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Notes from the IASC Foundation Trustees' meeting - Part 2

11 Jul 2008

The Trustees of the IASC Foundation (IASCF) met in Washington on 8 and 9 July 2008. The portion of the meeting on 8 July 2008 was open to public observation.

Presented below are the preliminary and unofficial notes taken by Deloitte observers at the meeting on discussions relating to matters other than the Constitution Review. Our notes of discussions about the Constitution Review were presented separately in an earlier news story (scroll down).

IASCF Trustees Meeting, Washington, 8 July 2008
Matters Other Than the Constitution Review

Proposals Regarding the Future of the Standards Advisory Council (SAC)

Proposals for the future of the SAC are part of the second part of the Constitutional Review. The Chairman noted that because the term of the current Chairman of the SAC, Nelson Carvalho, is ending, a subgroup was created to form ideas on the future of the SAC so that the incoming Chairman of the SAC would be aware of the responsibilities that may change in light of these proposals.

Phil Laskawy, IASCF Vice-Chair and the chair for the SAC subgroup, presented the subgroup's recommendations. The focus was to enhance the role of the SAC, integrate it better into the overall IASCF organisation, and to make the process more effective. The recommendations include what the SAC should do, who should be participants, and the number of meetings. The sub-group recommended that:

  • The primary purpose of the SAC is to advise the Board.
  • The Chairman of the SAC should be rotated every three years.
  • There was support for two plenary meetings and one regional meeting, but this is open for discussion and to be determined.
  • The membership of the SAC should primarily be persons who serve as representatives of appropriate organisations, with the ability of the Trustees to appoint several members as individuals who do not represent organisations. This would be different from the current approach whereby SAC members are appointed as individuals rather than as representative of organisations. Mr Laskawy noted that this was the most important change to the SAC of all the recommendations made.

Regarding the last recommendation on composition, the IASCF Director of Operations commented that the vision is that the representative of an organization would serve as a liaison between the SAC and the organization. Therefore, the representative would not necessarily be an employee or member of that organisation, but that the organisation would participate to help select their appropriate liaison. It was also noted that all these recommendations were acceptable within the language of the current Constitution, so amendment of the Constitution is not needed.

Current SAC Chairman Nelson Carvalho offered the following comments, which he had previously communicated to the subgroup and which are incorporated in the subgroup's paper provided to the Trustees:

  • Proper mix between representatives of organisations versus individuals.
  • Introductory session to get new members involved and aware of their responsibilities.
  • The need for action against non-performers.
  • Breakout sessions in the plenary sessions should be maintained.
  • Keep voting by the SAC rare.
  • Enhance feedback from the IASB and the Trustees regarding the SAC's advice.
  • Supportive of regional meetings.
  • Future SAC Chairman should come from the existing SAC members because their experience will make the transition easier. Also suggested that the identified new Chairman can assist in the November 2008 meeting.

The IASCF Chairman asked the Trustees for comments on their views on regional SAC meetings, since this remained an open question in the subgroup's recommendations. He clarified that there would be two plenary meetings and then several open regional meetings which would allow the SAC members, Trustees, and others within the region outside of SAC to discuss regulatory or practical issues specific to the region. Several Trustees agreed with having regional meetings. One Trustee noted that regional meetings require substantial time and effort for the Chairman. Therefore, he also suggested keeping an option open for a SAC vice-chairman to provide an additional resource to conduct further regional activities, thereby enhancing the understanding of the regional issues. One Trustee had concerns with cutting down the plenary meetings from three to two, particularly because of the long time gap between meetings. Therefore, he suggested retaining the three plenary meetings, in addition to conducting regional meetings.

Regarding the size and composition of the SAC, some Trustees said that it would be difficult to have fewer than the current 40 members and continue to be inclusive, even though this larger size may affect efficiency. However, other Trustees noted that the quality of the members is more important to efficiency, which will come through the selection process of these organisations. In general, there was support for the suggestion of more representatives of organisations.

