IASB issues convergence standard on segment reporting

30 Nov 2006

The IASB has issued IFRS 8 'Operating Segments' as part of joint project with the US Financial Accounting Standards Board to reduce differences between IFRSs and US GAAP.

IFRS 8 replaces IAS 14 Segment Reporting and aligns the IASB's standards with the requirements of SFAS 131.

IFRS 8 requires an entity to report financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria.

Operating segments are components of an entity about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, financial information is required to be reported on the basis that it is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments.

 IFRS 8 Operating Segments:

  • applies only to listed entities
  • requires identification of operating segments based on internal reports that are regularly reviewed by the entity's chief operating decision maker in order to allocate resources to the segment and assess its performance
  • includes a component of an entity that sells primarily or exclusively to other operating segments of the entity in the definition of an operating segment if the entity is managed that way
  • requires the amount of each operating segment item reported to be the measure reported to the chief operating decision maker for the purposes of allocating resources to the segment and assessing its performance
  • requires reconciliations of total reportable segment revenues, total profit or loss, total assets, total liabilities and other amounts disclosed for reportable segments to corresponding amounts in the entity's financial statements
  • requires an explanation of how segment profit or loss and segment assets and liabilities are measured for each reportable segment.
  • requires an entity to report information about the revenues derived from its products or services (or groups of similar products and services), about the countries in which it earns revenues and holds assets, and about major customers, regardless of whether that information is used by management in making operating decisions
  • requires an entity to give descriptive information about the way in which operating segments were determined, the products and services provided by the segments, differences between the measurements used in reporting segment information and those used in the entity's financial statements, and changes in the measurement of segment amounts from period to period
  • applies to the annual financial statements for periods beginning on or after 1 January 2009. Earlier application is permitted.

 Click for Press Release (PDF 68k).

IASB discussion paper on fair value measurements

30 Nov 2006

The IASB has published for public comment a Discussion Paper on Fair Value Measurements.

The Discussion Paper sets out the IASB's preliminary views on how to measure fair values when fair value measurement is already prescribed under existing IFRSs. It does not propose any extensions of the use of fair values. The Discussion Paper is built around FASB's recently issued SFAS 157 Fair Value Measurements. SFAS 157 establishes a single definition of fair value together with a framework for measuring fair value for financial reports prepared in accordance with US GAAP. The IASB's Discussion Paper:
  • indicates the IASB's preliminary views on the provisions of FAS 157;
  • identifies differences between FAS 157 and fair value measurement guidance in existing IFRSs; and
  • invites comments on the provisions of FAS 157 and on the IASB's preliminary views about those provisions.

Some points about FAS 157:

  • Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts.
  • Fair value should be based on the assumptions market participants would use when pricing the asset or liability.
  • FAS 157 establishes a fair value hierarchy that prioritises the information used to develop those assumptions. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data, for example, the reporting entity's own data.
  • Fair value measurements would be separately disclosed by level within the fair value hierarchy.
  • FAS 157 is effective for financial statements issued for fiscal years beginning after 15 November 2007, and interim periods within those fiscal years. Early adoption is permitted.
  • FAS 157 may be downloaded from FASB's Website without charge.
Click for IASB Press Release (PDF 53k). The Discussion Paper will be available without charge on the IASB's website starting 11 December 2006. Comment deadline is 2 April 2007. The IASB plans to publish an Exposure Draft in 2008.

Japan and EC discuss accounting progress

30 Nov 2006

Officials from the Japanese Financial Services Agency and the European Commission met in Tokyo on 27 November 2006 to discuss the progress made by Japan towards converging with International Financial Reporting Standards.

Participants also discussed consistency in the interpretation and application of both standards. Japan is seeking recognition of Japanese GAAP as equivalent to IFRSs for the purpose of filings by Japanese companies listed in the European Union. The EC explained its intention to defer the equivalence assessment until 2009, and highlighted the importance of continued effort towards accelerating the convergence and ensuring the consistent application of the accounting standards. The JFSA detailed the time-framed convergence programme of the Accounting Standards Board of Japan. The two groups plan to meet twice yearly, with the next meeting planned for the first half of 2007. Click for Press Release (PDF 22k).

EFRAG does not support IFRIC D20

30 Nov 2006

The European Financial Reporting Advisory Group (EFRAG) has written to the International Financial Reporting Interpretations Committee expressing reservations about the proposals in IFRIC Draft Interpretation D20 Customer Loyalty Programmes.

Here is an excerpt from EFRAG's Letter to IFRIC (PDF 35k):

We do not support the consensus proposed by the Draft Interpretation. In particular, we do not support the adoption of a deferred revenue approach. Instead, we favour adoption in D20 of the so-called cost/provision approach and believe that this approach will, in most instances, result in the most appropriate accounting treatment. We believe that the lack of a clear set of guidelines on segmentation of revenue transactions will lead to inconsistent accounting practices and, generally we doubt whether a consistent and comparable approach will be achieved if the measurement model being proposed is adopted. For those reasons, and until further research is undertaken, we believe that the cost/provision approach will provide the most suitable level of comparability of information in the financial statements.

Deloitte partner assumes the Presidency of IFAC

30 Nov 2006

Fermin del Valle, a Partner in Deloitte Argentina since 1980, has become the President of the International Federation of Accountants for a two-year term ending in November 2008.

