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Deloitte responds to CESR's equivalence consultation

31 May 2007

In our News Story of 23 April 2007 we reported that the Committee of European Securities Regulators (CESR) is seeking technical advice on a mechanism for determining the equivalence of the generally accepted accounting principles of non-EU countries with IFRSs.

We have submitted our response to the six questions in CESR's consultation. Click to Download the Deloitte Letter to CESR (PDF 186k).
Click for 23 April 2007 News Story.

South Africa, Australia proposing to adopt the IFRS for SMEs

31 May 2007

Both South Africa and Australia have taken steps that would lead to adoption of the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) in those jurisdictions.

The IFRS for SMEs is currently an Exposure Draft. A final standard is expected in the second half of 2008.


The South African Institute of Chartered Accountants has issued its Exposure Draft No. 225, proposing to early-adopt the ED of the IFRS for SMEs as an interim standard in South Africa for limited interest companies even before the final standard is adopted by the IASB. The early-adopted version would be replaced by the final standard when it is issued. Currently, limited interest companies must choose either full IFRSs or full South African GAAP, which is very close to full IFRSs; those choices would remain. Click to Download ED 225 (PDF 98k). Comment deadline is 18 June 2007.


The Australian Accounting Standards Board (AASB) has approved for publication an Invitation to Comment (ITC) on A Proposed Revised Differential Reporting Regime for Australia and the IASB Exposure Draft of a Proposed IFRS for Small and Medium-sized Entities. Comment deadline is 1 September 2007. In essence, the ITC is really two major but inter-related proposals:

  • A proposal to implement a revised 'differential reporting' framework in Australia, eliminating the 'reporting entity' concept, and
  • The IASB's own proposed IFRS for SMEs.

Under the proposed differential reporting framework, if a business entity's revenue exceeds A$500 million or it assets exceed A$250 million and it is required to, or elects to, publish financial statements, it must use the Australian equivalents of full IFRSs (A-IFRSs). If its revenue and assets are below those size thresholds and it is required to, or elects to, publish financial statements, it would have an option of using full A-IFRSs or the Australian Equivalent of the IFRS for SMEs. Unlisted companies that are required to publish financial statements could no longer produce simplified 'special purpose' statements. This Accounting alert (PDF 52k) provides more information. The invitation to comment will be available shortly on the AASB's Website.

Use of IFRSs in Samoa

30 May 2007

We have added a Country Page for Samoa.

Samoa does not have an accounting law or a statutory requirement for all companies to publish financial statements. Nor are there Samoan accounting standards. The Samoa Institute of Accountants requires companies that are audited to follow either IFRSs or another internationally accepted accounting framework such as US GAAP. In most cases, companies report under IFRSs. The Institute also requires the use of International Standards on Auditing.

Near-final draft of amendments to IFRS 2

30 May 2007

The IASB has posted in the On-line Subscriber Area of its website the near-final draft of a forthcoming amendment to IFRS 2 Share-based Payment.

The amendment relates to Vesting Conditions and Cancellations. The amendment would be effective for annual periods beginning on or after 1 January 2008 and would be applied retrospectively.

FASB Chairman comments on convergence

29 May 2007

The 2006 annual report of the US Financial Accounting Foundation (under which FASB operates) includes comments of FASB Chairman Robert H Herz on FASB-IASB convergence efforts.

Mr Herz's comments are set out below. Here is the link to Download the Full FAF Annual Report  from the FASB website (PDF 3,328k).

What is the status of the convergence initiative with the IASB?

The FASB and IASB are making continued progress in our joint effort to enhance consistency, comparability, and efficiency in global capital markets through our convergence initiative. In fact, virtually all of our major projects are now being conducted jointly, and the Boards are devoting a majority of our time and resources to this effort.

In February 2006, the Boards published a Memorandum of Understanding that reaffirmed the Boards' shared objective of developing a common set of high-quality standards for both domestic and crossborder use. We continue to believe that ensuring that high-quality standards that provide credible, comparable, conceptually sound, and usable information to the global capital markets should be at the core of the FASB and IASB missions.

We also continue to work closely with the IASB to develop a common conceptual framework. Presently, the FASB and IASB are each guided by their own individual frameworks. While similar, these differ from each other in various respects, are incomplete, and are not up-to-date. The Boards believe that a common conceptual framework will improve the foundation and concepts that underlie global financial reporting and serve as a more effective guide in developing global financial reporting standards. Accordingly, during 2006, the FASB and IASB jointly published for public comment a consultative document setting out our preliminary views on the first two chapters of an enhanced conceptual framework.

Our views on Related Party Disclosures Exposure Draft

29 May 2007

We have submitted to the IASB our comments on the Exposure Draft: Proposed Amendments to IAS 24 Related Party Disclosures.