Based on the discussions, the Trustees concluded that:

  • There was support for a structure containing primarily representatives of organisations, with some individuals.
  • There was support for more regional activities, but the frequency of the plenary and regional meetings will be discussed at a later time when the new Chairman of the SAC is decided.
  • Regarding feedback to the SAC, both the following options could be undertaken:
    • The IASB staff could note where SAC expressed a particular view on a topic in the IASB meeting papers, and the IASB could address the views during the public meeting.
    • The IASC could also dedicate a portion of their public meetings to discuss the views received at the last SAC meeting and determine items to raise at the next SAC meeting.

Review of Long-term Funding of the IASC Foundation

The IASC Foundation Director gave a very brief report on the current state of the ongoing efforts to secure a stable long-term funding base for the Foundation.

Several processes are being undertaken in countries to achieve this. In India, Spain, and potentially Israel, the stock exchanges are organising a levy collection process on registered entities. In Canada, a levy collection system is also underway organised by the securities regulator and the accounting standards body.

Currently, the IASCF had secured approximately £13.7 million of the £16 million annual funding it is seeking. The levy systems have been working since they have been successful in the collection of the committed funds, receiving approximately half of the budget.

Report of the IASB Chairman

The IASB Chairman reported on IASB activities. He highlighted the projects relating to the MOU between the IASB and FASB, noting that the goal is to complete those projects by 2011. The two Board's met in April to consider how best to meet that deadline. They did not change the projects but rather recognised that they will need to carefully consider the scope of each project and stop increasing the issues to address within each project. Regarding the convergence projects, he noted that the most urgent in light of the credit crisis are (1) fair value measurement and (2) derecognition of financial instruments. Some questions were asked for more information on the fair value measurement project, the interaction between the conceptual framework project and the liabilities and equity project, the some other projects not related to the MOU, including the IFRS for Private Entities (formerly IFRS for Small and Medium Entities).

The IASB Chairman noted the priority of several projects was raised to respond to the credit crisis. He noted that the three issues central to the issues are (1) valuation of collaterised debt, for which an valuation expert advisory panel has been created, (2) consolidation, for which a draft of an exposure draft will be presented to the Board in July, and (3) derecognition of financial instruments, for which the Board is proposing to move to the active agenda. The IASB Directors on the consolidation and derecognition projects responded to several Trustees' questions regarding these projects.

The IASCF Chairman asked the Trustees if they agree that the two research agenda items, (1) Liabilities and Equity and (2) Derecognition of Financial Instruments, should be put on the active agenda. The Trustees agreed that they should be added.

In response to a Trustee's comment regarding whether there should be some sort of emergency procedures to respond quickly to urgent matters (such as the credit crisis), the IASCF Chairman noted that they should consider incorporating emergency procedures in part two of the Constitutional Review. The IASB Chairman noted that they also plan to conduct roundtables around the consolidation and derecognition projects to expedite these topics.

Report of the SAC Chairman

The SAC Chairman presented the views of SAC members at the June 2008 meeting on several IASB agenda items.

  • There was general support for the IASB agenda items although SAC members recommended that the due process not be sacrificed to appease the pressure by regulators for completion.
  • There is support for the consolidation project.
  • They recommended that the derecognition project be coordinated with the consolidation project since they are interrelated.
  • There was no objection to the projects on the active agenda, but recommended that lower priority is given to non-MOU items in order to meet the 2011 timeline for the MOU.
  • There was general support for the liabilities and equity project but SAC members recommended that the conceptual framework issues also affecting this project be considered.

Regarding the Constitutional Review, concerns were already voiced in the previous discussion.

Items suggested by the SAC Agenda Committee to be on the agenda in November for a revisit by the Board are revenue recognition, conceptual framework, consolidations, financial instruments and the expert panel, financial statement presentation, and private entities. Also non-technical matters related to those adopting IFRSs, particularly what are the issues when initially adopting and how those issues have been resolved in particular jurisdictions. SAC would also like to invite the new coordinator of the IFRIC to the November SAC meeting to share views on how IFRIC will address implementation activities. SAC would also like to take that opportunity to share experiences on post-implementation reviews.

Regarding the SAC minutes, one Trustee asked if, in light of the proposals on the future of SAC made previously, there should be more of an attempt to come to a majority agreement which would represent the SAC advice to the Board (in other words, take a vote on issues). To capture the views, the SAC Chairman suggested that one or more Board members summarise what they have observed as key issues by SAC. Then a SAC member would ensure that the summary of views is complete. He noted that the SAC has tried to avoid voting to prevent a bias of the views of those that speak during the meeting over those that do not. He also commented that improvement of their procedures could also be tackled in the discussions on the future procedures of the SAC.

