FASB Chairman Herz speaks about simplification of US GAAP

16 Jun 2005

In a (PDF 62k) at the 24th Annual SEC and Financial Reporting Institute Conference on 2 June 2005, FASB Chairman Robert H.

Herz spoke about the FASB's plans to simplify US generally accepted accounting principles with the twin goals of reducing the volume and disjointedness of standards, rules, and regulations and reducing the complexity of individual pronouncements.

The fact is that we call US GAAP is comprised of over 2000 individual pronouncements issued by various bodies and organizations in a variety of forms. FASB Statements, Interpretations, Technical Bulletins, Staff Q&As;, APB Opinions and Interpretations, AcSEC Statements of Position, AICPA Audit & Accounting Guides and Technical Practice Aides, SEC Accounting Series Releases, Staff Accounting Bulletins, letters and speeches, EITF consensuses and D topics, and so on and so forth. And because the various standards, rules, and regulations can sometimes conflict, it needs to be organised into a GAAP hierarchy, you know, levels A, B, C, D.

SEC report on off-balance sheet arrangements and SPEs

16 Jun 2005

The US Securities and Exchange Commission has released a Staff Report on Off-Balance Sheet Arrangements, Special Purpose Entities, and Related Issues.

The report was prepared pursuant to Section 401(c) of the Sarbanes-Oxley Act of 2002 and, as required by that Act, has been submitted to the President and several Congressional committees. The staff report includes an analysis of the filings of issuers as well as an analysis of pertinent US generally accepted accounting principles and Commission disclosure rules. The report includes several recommendations for potentially sweeping changes in current accounting and reporting requirements for pensions, leases, financial instruments, and consolidation:

  • Pensions: The staff recommends the accounting guidance for defined-benefit pension plans and other post-retirement benefit plans be reconsidered. The trusts that administer these plans are currently exempt from consolidation by the issuers that sponsor them, effectively resulting in the netting of assets and liabilities in the balance sheet. In addition, issuers have the option to delay recognition of certain gains and losses related to the retirement obligations and the assets used to fund these obligations.
  • Leases: The staff recommends that the accounting guidance for leases be reconsidered. The current accounting for leases takes an 'all or nothing' approach to recognizing leases on the balance sheet. This results in a clustering of lease arrangements such that their terms approach, but do not cross, the 'bright lines' in the accounting guidance that would require a liability to be recognized. As a consequence, arrangements with similar economic outcomes are accounted for very differently.
  • Financial instruments: The staff recommends the continued exploration of the feasibility of reporting all financial instruments at fair value.
  • Consolidation: The staff recommends that the Financial Accounting Standards Board continue its work on the accounting guidance that determines whether an issuer would consolidate other entities – including SPEs – in which the issuer has an ownership or other interest.
  • Disclosures: The staff believes that, in general, certain disclosures in the filings of issuers could be better organized and integrated.
Click to download:

IASC Foundation trustees will meet 21 June

15 Jun 2005

The Trustees of the IASC Foundation, which oversees the IASB, will meet on 21 June 2005 at the offices of Lafarge, 61 rue des Belles Feuilles, Paris starting at 8:30am.

The agenda of the public portion of the meeting (the morning) is:

  • Approval of March minutes and introductory remarks
  • Joint meeting with IASB
    • Consideration of specific topics on IASB's agenda and work programme
    • Convergence
    • Conceptual Framework
    • Performance Reporting
  • Approval of the Constitution Review Report

Article on adoption of IFRSs in Europe

15 Jun 2005

We have posted an article by Paul Pacter, IAS Plus webmaster, titled Adoption of IFRSs in Europe (PDF 1,012k) from the April 2005 issue of The Hong Kong Accountant.

In this article Paul responds to the following questions:

  • Is switching to IFRSs a big adjustment for European listed companies?
  • What are the big changes in the reported profits of European listed companies as a result of changing to IFRSs?
  • In your opinion, what are the principal fears of the European companies concerning IFRSs? Which IFRSs are the most troublesome?
  • Are European companies finding it difficult to apply IAS 39?
  • What is the IASB's project on standards for small and medium-sized entities all about? Why are IASB SME standards needed?
  • What will be the subjects addressed in the next group of IASB standards?

SAC will meet in London 27-28 June 2005

14 Jun 2005

The IASB will meet with the Standards Advisory Council on Monday 27 June 2005 (10:30 to 17:30) and on Tuesday 28 June 2005 (10:00 to 15:00) at the Renaissance London Chancery Court Hotel, 252 High Holborn, London.

The agenda for the meeting is set out below.

