The Communiqué goes on to say:

We encourage the International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) to complete work promptly, and report to our next meeting.

The meeting also received a report from the Financial Stability Board (FSB), entitled Progress on Financial Regulatory Reforms, which includes a summary on accounting convergence.  The report discusses the progress made by the IASB and FASB, noting the recent moves towards closer alignment in the area of classification and measurement of financial instruments.  However, the report also laments the lack of convergence on financial instrument impairment.

The report further explains the FSB's concerns as follows:

Sound expected loss provisioning for financial institutions is critically important to financial stability.  Final IASB and FASB standards should result in improved provisioning practices that incorporate a broader range of available credit information than current practices, so as to recognise credit losses in loan portfolios at an earlier stage.  The FSB is concerned that the two boards have not developed a common model in this important area, and encourages them to renew their efforts to converge.

The FSB report also reiterates the importance of the overall IASB-FASB convergence process and requests a report from the boards by the end of June 2013.

Both the communiqué and FSB report cover many other topics related to improving the resilience of the financial system in response to the global financial crisis.  The communiqué also includes a commitment to "voluntarily self-report again in 2013 on our efforts to incorporate green growth and sustainable development policies into structural reform agendas, taking into account the outcome of the UN Conference on Sustainable Development (Rio+20)".

Click for:

• the full text of the Communiqué of Ministers of Finance and Central Bank Governors of the G20 (link to G20 website)
• FSB report to the G20 (link to FSB website).

ISAR was established in 1982 and is a forum dedicated to strengthening corporate reporting, especially in developing countries.  It meets annually to build on previous sessions and discuss topical issues.  This year's session saw over 300 attendees representing government authorities, regulators, standard-setters and academia.

The Deputy Secretary-General of UNCTAD, Petko Draganov, opened the meeting by noting that good reporting is a "key foundation of transparent markets and a healthy economy" and depends on "the wider infrastructure that supports, guides and facilitates" it.  The speech went on to comment on global developments: "one of the defining characteristics of the past two decades has been the proliferation of international standards and codes in accounting, auditing, professional training, and on the disclosure of environmental, social and governance information".

In response to the fact that "accounting infrastructure is a complex set of institutions and regulatory requirements",  Mr Draganov outlined the 'accounting development toolkit' as a practical response to the needs of member States.  The toolkit is designed to addresses the full range of accounting and reporting issues in a systematic way, and sets priorities for policy makers in strengthening and further developing their accounting infrastructure.

Nine countries have pilot-tested the toolkit: Brazil, China, Côte d’Ivoire, Croatia, Mexico, South Africa, the Netherlands, Russia and Vietnam, and feedback during the session was largely positive.  Feedback from the pilot programme will be use to further improve the toolkit for use by member states.

Mr Draganov also discussed the important role that accounting and reporting play in addressing many environmental, social and corporate governance issues, noting "[w]hat we measure affects what we do, and if our measurement is flawed, our decisions will be ill informed".  Mr Draganov called on member states and others to support the paragraph 47 of the outcome document from the Rio+20 United Nations Conference on Sustainable Development which encourages companies to integrate sustainability information into their reporting cycle.

Michael Prada, Chairman of the IFRS Foundation Trustees, gave a key note speech at the session, which outlined the importance of global accounting standards, provided a summary of some of the key achievements of the International Accounting Standards Board (IASB), and discussed the process of strengthening the institutional arrangements underpinning the IFRS Foundation.

Mr Prada went on to discuss the regulatory and institutional arrangements around the implementation of IFRS, noting the importance of global consistency in application to avoid "individual flavours" of IFRS but also stating that the "IASB does not have a mandate or the resources to enforce and monitor application of the standards that it creates". To his mind this is a role for governments and regulators in individual jurisdictions.

However, Mr Prada acknowledged his belief that IOSCO can "play a leading role in monitoring the implementation of global accounting standards".  He  believes this role has been enhanced through IOSCO's recent restructure, and discussed the recent moves by the IASB and IOSCO to co-operate more closely, which at a technical level may involve IOSCO's new policy committee on accounting, auditing and financial reporting.

Mr Prada also discussed the Emerging Economies Group (EEG), the objectives and use of the IFRS for SMEs, and the possible adoption of IFRS in the United States where he reiterated his comments that it was "clear from the analysis that there are no insurmountable issues that stand in the way of the US moving to IFRS".