Report of the Due Process Oversight Committee

IASB will conduct a review of the effectiveness of IASB working groups. The objective will be to determine how to make working groups better and to obtain feedback from current members of all working groups. Regarding timing, they originally were targeting the last IASCF Trustee meeting for the year (October 2008), but because the Constitutional Review is a higher priority, they are now targeting a completion date of January 2009.

The IASCF staff provided Trustees with a first effort to amend the Due Process Handbook to reflect all the activities that are performed. During that process, it sparked discussion on how far to define impact assessment (also known as an Effect Analysis) and whether these assessments are consistent with the Framework. Some discussion ensued among the Trustees on impact assessments, particularly whether the IASB was comfortable doing the assessment and if it was more appropriate for an economic analysis firm to do. Some noted that an impact analysis is important since the macro-economic consequences are relevant to supporting the standard-setters' accounting decisions. Since a further discussion is needed on impact assessments, the Due Process Handbook will be revisited at a later date.

Finally, the Trustees were asked if there were any additional topics to put on the agenda for the next joint meeting with the IASB in September. No additional topics were provided.

This summary is based on notes taken by observers at the IASCF meeting and should not be regarded as an official or final summary.


European joint statement on the current market turmoil

11 Jul 2008

EFRAG and the accounting standard setters in France, Germany, and the United Kingdom have discussed the current turmoil in the world's capital markets and have issued a Joint Statement.

Here as an excerpt:

The ASB, CNC, EFRAG and GASB take very seriously the questions that are being asked about financial reporting as a result of the current market turmoil. While we do not believe that financial reporting has caused the crisis as some have claimed, we do believe it is essential that a comprehensive review is carried out of existing external financial reporting requirements to determine whether any of those requirements has intensified some or all of the problems that have arisen. It is also essential that any weaknesses identified in the financial reporting requirements are addressed and improvements made as a matter of priority.

A number of bodies have carried out work on this subject and have suggested that the main areas worth exploring further are:

  • The consolidation model, particularly in the context of SPEs.
  • Derecognition and the disclosures provided about off-balance sheet items, particularly those items that were near to being recognised.
  • The requirement to measure many financial instruments at fair value, how that requirement should be applied particularly in illiquid markets.
  • The disclosures that should be provided to support the measure used.

In response to the credit crisis, the IASB has undertaken to carry out and complete in a timely fashion work on all these areas. It has also undertaken to consider whether other improvements in IFRSs are necessary in the light of recent experience.

In our view, the IASB should be the body that first responds to the accounting issues arising as a result of the current market turmoil. However, if the IASB is to be able to move quickly and with confidence, it is important that it receives timely and high quality advice from bodies such as ourselves. Therefore, we will follow closely the IASB's work and on a timely basis provide advice and other comments to help the IASB complete its work effectively and quickly, and evaluate and respond to any other relevant proposals on the subject that might affect financial reporting.

In this situation we recognise and accept that it might be necessary for the IASB to adopt some sort of modified due process in developing its response.

Click to view the Joint Statement (PDF 65k).

You will find much related information on our Credit Crunch Page.

Notes from the IASC Foundation Trustees' meeting - Part 1

11 Jul 2008

The Trustees of the IASC Foundation (IASCF) met in Washington on 8 and 9 July 2008. The portion of the meeting on 8 July 2008 was open to public observation.

The 2008 Constitution Review was a key topic for discussion. Presented below are the preliminary and unofficial notes taken by Deloitte observers at the meeting on discussions relating to the Constitution Review.

IASCF Trustees Meeting, Washington, 8 July 2008Constitution Review Proposals

Background and Observations on the Roundtables

The objective of the discussion was to determine whether the trustees are prepared to publish and invite comment on the first part of the Constitution Review proposals. To facilitate the discussion, the IASCF Director of Operations introduced a paper that summarised the comments made at the 19 June 2008 Roundtables on the draft document Proposals and Issues for the Constitutional Review, as well as a revised version of those proposals after consideration of comments made at the roundtables.

