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Insurance contracts notes from the May IASB meeting

May 28, 2012

Deloitte observer notes are posted from the insurance sessions of the May IASB meeting, which took place in Norwalk, CT, on May 21–24, 2012. The discussions, many jointly with the FASB, covered unbundling, whether to abandon the risk adjustment, the use of other comprehensive income, and acquisition costs.

Click for direct access to the notes:

Tuesday, May 22, 2012

Wednesday, May 23, 2012

Thursday, May 24, 2012

Meeting notes from the remaining sessions 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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Additional notes from the May IASB meeting

May 25, 2012

The IASB held its May meeting in Norwalk, CT, on May 21–24, 2012; much of it was a joint meeting with the FASB. Deloitte observer notes are posted from the investment entities session held on Monday and the IFRS 10 transition guidance session held on Wednesday.

Click for direct access to the notes:

Monday, May 21, 2012 

    Wednesday, May 23, 2012

    Meeting notes from the remaining sessions 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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    IFRS Foundation's framework-based teaching workshops

    May 25, 2012

    The IFRS Foundation has developed framework-based teaching workshops for those teaching IFRSs. As part of the IASB's education initiative, the workshops train teachers to develop their students' skills in interpreting and applying IFRSs (including IFRS for SMEs).

    At a recent workshop on May 14 in London, the IASB welcomed 30 participants from 20 countries for a framework-based IFRS teaching session. Following this session, the IASB project staff provided updates on the investment entities, financial instruments, leases, and insurance projects currently on the IASB's active agenda. Further, there was a Q&A session for IFRS teachers with the IASB staff on the new and amended IFRSs that would become mandatory in 2013.

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    Chairman Michel Prada speech to IOSCO

    May 24, 2012

    On May 16, 2012, Michel Prada, chairman of the IFRS Foundation Trustees, addressed the 2012 IOSCO conference in Beijing, China. In his speech, Mr. Prada highlighted the IOSCO's role in developing IFRSs, discussed the future of the IASB as a global standard-setter, and shared his goal of greater coordination between the IASB and IOSCO.

    Mr. Prada began his speech congratulating the IOSCO on its governance reform, noting that the reform will enhance the IOSCOs visibility and efficiency. He spoke about the IOSCO being a catalyst for the the global accounting standards movement in May 2000, when it endorsed for cross-border listings. These were the "core standards" of the Accounting Standards Committee, which later became the IASB.

    In his speech, Mr. Prada discussed the success of IFRSs and that he was hopeful that the remaining countries, including the United States, India, and China, will come "fully on board" to see the full benefits of a single set of global accounting standards.

    Mr. Prada also spoke about the future role of the IASB as a global accounting standard setter. He cited the reviews by the IFRS Foundation Monitoring Board and the IFRS Trustees, which released jointly in February 2012. He believes that one of the most important findings in the Trustees' strategy review is the recommendation to "formalise the IASB's relationship with others involved in the financial reporting supply chain — accounting standard-setters, audit and securities regulators, and others. The purpose of this is twofold."

    Mr. Prada goes on to explain:

     

    The first relates to the IASB’s ability to create standards that can be applied around the world and without modification. The IASB cannot do this alone. It must find ways to work in close cooperation with standard-setting bodies around the world, to tap-into the best thinking in financial reporting, but also to make sure that jurisdictional requirements are fully taken into consideration.

    The second purpose is to improve consistency in the implementation of those standards. The IASB has been given the responsibility to develop international standards, but it does not have the authority to say how those standards should be endorsed, implemented or enforced.

    Neither is it equipped to easily identify the consequences of the standards without the contribution of those entities that implement them in the field.

    Mr. Prada then asked for more cooperation and collaboration between the IOSCO and the IASB, noting that the Trustees' strategy review provided a framework for a better-developed relationship.

    Click for the full text of Mr. Prada's speech on the IASB's Web site.

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    Further notes from the May IASB meeting

    May 24, 2012

    The IASB held its May meeting in Norwalk, CT, May 21–24, 2012; much of it was a joint meeting with the FASB. Deloitte observer notes are posted from Wednesday's sessions on the agenda consultation and an IFRS Interpretations Commitee issue.

