News

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Proposed revisions to Code of Ethics

29 Feb, 2012

The International Ethics Standards Board for Accountants (IESBA) has released proposed changes to the definition of "engagement team" in the IESBA 'Code of Ethics for Professional Accountants' (the Code) to avoid any perceived incompatibility between the Code and the International Standards on Auditing (ISAs).

The proposals address comments received by the International Auditing and Assurance Standards Board (IAASB) on its Exposure Draft (ED) on ISA 610 Using the Work of Internal Auditors. A number of respondents to that ED pointed out the perceived inconsistency between the independence requirements for external auditors under the Code and the use of internal auditors to perform external audit procedures. The proposed IESBA changes clarify that individuals in an internal audit function providing direct assistance to auditors do not meet the definition of the engagement team under the Code.

The proposals are open for comment until 31 May 2012. Click for IESBA announcement (link to IFAC website).

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Notes from the February IASB meeting

28 Feb, 2012

The IASB is holding its regular monthly meeting on 27 February – 2 March 2012 in London, part of it a joint meeting with the FASB. We have posted Deloitte observer notes from the impairment session held on Tuesday.

Click through for direct access to the notes:

Tuesday, 28 February 2012

Notes from the remaining sessions on Monday (insurance contracts) and Tuesday (insurance contracts and classification and measurement of financial instruments) will be posted soon.

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

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IVSC to tackle valuation of derivative instruments

28 Feb, 2012

The International Valuation Standards Council (IVSC) has launched a project on the valuation of financial derivatives.

The types of derivative instrument that will be addressed by the project are equity derivatives, fixed income derivatives, credit derivatives, foreign exchange derivatives, commodity derivatives and hybrid derivatives. The intention is to examine the factors that influence the value of these instruments and how these are reflected in the models most commonly used for valuing them.

The IVSC Standards Board has formed an expert working group comprising of representatives of some of the major banks including UBS, Deutsche Bank and HSBC, independent consultants and buy side investors to advise it on the project.

An exposure draft is anticipated in the (Northern) autumn of 2012. Click for more information (link to IVSC website).

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EFRAG report on implementation of IFRS 10, IFRS 11 and IFRS 12

27 Feb, 2012

The EFRAG has issued a feedback report regarding field-tests on implementing IFRS 10, IFRS 11 and related disclosures in IFRS 12.

The field-tests were conducted by members of EFRAG and the European National Standards Setters. The tests were conducted in two separate questionnaires which gathered feedback from participates on issues arising from implementation of the new requirements and the estimate of expected costs and benefits preparers experienced.

Participants described certain benefits related to the implementation of IFRS 10 and 11, including (1) IFRS 10 provided "a single basis for consolidation and a uniform approach for all types of entities including 'special purpose entities'" and (2) IFRS 11 would eliminate "the existing accounting option for interests in jointly controlled entities."

Click for:

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AAOIFI issues two drafts on Islamic accounting

24 Feb, 2012

The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) is an Islamic international autonomous non-for-profit corporate body that prepares accounting, auditing, governance, ethics and Sharia'a standards for Islamic financial institutions and the industry. Recently, the AAOIFI has published an exposure draft (ED) and a consultation paper.

The ED topic is about the proposed standard for a new investment in real estate. The consultation paper discusses the revision of two existing standards for investment accounts. Islamic financial transactions are particularly influenced by the consideration of the interest prohibition; conventional accounting standards are therefore sometimes difficult to apply to those financial transactions. Comments for both drafts are due 8 April 2012.

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IFRS Foundation appoints Ronald Arculli as a Trustee

23 Feb, 2012

The Trustees of the IFRS Foundation have announced the appointment of Ronald Arculli as a Trustee.

Mr Arculli currently serves as the chairman of Hong Kong Exchanges and Clearing Limited, which operate the Hong Kong Stock Exchange. In addition, he is a member of the Hong Kong government's executive council.

Mr Arculli term is effective immediately and will end on 31 December 2014. He is allowed to renew his term once.

Click for IFRS foundation press release (link to IASB website).

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IASB and FASB to host webcast on revised revenue exposure draft

23 Feb, 2012

A one-hour webcast by the IASB and the FASB will be held on 29 February 2012 to discuss the main issues from the outreach on the revised exposure draft Revenue from Contracts with Customers (November 2011).

Details of the webcast are provided below:

Topic: Revised exposure draft Revenue from Contracts with Customers (November 2011)
Date and time: Wednesday, 29 February 2012 16:00 GMT
More information and registration: Click Here

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Latest batch of editorial corrections to IFRSs released by the IASB

22 Feb, 2012

The IASB has posted to its website a new batch of 'Editorial Corrections to IFRSs.'