The two principal changes being proposed would be:

  • Creation of a 'monitoring group' of representatives of official organisations, including securities regulators, that would approve Trustee appointments and review Trustee oversight activities.
  • Expansion of the IASB to 16 members from the present 14, with a specified geographical mix.

In summary, there appeared to be support for the concept of creating a Monitoring Group (MG). However, several concerns were raised regarding the independence of the IASC Trustees and IASB and the absence of investor representation on the MG. The proposals on the IASB size and composition generated fewer concerns than the proposal on the MG. However, some comments included concerns around the geographical criteria diluting the other technical competence criteria of IASB membership and the omission of a specific mention of Africa and South America in the geographical spread.

Some comments made during the roundtables may not have been reflected in the revised version brought before Trustees at meeting, but the expectation is to consider them with the other written comments received on the proposals. Several Trustees noted that they received positive feedback on the use of roundtables.

Regarding the composition of the MG, Trustees asked if the initial composition should also include banking supervisors, since they have a strong influence in emerging markets. The Chairman suggested adding a specific question to the proposals on whether banking supervisors should be represented on the MG.

Regarding the geographical composition of the IASB, the Chairman also noted that there was language in the revised proposals that suggests that of the seats appointed from any area, the Trustees would normally appoint at least one member from South America and Africa, but this language had not been added to the marked Constitution changes. He suggested specifically requiring this in the Constitution.

Revisions to the draft proposals discussed at the Roundtables

The discussion moved to the revisions made to the proposals. The IASCF Director explained the rationale for the revisions from the initial draft provided during the roundtables. Some minor revisions were made for better readability of the document. Other revisions were made to better clarify the concepts or arguments behind the proposal for the MG (for instance, to draw a better link between creation of a Monitoring Group and the objective for public accountability) or to address some of the recurring concerns noted at the roundtables.

The more significant revisions include:

  1. An added line in the Introduction, noting that Constitution Review must be completed by June 2010.
  2. A paragraph was added under the section titled 'Enhancing Public Accountability' that states that the Trustees will continue active engagement of stakeholders through SAC and formal discussion with interested parties. This paragraph was added to address a concern frequently raised at the Roundtables about why investor groups are not included on the MG. The reason is that there already are other avenues available to investors for interfacing with the IASCF and the IASB.
  3. New paragraphs were added to clarify the relationship between the Trustees and the MG, particularly that the MG will be a group outside of the IASCF's formal organisational framework. Accordingly, the MG will be an autonomous entity. For purposes of the Constitutional Review, the proposal is for the Constitution to recognise a relationship with a Monitoring Group. However, the actual working relationship between the MG will be further defined in a Memorandum of Understanding (MOU) between the Trustees and the MG.
  4. Regarding the proposal on the geographical composition of the IASB, language has been added to the proposed Constitution revisions that the Trustees 'should normally appoint at least one member each from Africa and South America'.
  5. A paragraph has been added to explain that geographical component of IASB membership should not dilute the importance of the other criteria for Board membership. The proposals emphasised that members shall act in the public interest, not as representatives of constituencies of geography.
  6. The voting majority under the larger IASB would rise to 10 out of 16 members or nine if there are fewer than 16 serving members.

Relationship Between the Trustees and the Monitoring Group

A discussion started regarding the relationship between the Trustees and the Monitoring Group. One Trustee asked for more information regarding the MOU between the Trustees and the MG. The IASCF Chairman noted that the details of what is in the MOU would not be established in the Constitution amendments. Rather, the proposals recognise that an MOU between the parties must be created and agreed upon by both parties. The MOU is intended to be another public document that will be negotiated between the MG and Trustees after this first part of the Constitution Review is completed. The same Trustee asked if the MOU, as a public document, will also be exposed for a comment period. The Chairman was in favour of a comment period for the MOU.

Several Trustees raised concerns around the independence of the IASCF and whether the MG responsibilities will conflict or overlap with Trustee responsibilities. The IASCF Chairman recognised that the negotiation of a reasonable MOU will be central to easing these concerns. He also noted that the MOU cannot change the requirements in the Constitution itself.

