There is clear momentum towards accepting IFRSs as a common financial reporting language throughout the world. Today, companies in the European Union are benefiting from reduced compliance costs associated with the removal of the need for the consolidation of different national accounts into a single statement to meet their home country's requirements. Investors are able to make comparisons of companies operating in different jurisdictions more easily. Regulatory authorities are now more able to develop more consistent approaches to supervision across the European economies.

As momentum towards a common set of international standards has built, the relevance of the IASB's work to the world's economy naturally invites increased scrutiny of our operations and the standard-setting process. This is something that the IASC Foundation Trustees and my IASB colleagues and I welcome. At the same time, I would ask for your help as elected representatives within the European Union, a leading beneficiary of IFRSs, in sustaining and protecting the project underway. Any unnecessary shock to the emerging IFRS system could derail what is becoming a global consensus around IFRSs.

Last week, the Trustees considered the comments received from the European Commission and others on our working procedures and responded positively to those comments. The Trustees are working with the IASB to build a framework that makes more explicit how cost-benefit considerations are taken into account when the IASB addresses new standards. Using field research and building upon its consultative processes, the IASB will seek to explain the impact of new standards on capital markets more clearly. Furthermore, the IASB will establish feedback statements related to comments received throughout the consultation process, enabling respondents and others to see clearly how the IASB dealt with comments received. Other regulatory groups, including the Committee of European Securities Regulators, adopt this approach to explain their conclusions, and the IASB will look to them as models.

The Trustees also discussed the need for a more active engagement on both the Trustee and IASB-level with key stakeholders, including the European Parliament. It is fair to say that we have not established regular contact with the members of the ECON committee, and the IASB wants to rectify this.

AGENDA FOR THE JOINT IASB-FASB MEETING

23-24 April 2007, London

Monday 23 April 2007

• Intangible Assets – Agenda proposal
• Liability and Equity
  • A presentation of a discussion paper prepared by staff of the Accounting Standards Committee of Germany on behalf of the German Accounting Standards Board and the European Financial Reporting Advisory Group. The paper provides an alternative view on distinguishing between liabilities and equity.
• Conceptual Framework – Measurement Bases
• Conceptual Framework – Project plan

Tuesday 24 April 2007

• Business Combinations
  • The Boards will discuss several convergence issues related to the proposed business combinations standard. The Boards also will consider an analysis of the benefits and costs of the proposed business combinations and non-controlling interest standards.
• Leases – scope of a discussion paper

BOARD MEETING AGENDA

17-19 April 2007, London

Tuesday 17 April 2007

• Meeting of IASB with representatives from EFRAG
• Discontinued Operations – Agenda decision
• Short-term Convergence – Income Taxes
• Post-employment Benefits
• Financial Instruments Puttable at Fair Value and Obligations Arising on Liquidation

Wednesday 18 April 2007

• Conceptual Framework
• Financial Instruments – Comprehensive Project

Thursday 19 April 2007

• Annual Improvements 2006-2007– Advertising and promotional expenditure
  • The Board will consider whether paragraph 70 of IAS 38 should be amended to state that payments made in respect of training and advertising and promotional activities may be recognised as an asset until such time as those activities first take place.
• Short-term Convergence – Joint Ventures [Education session]
• Liabilities – Amendments to IAS 37[Education session]
  • Representatives from the legal profession will meet with the Board to discuss issues particularly associated with applying the proposals in the IAS 37 ED to lawsuits.
• Business Combinations II

• IFRIC 12 Service Concession Arrangements. Views of ARC members were divided regarding whether the ARC should recommend endorsement, including possibly some type of transitional modification of IFRIC 12 for use in Europe. The ARC decided to continue consideration of endorsement at its 6 June 2007 meeting. Meanwhile ARC members were invited to put their views in writing by 30 April 2007.
• Effective dates of IFRSs. The Commission Services presented the issue of suitable wording for the date of application of IFRSs and IFRICs adopted in Commission Regulations. Two alternatives were discussed. Member States appeared to unanimously support the following approach for the 'date of applicability' clause in the endorsing Commission Regulations endorsing IFRSs and IFRICs: The endorsed IFRS or IFRIC should apply to the company's first financial year beginning after a specific date.
• Roundtable for Consistent Application of IFRSs in Europe. The Commission Services reported on discussions at the three Roundtable meetings that have taken place to date (May and September 2006, January 2007). Twenty-six issues have been discussed of which five have been concluded as being of common concern regarding consistent application of IFRS in Europe.
• CESR experience in IFRS implementation. The Committee of European Securities Regulators (CESR) will publish, in 'early summer', a report giving a general overview of issues. Another report with information on about 20 enforcement decisions taken by EU Regulators is expected to be published by the end of March 2007. Some CESR members have also issued reports on IFRS application at a national level.
• IFRS branding.The ARC discussed an IASB plan to modify IAS 1 to require companies to disclose any differences between full IFRSs and the company's reporting framework if that framework is based on, but not fully compliant with, full IFRSs. The ARC considered such matters as:
  • Whether the differences between IFRSs as adopted by the EU and full IFRSs are likely to be so material that they merit a disclosure in the accounts.
  • Whether the SEC's requirement for reference to full IFRSs is in accordance with the principle of the mutual recognition of EU-US accounting standards.
  • Whether there is a need for a standard formulation for those companies using the carve out (a standardised description of the differences).
• Equivalence of IFRSs and Third-Country GAAP. The Commission Services described the key points to be covered in its first report to the European Securities Committee and European Parliament under the two legislative measures adopted in late 2006. It will describe the work timetables towards convergence to IFRSs in Canada, Japan, and the US.
• Simplification of accounting rules for small and medium-sized entities (SMEs) – possible revision of the 4th and 7th Directives. The ARC discussed a range of issues relating to SMEs, including introduction of a category of 'micro entities' and relieving small entities of any requirement to publish annual accounts. Regarding the IASB's Proposed IFRS for SMEs: "The majority of Member States confirmed that the exposure draft of the IFRS SME standard would not be suitable for most SMEs in Europe, as it does not contain enough simplifications. Member States also explicitly expressed their opposition to making a future SME standard binding for non-listed companies in the EU."

FEI's Recommendations to Address Complexity in Financial Reporting

• 1. The FASB and SEC, in coordination with key financial reporting stakeholders (preparers, auditors and financial statement users), should take steps to end the proliferation of detailed rules.
  • a. Agree to a stable platform for a specified period of time, during which no new accounting standards would be issued. Efforts would be shifted from new standards to completion of the conceptual framework, including the development of a comprehensive accounting and disclosure model that is integrated with the codification project.
  • b. Upon completion of the model,work jointly with the IASB to evaluate proposals by stakeholders to improve and simplify the most complex standards by making them more principles-based, and eliminate important differences between US GAAP and IFRS. Stakeholders in the financial reporting process should continue to encourage global convergence and mutual recognition of high-quality accounting standards.
• 2. Congress should consider meaningful class-action reform.
• 3. The SEC and PCAOB should develop a framework that provides effective regulation in a principles-based environment, one that balances the objective of investor protection with the need to maintain market competitiveness.
• 4. Stakeholders should come together to form an independent 'Committee on Complexity'.

Please note that for months that end a calendar quarter, separate monthly Accounting Roundups will no longer be published. This should ensure a more timely release of the Quarter in Review issues.