February

Notes from the February 2013 IASB meeting

18 Feb, 2013

The IASB's February meeting is being held in London on 18-22 February 2013, some of it a joint meeting with the FASB. We have posted Deloitte observer notes from Monday's session on conceptual framework.

Click through for direct access to the notes:

Monday, 18 February 2013

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

Deloitte comment letter on annual improvements ED (2011-2013 cycle)

18 Feb, 2013

Deloitte's IFRS Global Office has submitted a letter of comment responding to the IASB Exposure Draft 2012/2 — Annual improvements to IFRSs 2011–2013 Cycle.

We believe that the Annual Improvement Project is an efficient and effective method of handling isolated issues within IFRSs that are leading to divergent practice and support the proposed amendments in the exposure draft. However, we offer some recommendations for drafting changes and amendments to transitional provisions.

Click to access the comment letter.

Trustees publish revised IFRS Due Process Handbook

18 Feb, 2013

The Trustees of the IFRS Foundation have published a revised version of their IFRS Foundation Due Process Handbook. The Handbook describes the steps followed by the IASB and the Interpretations Committee in developing or revising International Financial Reporting Standards (IFRSs) and Interpretations.

The updated Handbook includes due process enhancements recommended by the Monitoring Board Governance Review and Trustees' Strategy Review. It also includes recommendations from the Trustees' Review of the Efficiency and Effectiveness of the IFRS Interpretations Committee.

The updated Handbook is a significant rewrite of existing requirements, introducing many new policy level objectives and formalising current practice. It consolidates the due process requirements of the IASB and the IFRS Interpretations Committee into a single document, outlines the responsibilities and activities of the Trustees’ Due Process Oversight Committee (DPOC), includes a more extensive discussion of the process of assessing the likely effects of an IFRS, describes the new research programme forming the development base from which potential standards-level projects will be identified, outlines the practice that the IASB and Interpretations Committee follow for addressing matters that are narrow in scope, describes how the IASB expects to conduct and complete post implementation reviews, and includes consideration of due process requirements related to the extensive programme of outreach activities that is now routinely conducted by the IASB as part of its standard-setting activities.

The proposed revised version of the Handbook had been published for public comment in May 2012. The majority of the proposals included in the draft Handbook were supported by the public. On basis of the comment letters received, however, some changes were made. Some of the changes were clarifications (regarding the status of rejection notices for example), some were alignments (regarding the quorum of the IASB and the Interpretations Committee for example), some regarded omissions (for example an objective of the Due Process Oversight Committee has now been included). The most noticeable change regards the suggestions that re-exposures of IASB proposals could have a minimum comment period of 60 days. This suggested change did not find the desired support, and the minimum comment period has been changed to 90 days. Further changes were warranted by current developments, for example the establishing of the ASAF which is now also described in the Due Process Handbook.

Please click for the following documents on the IASB website:

G20 Finance Ministers and Central Bank Governors remain concerned about convergence

17 Feb, 2013

The Communiqué from meeting of the G20 Finance Ministers and Central Bank Governors held in Moscow on 15-16 February 2013 expresses 'concern' about the delay in the convergence of accounting standards, and also calls for improvements in public sector reporting.

The Communiqué states the following:

We note with concern the delays in the convergence of accounting standards to date and ask the IASB and the FASB to finalize by the end of 2013 their work on key outstanding projects for achieving a single set of high-quality standards.

The meeting received a report from the International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) on the status and timeline of their remaining projects on converging their standards.  The report responds to a request from an earlier November 2012 meeting of the G20 Finance Ministers and Central Bank Governors where concern was also noted on the slow progress of convergence, with a particular focus on financial instruments impairment.

The IASB-FASB report was submitted to the meeting by the Financial Stability Board (FSB). The FSB's accompanying summary and analysis of the report, communicated in an FSB Chairman's letter entitled Progress of Financial Regulatory Reforms, is as follows:

The two Boards expect to make progress on the two key outstanding issues of impairment of loans, where they expect to complete their deliberations in 2013, and insurance contracts, where both Boards will be holding public consultations this year. Of these two outstanding issues, the need for convergence on a new forward-looking expected loss approach to provisioning is of most immediate concern for end-users and from a financial stability perspective. We note with concern the delays in convergence to date. We therefore recommend that the G20 ask the IASB and FASB to prepare by end-2013 a roadmap for converging to a common approach for impairment and for achieving the G20 objective of a single set of high quality accounting standards.

The Communiqué also deals with many other topics, many related to the response to the global financial crisis.  To this end, the Communiqué acknowledges the important role of public sector reporting in financial stability:

In pursuit of our goal of strengthening the public sector balance sheet, work is needed to better assess risks to public debt sustainability. This includes, inter alia, taking into account country-specific circumstances, looking at transparency and comparability of public sector reporting, and monitoring the impact of financial sector vulnerabilities on public debt.

