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2012

IVSC exposes proposed guidance on valuation uncertainty, forest valuation

Nov 19, 2012

The International Valuation Standards Council (IVSC) has released two exposure drafts (EDs) of proposed "Technical Information Papers" on valuation uncertainty and the valuation of forests.

The IVSC's International Valuation Standards (IVS), which were last comprehensively updated in July 2011, contain the principles of valuation rather than prescriptive requirements.

The IVSC Technical Information Papers (TIPs) are designed to provide technical guidance for valuation professionals on generally accepted best practice, but do not provide valuation training or instruction or direct to a particular approach or method that should or should not be used in any specific situation.

Valuation uncertainty

The exposure draft on valuation uncertainty looks at how valuation uncertainty can be identified, explained and disclosed in a way that is informative to those relying on valuations, and responds to calls from the G20 and financial regulators around the world for improved standards of transparency and disclosure of valuation uncertainty factors.

The ED proposes to define "valuation uncertainty" as follows:

The possibility that the estimated value may differ from the price that could be obtained in a transfer of the same asset or liability taking place at the same time under the same terms and within the same market environment.

The ED also notes that material uncertainty can be caused by various factors, including:

  • Market uncertainty — Arises when a market is disrupted at the valuation date by current or very recent events such as sudden economic or political crises.
  • Model uncertainty — Arises from characteristics of either the valuation model, or method, used.
  • Input uncertainty — Arises when there are a number of equally reasonable or feasible inputs or assumptions that can be used from the degree of veracity that can be attached to the data inputs used in the valuation and their impact on the outcome.

The ED makes a clear distinction between market risk, which is both generally understood and acknowledged by investors and reflected in the pricing, and the uncertainty caused by disruption or dislocation in the market place.

The ED also discusses many IFRS concepts and their interaction with IVS, including the Level 1/2/3 hierarchy in IFRS 13, Fair Value Measurement.

The ED notes a simplistic expression of valuation uncertainty might be to provide a range within which the value is considered to fall, but concludes this "is not recommended" for various reasons, including the use of amounts usually requires a single valuation figure, the possibility of unrealistic extremes of a range, and the possibility that users may assume all outcomes within the range are equally likely of occurring, or assume there is no possibility of a valuation falling outside a range.

Valuation of forests

The second ED addresses the way in which valuations of forestry assets are prepared and presented, particularly in light of IAS 41, Agriculture, which requires the fair value of the biological asset (tree crop) to be estimated.

The ED:

  • Proposes that all three approaches described in the IVS Framework (market approach, income approach, and cost approach) are applicable to the valuation of forests and includes some of the strengths and weaknesses of methods under each approach in the context of valuing forestry interests.
  • Points out significant diversity in the length of the explicit forecast period that is used when using a discounted cash flow model to value a forestry interest and seeks constituent feedback on this issue.
  • Discusses the discount rate used in a discounted cash flow model noting "evidence that in some parts of the world inappropriate reliance is being based on models such as the Capital Asset Pricing Model or the Weighted Average Cost of Capital."
  • Notes the use of the cost approach is mostly applicable to recently planted forests because the physical and possible economic changes that occur as a forest matures mean that other methods become more reliable.
  • Explores difficulties with one suggested valuation approach in IAS 41 that the value of the “raw land” be deducted from the value of the combined asset, with the residual representing the value of the biological asset, and discusses the specific question of how to measure a biological asset when the "highest and best use" of the land is not forestry (this issue was also recently considered by the IFRS Interpretations Committee).

Comment period

Both EDs are open for comment until February 15, 2013. Click for (links to the IVSC's Web site):

New editorial corrections from the IASB

Nov 19, 2012

The IASB has posted a new batch of editorial corrections ahead of the publication of the IFRS "Blue Book" expected in the coming weeks.

This batch makes corrections to:

  • Corrections to stand-alone standards:
    • IFRS 10, Consolidated Financial Statements (issued May 2011).
    • Disclosures — Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7) (issued December 2011).
    • Annual Improvements 2009–2011 Cycle (issued May 2012).
  • Corrections to IFRS 2012 (Blue Book) and IFRS 2012 (Red Book), A Guide through IFRS 2012.
  • Corrections to the Glossary (issued in IFRS 2012 (Red Book) and A Guide through IFRS 2012).

In accordance with its newly established procedures, the IASB's editorial corrections are issued three times a year — before the issue of IFRS (Blue Book), IFRS (Red Book), and A Guide through IFRS. The IASB recently announced the IFRS 2012 (Blue Book) will be published in December 2012.