Before the proposals are published for comment, they will be revised to clarify that adoption of the MOU will require agreement of 'the MG and the Trustees' rather than 'members of the MG and the Trustees'. This is to clarify that each member of the MG is not required to agree with the MOU before it can be effective.

The Chairman noted that the proposals as drafted intend to view the MG as a monitoring group akin to an audit committee, not an oversight committee. Any wording in the proposals suggesting that the MG would have oversight capacity would be removed.

Several Trustees were also concerned about future disputes between the Monitoring Group and the Trustees and what 'safety mechanism' would be available if the parties are unable to agree. This concern related both to overall disputes and to disagreements on the future composition of the MG since the proposals only define the composition at initial formation. Echoing those concerns, other Trustees highlighted the conflict between independence and the need to obtain sustainable long-term funding, particularly when the proposed members of the MG are also the public authorities organising the funding for that jurisdiction. The IASCF Chairman was hesitant to add a 'safety mechanism' to the Constitution language because it could be perceived to contradict the MG as an independent external group. The intent is that the future composition of the MG would be at their discretion going forward, potentially under guidance written in the MOU.

The discussion moved to the reporting requirements between the IASCF and the Monitoring Group. One Trustee suggested that the MG as an external group should also have public accountability and, therefore, should consider providing its own annual report on its activities. The IASCF Chairman noted it was a good suggestion, but would be one that the MG would need to decide when its sets up its operating procedures. Since the MG's operations are outside of the IASCF, it would not be appropriate to incorporate reporting requirements in the Constitutional proposals. Regarding the reporting from the IASCF to the Monitoring Group, another Trustee suggested the IASCF Annual Report should serve this purpose, to ensure IASCF independence and transparency to the public. The IASCF Director of Operations hoped that the IASCF Annual Report would be sufficient reporting to MG due to its extensive disclosures. The Chairman agreed that there should be one public report for the public and Monitoring Group, and the Trustees would incorporate any additional requests from the MG into the annual report.

Consistency with Governance Recommendations of European Council

One Trustee asked for clarification on how the European Council's suggestions on the governance of the IASCF provided in the materials reconcile with the Trustees' proposals. [See IAS Plus News Story of 9 July 2008 The IASCF Director noted that it is broadly aligned with the Trustee proposals, and meetings with the European Council have confirmed that. Although the language is different, the broad concepts are consistent. Any additional points relating to issues outside of the proposals suggested in part one of this Constitutional Review will be considered in the second part of the review.

Changes to the Proposals Agreed by the Trustees

Based on these discussions, the following additions would be incorporated to the proposals before issuance for public comment:

  • An additional question asking if other parties should be considered in the initial composition of the MG, specifically banking supervisors.
  • Adding language to the Constitution marked text to specifically require that of the seats appointed from any area, the Trustees would appoint at least one member from South America and one from Africa.
  • Language noting that the MOU between the Trustees and the MG would be issued for public comment.
  • The wording that states 'A Memorandum of Understanding will be agreed between the members of the Monitoring Group and the Trustees describing' will be revised to 'A Memorandum of Understanding will be agreed between the Monitoring Group and the Trustees describing'. This change is to clarify that not all individual members of the Monitoring Group have to agree for it to be considered agreed upon.
  • Agreed that the IASCF Annual Report would be the one deliverable sufficient for purposes of public reporting and reporting to the MG. Any additionally requested disclosures required by the MG would also be incorporated in the Annual Report.

Approval and Timing of Proposals

The Trustees approved these revisions and approved issuance of the proposals for public comment shortly after the meeting. Comments received will be reviewed at the October IASCF Trustees meeting.

Due to timing (August holiday season), a Trustee said that a 15 September 2008 comment deadline seemed aggressive. The IASCF Director noted that there is a clear expectation by regulators that this part will be done by year-end. Therefore, the date cannot be extended much further. Regulators need to make decisions based on completion of this process. Examples of those decisions include:

  • SEC decisions on domestic use of IFRS, and
  • EU equivalency assessment.
To meet that timing, staff need to assess the comments in time for 9-10 October 2008 Trustees' meeting. As a compromise, Trustees agreed to push the comment deadline for these proposals to 20 September 2008.