Mr del Valle was IFAC Deputy President from November 2004 to November 2006 and served as a member of the IFAC Board beginning in October 1997. He has been an Associate Professor at the School of Economic Sciences at the University of Buenos Aires and a Professor of Accounting and Auditing at the University of San Andres.
Mr. del Valle is also a member of the IFAC Regulatory Liaison Group and most recently served as chairman of IFAC's Planning and Finance Committee, where he led the organisation in the development of its operational and strategic plan for 2006-2008. He is also a former member of IFAC's Compliance Committee, Audit Committee, and Structure and Organisation Task Force.

IPSASB proposal on disclosure of assistance

29 Nov 2006

The International Public Sector Accounting Standards Board IPSASB) has published Exposure Draft 32 on Financial Reporting Under the Cash Basis of Accounting – Disclosure Requirements for Recipients of External Assistance.

ED 32 proposes that the financial statements of governments that receive external assistance disclose the total amount of external assistance received, used, and available during the reporting period. ED 32 also encourages a range of additional disclosures that will further enhance the usefulness of the financial statements in the assessment of the financial position of recipients and of their use of external assistance. ED 32 was developed following consideration of responses that the IPSASB received to a previous exposure draft, ED 24, a document with the same title which was issued in February 2005. ED 32 proposes amendments to address constituents' concerns regarding the previous exposure draft. Comments due by 31 March 2007. Click for Press Release (PDF 83k). Click for Exposure Draft 32 (PDF 309k).

European discussion paper on performance reporting

28 Nov 2006

The European Financial Reporting Advisory Group (EFRAG) and the Instituto de Contabilidad y Auditoría de Cuentas (or ICAC) have published a Discussion Paper on performance reporting entitled 'What (if anything) is wrong with the good old income statement?' It is the second paper issued under the auspices of the Pro-active Accounting Activities in Europe (PAAinE).

The paper identifies and analyses the arguments of those who believe that fundamental changes are needed to the existing performance reporting model, and also explains the reasoning of those who believe such changes are not needed.

The paper does not reach any conclusions on the issues, but it sets the scene for a subsequent paper that will explore the underlying issues involved in greater detail.

The comment period ends on 31 March 2007. Click to Download the Discussion Paper (PDF 896k).


EC Commissioner comments on accounting issues

24 Nov 2006

In a presentation titled Rewarding Excellence in Legibility of Accounts: Meeting the IFRS Challenge, Charlie McCreevy, the European Commissioner for Internal Market and Services, commented on a number of IFRS-related issues:

  • Readbility. "IFRS aim to give increased transparency in accounts. But this must not be at the expense of legibility. Preparers have been grappling with the novelties of IFRS. Companies and investors will take some time to absorb and digest them. That is why I have repeatedly said we need a period of relative stability to let the new standards bed down."
  • Information overload. "The world's biggest accounting firms have recently joined forces to call for a radical overhaul of how companies report. They have called, in particular, for two changes. The first is that there should be a move to real-time, internet-based accounting, instead of quarterly statements. The second is that more non-financial information should be provided to give a fuller picture of companies' performance. The accounting firms are right to provoke a debate. But I wonder whether a flood of information is really the answer. Of course, we must make use of new technological tools. Yet often the real problem in the digital age is how best to sift the mass of information that is available. How to find the needle in the haystack. Too much information may mean many investors will have to rely more heavily on professional analysts. In fact, I have to tell you that I am very glad we didn't go for quarterly reporting in Europe."
  • IFRS for SMEs. "The Commission is working to identify areas of EU accounting and company law which can be simplified for SMEs. Important work on SME accounting is also going on at the International Accounting Standards Board (IASB). I have already made clear to that board that if this work is to be useful, it must be kept simple. This is the clear test that I will apply in determining whether it is worthwhile making use of the results of the IASB's work at EU level."

Click for Full Presentation (PDF 72k).

Standard setting activity in Asia-Pacific region

23 Nov 2006

We have updated a number of pages on this website to reflect recent standard setting activity in the Asia-Pacific region.

Click for access to our jurisdiction pages:

Updated summary of issues not added to IFRIC agenda

22 Nov 2006

We have updated our Summary of Issues Not Added to IFRIC's Agenda to include IFRIC's final decisions in November 2006 not to add the following topics to its agenda:

  • IAS 1 - Whether the liability component of a convertible instrument should be classified as current or non-current
  • IAS 11 - Allocation of profit in a single contract
  • IAS 16 - Revaluation of investment properties under construction
  • IAS 32 - Changes in the contractual terms of an existing equity instrument resulting in it being reclassified
  • to financial liability
  • IAS 32 - Classification of a financial instrument as liability or equity
  • IAS 32 - Foreign currency instruments exchangeable into equity instruments of the parent entity of the issuer
  • IAS 32 - Puts and forwards held by minority interests
  • IAS 38 - Classification and accounting for SIM cards
  • IAS 38 - Adoption of IAS 38 (revised 2004)
  • IAS 39 - Valuation of electricity
  • IAS 39 - Testing of hedge effectiveness on a cumulative basis
  • IFRS 2 - Fair value measurement of post-vesting transfer restrictions
  • IFRS 2 - Incremental fair value to employees as a result of unexpected capital restructurings
  • IFRS 2 - Employee benefit trusts in the separate financial statements of the sponsor
  • IFRS 3 - Are puts or forwards received by minority interests in a business combination contingent consideration?
  • IFRS 7 - Presentation of 'net finance costs' on the face of the income statement
  • SIC-12 - Relinquishment of Control

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