Access the editorial corrections on the IASB's Web site.

ACCA report on "IFRS in the U.S."

Nov 16, 2012

The Association of Chartered Certified Accountants (ACCA) has released a research report "IFRS in the US: An investor's perspective" that outlines the outcome of a survey of nearly 500 U.S.-based investors (professional investment managers, asset managers, and fund managers), which asked whether they believe the SEC will eventually adopt IFRSs. The results indicate that 57 percent of investors surveyed expect the adoption of IFRSs in the United States to occur "one day," with the long-term benefits outweighing the costs.

According to Sue Almond, technical director at ACCA, "More investors believe the eventual adoption of IFRS in the USA will result in a net benefit to the American economy than not. In ACCA's view, US adoption of IFRS would give a tremendous boost to the cause of globally comparable financial reporting, and more importantly, the US and world economies. ACCA has repeatedly called for putting investors at the heart of the standard-setting process globally, and this is why we commissioned this research, to understand what American investors thought about the future of IFRS in the USA."

IASB Chairman Hans Hoogervorst also weighed in with his thoughts on the ACCA results: "The ACCA's findings are consistent with anecdotal feedback we hear from the US investor community. They also lend further credence to the argument that the USA is well prepared for a successful transition to IFRS."

The report also identified several key findings that investors have noted in regards to the adoption of IFRSs:

  • The most informed investors polled believe it will take U.S. corporates some four and a half years to be ready for IFRSs. They ask that convergence plans aim for full convergence, allowing adequate time for investors and industry to adjust.
  • Awareness of IFRSs among U.S.-based investors is modest: when asked, only 34 percent of investors felt able to cite specific differences between U.S. GAAP and IFRSs.
  • However, 38 percent of investors said they were comfortable comparing statements prepared under IFRSs with statements prepared under U.S. GAAP.
  • Investors saw marginal differences between IFRSs and U.S. GAAP, with 22 percent of investors claiming that the quality of disclosures under IFRSs is higher, versus 25 percent who favored U.S. GAAP.
  • Among investors with a solid understanding of IFRSs, however, the balance shifts from 40 percent to 21 percent in favor of IFRSs.

Further, the report identified the main concerns that U.S. investors have toward a move to IFRSs. According to the report, these concerns are:

  • Will IFRS adoption lead to reduced complexity for U.S. corporates?
  • Is IFRS adoption going to lead to a dangerous loss of U.S. influence over the standard-setting process?
  • Are U.S. corporates likely to see cost savings and synergies emerging as a result of IFRS adoption?
  • Will IFRS adoption make it easier to compare the performance of U.S. corporates with that of other companies overseas?
  • Are U.S. auditors likely to second-guess management more frequently as a result of IFRS adoption?

Click to view the ACCA's press release and the research report "IFRS in the US: An investor's perspective" (links to the ACCA's Web site).

Mary Tokar appointed as member of the IASB

Nov 15, 2012

The Trustees of the IFRS Foundation announced the appointment of Mary Tokar as a member of the IASB for an initial term ending June 30, 2017. The term is renewable for a further three years. Ms. Tokar will join the IASB in January 2013.

For more than 10 years, Ms. Tokar has been the global leader for KPMG’s International Financial Reporting Group, leading the firm's dialogue with the global accounting regulatory and standard-setting communities. Having worked with engagement teams and clients around the world in their transition to and application of IFRSs, she has gained extensive experience in the application of IFRSs in both developed and emerging economies. Previously, Ms. Tokar worked at the SEC as the senior associate chief accountant, international, in the Office of the Chief Accountant. Ms. Tokar was a member of the IFRS Interpretations Committee from 2001 to 2007.

Click for the IASB press release (link to the IASB's Web site).

The Bruce Column — Hoogervorst makes his case for leasing reform

Nov 13, 2012

At a speech to an audience at the London School of Economics IASB Chairman Hans Hoogervorst made his resolve for further reform plain. Robert Bruce, our regular columnist, was there to listen to the arguments.

There was a sense of great anticipation at the London School of Economics. The audience was the broadest of groupings. There was a large number of young students and a wide range of academics and practitioners, right down to Ian Hay Davison, Arthur Andersen’s UK managing partner from the days when they first set up in the country.

They had gathered to hear Hans Hoogervorst, Chairman of the IASB, set the current thinking on IFRS into context. The day before he had been before the European Parliament where an aside about how waiting for the US to decide whether or not it was going to join the IFRS family was now resembling the Samuel Beckett play ‘Waiting for Godot’ had charmed his audience.