Numerous other speakers from various organisations also participated in the conference.  The agenda, papers and other information from the conference are available on the UNCTAD website.

Click for press release (link to UNCTAD website).

The special edition of the Australian Accounting Review, a leading practitioner-focused journal, appears in two parts: in the September and December 2012 issues.

The first part of the forum includes 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.

We are grateful to the editor of this special issue, Professor Ann Tarca, for pointing it out to us. The second part of the forum, to be contained in the December issue, will complement 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.

The role of the ASAF is create a more streamlined and formal representation of national and regional issues to be incorporated into the due process of a standard-setting workflow. The IFRS Foundation would like participating national standard setters to formally commit to:

1. supporting the IFRS Foundation in the development of a single set of high quality globally accepted accounting standards,
2. encouraging input from jurisdictions/regions during the consultation process,
3. supporting consistent application of IFRSs by jurisdiction and in the region,
4. adopting the use of IFRSs as issued by the IASB,
5. having the resources and capabilities to have an active role in the work of the ASAF.

A Memorandum of Understanding is to be signed by the members of the ASAF and the IASB to formalise these commitments.

The ASAF will be comprised of 12 members, whom will have a term of two years. Composition of the members will be based on achieving geographical balance:

• Africa: 1 seat
• Americas: 3 seats
• Asia-Oceania: 3 seats
• Europe (including non-EU): 3 seats
• World at large: 2 seats

The ASAF will meet four times a year with the representatives of the IASB to discuss relevant issues, with one of the meetings being combined with the annual conference for WSS.

The IFRS Foundation believes some of the advantages of the creation of the ASAF are:

• The IASB has a single contact instead of many bilateral relationships.
• The ASAF has a larger forum than the current bilateral relations, which will provide the IASB a wider access to information from jurisdictions and further improve the quality of the final standards.
• One of the key demands of the strategy review by the trustee is satisfied.
• The IASB standards are supported by an even larger group of users, promoting their further adoption and uniform application.
• The establishment of the ASAF requires no changes to the structure of the IFRS Foundation.
• The ASAF could be a useful complement to the International Forum of the standard setter in the field of accounting (International Forum of Accounting Standard Setters, IFASS).
  
• The ASAF would encourage multilateral discussions.

The risk of the creation of the ASAF are:

• The standard-setting process could drag on.
• It would be difficult to find a composition of the ASAF, which will satisfy all interested parties. This could mean that national standard setters, which are not represented in the ASAF develop, no sense of belonging to the body.
• There is a risk that the group becomes too large and immobile.
• It might need for additional staff and resources arise.
• It might be difficult to control the discussion and to reach agreement.
  

Comments are due by 17 December 2012.

Click for (links to IASB website):

• IASB press release
• Invitation to Comment: Proposal to Establish an Accounting Standards Advisory Forum

The content of the education sessions will now be incorporated into the IASB meeting sessions scheduled for the week beginning 19 November 2012.

The amendments define an 'investment entity' as an entity that:

• obtains funds from one or more investor for the purpose of providing those investor(s) with investment management services
• commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both, and
• measures and evaluates the performance of substantially all of its investments on a fair value basis.

An entity is required to consider all facts and circumstances when assessing whether it is an investment entity, including its purpose and design.  The amendments provide that an investment entity should have the following typical characteristics:

• more than one investment
• more than one investor
• investors that are not related to the entity or other members of the group containing the entity
• ownership interests, typically in the form of equity or similar interests (e.g. partnership interests), to which proportionate shares of the net assets of the investment entity are attributed.

If an entity does not meet one or more of these typical characteristics, it is required to justify and disclose how its activities continue to be consistent with that of an investment entity. Additional guidance is provided on detailed specifics in determining whether an entity is an investment entity, such as the impacts of being involved in the day-to-day management of an investee or providing investment-related services to third parties, the nature of the entity, and how the entity measures and manages its financial liabilities.

The types of entities which may meet the definition of an investment entity may include private equity organisations, venture capital organisations, pension funds, sovereign wealth funds and other investment funds.

Where an entity meets the definition of an investment entity, it is not permitted to consolidate its subsidiaries and is required to measure its investments in those subsidiaries at fair value through profit or loss.   However, an investment entity is still required to consolidate a subsidiary where that subsidiary provides services that relate to the investment entity’s investment activities.