The amendments relate to disclosures of relationships and transactions among state-controlled entities and to the definition of related parties. Here is an excerpt from our comment letter on the proposal:

The ED addresses a very real practical issue for jurisdictions where state-controlled and state-influenced entities play a major role. We have previously sent an agenda submission to the IFRIC raising our concerns regarding whether compliance by such entities with the disclosure requirements of the current version of IAS 24 is achievable in certain jurisdictions. In general, we are supportive of the approach proposed in the ED for easing the disclosure burden for entities controlled or significantly influenced by the state.

Similarly, we are pleased to see the Board addressing a number of inconsistencies in the definition of a related party and proposing to improve the wording in the Standard. We believe that the proposals would improve the definition, but that it is still unclear and difficult to understand in places. We also find the wording in many areas of the revised Standard somewhat ambiguous and so, in some cases, we are forced to deduce the intentions of the Standard, rather than being able to understand the words used. We believe that the lack of clarity could cause significant problems to readers if English is not their first language and also when the Standard is translated into other languages.

Although we have noted some significant reservations with the ED, we feel that the IASB is heading in the right direction. If the Board focuses on developing the key points, e.g. the definition of 'state' and the application of the indicators of influence, and also works to clarify the language of the Standard, then we are optimistic that it will result in an improvement in disclosures made under the Standard.

Links to:

CFA Institute recommendations on quarterly reporting

29 May 2007

The CFA Institute Centre for Financial Market Integrity and the Business Roundtable Institute for Corporate Ethics have jointly published Apples to Apples: A Template for Reporting Quarterly Earnings.

This report is based on concerns expressed at a series of symposia held in 2005 and 2006 addressing the issue of short-term thinking in today's financial markets. The report makes a number of recommendations for specific refinements to the content and organization of quarterly earnings releases to improve transparency. It includes an example 'template' of a third quarter earnings announcement. Click to Download the Report  (PDF 198k). The report is copyright CFA Institute and has been posted here with their kind permission.

Excerpts from Recommendations

To better enable all financial statement users to make consistent, apples-to-apples comparisons among quarterly financial reports, we recommend that all public companies voluntarily adopt a consistent template for quarterly earnings releases. The template would provide management with a user-friendly format in which to highlight issues of importance in an informative and concise manner. These recommendations are based on a comprehensive review of quarterly earnings announcements from a number of companies and discussions with financial experts and users of financial statements.

In order to improve the quality of communications between companies and investors, we strongly urge companies to issue quarterly earning reports that:

  • End quarterly earnings guidance
  • Include a GAAP income statement that starts at the revenue line and proceeds to net income
  • Position GAAP reconciliation tables in immediate proximity to the non-GAAP financial measures they are meant to illuminate
  • Include a balance sheet and statement of cash flows
  • Place information consistently


We comment on three proposed auditing standards

28 May 2007

Deloitte has recently submitted letters of comment to the International Auditing and Assurance Standards Board (IAASB) on the following three proposed International Standards on Auditing.

In each case, while offering some suggestions for improvement, we concluded that "we are supportive of the development of this guidance and believe, overall, that the redrafting of the proposed standard was completed in accordance with the clarity conventions and criteria adopted by IAASB". You can find past Deloitte letters to the IAASB Here.

IOSCO will hold roundtable on audit quality

28 May 2007

The International Organization of Securities Commissions (IOSCO) will hold a Roundtable on the Quality of Public Company Audits in Paris on 1 June 2007. The roundtable will address audit quality from the perspective of securities regulators.

The Roundtable Program  (PDF 37k) will consist of three substantive panels followed by a concluding analysis and commentary. The panel topics are:
  • Audit Quality: Evaluating External Audits in Today's Environment
  • Effects of Auditor Liability on Behaviour and Quality
  • Audit Firm Concentration – Potential Effects on Audit Quality

New publication on tax reporting challenges

28 May 2007

Deloitte & Touche (United Kingdom) has published Mind the GAAP: Best Practice Tax Reporting in a Changing Environment.

This publication  contains recommendations as to how companies might address the challenges of tax reporting in financial statements brought about by recent changes including IFRSs and auditor independence. The report draws on market research that investigates how large businesses in the UK are managing the challenges of tax reporting. Some of the facts uncovered may be surprising:
  • Company tax directors and managers lack confidence in their company figures.
  • Alarmingly, 43% of companies are concerned that errors in brought forward balances may eventually lead to material errors.
  • There is a high level of discomfort with the technical requirements of the accounting standards.
  • Nearly half (49%) of the companies claim to have had differences of opinion with their auditors on the interpretation of IAS 12.
  • Only 50% of in-house tax professionals believe that their personal knowledge of IAS 12 is adequate, and only 12% believe that their staff is fully trained in this area.
  • Accounting systems appear not to support the requirements of the tax function – making it difficult to get the numbers right.
The publication presents Deloitte's recommendations as to how companies can get to a 'fit for purpose' year end. Key recommendations for companies include the adoption of tax basis balance sheets, full quarterly tax reporting, and real time audits which conclude on the tax reporting impact of significant transactions, as they happen, to enable early identification of material issues.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.