At the LSE there was no talk of playwrights or delays. Hoogervorst wanted to emphasise the IASB’s firmness of purpose and its determination. He recalled the past. He talked of the time when the IASB and the FASB ‘had the mother of all battles against vested interests to record the granting of stock options as an expense’. He recalled the pressure brought to bear. He talked of the ‘huge lobbying campaign led in part by the technology sector’. He talked about the legendary investor Warren Buffett’s 1998 criticism of widespread opposition to ‘FASB’s attempts to replace option fiction with truth’ with virtually none having spoken out in support of FASB. Its opponents, Buffett had complained, ‘even enlisted Congress in the fight, pushing the case that inflated figures were in the national interest’. Back then, Hoogervorst pointed out, lobbyists spent $70m in their efforts to stop the standard-setters’ efforts. And ultimately the standard-setters had won. ‘It was the IASB, and I am really proud of that’, he said, ‘that led the way, paving the way for the FASB to follow suit’.

This was the heart of Hoogervorst’s thesis. There was a pattern. Enormous amounts of money and lobbying were brought to bear. The standard-setters, more concerned with recording economic realities, finally won. And now, years later, no one can understand what all the fuss had been about. ‘Almost ten years on’, he said of the stock option fracas, ‘and very few people question the logic of recording stock options as an expense. It is simply regarded as a good business practice’.

The same, he argued, had been true of the battle to bring pensions and other post-employment benefits onto the balance sheet. ‘Many years ago’, as Hoogervorst pointed out, ‘companies were able to keep the information related to these liabilities off the balance sheet’. And without their clear and visible presence strategies, unsurprisingly, could go disastrously awry. ‘As a result’, said Hoogervorst, ‘the management of some companies were able to literally give away the value of the company without shareholders knowing anything about it’.

Reform was, understandably, painful to companies. ‘At the time’, he said, ‘bringing pension liabilities on balance sheet was hugely controversial. And to some degree it still is. However such liabilities are now routinely discussed in the boardroom and with investors. This is especially true as many pension schemes are in trouble and the company is on the hook if things go wrong’.

This brought Hoogervorst to the third of his examples. And this one is still playing in realtime. ‘Today we have a similar battle with leasing’, he said. And the ingredients are the same.

‘The vast majority of lease contracts are not recorded on the balance sheet’ said Hoogervorst, ‘even though they usually contain a heavy element of financing. For many companies, such as airlines and railway companies, the off-balance sheet financing numbers can be quite substantial. What’s more, the companies providing the financing are more often than not banks or subsidiaries of banks. If this financing were in the form of a loan to purchase an asset, then it would be recorded. Call it a lease and miraculously it does not show up in your books’.

And this, he argued, caused real problems for users of financial reporting. ‘Right now’, he said, ‘most analysts take an educated guess on what the real but hidden leverage of leasing is by using the basic information that is disclosed and by applying a rule-of-thumb multiple. It seems odd to expect an analyst to guess the liabilities associated with leases when management already has this information at its fingertips. That is why it is urgent the IASB creates a new standard on leasing and that is exactly what we are doing, in close cooperation with the FASB’.

And the lobbyists are again arguing that the standard-setters’ proposals, like stock options and pensions before them, will in Hoogervorst’s words, mean ‘that the end of the world is nigh’. ‘I seem to remember similar claims being made when the IASB and the FASB required stock options to be expensed’, he said. And it is not as though regulators have not provided the same warnings. Hoogervorst quoted from what the staff of the US regulator, the SEC, had to say on the leasing issue back in 2005. “The fact that lease structuring based on the accounting guidance has become so prevalent will likely mean that there will be strong resistance to significant changes to the leasing guidance, both from preparers who have become accustomed to designing leases that achieve various reporting goals, and from other parties that assist those preparers”, it said.

But Hoogervorst is making a wider point. We have all learned, very painfully, what the effect of hiding debt has upon the global economy. ‘As the financial crisis was caused by excessive leverage’, he said, ‘our efforts to shed light on hidden leverage should be warmly welcomed around the world. The fact is that we are still facing an uphill battle. We will need all of the help we can get, to ensure that we do not get lobbied off course. We need national accounting standard-setters, regulators such as the SEC, investors and others to stand by their beliefs and help us to bring much-needed transparency to this important area’.