The amendments also:

• introduce new disclosure requirements related to investment entities in IFRS 12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial Statements
• provide an scope exemption for investment entities from IFRS 3 Business Combinations (meaning such entities do not need to apply business combination accounting to the acquisition of subsidiaries)
• include various consequential amendments to numerous standards.

The amendments do not introduce any new accounting requirements for investments in associates or joint ventures.  IAS 28 Investments in Associates and Joint Ventures already permits a venture capital organisation, mutual funds, unit trusts and similar entities including investment-linked insurance funds to elect to measure investments in associates and joint ventures at fair value through profit or loss in accordance with IFRS 9 or IAS 39, and the IASB expects that investment entities would apply these requirements.

The new requirements are applicable, on a modified retrospective basis, to annual periods beginning on or after 1 January 2014, a year later than IFRS 10 which is applicable to annual periods beginning on or after 1 January 2013. The amendments can be applied early, and accordingly entities can elect to apply them from when they first apply IFRS 10, avoiding the need for investment entities to consolidate subsidiaries only in the first year of applying IFRS 10.

Click for:

• Press release (link to IASB website)
• IFRS in Focus newsletter on the amendments
• Our project page on the amendments.

The presentation will be delivered by Patricia McConnell, Member of the IASB, and Sarah Geisman, Technical Manager at the IASB. The presentation and the question and answer sessions will be recorded and made available on the project website.

For the convenience of participants in different time zones two slots have been scheduled:

• 09.00 (London time),
• 15.00 (London time).

Registration for the different slots is available through the IASB's website.

The EDTF was formed in May 2012 at the initiative of the FSB and had wide geographic representation with participants from asset management firms, investors and analysts, global banks, credit rating agencies and external auditors.  The task force also liaised with regulators and standard setters in undertaking its work.

The task force established six work streams reflecting banks’ primary risk areas, being: risk governance and risk management strategies/business model, capital adequacy and risk-weighted assets, liquidity and funding, market risk,  credit risk, and other risks.  Each work stream analysed current disclosures in its risk area by reviewing a sample of banks’ recent annual and interim reports, 'Pillar 3' reports (under Basel) and other publicly available information,  such as media releases and presentations to investors, and developed recommendations for enhancing disclosures for that risk area.  The recommendations from each work stream were then analysed by the task force as a whole and discussed with various international and other bodies.

The seven fundamental principles for enhanced risk disclosures identified in the report are:

1. Disclosures should be clear, balanced and understandable
2. Disclosures should be comprehensive and include all of the bank’s key activities and risks.
3. Disclosures should present relevant information
4. Disclosures should reflect how the bank manages its risks
5. Disclosures should be consistent over time
6. Disclosures should be comparable among banks
7. Disclosures should be provided on a timely basis.

Each of the principles is further elucidated through the use of guidelines and examples of how it should be met.  The report then outlines 32 specific recommendations for enhancing risk disclosures based on the application of the principles, providing general recommendations and those for each of the work streams. These recommendations include both broad objectives, such as presenting all risk information in one place and providing narrative discussion about the nature of risks, and detailed specific requirements such as flow statements of each tier of regulatory capital and risk-weighted assets and a tabulated summary of credit risk in the banking book.

The report is agnostic on where the disclosures should be made, noting "banks should retain flexibility in what  they choose to disclose in their annual reports and other filings".  Reference is made to existing requirements, which in the case of IFRS, include IFRS 7 Financial Instruments: Disclosures and IFRS 13 Fair Value Measurement.

The report notes that the EDTF believes that many of the recommendations can be adopted in 2012 or 2013, particularly where existing disclosure simply needs to be presented differently or where information is already available.  Other recommendations may require system changes or require regulatory change and may take longer to implement.

Click for press release (link to FSB website).  Deloitte participated in the EDTF and has endorsed the recommendations in the report.

On 2 November 2012, the IASB published a press release welcoming the report saying that it "complements our own efforts to enhance transparency and the usefulness and comparability of financial statements". The IASB has also announced that it will consider the EDTF recommendations as it develops new financial reporting disclosure principles in the conceptual framework project. Click for access to the press release on the IASB website.