This batch makes editorial corrections and changes to the Bound Volume (Red Book) 2011, Bound Volume (Education) 2011, Bound Volume (Education) 2010, Bound Volume (Blue Book) 2012, Bound Volume (Blue Book) 2011, IFRS 9 Financial Instruments (issued November 2009), IFRS 10 Consolidated Financial Statements (issued May 2011), IFRS 12 Disclosure of Interests in Other Entities (issued May 2011), IAS 19 Employee Benefits (issued June 2011), Disclosures — Transfers of Financial Assets (issued October 2010), Presentation of Items of Other Comprehensive Income (issued June 2011), and Mandatory Effective Date of IFRS 9 and Transition Disclosures (issued December 2011).

Access the editorial corrections on the IASB's website.

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The Bruce Column — Independence, eligibility, and the IASB

21 Feb, 2012

Independence and accountability have always been the big issues for the IASB and the IFRS Foundation. Now the Foundation’s Monitoring Board has produced a report which deals with the most sensitive issues. Robert Bruce, our regular resident columnist takes a look.

The question which has faced the IASB from its outset is how to square the circle of independence and accountability. The answer has always been to show more rigorous governance. The better the governance the less wriggle-room there will be for critics. And the latest in these efforts is the report on the review of the IFRS Foundation’s governance by its Monitoring Board (the securities markets authorities responsible for monitoring the activities of the IFRS Foundation).

The process itself was rigorous. Its aim was to assess whether the current governance arrangements promoted  ‘the primary mission of the International Accounting Standards Board, (IASB), of developing high quality, understandable, enforceable and globally accepted accounting standards, and provide for both the accountability and independence of the IASB’.  To achieve this, a series of proposals for governance improvements were published last year, a full consultation period ensued, responses were considered, and roundtables were held around the world.

One of the more obvious concerns was that the crossroads where independence, ownership, influence and other issues could collide should be properly defined. For example, the elusive goal of ‘financial stability’ which motivates prudential supervisors should not be a motivation, necessarily, of standard setters.

All this has been clarified in the report. ‘While there were some strong calls for the involvement of prudential authorities in the monitoring process’, says the report, ‘a larger number of respondents cautioned that financial stability should not be regarded as a primary objective of financial reporting, and that inputs from such standpoint should be made to the standard-setter through other existing channels. Considering the diversity of views and also the possible undesirable effect any changes to the current set-up would have on stakeholders’ perceptions, the Monitoring Board concluded that the status quo should be maintained’.

Overall the report is governed by a simple statement. The aim is ‘to increase understanding and introduce greater clarity’, and a whole variety of measures are introduced to achieve just that. But there is one which contains a degree of political diplomacy. And this is the membership of the Monitoring Board. This will continue on the same basis. ‘Full membership of the Monitoring Board will continue to be confined to capital markets authorities, defined as those authorities responsible for setting the form and content of financial reporting for use in the capital markets in respective jurisdictions’.  And membership is to be expanded from the current five seats to eleven, by including additional capital markets authorities, ‘primarily from major emerging markets’. . But they are also to ‘refine the existing membership criterion’. At present members need to have a strong commitment to: ‘supporting the development of high quality international accounting standards’. But now that commitment has been refined ‘to call for demonstration of this commitment through domestic use of IFRSs in the jurisdiction’s capital market and participation by the jurisdiction in Foundation funding. To become and/or remain a member, all permanent members must meet that criterion, and will be assessed for their eligibility on a regular basis’.

This answers the persistent gripe of countries around the world which see countries participating in the IFRS decision-making process while not using IFRS. Now if you want a seat at the table you have to be in the game as well. So what of the prominent current absentees from the actual playing-field, like Japan and the US, who hold two of the current five seats? Well, like so much in accounting, it is all about the timing.

The report, with a degree of deftness, makes this clear. ‘The first assessment of eligibility will start in early 2013’, it says. And, ‘during early 2012, the Monitoring Board intends to develop and document in its Charter a definition for the criterion “use of IFRSs”’. In other words the development of the criteria and the first assessment will not begin until after the point, hopefully, when the SEC makes it reasonably clear what happens with IFRS in the US. And Japan has long been expected to follow suit. The report itself was, after all, produced by the IOSCO secretariat in Japan.

This report is a clever and helpful piece of work. And by putting independence, understanding and clarity at its centre it has shown that its heart is in the right place.

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IASB releases agenda for its February meeting

21 Feb, 2012

The IASB will be holding its February 2012 meeting on 27 February – 2 March 2012, much of it a joint meeting with the FASB.

You can access the agenda on our February 2012 IASB meeting page.  We will also post Deloitte observer notes on this page as they are available.

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