Click for our previous story on Chairman Hoogervorst's speech to the London School of Economics.

Updated IAS 34 compliance checklist

Nov 12, 2012

Deloitte's IFRS Global Office has published an updated checklist of the requirements of IAS 34, "Interim Financial Reporting," formatted to allow the recording of a review of interim financial statements, with a place to indicate yes/no/not applicable for each item.

The checklist addresses the requirements of IAS 34 as of June 30, 2012.

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The Bruce Column — Valuing the pieces of eight

Nov 09, 2012

Segmental reporting is about to undergo the first of the IASB’s post-implementation reviews. Robert Bruce, our regular columnist, looks at the Deloitte survey of the segmental disclosure practice.

In mid-November the deadline for comments in the first of the IASB’s planned post-implementation reviews closes. Under scrutiny is IFRS 8 on Operating Segments, segmental reporting. For the first time the IASB will have gathered the evidence to assess whether the standard it introduced is producing the effects and improvements in disclosure that it had planned for and hoped for.

So the Deloitte survey: “Pieces of Eight: Surveying IFRS 8 Disclosures” provides a timely insight into IFRS 8 practices in the UK. It is based on the mass of information and analysis produced from the disclosures of 100 listed companies which feature in the main survey of annual reports produced by Deloitte.

What this survey shows, for example, is that there has been no change to the average number of reportable segments under IFRS 8 compared to its predecessor standard IAS 14. The average was three under both standards. And it also shows that the number of companies with only a single reportable segment has fallen from 18 under IAS 14 to 11 under IFRS 8.

At a time when the consistency and connection of narrative reporting with the figures is uppermost in peoples’ minds it is encouraging to see that 85% of companies were deemed to provide consistent segmentation in their narrative reporting when compared against their IFRS 8 disclosures. You would expect and hope this to be so, after all the underlying principle of IFRS 8 is based on information reported to management. But nevertheless it is a refreshing example of the theory appearing to hold true in practice, at least for most.

Click here for the full detail of the survey.

IPSASB issues exposure drafts in two phases of its conceptual framework project

Nov 09, 2012

The International Public Sector Accounting Standards Board (IPSASB) has published two exposure drafts (EDs) as part of its project to develop a Conceptual Framework for the general purpose financial reporting of public sector entities. The EDs cover the elements and recognition in financial statements and the measurement of assets and liabilities in financial statements. In contrast to the IASB's Conceptual Framework, the IPSASB's framework proposes additional elements of financial statements including "deferred inflows," "deferred outflows," "ownership contributions," and "ownership distributions," but does not include a definition of "ownership interests."

The EDs, which follow earlier consultation papers issued in December 2010, are:

  • Conceptual Framework Exposure Draft (ED) 2, Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities: Elements and Recognition in Financial Statements (ED 2).
  • Conceptual Framework Exposure Draft (ED) 3, Measurement of Assets and Liabilities in Financial Statements (ED 3).

"Deferred" inflows and outflows

ED 2 proposes to define "deferred inflows" and "deferred outflows" as follows:

"A deferred inflow is an inflow of service potential or economic benefits provided to the entity for use in a specified future reporting period that results from a non-exchange transaction and increases net assets."

"A deferred outflow is an outflow of service potential or economic benefits provided to another entity or party for use in a specified future reporting period that results from a non-exchange transaction and decreases net assets"

Examples of deferred inflows may include items such as specific multi-year grants that do not meet the definition of a liability. Examples of deferred outflows may include multi-year grants that stipulate they must be used over future reporting periods. These items would be recognized as revenues or expenses as the future time periods expire.

The Basis of Conclusions accompanying ED 2 notes the prevalence of nonexchange transactions of public sector entities, particularly taxation and grants. The IPSASB argues that it is "important to be able to show separately flows that relate to specified future reporting periods" and considered a number of different approaches in meeting this objective, including changing the definitions of "assets" and "liabilities," introducing an "other comprehensive income" notion, and requiring disclosure in the notes.

The Basis of Conclusions documents the IPSASB's decision to introduce new elements of financial statements as follows:

The IPSASB . . . concluded that the most transparent approach is to define deferred inflows and deferred outflows as separate elements. In coming to this view the IPSASB considered it likely that, if separate elements are not defined, the treatment of flows that are considered applicable to future reporting periods is likely to be addressed on an issue-by-issue basis at the standards level, using ambiguous and potentially conflicting principles.