    Click for direct access to the notes:

    Wednesday, May 23, 2012 

    Meeting notes from the remaining sessions 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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    ISDA compares derivative reporting under U.S. GAAP and IFRSs

    May 24, 2012

    The International Swaps and Derivatives Association (ISDA) has published a paper "Netting and Offsetting: Reporting Derivatives Under US GAAP and Under IFRS." The paper describes the key differences between the approaches used by the IASB and FASB in balance sheet offsetting and explains how each Board arrived at its current position. The paper examines why U.S. GAAP allows for derivatives to be reported as net rather than gross on the balance sheet and why the ISDA favors this method.

    The ISDA's paper provides insight into the different offsetting requirements under IFRSs and U.S. GAAP and their impact on liquidity, collateral, and the new Basel III Leverage Ratio.

    The paper also covers:

    • Why is netting/offsetting an issue?
    • Differences among securities, loans and receivables, and derivatives.
    • Portfolio management.
    • The interest rate swap and credit default swap markets.
    • The efficacy of netting and collateral as risk mitigation techniques.
    • The offsetting rules under U.S. GAAP and IFRSs.
    • Criteria for derivatives and repo markets.
    • New offsetting disclosures.
    • The new Basel III Leverage Ratio.

    The paper, Netting and Offsetting: Reporting Derivatives Under US GAAP and Under IFRS, is available on the ISDA's Web site.

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    New IFRS for SMEs training module

    May 24, 2012

    The IFRS Foundation Education Initiative has developed a training module for Section 31 of the IFRS for SMEs, "Hyperinflation." This section establishes financial statement requirements for entities whose functional currency is the currency of a hyperinflation economy.

    Ultimately, the IFRS for SMEs training material will include 35 stand-alone modules — one for each section of the IFRS for SMEs. Currently, 29 modules are available. Most are also available in Arabic, Russian, Spanish, and Turkish.

    Click for more information on the Section 31 training module or access all training modules on the IASB's Web site.

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    Draft guide to effective business reporting processes published by IFAC

    May 24, 2012

    The Professional Accountants in Business (PAIB) Committee of the International Federation of Accountants (IFAC) has published an exposure draft, "International Good Practice Guidance (IGPG) — Eleven Principles for Effective Business Reporting Processes," which provide a broad range of recommendations in best practice business reporting.

    The stated aims of the draft IGPG are (1) to establish a benchmark for good practice in implementing effective reporting processes in organizations, and, in particular, (2) to help professional accountants in business and their organizations create a cycle of continuous improvement for their reporting processes to assist internal and external stakeholders in making informed decisions about these organization by providing high-quality financial and nonfinancial information.

    The exposure draft outlines the following principles:

    • Committing to effective reporting processes.
    • Determining roles and responsibilities.
    • Planning and controlling the reporting processes.
    • Engaging stakeholders.
    • Defining the reporting content.
    • Selecting frameworks and standards.
    • Determining reporting processes.
    • Using reporting technology.
    • Analysing and interpreting reported information.
    • Obtaining assurance and providing for accountability and transparency.
    • Evaluating and improving reporting processes.

    In relation to the objective of selecting frameworks and standards, the exposure draft notes the following:

    The organization should use reporting frameworks, standards, and guidelines to help develop effective reporting processes and to ensure that all relevant information is disclosed. Professional accountants may need to turn to sources beyond current financial reporting standards and regulations to make the best choices on reporting strategy so that reporting format, timing, content, and approach demonstrate transparency, credibility, relevance, and usefulness to the various stakeholders. Professional accountants will need to be familiar with the appropriate reporting frameworks, such as the International Accounting Standards Board (IASB)’s Practice Statement on Management Commentary, and the Integrated Reporting Framework, which is being developed by the International Integrated Reporting Coucil (see Appendix B for an overview of various frameworks).

    The exposure draft is open for comment until August 23, 2012. Click for more information (link to the IFAC's Web site).

