November 2012, the IFRS Foundation has published the 2013 IFRS Consolidated without early application.

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.

FEE roundtable on better financial reporting through audit committee improvements

07 Dec 2012

The Federation of European Accountants (Fédération des Experts-comptables Européens, FEE) has announced a roundtable to further discuss improvements to the functioning of audit committees, which are considered essential for the quality of financial information provided by companies. The roundtable follows the publication of a discussion paper on the same topic in June 2012. It will be held in Brussels on 5 February 2013.

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

Agenda for December 2012 IASB meeting

06 Dec 2012

The IASB will meet in London on 13-17 December 2012. Topics to be discussed include conceptual framework, IAS 12, macro hedge accounting, insurance contracts, revenue recognition, IAS 36, agriculture and rate regulated activities. Revenue recognition on Monday will be discussed jointly with the FASB.

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.

FEE publishes policy statement on the EC proposals for the recast of the 4th and 7th Accounting Directives

06 Dec 2012

On 25 October 2011 the European Commission published proposals for revising the Accounting Directives and the Transparency Directive which have been discussed widely throughout Europe. The final report of the European Parliament Legal Affairs Committee (JURI) of 25 September 2012 however seems to indicate that there is a gap between the views in the European Parliament and the Council. The Federation of European Accountants (Fédération des Experts-comptables Européens, FEE) believes that some of the differences are due to misconceptions and has therefore published a Policy Statement that is intended to inform the debate and also to represent the accountants' view as a third major party involved in the discussions.

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.

EFRAG draft comment paper on emissions trading schemes

05 Dec 2012

The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment paper discussing the need for accounting guidance on emissions trading schemes.

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:

Comments are invited by 30 April 2013.

IASB work plan updated

04 Dec 2012

The International Accounting Standards Board (IASB) has updated its work plan. The finalisation of the hedge accounting section of IFRS 9 has been deferred to the first quarter of 2013, a new project for the next cycle of annual improvements introduced, and various other project milestones introduced or clarified.

Details of the changes are:

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):

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.

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.