The practical effect of the definition of these elements may in some cases result in outcomes similar to the requirements for government grant received under IAS 20, Accounting for Government Grants and Disclosure of Government Assistance. However, the IPSASB notes the deferred inflow and outflow approach is "not the same as the matching concept  used in earlier private sector frameworks."

Comparison of element definitions with the IASB

Because of the introduction of the additional elements, the definitions of other elements are different in some cases from those used under IFRSs. The table below compares the definitions in the IPSASB proposals with those in the IASB Conceptual Framework:

IPSASB ProposalIASB Framework
An asset is a resource, with the ability to provide an inflow of service potential or economic benefits that an entity presently controls, and which arises from a past event. An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.
A liability is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. A liability is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.
Revenue is:
  1. Inflows during the current reporting period, which increase the net assets of an entity, other than:
    1. Ownership contributions; and
    2. Increases in deferred inflows; and
  2. Inflows during the current reporting period that result from decreases in deferred inflows.
Income is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants*
Expenses are:
  1. Outflows during the current reporting period which decrease the net assets of an entity, other than:
    1. Ownership distributions; and
    2. Increases in deferred outflows; and
  2. Outflows during the current reporting period that result from decreases in deferred outflows.
Expenses are decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants
Ownership contributions are inflows of resources to an entity, contributed by external parties that establish or increase an interest in the net assets of the entity.
Ownership distributions are outflows of resources from the entity, distributed to external parties that return or reduce an interest in the net assets of the entity
Ownership interests are not defined
Equity is the residual interest in the assets of the entity after deducting all its liabilities

* Under the IASB's Framework, income encompasses both "revenue" and "gains."  The Framework notes that gains "represent increases in economic benefits and as such are no different in nature from revenue" and so are not considered a separate element.

Measurement

ED 3 identifies the measurement concepts intended to guide the IPSASB in the selection of measurement bases for International Public Sector Accounting Standards (IPSAS). The ED focuses on selecting measurement bases that meet the objectives of financial reporting-decision making and accountability. Because many assets in the public sector are held for their operational capacity, the ED argues the cost basis will often be appropriate.

Comments on the EDs close on April 30, 2013. Click for the IPSASB press release (link to the IFAC's Web site).

Deloitte releases new IFRS e-learning modules

Nov 08, 2012

Deloitte’s Global Audit Learning group has released two e-learning modules on derecognition under IFRS 9, "Financial Instruments," and offsetting under IFRS 32, "Financial Instruments: Presentation." These modules are additions to the extensive catalog of IFRS e-learning content made freely available by Deloitte.

Details of the two new modules are:

  • IFRS 9, Financial Instruments: Derecognition — Covers the background, scope, and principles related to the derecognition of financial instruments under IFRS 9.
  • IAS 32, Financial Instruments: Presentation — Covers the key presentation requirements for financial instruments under IAS 32, as revised by the IASB in December 2011, to include additional guidance and disclosures as a result of the joint offsetting project with the FASB.

(Note: You may be asked to register to access each module — no personally identifying information is requested in the registration process.)

The release of these modules follows three new modules on IFRS 9, IFRS 10, and IFRS 11, which were released a number of weeks ago. There are now 42 modules available, which tackle the key extant and new standards issues by the IASB. The IFRS e-learning modules are available free of charge and may be used and distributed freely, without alteration from the original form and subject to the terms of the Deloitte copyright over the material.

For details on the full range of e-learning modules, go to Deloitte’s IFRS e-learning. A listing of available e-learning modules is also available on our IAS Plus IFRS e-learning page.

Hoogervorst outlines thoughts on leases, U.S. convergence, and more

Nov 07, 2012

IASB Chairman Hans Hoogervorst has discussed a broad range of issues, and key themes emerging include challenges in some of the IASB projects, such as leases with its lobbying efforts against the proposals; global adoption of IFRSs, including in the United States; and accountability arrangements for standard setting and future priorities, including the possibility of revisiting the accounting for goodwill.

The IASB published a transcript of a public lecture Mr. Hoogervorst gave at the London School of Economics on November 6, 2012. The speech, Accounting Harmonisation and Global Economic Consequences, covered a number of topics. Many of these topics mirror discussions from a meeting of the European Parliament Committee on Economic and Monetary Affairs (ECON) held a day earlier on November 5, 2012, during which Mr. Hoogervorst participated in an exchange of views with the members of the committee.

