May

US House subcommittee clears stock option legislation

15 May 2004

A subcommittee within the US House of Representatives has cleared draft legislation – known as H.R.

3574, the Stock Option Accounting Reform Act – that would restrict the expensing of stock options in the United States to options granted to chief executives and the next four highest paid officers. Small businesses would be exempt from expensing options entirely, and newly public companies could delay expensing for three years. And the bill would prohibit the Securities and Exchange Commission from enforcing the proposed FASB rule until the SEC studies its economic impact. The legislation moves on to consideration by the full committee and, if approved, then on to the House. Before it could become law, identical legislation would have to be passed in the US Senate. Supporters of the legislation say it would "would preserve broad-based employee stock option plans and improve American competitiveness." A number of members of Congress have said they will oppose this legislation. For example, one senator issued a statement calling the House bill "misguided", saying that "stock option compensation is an expense that should be recorded on a company's income statement.... Companies that do not expense stock option compensation are misleading investors. [He] also expressed concern that members of Congress were substituting political decisions for complex technical accounting decisions and were undermining the independence of the nation's private accounting standards board."

SEC chairman reviews progress in securities market reforms

14 May 2004

In a comprehensive presentation to the US National Association of Securities Dealers, SEC Chairman William H.

Donaldson reviewed the SEC's progress and plans for restoring investor confidence, holding accountable those who have violated the public trust, promoting responsible corporate governance, and making the securities markets more efficient and transparent. Link to Remarks on SEC Website.

IAS Guía Rápida – Edición Revisada

14 May 2004

IAS Guía Rápida es una guía excepcional para ayudarle a conocer y entender cómo las normas contables continúan convergiendo a nivel mundial.

Deloitte letter of comment on IFRIC D5

14 May 2004

We have posted Deloitte's Applying IAS 29 Financial Reporting in Hyperinflationary Economies for the First Time.

We concur with the consensus reached on the three issues dealt with by the Draft Interpretation. Regarding the issue of how an entity should account for opening deferred tax, we believe IFRIC should consider whether a portion of the restatement of a comparative period should be reflected as part of the net monetary adjustment as opposed to the tax line. You will find all Past Deloitte Letters to IASB here.

US Federal Reserve Board Governor supports IFRSs

14 May 2004

In her Testimony (PDF 145k) yesterday before the US House of Representatives Financial Services Committee, Federal Reserve Board Governor Susan Schmidt Bies expressed strong support for the use of International Financial Reporting Standards by global banking organisations.

Among other things, she praised the IASB's standards on financial instruments:

The IASB is now independent of the international accounting profession and independently funded. It has adopted many of the structural elements of the FASB in the United States, which are intended to promote an independent, objective standards-setting environment. Many senior American accounting experts serve on the IASB and its staff. IASB GAAP has many similarities with U.S. GAAP and the IASB issued extensive enhancements to its standards last year and this year, with additional improvements also issued as a proposal this year. For example, in recent months the IASB issued major revisions to its standards for financial instruments, which are similar to U.S. GAAP and cover many areas of banking activities.

One aspect of these revisions by the IASB significantly improved the guidance on loan loss allowances in ways that could lead to better bank reserving practices around the world.

The Federal Reserve has long supported sound accounting policies and meaningful public disclosure by banking and financial organizations with the objective of improving market discipline and fostering stable financial markets...

New Australian accounting alert

13 May 2004

Deloitte (Australia) has published a new on Proposed Amendments to AASB 119 'Employee Benefits' (PDF 114k).

The Australian proposal mirrors the IASB's proposed amendments to IAS 19 (a) to introduce another option for recognising actuarial gains and losses (fair value changes reported directly in equity) and to extend the provisions relating to multi-employer defined benefit plans to a group of entities under common control. Past Alerts can be found Here.

EU Council approves Parliament's "Transparency Directive"

13 May 2004

At its meeting on 10-11 May 2004, the Council of Economics and Finance Ministers of the European Union voted to support the draft Directive on transparency that was approved by the European Parliament on 30 March 2004. The Directive establishes minimum requirements with regard to information to be reported by issuers whose securities are admitted to trading on a regulated market.

Details of the Directive as approved by Parliament can be found Here. Among other things, the Directive would establish a mechanism for assessing at EU level the equivalence between international accounting standards and non-EU country accounting standards for the purpose of allowing companies from non-EU countries to submit their national GAAP financial statements rather than IFRS statements.

Ratings agency studies impact of IFRS 4 Insurance Contracts

11 May 2004

Fitch Ratings – a leading global fixed income rating agency – has analysed the implications of IFRS 4 Insurance Contracts and has concluded that Fitch "does not expect any rating actions as a direct result of the move to IFRS.

However, Fitch cannot rule out the possibility that the additional disclosure and information contained in the accounts could lead to rating changes due to an improved perception of risk based on the enhanced information available." The special report Mind the GAAP: Fitch's View on Insurance IFRS provides an overview of IFRS 4 and the issues being addressed in Phase II of the IASB's insurance project; assesses the implications including increased volatility, greater use of discounting and fair values, changes to income recognition, and enhanced disclosures; and discusses how the changes affect ratings analysis. An excerpt:

Fitch welcomes the progress made by the IASB towards standards that will be more transparent and comparable across regions. The agency recognises the significant limitations of phase 1 but believes that the enhanced disclosure and greater consistency at phase 1 of the insurance accounting project (set out in IFRS 4) will aid in the analysis of insurers and is a useful stepping stone to the more valuable phase 2.

We are grateful to Fitch Ratings for allowing us to post their copyrighted report: Click to Download (PDF 209k).

CFA Institute is new name of AIMR

10 May 2004

The Association for Investment Management and Research has changed its name to CFA Institute.

CFA Institute, which administers the Chartered Financial Analyst (CFA) examinations, is an association of 129 member financial analysts' societies in 50 countries. The 70,000 members of these societies constitute one of the primary groups of users of IFRS financial statements. More information on CFA Institute's Website.

IFAC is studying IFRS implementation issues

09 May 2004

The IFAC Board has begun a project to obtain the views of individuals and groups of professional accountants and other stakeholders on the extent to which they have seen challenges and successes in implementing IFRSs and International Standards on Auditing.

The project includes a series of focus groups and interviews with members of regional accountancy organisations and with professional accountants from different backgrounds (large firms, medium-sized firms, small firms, members in business, and national accounting and auditing standard setters), regulators, users, and other interested parties. Individuals who would like to provide input should send an email to implementationstandards@ifac.org.

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