July

UK ASB report on insurance accounting

04 Jul 2005

The United Kingdom Accounting Standards Board has released its Report to HM Treasury on Financial Reporting for Life Assurance.

This report, together with accounting standard FRS 27 Life Assurance issued in December 2004, completes the ASB's response to the request from the Financial Secretary to the Treasury asking for an urgent study into accounting by life assurers. The report summarises the needs of different users of financial statements of life assurance entities, and the improvements introduced in FRS 27 to meet those needs. It also analyses key areas where further improvements may be made, including the measurement of liabilities, profit recognition, the distinction between equity and liabilities, and the role of embedded value methods. The report notes that the following matters still require fuller consideration. They are likely to be addressed in the IASB's Project on Accounting for Insurance Contracts:
  • Liability measurement and the role of management discretion.
  • Basis for recognition of profit for these long term contracts.
  • Liability/equity distinction for those surpluses not yet allocated.
  • Role of embedded value information in the financial reports.

IFAC extends comment period on auditor competence ED

03 Jul 2005

IFAC's Education Committee has extended the comment period on its exposure draft Competence Requirements for Audit Professionals (PDF 128k) until 15 August 2005. The deadline had been 15 July 2005. The proposal calls for auditing professionals to have an advanced level of knowledge in three areas: financial statement audits, financial accounting and reporting, and information technology.

That advanced level of knowledge is deeper than is expected of other professional accountants. The ED also would require individuals to gain a period of relevant practical experience (normally a minimum of three years) before having substantial involvement in a financial audit assignment. For audits of financial statements in specific industries (such as banking and finance, extractive industries, and insurance) and specific environments (such as transnational audits), the proposed standard would require that the audit professional possess professional knowledge and experience relevant to those environments or industries. Click for Press Release (PDF 67k).

CESR recommendations on financial reporting

03 Jul 2005

The Committee of European Securities Regulators (CESR) has published its Final Technical Advice on Possible Implementing Measures of the Transparency Directive.

Matters covered by CESR's recommendations include:

  • Half-yearly reporting. CESR proposes that the minimum content of half-yearly financial statements not prepared in accordance with IFRSs should be defined by reference to the principles of IAS 34 Interim Financial Reporting. Further, CESR proposes that in half-yearly reports, the definition of 'related party transactions' in IAS 24 Related Party Disclosures should apply both when an issuer prepares consolidated accounts and when it does not.
  • Equivalence of third countries' disclosure requirements. This part of the paper develops the concepts that CESR will use to establish equivalence. CESR's intends to test equivalence by (a) looking first at the key principles and objectives of the different disclosure requirements of the EU Transparency Directive and then (b) establishing what a third country's framework has to include in order to be deemed to be equivalent. CESR notes that "the requirements of the third country do not need to be identical; equivalence can be declared when general disclosure rules provide investors with understandable information which will lead to a broadly equivalent assessment of the issuer's position."
Click for (PDF 388k) and (PDF 68k).

New SEC disclosures for shell companies

02 Jul 2005

The US Securities and Exchange Commission has adopted regulations aimed at regulations deterring fraud and abuse in the securities markets through the use of shell companies.

Special rules require foreign private issuer shell companies to report transactions that cause them to cease being shell companies on Form 20-F, providing disclosure comparable to that which domestic companies will report on Form 8-K. Click for (PDF 57k).

IASB proposes amendments to provisions standard

01 Jul 2005

The IASB has invited comment on proposed amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets (to be retitled Non-financial Liabilities) and complementary limited amendments to IAS 19 Employee Benefits.

The amendments to IAS 37 would change the conceptual approach to recognising non-financial liabilities. Entities would be required to recognise in their financial statements all obligations that satisfy the definition of a liability in the IASB's Framework, unless they cannot be measured reliably. Uncertainty about the amount or timing of the economic benefits that will be required to settle a liability would be reflected in the measurement of that liability instead of (as is currently required) affecting whether it is recognised. This change would enhance financial reporting because some liabilities previously only disclosed in the notes to the financial statements will now be included in the balance sheet. Moreover, it would make the IASB approach consistent with the approach under US GAAP. Comments are due by 28 October 2005:

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