The objective of the exposure draft is to describe the discounted cash flow (DCF) method and its application for the valuation of businesses and real property interests. It describes best practice in performing and reporting valuations using the DCF method. It also considers the different inputs that are appropriate for valuations where market value is the objective and those where investment value is required.

The exposure draft concludes:

• the DCF method can provide an appropriate measure for either market value or investment value if properly applied
• the DCF method may be more applicable than other methods if the asset or business is experiencing significant growth, has yet to reach a mature level of operations, or where the asset will have a defined life such as the case with assets and businesses in the energy and natural resource sector
• if a minority interest in a business is being valued (as can arise under IFRS 3 Business Combinations (2008)), the possible applicability of a discount to the pro-rata value per share to reflect the lack of control and/or liquidity should be considered, if not already taken into account in the cash flows. In certain circumstances a Dividend Discount Model (DDM), which is a variant of the DCF method, may be a more applicable method to value a minority interest in an asset or business.

Comments on the exposure draft close on 30 April 2011. Click for access to the exposure draft (link to IVSC website).

Deloitte (Colombia) has published IFRS: una actualización para juntas y comités de auditora, the Spanish translation of IFRS: An update for boards and audit committees. Deloitte (Canada) has published L'IASB publie une directive sur les commentaires de la direction, the French translation of IFRS in Focus: IASB issues Practice Statement on management commentary. Deloitte (Russia) has published МСФО в кармане 2010, the Russian translation of IFRS in Your Pocket 2010.

Click for:

• IFRIC Review (PDF 67k)
• IFRS: una actualización para juntas y comités de auditora (IFRS: An update for boards and audit committees in Spanish, PDF 595k)
• L'IASB publie une directive sur les commentaires de la direction (IFRS in Focus: IASB issues Practice Statement on management commentary in French, 54k)
• МСФО в кармане 2010 (IFRS in Your Pocket 2010 in Russian, 2,097k)

Tuesday, 18 January 2011

• Insurance contracts — Comment letter analysis
• Financial instruments: impairment

Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers for the entire meeting.

• 17 January 2011 — Stephen Cooper: Reforming hedge accounting

All Investor Perspectives are archived on the IASB's website.

An interactive webcast on the proposed 2011 taxonomy will be held at 9:00am (London time) on Thursday, 27 January 2010, and repeated at 3:00pm (London time) on the same day. Click for registration information (link to IFRS Foundation website).

The exposure draft IFRS Taxonomy 2011 is open for comment until 18 March 2011.

Click for:

• Normas Internacionais de Relatório Financeiro - Modelo de demonstrações financeiras para 2010 (2010 Model financial statements in Portuguese, PDF 1,416k).
• Checklist de Apresentação e Divulgação IFRS 2010 (IFRS Presentation and Disclosure Checklist for 2010 in Portuguese, PDF 1,629k).
• IFRS Checkliste zu Ausweis- und Angabevorschriften 2010 (IFRS Presentation and Disclosure Checklist for 2010 in German, PDF 2,808k).

The EBA Board of Supervisors selected Andrea Enria as the EBA Chairperson, subject to confirmation by the European Parliament. Mr Enria is currently the head of the Supervisory Regulations and Policies Department at the Bank of Italy. The Board of Supervisors also appointed Thomas Huertas as the EBA Alternate Chairperson. Mr Huertas was Vice-Chairman of the EBA's predecessor CEBS and is currently Banking Sector Director at the UK FSA.

The EIOPA Board of Supervisors has selected Gabriel Bernardino to become the first Chairperson. Mr. Bernardino is currently the Director General of the Directorate for Development and Institutional Relations at the Instituto de Seguros de Portugal (ISP). His nomination is subject to confirmation by the European Parliament. Mr. Bernardino represented EIOPA's predecessor, CEIOPS, as Chairman until December 2010. Additionally, the Board of Supervisors elected Victor Rod, Director of the Commissariat aux Assurances, Luxembourg, to be EIOPA's Alternate Chairperson.

EBA and EIOPA have both also announced a new round of stress tests.

Click for:

• EBA omnibus press release (link to EBA website)
• EIOPA press releases:
  • EIOPA Elects Its First Management Board (PDF 115k, link to EIOPA website)
  • Gabriel Bernardino Selected to be EIOPA's First Chairperson (PDF 106k, link to EIOPA website)
  • EIOPA to Launch Second Europe-Wide Insurance Stress Test (PDF 109k, link to EIOPA website)
• Further news on the new European supervisory structure on our IFRSs in Europe pages

The IFRS Foundation has concluded the pilot initiative that it launched in April 2010 to work with US-listed foreign companies to produce IFRS financial reports in eXtensible Business Reporting Language (XBRL) that are compliant with United States Securities and Exchange Commission (SEC) requirements.

The SEC issued a ruling in December 2008 requiring all US-listed foreign private issuers to submit their IFRS financial reports, including their periodic reports in XBRL from 15 June 2011.

12 companies voluntarily used the IFRS Taxonomy to produce 20-F filings in XBRL format that could be accepted by the US SEC EDGAR filing system. 'Level 1' XBRL tagging was applied to the filings, i.e. all items in the primary financial statements were tagged while notes were tagged using a single text block.

The outcomes of the pilot initiative revealed some interesting outcomes:

• Between 6 and 60 hours was required to complete the first stage of the process, which was the mapping of the primary financial statement line items to IFRS Taxonomy items
• Many participants found that they needed to create additional taxonomy items (i.e. IFRS Taxonomy extensions) to reflect common-practice concepts for their 20-F filings. The need for these extensions arose largely from IFRS requirements and the flexibility that IFRS allows for presentation and aggregation. The Foundation acknowledges this will need to be addressed, with an analysis to be undertaken of concepts that are not in the IFRS Taxonomy but that are commonly reported by commercial and industrial companies

The results of the pilot and further analysis will be used to make amendments to the IFRS Taxonomy. Further field tests are expected with financial institutions and insurers, and on detailed note tagging.

Click for:

• IFRS Foundation press release (link to IFRS Foundation website)
• Our XBRL page

The IASB and the FASB originally published separate proposals on credit impairment of financial assets. Although both boards proposed moving to a more forward-looking approach to accounting for impairment they proposed different models. Following joint discussion of the responses each board received on its original proposals, and requests by the Group of 20 (G20) Leaders, the Financial Stability Board, the Basel Committee on Banking Supervision and others to achieve convergence in this area, the boards expect to propose a common approach that incorporates elements of each of their original models.

The boards will propose an impairment model based on accounting for expected losses. This approach provides a more forward looking approach to accounting for credit losses.

Click for:

• IASB announcement (link to IASB website)
• Our Financial instruments – Impairment page providing a comprehensive summary of the project, including recent joint discussions