27-28 June 2005, London Monday 27 June 2005

  • IASB Chairman's Update – Current Work
  • Convergence – Progress to Date and the Way Forward
    • Bringing together IFRSs and US GAAP with the aim of eliminating the need for the 20F reconciliation by non-US SEC registrants
    • Bringing together IFRSs and Japanese GAAP
    • Wider implications of convergence
  • IASB Agenda Priorities
  • Performance Reporting Progress to date and future direction
  • IFRIC Technical Matters
    • Emission Rights
    • Service Concessions
  • Revenue Recognition
Tuesday 28 June 2005
    • Interpretations Worldwide
    • IFRIC Review of Operations
  • Constitution – report on progress and impact on SAC
  • Open Forum
  • Possible Recognition and Measurement Modifications for SMEs – Progress since the February 2005 SAC meeting; responses to the Staff Questionnaire on Possible Recognition and Measurement Modifications for SMEs and discussion by the SAC; project plan.

Official recognition, funding for EFRAG?

13 Jun 2005

In the annual report of the European Financial Reporting Advisory Group for 2004, the chairman of EFRAG's supervisory board suggests that EFRAG may seek political recognition by the European Union and, possibly, funding as well: .

In the annual report of the European Financial Reporting Advisory Group for 2004, the chairman of EFRAG's supervisory board suggests that EFRAG may seek political recognition by the European Union and, possibly, funding as well:

Given the increasing political interest in accounting in Europe it may be necessary for EFRAG to be further enhanced. The objective would be to ensure an appropriate political interface by having EFRAG formally recognised by the EU system and also by ensuring there is public oversight and fully satisfactory accountability and transparency in our work.

As a consequence, the funding of EFRAG is also to be considered. It is clear to us that Europe will have to increase its funding of accounting activities compared to before the IASB era, especially if we want to influence the future direction of accounting standards. If we do not upgrade the funding of EFRAG from both the private and especially the public sector, there is a real fear that the future direction of the IASB's work will be heavily influenced by the US, where funding comes via a levy on the listed companies.

EC paper on international regulatory dialogues

13 Jun 2005

The European Commission has published a (PDF 52k) that outlines the state of play of ongoing international regulatory dialogues between the Commission and certain non-EU country regulators on internal market issues.

The paper sets out the Commission's policy priorities for the next several years. Priority will be given to "those regulators and issues where regulatory interdependence is highest and where inefficiencies or frictions are most likely to cause damage." Policy priorities relevant to accounting and auditing include these:

United States: Regarding the United States, regulators on both sides are convinced of the need to increase convergence and acceptance of functional equivalence in key areas such as accounting and audit standards....

Japan: As the move to global financial markets accelerates, the EU and Japan also intend to deepen their cooperation by enhancing the informal financial markets dialogue, covering such issues as accounting and auditing,

Recognition of equivalence: Experience has shown that 100% convergence to the point of identical rules may not always be feasible or necessary, for instance when the respective regulations already reflect broadly equivalent approaches or pursue broadly similar goals. Convergence and equivalence are often linked insofar as a convergence process should at some stage lead to a situation where protection standards of different regulators are equivalent. Before forcing foreign service-providers or businesses to comply with the full set of local rules, regulators and other relevant bodies should ask themselves whether the other jurisdiction already meets, for example, equivalent or materially reciprocal protection standards to those achieved by local rules.

IASB member Robert Garnett will chair IFRIC

11 Jun 2005

The Trustees of the IASC Foundation have announced that Robert Garnett, an IASB member who has served as the acting chairman of the International Financial Reporting Interpretations Committee (IFRIC) following Kevin Stevenson's departure, will become the non-voting chairman of the IFRIC.

The Trustees also announced the renewal of the terms of four IFRIC members for terms of three years ending 30 June 2008:
  • Phil Ameen, Vice President and Comptroller, General Electric Company, United States
  • Michael E Bradbury, Professor of Accounting, Unitec, New Zealand
  • Claudio de Conto, General Manager Administration and Control, Pirelli S.p.A, Italy
  • Jean-Louis Lebrun, Partner and Chairman of the Supervisory Board, Mazars, France
Click for Press Release (PDF 56k). Full list of IFRIC Members.

Comment letters on IFRIC D15 posted

10 Jun 2005

The IASB has posted on its public website the comment letters received on IFRIC Draft Interpretation D15: Reassessment of Embedded Derivatives. .

The IASB has posted on its public website the comment letters received on IFRIC Draft Interpretation D15: Reassessment of Embedded Derivatives.

Australian Accounting Alert on transition to A-IFRSs

10 Jun 2005

Deloitte (Australia) has published an Australian Accounting Alert covering a new Australian interpretation, Compliance with AASB 1 – SPFRs and Small Proprietary Companies (PDF 40k).

AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards should be applied when an entity prepares its first financial report using A-IFRSs. Many entities in Australia are not required to prepare a financial report (for example, small proprietary companies), and those that do prepare a financial report are often permitted to prepare a special purpose financial report (SPFR) on the basis that the entity is not a reporting entity. However, over time an entity's circumstances may change, requiring compliance with A-IFRSs. For these entities, the question arises as to when they should comply with the transitional provisions of AASB 1. This Accounting Alert addresses:
  • preparation of a SPFR under the Corporations Act
  • change in status from a small proprietary company to a large proprietary company
Links to all past Alerts are Here.

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