Regarding second part of Constitution Review, October is the goal for an initial draft of the second part of the Constitution Review proposals. The Constitution Committee will have an interim meeting before October to draft part two proposals to meet the October timing. Additional roundtables will be held for this second part also since there was positive feedback on the roundtable process.

This summary is based on notes taken by observers at the IASCF meeting and should not be regarded as an official or final summary.

First six national action plans under IFAC compliance programme

10 Jul 2008

The IFAC Member Body Compliance Program, launched four years ago, has reached a major milestone in its mission to encourage accountancy organizations worldwide to work together with their members, regulators, standard setters, and other key stakeholders to strengthen the profession.

The Compliance Program is a three-part process:
  • A member organisation's assessment of its country's regulatory and standard-setting framework.
  • A self-assessment of the extent to which a member body has committed to international convergence of standards and promoted the implementation of strong quality assurance and enforcement regimes as specified in IFAC membership requirements.
  • Development of action plans to further the convergence process and meet other IFAC membership requirements.
The Compliance Program is now in this third phase and the action plans of IFAC members from six countries have recently been publicly released on the IFAC Website. The six countries with action plans are Argentina, Botswana, China, Czech Republic, Kenya, and Romania. Click for IFAC Press Release (PDF 17k).


SEC advisory committee proposals on financial reporting

10 Jul 2008

The US SEC's Advisory Committee on Improvements to Financial Reporting will meet on 11 July 2008 to consider a draft of its final report.

The five main themes of the committee's draft recommendations, and examples of specific proposals, are presented below. Click to Download the Draft Report (PDF 5mb). You can get more information on the Advisory Committee's Page on the SEC's website.

SEC Advisory Committee on Improvements to Financial Reporting Examples of draft proposals

A. Increasing the usefulness of information in SEC reports

  • Put executive summaries at the beginning of annual and quarterly financial reports.
  • The private sector should develop key performance indicators (KPIs), on an activity and industry basis, that would capture important aspects of a company's activities that may not be fully reflected in its financial statements or may be non-financial measures.
B. Enhancing the accounting standards-setting process
  • Recognise the pre-eminence of the perspective of investors as the primary users of financial reports by increasing investor representation on the FASB and FAF.
  • FASB should increase the field work for proposed standards, formalise post-adoption reviews, and make periodic assessments of existing standards.
  • Create a Financial Reporting Forum (FRF) to coordinate the efforts of FASB with the SEC, the Public Company Accounting Oversight Board, investors, auditors, and other parties. The FRF would meet regularly to evaluate the current pressures on the financial reporting system, set priorities for projects, and discuss how to carry out these projects.
C. Improving the substantive design of new accounting standards
  • Redesign accounting standards to clearly articulate their objectives and principles. Use simple language. Avoid detailed rules, all-or-nothing bright-line tests (which sometimes make similar circumstances look different and which are susceptible to manipulation), and numerous exemptions.
  • The SEC should recommend that the FASB be judicious in issuing new standards and interpretations that expand the use of fair value until FASB completes a measurement framework and the infrastructure for measuring fair values is strengthened.
  • Because the current mixed attribute system of historic cost and fair value is likely to continue, the draft report supports the FASB's efforts to divide the income statement into two or more sections that would, among other things, help investors distinguish cash receipts from unrealised changes in fair value.
  • Move away from industry-specific guidance in authoritative literature.
  • Formally promulgated alternative accounting policies should not exist.
D. Delineating authoritative interpretive guidance
  • All authoritative accounting standards and interpretive implementation guidance of general significance should come from a single standard-setter – the FASB.
  • The SEC should codifying its existing accounting guidance in a format consistent with that used by FASB.
  • "If the convergence of US GAAP and IFRSs does not occur within a few years, FASB and the SEC should consider a systematic rethinking of US GAAP."
E. Clarifying guidance on financial restatements and accounting judgments
  • The SEC and PCAOB should adopt policy statements to provide more transparency into how these regulators evaluate the reasonableness of judgements.


Accounting Roundup – second quarter 2008 review

09 Jul 2008

We have posted Accounting Roundup: Second Quarter in Review–2008 prepared by the Accounting Standards and Communications Group of Deloitte LLP (USA).

