Heads Up on structural changes at FAF, FASB, and GASB

29 Feb 2008

In our News Story of 27 February 2008 we reported on the decision of the Trustees of the US Financial Accounting Foundation to make major changes to the oversight, structure, and operations of the FAF and its two standard-setting Boards, FASB and GASB, including reduction of the FASB from seven members to five.

Deloitte & Touche LLP (United States) has published a special edition of the Heads Up Newsletter (PDF 104k) explaining the structural changes.


EC Single Market Newsletter - 'equivalence'

29 Feb 2008

The European Commission has posted on its website the electronic English langugage version of its newsletter Single Market News 1Q 2008.

One article in that newsletter may be of particular interest to IAS Plus visitors: Adoption of 'Equivalence Mechanism' Paves the Way for Decisions on Third Country Accounting Standards (PDF 113k). Click to view Single Market News 1Q 2008 (link to EC website).

Guía del Nuevo Plan General de Contabilidad en España

28 Feb 2008

As a result of corporate and accounting law reforms in Spain, the Spanish Parliament recently adopted a new Plan General de Contabilidad (Spanish GAAP) effective for years beginning on or after 1 January 2008. It applies to individual companies and unlisted consolidated groups (listed consolidated groups are subject to IFRSs as adopted by the EU).

The new Spanish GAAP is 'inspired by IFRSs' but not equivalent, and differences remain. Deloitte Spain has published a pocket guide, in Spanish, to the new Spanish GAAP: Nuevo Plan General de Contabilidad – Guía de bolsillo (PDF 361k, en español) The guide also includes a summary of the main changes in corporate law approved in parallel and a quick guide to the most significant differences with respect to the previous Spanish GAAP and International Financial Reporting Standards.


Deloitte Australia Insights Podcast on revised business combination requirements

28 Feb 2008

How will the new business combination accounting requirements affect you?

In this Deloitte Australia Insights podcast, Deloitte partners Stephen Ferris and Debbie Hankey discuss the recent amendments to accounting for mergers, acquisitions and similar transactions made by the International Accounting Standards Board (IASB).

Debbie and Stephen explore some of the practical aspects of the major changes resulting from the amendments, including:

  • the immediate expensing of transaction costs
  • new volatility in reported profits arising from share-based payment arrangements, earn outs and other contingent arrangements, and pre-existing relationships
  • the use of the 'full goodwill' method to account for acquisitions
  • an expanded emphasis on fair value
  • what C-level executives need to do to prepare for the changes.

Click for all podcasts in the Deloitte Australia series.

Discussion Paper on how to define equity instruments

28 Feb 2008

The IASB has published for comment a Discussion Paper (DP) on financial instruments with characteristics of equity.

The DP has two parts – an Invitation to Comment and, as a separate document, the FASB's November 2007 Preliminary Views Financial Instruments with Characteristics of Equity. The IASB's Invitation to Comment includes background information and invites responses to the questions already included in the FASB document and to a number of additional questions raised by the IASB. IAS 32 is the current IASB standard that addresses the distinction between liabilities and equity.
The DP notes two broad types of problems with IAS 32 – uncertainties on how the principles in IAS 32 should be applied and, perhaps more significantly, whether application of those principles results in an appropriate distinction between equity instruments and non-equity instruments.

The FASB document describes three approaches to distinguish equity instruments and non-equity instruments – basic ownership, ownership-settlement, and reassessed expected outcomes. The FASB has reached a preliminary view that the basic ownership approach is the appropriate approach for determining which instruments should be classified as equity. The IASB has not deliberated any of the three approaches, or any other approaches, to distinguishing equity instruments and non-equity, and does not have a preliminary view.

The IASB's DP describes some implications of the three approaches in the FASB document for IFRSs. For instance:
  • Significantly fewer instruments would be classified as equity under the basic ownership approach than under IAS 32.
  • The ownership-settlement approach would be broadly consistent with the classifications achieved in IAS 32. However, under the ownership-settlement approach, more instruments would be separated into components and fewer derivative instruments would be classified as equity.
The goal of the Discussion Paper is to solicit views on whether FASB's proposals are a suitable starting point for the IASB's deliberations. If the project is added to the IASB's active agenda (it's currently on the research agenda), the IASB intends to undertake it jointly with the FASB. The IASB requests responses to the DP by 5 September 2008. Click for Press Release PDF 52k).


FASB trustees approve major structural changes

27 Feb 2008

The Board of Trustees of the Financial Accounting Foundation (FAF) has voted to approve major changes to the oversight, structure, and operations of the FAF and its two standard-setting Boards, the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB).