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FEE publishes an analysis of combined and carve-out financial statements

15 Feb, 2013

The European Federation of Accountants (FEE) has published a paper ‘Combined and Carve-out Financial Statements Analysis of Common Practices’. The paper summarises the most common practices as well as the main issues and challenges related to the preparation of combined and carve-out financial statements in compliance with IFRS.

This Analysis of Common Practices paper builds upon the FEE Discussion Paper Combined Financial Statements (issued in April 2011) and takes into consideration the feedback it has received by respondents concerning relevant issues not initially covered by the April 2011 discussion paper. Also, the Analysis of Common Practices paper includes additional input from the FEE Capital Markets Working Party that was deemed necessary in developing a more comprehensive and useful document.

The FEE believes this paper will:

    1. be useful for stakeholders with an interest in the subject matter (preparers, users, practitioners, regulators, researchers and professional bodies);
    2. encourage the IASB to consider a project on combined financial statements in its future agenda (currently, the IASB does not have a specific IFRS standard regarding the preparation of combined financial statements);
    3. be informative for securities regulators such as the ESMA and other national entities; and
    4. encourage public debate.

The FEE is welcoming comments and will update the document as needed.

The press release and Analysis of Common Practices are available on the FEE website.

New European newsletter on the debate on Conceptual Framework

15 Feb, 2013

The European Financial Reporting Advisory Group (EFRAG), the French Autorité des Normes Comptables (ANC), the Accounting Standards Committee of Germany (ASCG), the Organismo Italiano di Contabilità (OIC) and the UK Financial Reporting Council (FRC) have published the first issue of their new newsletter ‘Keeping up with getting a better framework’ informing European constituents on the latest developments regarding the progress of the Conceptual Framework project with the IASB and other stakeholders.

In this newsletter, an update is given on sessions held at the IASB regarding its plan to issue a Discussion Paper in July 2013. Topics discussed were:

  • the reporting entity
  • measurement
  • liability and equity
  • definitions of assets and liabilities
  • presentations (including other comprehensive income)

As outlined in by project partners (EFRAG, ANC, ASCG, OIC and FRC) in their strategy on conceptual framework, specific newsletters will be issued as new developments become available. In addition, the project partners intend on issuing bulletin reports on specific issues during the course of the project in an effort to stimulate debate that may be used in discussions with the IASB.

The press release and newsletter are available on the EFRAG website.

IFRS Advisory Council membership update

15 Feb, 2013

The IFRS Foundation Trustees have announced the appointment of Roger Best, Daniel McMahon, and Markus Grund as new members of the IFRS Advisory Council.

Roger Best. Mr Best is a former Partner of Deloitte (Hong Kong). He will be representing the Hong Kong Institute of Certified Public Accountants.

Daniel McMahon. Mr McMahon is the current President and CEO of the Ordre des comptables professionnels agréés of Québec, Canada. He will be representing the Fédération Internationale des Experts-Comptables Francophones.

Markus Grund. Mr Grund is the Chief Accountant of the Federal Financial Supervisory Authority in Germany. He will be representing the International Association of Insurance Supervisors.

The new members will replace Carlson Tong, Benoit Onana and Richard Thorpe.

In accordance with the IFRS Foundation Constitution, Advisory Council members are appointed for an initial term of three years and, depending upon the need to maintain a proper balance and for continuity, may be asked to remain for a further period of up to three years. A maximum period of service of six years is permitted.

A press release and a full list of Advisory Council members are available on the IASB website.

10 years of IFRS: Reflections and expectations - Part two

15 Feb, 2013

The 'Australian Accounting Review' has recently published the second part of a special edition that marks the 10th anniversary of the International Accounting Standards Board (IASB) with research papers exploring the impact of IFRS on standard setting, financial reporting practice and accounting education from the perspectives of standard setters, practitioners and academics.

The special edition of the Australian Accounting Review, a leading practitioner-focused journal, appeared in two parts: The first part of the forum included a set of papers reflecting on the IASB's activities over the past 10 years, the relationship of the IASB with national standard setters, and two papers providing background and insights into the important question of if, and how, the United States may adopt IFRS.

The second part complements the first by exploring the adoption of IFRS in a developing economy, IFRS educational issues and initiatives, and practitioners’ reflections on the impact of IFRS together with suggestions for future research. Among the articles is a contribution co-authored by Nadia Albu, one of the outstanding young researchers chosen recently as scholars for the Deloitte IAAER Scholarship Programme.

 

Philip Brown and Ann Tarca review the growing body of research evaluating the widespread adoption of IFRS and link the findings of academic research with feedback from practitioners about whether the hoped-for benefits of adoption are being realised. In addition, they present comments from practitioners about IFRS research and they identify areas that may be usefully explored in future research.

Beverley Jackling, Bryan Howieson and Riccardo Natoli consider the challenges educators face in their teaching following adoption of IFRS. They discuss IFRS education in Australia, the US and Romania. The authors conclude that teaching resources, educational research and Continuing Professional Development activities related to a principles-based approach to teaching IFRS are necessary for educators to enrich the learning experience of students.

