FASB statement on penisons and other retirement plans

30 Sep 2006

The US Financial Accounting Standards Board has issued FASB Statement No.

158 Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans. FASB is conducting its retirement benefits project in phases. The goal of phase 1 is to make balance sheets more complete, transparent, and understandable. FAS 158 is intended to do that. Phase 2 is comprehensive reconsideration of accounting for pensions and other retirement plans. For an entity whose securities are traded in a public market, the recognition provisions of FAS 158 (see below) are effective for fiscal years ending after 15 December 2006. For non-public entities, the effective date is fiscal years ending after 15 June 2007. FAS 158 also requires that employers measure plan assets and benefit obligations as of the balance sheet date; this requrement takes effect for all entities for years ending after December 15, 2008. In July 2006, the IASB added to its agenda a two-phase Project on Post-Retirement Benefits including Pensions. The IASB plans to complete phase 1 in 2010 with an interim standard that would address presentation and disclosure, definition of defined benefit and defined contribution arrangements, accounting for cash balance plans (possibly), smoothing and deferral mechanisms, and treatment of settlements and curtailments. Click for (PDF 56k). FAS 158 is available on FASB's Website without charge.

Under FAS 158, an employer that is a business entity is required to:

  • Recognise in its statement of financial position the overfunded or underfunded status of a defined benefit postretirement plan measured as the difference between the fair value of plan assets and the benefit obligation. For a pension plan, the benefit obligation would be the projected benefit obligation; for any other postretirement benefit plan, such as a retiree health care plan, the benefit obligation would be the accumulated postretirement benefit obligation.
  • Recognise as a component of other comprehensive income, net of tax, the actuarial gains and losses and the prior service costs and credits that arise during the period but pursuant to FASB Statements No. 87 Employers' Accounting for Pensions and No. 106 Employers' Accounting for Postretirement Benefits Other Than Pensions, are not recognised as components of net periodic benefit cost. Amounts recognised in accumulated other comprehensive income would be adjusted as they are subsequently recognised as components of net periodic benefit cost pursuant to the recognition and amortisation provisions of Statements 87 and 106.
  • Any remaining transition amounts from initial adoption of FAS 87 and FAS 106 would also now be recognised in measuring a plan's funding status and in other comprehensive income.
For many entities with defined benefit plans, FAS 158 could result in increased liabilities, with corresponding reductions in equity.

Deloitte comments on proposed amendments to IAS 23

30 Sep 2006

Deloitte has submitted to the IASB our comments on the (PDF 92k).

Over overall view:

We acknowledge that a general objective of the IASB's standard setting-agenda is the reduction of accounting alternatives in its standards. The ED could be seen in this light. However we see no evidence to support the IASB's conclusion that requiring capitalisation of interest is a higher quality answer.

Specifically we see no evidence in the Invitation to Comment or the ED's Basis for Conclusions that the IASB conducted an analysis of whether users are concerned about treating interest as an expense as opposed to including it as part of the acquisition cost of an asset and (if it did) what the conclusions of that analysis were. We are aware that users represented by the Chartered Financial Analyst Institute have consistently opposed capitalisation of borrowing costs. Indeed in BC 3, the proposals seem to be justified primarily on the basis that FAS 34 and IAS 23 are equally poor standards, We do not think that such a justification is in the spirit of convergence.

Deloitte comments on proposed IFRIC due process

30 Sep 2006

Deloitte has submitted to the Trustees of the IASC Foundation our comments on the (PDF 112k).

Our overall view:

We generally support the approach outlined in the Draft Handbook and think it would be a useful document in explaining the approach used to interpret Standards adopted by the IASB. Further, we are pleased to observe that the Draft Handbook addresses concerns raised in our comment letter on the IFRIC–Review of Operations consultation. However we do draw attention to our principal comments on the IFRIC Agenda Committee procedures under Question 1 as well as the concerns addressed under Question 3 on the consultative process for issues not added to the IFRIC agenda.

Heads Up newsletter on stock options

29 Sep 2006

In our news story of 20 September 2006 we reported on a letter sent to the FEI and the AICPA by the Office of the Chief Accountant (OCA) of the US SEC.