This newsletter provides brief descriptions of pronouncements affecting accounting, financial reporting, and corporate governance issued during 2Q-2008 by standard setters and regulators including FASB, EITF, AICPA, SEC, FASAB, PCAOB, GASB, IASB, and IFRIC. This quarterly review consists of articles, adapted as necessary, from issues of Accounting Roundup published in April and May 2008, as well as new articles for the month of June. There's also information about upcoming Dbriefs Webcasts. You will find past issues Here. International and IFRS-related developments covered in this edition of Accounting Roundup are:
  • AICPA Recognizes IASB as Standard Setter
  • IASB Issues Annual Improvements to International Standards
  • IASB and FASB Issue Two Conceptual Framework Documents
  • IASC Foundation Publishes 2008 IFRS Taxonomy
  • IASB Forms Advisory Panel for Financial Instruments
  • IASC Foundation Constitution Review

Click to view Accounting Roundup: Second Quarter in Review–2008 (PDF 872k).


SEC launches re-examination of the way regulated entities report

09 Jul 2008

The US Securities and Exchange Commission has launched an 'ambitious effort' to examine to examine how the SEC acquires information from public companies, mutual funds, brokers, and other regulated entities, and how it makes that information available to investors and the markets.

They are calling the project the 21st Century Disclosure Initiative. The first phase of the study will be to outline the attributes of the disclosure system for a future that incorporates technology, the new ways in which investors get their information, and recent developments in how companies compile and report the information in their SEC-mandated disclosures. That phase will be completed by the end of 2008, when a follow-on advisory committee will be appointed to consider the questions in more detailed fashion through a public and consultative process. Click for SEC Announcement (PDF 28k).

21st Century Disclosure Initiative

The study will be a fundamental rethinking of financial disclosure, beginning with the basic purposes of disclosure from the perspective of investors and markets. The inquiry will be aimed at identifying the objectives of the ideal disclosure system at the architectural level. Essential to the study will be the determination of how to match the capabilities of today's information technology with the SEC's regulatory aims and the needs of investors.

The study will include a review of all existing SEC forms and reporting requirements, as well as the manner in which information is provided to the Commission, with a special focus on needless redundancy. It will also include consideration of various alternative strategic approaches to acquiring and publishing disclosure information. In addition, the study will consider ways that regulatory requirements for the collection of information might be tailored to get the best real-time distribution of financial and narrative disclosure to investors. Finally, the study will examine how best to integrate public disclosure with the SEC's proposed new post-EDGAR architecture for investor search, assembly, and comparison of data.


IAESB paper on measuring continuing professional development

09 Jul 2008

The International Accounting Education Standards Board (IAESB) has published an information paper to assist IFAC member bodies and others in developing effective continuing professional development (CPD) programs for professional accountants.

Titled Approaches to Continuing Professional Development (CPD) Measurement, the paper explains the elements of an effective CPD program, examines current practices by accountancy and other professional associations, and discusses approaches to measure a program's effectiveness.

A fundamental theme of this paper is the debate between input and output-based CPD measurement. Input-based measurement has recently been brought into question by many professional bodies. These bodies recognize that simply recording the time spent on CPD does not necessarily indicate that anything has been learned, or that CPD will lead to any change in practice. In a climate of increased accountability and external pressures, professional bodies are turning to output-based measurement techniques that can measure exactly what input-based measurement cannot: the impact of CPD on the professionalism of practitioners.

There is some resistance to the implementation of output-based measures, including perceived cost, and professionals feeling as if they are being 'tested'. The aim of this paper is to find out what professional bodies are currently doing in terms of CPD measurement, and to understand the success of different types of systems. This will result in an informed analysis of the arguments for and against input and output-based measurement systems. We discovered that there are many steps along the way to a fully output-based system, and that successful output measurement is not as far from reach as many professional bodies may suspect.

Click to view the Press Release (link to IFAC website).


ECOFIN resolution on IASB governance

09 Jul 2008

The European Union's Economic and Financial Affairs Council (ECOFIN) met in Brussels on 8 July 2008. Among other things, they discussed governance of IASB and adopted ECOFIN Conclusions on IASB Governance.

An excerpt is below.