Nadia Albu and Cătălin Nicolae Albu discuss the adoption of IFRS in an emerging economy, Romania. They illustrate the effect of various contextual factors, some historical, on the process and outcomes of IFRS implementation. They conclude that adoption of IFRS can follow a different pattern in emerging economies compared to developed economies.

We are grateful to the editor of the special issue, Professor Ann Tarca, for pointing it out to us.

Feedback statement on the ESMA consultation paper on materiality

14 Feb, 2013

The European Securities and Markets Authority (ESMA) has published a feedback statement summarising the responses to its consultation paper 'Considerations of materiality in financial reporting'.

The apparent differing views regarding the practical application of the concept of materiality amongst preparers, auditors, possibly users of the financial reports and, in some instances, accounting enforcers led ESMA to publish the consultation paper in November 2011.

The feedback statement published today provides an overview of the views expressed by respondents to the questions in the consultation paper as well as the feedback from a public roundtable on materiality in financial reporting ESMA hosted in October 2012, and sets out ESMA’s response to the issues arising from the consultation process.

The findings of ESMA's consultation were:

  • A majority of respondents believe that the concept of materiality is generally well understood but that there is diversity in application.
  • Diversity in application was attributed to management judgement, differing perspectives and application challenges.
  • Responses included concerns about the length of disclosures, sometimes obscuring the entity’s financial position and performance.
  • There was agreement that if further guidance was required it should be addressed by the IASB, rather than by ESMA.
  • A number of respondents mentioned the need for greater consistency between accounting and auditing standards.
  • Most respondents highlighted the role of qualitative as well as quantitative aspects in materiality assessments.
  • A lists of items to be considered in materiality judgements was not considered desirable as it could not be exhaustive and is not in line with principle-based standards.
  • A majority of respondents agreed that the impact of all uncorrected misstatements should be considered when evaluating whether aggregate misstatements are material.
  • The majority of respondents were of the opinion that the principles to be applied in assessing materiality in interim and annual financial reports should be the same.

Based on this feedback, ESMA will provide the IASB and the IAASB with the outcome of the consultation and will encourage them to address the aspects of materiality that are seen to be problematic in practice.

Please click for access to the full feedback statement on the ESMA website.

The Bruce Column — Taking scholars to a global level

14 Feb, 2013

A new initiative seeks to bring young scholars to the global table and enhance understanding. Robert Bruce, our regular columnist, takes a look at how it will work and the benefits it should create.

No one doubts that better understanding at a global level makes life easier, more effective, and more productive. And this works just as much in the field of accounting as any other. The profession, business, and all its support systems are inexorably becoming more global. The example of the global growth and spread of International Financial Reporting Standards, (IFRS), for example, is there for all to see. The world of academia, the teaching and research, needs to be up there also.

And that is what a new initiative seeks to do. The International Association for Accounting Education and Research, (IAAER), has got together with accounting firm Deloitte to create a scholarship programme which will start to break down the barriers. The idea is to initially take five associate professors from around the world and provide them with the means to enable them to gain a broader perspective.

The Deloitte IAAER Scholars are drawn from all around the world, Brazil, Indonesia, Poland, Romania and South Africa, and the idea is that their bursaries will enable them to increase their exposure to internationally recognised accounting scholars, best practices in accounting and business education and research, and a global peer network. In the words of Professor Donna Street, the director of research and educational activities for the IAAER: ‘We want young scholars who can network with international established scholars, policy makers and standard-setters, to help them develop an international way of thinking. Often’, she says, ‘people don’t understand that we all face the same or similar problems. We want to encourage the emerging scholars to think globally, not locally, and learn that we are all in this together’.

And the scholars themselves see not just greater contact with ideas and people around the world but also positive benefits back home. ‘My participation can contribute to the internationalization of the Brazilian accounting profession, which will benefit our capital market in the long run’, says Fernando Murcia of the University of Sao Paulo. ‘Learning first hand from leading accounting scholars about the new frontiers of accounting standards, in particular IFRS, will have a great impact on my country’ says Supriyadi, an associate professor at the Gadjah Mada University in Indonesia. ‘Indonesia has just completed it s first year of IFRS implementation, and as the standards continue to develop it is important that we provide considered input into this process’.

One of the most useful parts of the program is that each Scholar will be assigned a mentor of global reputation to enhance the experience. People like Mary Barth of Stanford University who was previously a highly-respected Board member at the IASB is participating, for example. ‘This really breaks down the door’, says Professor Street. ‘Mentors will be so important’.

The programme will also go some way to closing the divide which often exists between the academic community and the accounting profession. It will have the effect of influencing and changing curricula. ‘The greater the connection with real-world practice and practitioners the more that is being taught and researched can be enriched’, says Professor Street. ‘Being in regular contact with the practice world will help scholars understand how they can get resources, and then utilize that experience and knowledge for their teaching purposes’.

It is a small start but there is no doubt that opening doors for people all around the world brings about change

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