That letter stated OCA's views on the application of the stock option accounting literature in the historical financial statements of public companies when an award of stock or stock options is 'back-dated' before the actual award date, and related circumstances, Deloitte & Touche LLP (United States) has published a special issue of the (PDF 119k) explaining the SEC letter, with an appendix of illustrative examples.

Heads Up newsletter on fair value measurements

28 Sep 2006

Deloitte & Touche LLP (United States) has published a special issue of the (PDF 218k) summarising FASB Statement No 157 Fair Value Measurements.

FAS 157, released on 15 September 2006, provides enhanced guidance for using fair value to measure assets and liabilities. It applies whenever other standards require or permit assets or liabilities to be measured at fair value. FAS 157 does not expand the use of fair value in any new circumstances. (PDF 19k). FAS 157 may be Downloaded from FASB's Website without charge. As part of its Fair Value Measurements Project, the IASB intends to issue a Discussion Paper before the end of 2006 that will invite comments on FAS 157 and on the IASB's preliminary views on the principles in FAS 157.


EC will assess economic impact of IFRSs

28 Sep 2006

In 2007, the European Commission will begin a comprehensive evaluation of the economic impact of its Financial Services Action Plan (FSAP).

The FSAP includes the adoption of International Financial Reporting Standards for listed companies throughout Europe. To plan the impact assessment, the Commission will convene a workshop on methodology on 25 October 2006 in Brussels. "Economic experts representing the financial services industry, supervisors, consumers, and the academic world have been invited to present their views on how best to carry out the evaluation of such a complex programme." Background documents for the workshop include:

EFRAG advisory forum on revenue recognition

28 Sep 2006

The European Financial Reporting Advisory Group will hold an Advisory Forum on Revenue Recognition on 18 October 2006 in Brussels.

The objective of the Forum is to "debate and obtain input from high-level representatives of key stakeholders". A few seats are still available. More information, including a list of speakers and agenda, is on the EFRAG Website.

SEC will make its electronic database interactive

26 Sep 2006

US Securities and Exchange Commission has awarded three separate contracts totaling US$54 million to "transform the agency's 1980s-vintage public company disclosure system from a form-based electronic filing cabinet to a dynamic real-time search tool with interactive capabilities".

By moving to interactive data using the XBRL computer language, the SEC will be joining the US FDIC, the Federal Reserve, and the Comptroller of the Currency, which already require banks to use it. For the last year, approximately 8,200 US financial institutions have been using XBRL to submit quarterly reports to US banking regulators. To SEC's current electronic - nicknamed EDGAR - cannot yet utilise the extra capabilities of XBRL. The three contracts announced today will close that gap, paving the way for universal XBRL filings by companies, which are currently voluntary. Click for (PDF 42k). The SEC will hold an (PDF 39k) at its offices on 3 October 2006.

Board agenda project pages updated

25 Sep 2006

We have updated the following Board agenda project pages to reflect the discussions and decisions at the International Accounting Standards Board's September 2006 meeting: Amendments to IAS 14 Segment Reporting Amendments to IAS 37 Non-Financial Liabilities Business Combinations Phase II Conceptual Framework Consolidations (including Special Purpose Entities) Fair Value Measurements Financial Instruments – Comprehensive Project Financial Statement Presentation IAS 39 Financial Instruments: Recognition and Measurement – Derecognition Issues IFRS 1 – Cost of a subsidiary in the separate financial statements of a parent on first-time adoption of IFRSs IFRS for Small and Medium-sized Entities Insurance Contracts - Phase 2 Measurement Bases for Financial Reporting Related Party Disclosures Revenue Recognition .

Updated EFRAG endorsement status report

24 Sep 2006

The European Financial Reporting Advisory Group has updated its report showing the status of endorsement, under the EU Accounting Regulation, of each IFRS, including standards, interpretations, and amendments.

Click to download the Endorsement Status Report as of 15 September 2006 (PDF 25k). (You can always find it on our EFRAG Page.) Currently, the following IASB pronouncement has not yet been endorsed for use in Europe:
  • IFRIC 10 Interim Financial Reporting and Impairment

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