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    FAF outlines new body to simplify U.S. GAAP for private companies

    May 24, 2012

    The Financial Accounting Foundation (FAF) Board of Trustees has announced the establishment of a new body to improve the process of setting accounting standards for private companies. The new Private Company Council (PCC) will determine whether exceptions or modifications to existing U.S. GAAP are necessary to address the needs of users of private company financial statements. The AICPA has supported the PCC and announced plans to develop an “other comprehensive basis of accounting” (OCBOA) financial reporting framework for companies that are not required to comply with U.S. GAAP.

    In making its determinations on exceptions or modifications, the PCC will apply criteria mutually developed, and agreed to, with the FASB. Proposals for exceptions or modifications will be subject to FASB endorsement and exposed for public comment. The PCC will then redeliberate the proposals and forward them to the FASB for a final decision (with a written explanation provided if endorsement is rejected).

    The FAF Board of Trustees will create a special-purpose committee of Trustees, the Private Company Review Committee, which will have primary oversight responsibilities for the PCC. The Review Committee will hold both the PCC and the FASB accountable for achieving the objective of ensuring adequate consideration of private company issues in the standard-setting process. The PCC will prepare quarterly reports to the FAF Trustees and a review of the operation of the PCC will be conducted after a three-year period.

    The PCC will have between nine and 12 uncompensated members and will meet at least five times a year in its first three years of existence. The FAF Board of Trustees will issue a call for nominations for members of the PCC via the FAF Web site in the next few weeks and also will publish a complete report on the establishment of the PCC on its Web site.

    Background

    The establishment of the PCC is the culmination of a long consultative process.  There have been long-term calls in the United States for relief from listed company requirements for private sector entities, with many noting the complexity of accounting under U.S. GAAP is not useful to users of private company reports.

    In more recent times, the AICPA/FAF/NASBA "Blue-Ribbon Panel" on Standard Setting for Private Companies started a consultation process in 2010, which lead to its published recommendations in January 2011 for the creation of a new board, to be overseen by the FAF, that would focus on making exceptions and modifications to U.S. GAAP for private companies.

    In early 2011, the FAF Trustees subsequently formed a Trustee Working Group to address the accounting standard setting for nonpublic entities. In October 2011, the Trustees concluded that creating a separate standard-setting board for private companies would likely lead to the establishment of two separate sets of U.S. accounting standards, a result that seemed undesirable. Instead, the FAF Trustees proposed to create a "Private Company Standards Improvement Council," which would have the authority to identify, propose, and vote on specific improvements to U.S. accounting standards for private companies. The announced PCC is largely consistent with these proposals.

    The consultative process also confirmed that mandating the use of the IFRS for SMEs in the United States is not appropriate at the current time. However, because the AICPA now recognizes the IASB as an authoritative standard setter, in many instances private companies (other than financial institutions) may also report under IFRSs or the IFRS for SMEs.

    Reaction from the AICPA

    The AICPA has released a press release in response to the FAF's announcement, in which it states "we recognize and appreciate that the FAF has taken solid steps in the right direction regarding the Private Company Council."

    The AICPA was a strong advocate for a separate private company board and was disappointed that the FAF Trustees rejected the Blue-Ribbon Panel's recommendations to this effect.

    The AICPA's press release announces its plans to develop an “other comprehensive basis of accounting” (OCBOA) financial reporting framework to meet the needs of some privately held small- and medium-sized enterprises (SMEs) as well as the users of the financial statements of these entities. The AICPA envisages that the SME OCBOA framework will be a less complicated and a less costly alternative system of accounting to U.S. GAAP for SMEs that do not need U.S. GAAP financial statements.

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    More notes from the May IASB meeting

    May 23, 2012

    The IASB's May meeting was held in Norwalk, CT, on May 21–24, 2012; much of it was a joint meeting with the FASB. Deloitte observer notes are posted from the financial instrument impairment sessions held on Monday and Tuesday. The sessions covered the impairment of lease receivables, the discount rate that should be used when discounting expected losses in the general “three-bucket” impairment model, and how modifications on financial assets should be treated.

    Click for direct access to the notes:

    Monday, May 21, 2012 

    Tuesday,  May 22, 2012 

    Meeting notes from the other sessions held on these two days 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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