Leases

In the lecture, Mr. Hoogervorst focused on the challenges facing the leasing project in particular and stated that the "vast majority of lease contracts are not recorded on the balance sheet, even though they usually contain a heavy element of financing." He went on to note that "companies tend to love off-balance sheet financing, as it masks the true extent of their leverage and many of those that make extensive use of leasing for this purpose are not happy," and outlined some of the lobbying efforts going on, including claims in the United States that "leases on balance sheet will lead to 190,000 jobs being lost in the US alone."

Noting such lobbying efforts should not be surprising, Mr. Hoogervorst compared the current controversy around leases with past projects such as the expensing of share options under IFRS 2, Share-based Payment, and the changes to pension accounting under IAS 19, Employee Benefits, outlining the "uphill battle" the IASB faced. He concluded that the IASB needs "all of the help we can get, to ensure that we do not get lobbied off course" and "to counter what is a well-funded and well-resourced lobbying campaign."

The lecture echoed his comments to the ECON committee members in which he warned committee members about being approached by the leasing industry because they want to "take the bite out of [the] upcoming leasing standard" and hoped he could "count on your sympathy" to support the leasing proposals.

Global adoption of IFRSs

In the lecture, Mr. Hoogervorst outlined how IFRSs has been an important response to "globally interconnected nature of today’s financial markets" and emphasized how "repeated G20 communiqués have supported the work of the IASB and called for a rapid move towards global accounting standards." He went on to outline his view that "momentum for IFRS becoming global standards has now become unstoppable" with so many countries adopting IFRSs, reiterating his comments to the ECON committee that the "use of IFRS has reached critical mass" and he doesn't "think it can be stopped."

Turning to the specific issue of whether, and if so how, the United States will adopt IFRSs, in the lecture Mr. Hoogervorst stated "it is important that progress is made soon" and hoped for news in 2013. In more candid comments to the ECON committee, he discussed Canada's and Mexico's adoption of IFRSs and the "country in between which is still hesitating." He later went on to comment that it was like "waiting for Godot" and it was "really disappointing" that a U.S. decision had not yet been made, but that once "the presidential elections are out of the way" he hoped that the United States' "big stake" in IFRSs would continue. In addition, he stated that the "absence of a U.S. decision is not reason to stall" the IASB's work.

Accountability

In the ECON committee meeting, Mr. Hoogervorst discussed how the IFRS Foundation was making efforts to be "more inclusive and responsive to constituents." He later commented that he had "never before worked in an environment that is so transparent" as that at the IASB.

At a technical level, he noted that the bilateral arrangement between the IASB and FASB was effectively coming to an end, to be replaced with a new multi-lateral arrangement through the proposed Accounting Standards Advisory Forum (ASAF). Lamenting that IASB-FASB convergence "had not ended as hoped" and that it is difficult to reach agreement when there are two separate boards, Mr. Hoogervorst wondered whether outcomes may have been different in key areas in which "convergence was lost," such as financial instrument impairment and offsetting, if the boards were operating in an environment in which the United States was committed to adopting IFRSs.

Responding to committee questions about the IASB's independent status and the importance of standard setting, Mr. Hoogervorst noted the "true devotion" to the public interest embodied in the IASB, the governance improvements implemented with initiatives, such as the Monitoring Board, and the endorsement mechanisms that most countries adopting IFRSs use. He reiterated the IASB's extensive due process, which can result in "five to ten years to get a standard done" and affirmed the need to "listen carefully to what constituents have to say," highlighting the important role the Accounting Standards Advisory Forum (ASAF) will have in this process.

Future directions

In both the lecture and committee meeting, Mr. Hoogervorst outlined the future direction of the IASB's work plan, focusing on projects such as the restarted Conceptual Framework project and addressing specific constituent concerns, while maintaining a "period of calm."

There was also much discussion at the committee meeting about the IASB's project on financial instrument impairment, including the suitability of the expected loss model and questions why an "unexpected loss" model is unsuitable.

Responding to committee questions about "country-by-country reporting" for the resources industry, Mr. Hoogervorst noted that constituents had not raised this as a priority issue in the Agenda Consultation process and that it was a matter better dealt with by regulation.

Several times during the committee meeting, Mr. Hoogervorst raised the question of whether accounting for goodwill needs to be revisited. Contrasting the situation in which leases were "not enough" on the balance sheet, he commented that goodwill might be "too much on the balance sheet" and that this was something he was personally worried about, particularly in relation to banks and prudential reporting. While not calling for an immediate write off or an "arbitrary" amortization of goodwill, Mr. Hoogervorst commented that he "wondered whether standards are strict enough."

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