The Council adopted the following conclusions:

The Council welcomes the proposals that have been made in this direction by the IASCF and considers that the further reform of the IASCF and IASB's governance and public accountability should be made according to the following key principles:

  • the public accountability of the IASCF should be enhanced through the creation of an effective Monitoring Board, which should have sufficient powers to provide the necessary oversight of the IASCF; it should first ensure that Trustees effectively discharge their oversight role towards the IASB, play an active role in the selection of Trustees and approve their final selection. The members of the Monitoring Body should be able to further refer issues of public interest, including those related to financial stability and prudential requirements, and matters of overall strategy for consideration by the IASB. The Monitoring Board should thus remain in close relation with the Chairman of the Board of Trustees, who should be put in charge, under the IASC constitution, to ensure that all views and concerns of public interest representatives are fully addressed by the IASB Board;
  • the Monitoring Board should be composed of relevant authorities responsible for public interest related to the adoption and endorsement of accounting standards in their respective jurisdictions, including the global body representing authorities responsible for financial stability or key authorities involved in financial stability. The European Commission shall propose mechanisms to ensure that it represents the co-ordinated position of all relevant European institutions and bodies, and Member states;
  • the IASB must achieve greater transparency and legitimacy of its standard-setting and agenda-setting processes, in particular through more systematic public consultations about the IASB's work programme, including the IASB-FASB convergence agenda and more field testing. The effectiveness of the Standards Advisory Council should be enhanced; the role of impact assessments as a mandatory part of the IASB's due process should be formalised; and, possible changes to the terms of service of IASB members should be considered, including a possible term limitation for the chairman of the IASB. The views of public authorities, in particular those charged with financial stability and prudential regulation, should be adequately reflected in the IASB's standard-setting process.
  • members of the IASB should reflect an appropriate balance of practical and technical expertise, as well as a diversity of geographical experience in order to contribute to the development of high quality, global accounting standards. The role of the EU as the largest jurisdiction applying IFRS should be properly reflected.
  • The Council emphasises the urgency of enhancing the EU's ability to contribute in a timely and consistent manner to the international accounting debate. It therefore welcomes efforts to enhance the role of the European Financial Reporting Advisory Group (EFRAG), especially in relation to timely upstream input to the IASB's agenda-setting process. EFRAG's governance arrangements should ensure a balanced representation of all European stakeholders. EFRAG should establish effective and transparent procedures ensuring that it operates in the public interest and in a manner consistent with the EU's financial reporting policy. The Council welcomes recent progress to reform EFRAG's structure of governance in this direction.

Click to view ECOFIN Conclusions on IASB Governance (PDF 133k).

New Deloitte IFRS 3 and IAS 27 Guide is now available

08 Jul 2008

The Deloitte IFRS Global Office has published Business Combinations and Changes in Ownership Interests: A Guide to the Revised IFRS 3 and IAS 27.

In January 2008, the IASB issued a revised IFRS 3 Business Combinations and a revised IAS 27 Consolidated and Separate Financial Statements. In doing so, the Board completed phase II of its business combinations project, and achieved substantial convergence between IFRSs and US GAAP on these topics. This new 164-page guide deals mainly with accounting for business combinations under IFRS 3(2008). Where appropriate, it deals with related requirements of IAS 27(2008) – particularly as regards the definition of control, accounting for non-controlling interests, and changes in ownership interests. Other aspects of IAS 27 (such as the requirements to prepare consolidated financial statements and detailed procedures for consolidation) are not addressed.

Chapters in Deloitte's new 164-page guide to IFRS 3 and IAS 27:

  1. Introduction
  2. Principles underlying the revised Standards
  3. Acquisition method of accounting
  4. Scope
  5. Identifying a business combination
  6. Identifying the acquirer
  7. Determining the acquisition date
  8. Recognising and measuring the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree
  9. Identifying and measuring consideration
  10. Recognising and measuring goodwill or a gain from a bargain purchase
  11. Post-combination accounting
  12. Step acquisitions and partial disposals
  13. Business combinations with no transfer of consideration
  14. Reverse acquisitions
  15. Effective date and transition
  16. Disclosure
  • Appendix 1 Comparison of IFRS 3(2008) and IFRS 3(2004) and Comparison of IAS 27(2008) and IAS 27(2003)
  • Appendix 2 Continuing differences between IFRSs and US GAAP


Correction list for hyphenation

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