The changes include reducing the size of FASB from seven to five members effective 1 July 2008 and vesting in the chairs of the two standards boards the authority to establish board agendas. Click for:

Key Structural Changes Approved by the FAF Board of Trustees

Financial Accounting Foundation (FAF)

  • Expand the number and breadth of investors, accounting, business, financial, and government organisations and entities invited to nominate FAF Trustees with the understanding that final authority for all appointments rests solely with the discretion of the Board of Trustees. The manner of implementation of this open nomination process will be determined pending further discussions among the Trustees and interested constituencies.
  • Change the current term of Trustees from one three-year term with a possible second three-year term to one five-year term.
  • Change the size of the Board of Trustees from a fixed 16 Trustees to a flexible range of 14 to 18 Trustees, the size to be fixed by Board resolution from time to time.
  • Increase the Trustee governance activities, including its level of formal review, analysis, and oversight of the data and materials regularly provided by FASB, FASAC, GASB and GASAC.
Financial Accounting Standards Board (FASB)
  • Reduce the size of the FASB from seven members to five, effective 1 July 2008.
  • Retain the FASB simple majority voting requirement.
  • Reaffirm the need for investor participation on the FASB by broadening the current by-law requirement that FASB members possess investment experience.
  • Change the FASB's agenda-setting process to a 'leadership agenda process' whereby the FASB chair is vested with the authority, following appropriate consultation, to set the FASB project plans, agenda, and priority of projects.
Governmental Accounting Standards Board (GASB)
  • Secure a stable and permanent funding source for the GASB.
  • Retain the current size (seven members), term length (five years renewable once), and composition of the GASB.
  • Change the GASB's agenda-setting process to a 'leadership agenda process' whereby the GASB chair is vested with the authority, following appropriate consultation, to set the GASB project plans, agenda, and priority of projects.


Reminder about the comment deadline on IFRS 1 revision

26 Feb 2008

We remind you that today is the deadline for responding to the revised IASB Exposure Draft Amendments to IFRS 1 First-time Adoption – Cost of a Subsidiary in Separate Financial Statements, which was published on 13 December 2007.

FASB's VRG discusses six fair value issues

26 Feb 2008

The US Financial Accounting Standards Board established a Valuation Resource Group (VRG) to provide the FASB staff with information about implementation issues regarding fair value measurements used in financial reporting.

The VRG met on 1 February 2008 and discussed six valuation issues. Deloitte & Touche LLP (United States) has published the 20 February 2008 edition of the Heads Up Newsletter (PDF 117k) explaining the six issues, which are:
  • VRG Issue 2008-1: Accounting for an Asset That the Acquirer Does Not Intend to Use or Intends to Use in a Way Other Than Its Highest and Best Use
  • VRG Issue 2008-2: Customer Relationships
  • VRG Issue 2008-3: Valuation of Intangible Assets Using the 'Current Replacement Cost' Method
  • VRG Issue 2008-4: Meaning of 'Legally Permissible' in Assessing the Highest and Best Use
  • VRG Issue 2008-5: Fair Value of Inventory
  • VRG Issue 2008-6: Allocation of Portfolio-based Credit Adjustments for Hedge Effectiveness Testing


We comment on two IAASB proposals

26 Feb 2008

Deloitte has recently submitted letters of comment to the International Auditing and Assurance Standards Board (IAASB) on two proposed International Standards on Auditing (ISAs), as listed below.

Agenda for 6-7 March 2008 IFRIC meeting

25 Feb 2008

The International Financial Reporting Interpretations Committee (IFRIC) will meet at the IASB's offices in London on Thursday 6 March and Friday 7 March 2008. The meeting is open to the public and will be webcast.

The tentative agenda is shown below.

Agenda for the IFRIC Meeting
6-7 March 2008, London

Thursday 6 March 2008

  • Introduction
  • D22 Hedges of a Net Investment in a Foreign Operation – Preliminary discussion of comprehensive example – no decisions will be made
  • D21 Real Estate Sales – Analysis of comment letters and first redeliberations
  • Review of Tentative Agenda Decisions published in November and January IFRIC Updates
    • IAS 37 Provisions, Contingent Liabilities and Contingent Assets – Deposits on returnable containers
    • IAS 7 Statement of Cash Flows – Classification of Expenditures
  • Staff Recommendations for Tentative Agenda Decision
    • IAS 19 Employee Benefits – Settlements
  • Administrative Session – IFRIC work in progress
Friday 7 March 2008 (morning only)



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