In August 2004 the had APB published preliminary guidance on issues that may arise when companies make the transition from UK/Irish GAAP to IFRSs. The new Bulletin reflects a number of additional issues, including the auditor's review of interim financial information in the first year of adoption of IFRSs. The Bulletin notes:

In spite of the progress made in resolving many of the legal and regulatory issues there are some remaining uncertainties. In particular, the specific wording to be used in the auditor's report when describing the financial reporting framework is still under debate. The wording used in the draft Bulletin is "those IFRSs adopted for use in the European Union" but there is a continuing discussion within Europe on the best term to use. The APB favours a consistent approach to this matter within Europe and accordingly this Bulletin is being issued as interim guidance and the description of the financial reporting framework used in it may be changed if there is a European consensus for a different description.

Click to download:

• Interim Guidance 2005-3 (PDF 269k).
• Press Release (PDF 25k).

The letters will be released individually through the SEC's EDGAR system at www.sec.gov not earlier than 45 days after the review of the disclosure filing is complete.

As a result, common control business combinations will be accounted for in the same manner under AASB 3 and IFRS 3. Deloitte Australia has been a long-term critic of the AASB's scope amendments to IFRS 3 when originally creating the local Australian standard, most recently in this (PDF 509k).

Paul's article discusses different national and regional approaches to converging local GAAP with IFRSs and the progress in various countries around the world. It was published in a special issue of the International Journal of Accounting, Auditing and Performance Evaluation devoted to "the new value-relevant global financial reporting model" (copyright 2005 by Inderscience and posted with the kind permission of the publisher).

Typically, each event will include a three-hour meeting of several Board and staff members with 20 or so CFOs and CAOs and a press briefing. The focus of the discussion will be the Board's current and future projects. The schedule is as follows:

• The Hague, Netherlands – Monday 6 June 2005
• Frankfurt, Germany – Wednesday 8 June 2005
• Copenhagen, Denmark – Thursday 9 June 2005
• Helsinki, Finland – Friday 10 June 2005
• Rome, Italy – Monday 13 June 2005
• Brussels, Belgium – Wednesday 15 June 2005
• Vilnius, Lithuania – Wednesday 15 June 2005
• Vienna, Austria – Friday 17 June 2005
• Oslo, Norway – Monday 27-Tuesday 28 June 2005
• Lisbon, Portugal – Thursday 30 June-Friday 1 July 2005
• Zurich, Switzerland – Monday 4-Tuesday 5 July 2005
• London, United Kingdom – Friday 8 July 2005
• Stockholm, Sweden – Tuesday 13 September 2005
• Dublin, Ireland – Expected in September 2005
• Paris, France – Expected in September 2005
• Athens, Greece – To be confirmed
• Warsaw, Poland – Expected in September 2005

EFRAG's primary reason is that:

 

[IFRIC 3] creates a measurement mismatch (whereby some items are measured at cost (IAS 38 and IAS 20) and others at fair value (IAS 37)) and a reporting mismatch (whereby some gains and losses are reported in profit and loss (IAS 37 and IAS 20) and others in equity (IAS 38)) ....

EFRAG believes that application of IFRIC 3 will not always result in relevant financial information because in certain cases it does not faithfully represent the economic reality. EFRAG also believes that the disadvantages that would arise from endorsing the interpretation outweigh the advantages of guidance on the accounting of emission rights schemes. EFRAG has therefore concluded that IFRIC 3 does not meet all of the requirements of the Regulation EC No. 1606/2002 of the European Parliament and of the Council on the application of International Accounting Standards....

For the reasons given above we believe that it is not in the European interest to adopt IFRIC 3 in its present form. EFRAG therefore recommends that the EU Commission should not endorse IFRIC 3 Emission Rights.

Click to Download EFRAG's Letter (PDF 303k). EFRAG has also posted on its Website its draft comment letter on IFRIC D15 Reassessment of Embedded Derivatives.

 

Service concessions are arrangements whereby a government or other body grants contracts for the supply of public services, such as roads, energy distribution, prisons, or hospitals, to private operators. The draft interpretations establish two accounting models – the financial asset model and the intangible asset model. The appropriate model depends on whether the grantor or the users have the primary responsibility to pay the operator for the concession services. Click to download the (PDF 135k). Here is an excerpt:

With the benefit of hindsight, we believe that if this project were started from the beginning, it might be better suited to a Board project to develop an accounting standard. However, given the advanced stage of the project and the desperate need in the market place for these interpretations we believe the IFRIC should complete this project with all due haste.... We do have a number of pervasive concerns, which we believe are fundamental flaws in the accounting models proposed by the IFRIC.

The agenda for the meeting is presented below.

16-18 May 2005, London Monday 16 May 2005 (afternoon only) Measurement on Initial Recognition – Draft Discussion Paper Measurement Bases for Financial Accounting: Measurement on Initial Recognition Short-term Convergence – Provisions, Contingent Liabilities and Contingent Assets Tuesday 17 May 2005 Insurance Contracts – Non-life insurance accounting Accounting Standards for Small and Medium-sized Entities (SMEs) – Approach to considering possible presentation and disclosure modifications of IFRSs for SMEs. Conceptual Framework – Qualitative characteristics of financial information Performance Reporting – Impact of April Board decisions on Segment A topics on EPS Wednesday 18 May 2005 (morning only) IFRIC X Liabilities Arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment – Approve a proposed Interpretation Share-based Payment – Following the IFRIC's recent discussion of D11, the Board will consider whether to amend IFRS 2 re cancellations and the definitions of vesting conditions IFRS 7 Financial Instruments - Disclosures – Day 1 profit disclosures and amendments to IFRS 4

We have updated the following agenda project pages to reflect discussions at the Board's April 2005 meeting:

• Conceptual Framework,
• Extractive Industries,
• Financial Instruments – Comprehensive Project,
• IAS 39 Fair Value Option,
• IAS 39 Financial Guarantees and Credit Insurance,
• IFRS 6 – Small Amendment,
• Insurance Contracts,
• Performance Reporting, and
• Short-term Convergence – IAS 12.

IAS 27 requires investors to recognise income from a subsidiary "only to the extent that the investor receives distributions from accumulated profits of the investee arising after the date of acquisition". Any distributions received out of preacquisition profits are treated as a recovery of part of the cost of the investment. Because of the retrospective transition requirements of IFRS 1 for first-time adopters of IFRSs, "a parent company must examine all past distributions made by each of its subsidiaries to determine whether they were paid from pre-acquisition profits. Some parent companies have a substantial number of subsidiaries and will need to locate and examine data – which in some cases may no longer be available or obscured by intra-group reorganisations – from the date of the initial acquisition of the investment. In many cases this is likely to prove a highly onerous task." The ICAEW urges an early amendment to IFRS 1 to ease the burden. Click to (PDF 29k).