IASB and FASB issue two Conceptual Framework proposals

31 May 2008

The IASB and the US FASB have published similar consultative documents on two of the eight phases of their joint project to develop an improved conceptual framework.

The framework will provide a foundation for developing future accounting standards. The two consultative documents are:
  • Exposure Draft: Chapters 1 and 2 of the Conceptual Framework (Objective and Qualitative Characteristics)
  • Discussion Paper: Preliminary Views – The Reporting Entity

Exposure Draft (ED): Chapters 1 and 2 of the framework (Objective and Qualitative Characteristics)

This ED addresses the objective of financial reporting, the qualitative characteristics of information provided by financial reporting, and constraints on the provision of that information. The draft reflects the boards' updated proposals in the light of comments received on an initial consultation document published in July 2006. The ED proposes the following objective of financial reporting:

The objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to present and potential equity investors, lenders and other creditors in making decisions in their capacity as capital providers. Capital providers are the primary users of financial reporting. To accomplish the objective, financial reports should communicate information about an entity's economic resources, claims on those resources, and the transactions and other events and circumstances that change them. The degree to which that financial information is useful will depend on its qualitative characteristics.

The ED also presents an improved description of 'faithful representation' – one of the qualitative characteristics that financial information should possess if it is to provide a useful basis for economic decisions:

To be useful in financial reporting, information must be a faithful representation of the economic phenomena that it purports to represent. Faithful representation is attained when the depiction of an economic phenomenon is complete, neutral, and free from material error. Financial information that faithfully represents an economic phenomenon depicts the economic substance of the underlying transaction, event or circumstances, which is not always the same as its legal form.

Discussion Paper: Preliminary Views – The Reporting Entity

The second document published sets out the boards' preliminary views on the reporting entity concept and related issues. Although the reporting entity concept determines some important aspects of financial reporting, the boards' existing frameworks do not address it specifically. The boards' preliminary views are:

  • A reporting entity is a circumscribed area of business activity of interest to present and potential equity investors, lenders and other capital providers.
  • Control is the basis for determining the composition of a group reporting entity.
  • Consolidated financial statements should be prepared from the perspective of the group reporting entity.
The IASB and the FASB invite comments on both documents by 29 September 2008. Click for Joint Press Release (PDF 46k).


IASC Foundation publishes 2007 annual report

28 May 2008

The IASC Foundation, under which the IASB operates, has published its annual report for 2007. The 63-page report includes an overview of the Trustees' oversight activities for 2007, as well as reports of the Chairman of the IASC Foundation Trustees and the IASB Chairman, and audited financial statements.

Click here to Download from IASB Website (PDF 2,075k).

IAS Plus Newsletter on improvements to IFRSs

27 May 2008

Deloitte's IFRS Global Office has published a special edition IAS Plus Newsletter on Improvements to IFRSs 2008.

Our News Story of 22 May 2008 announced these revisions.
Click to view IAS Plus Newsletter on Improvements to IFRSs 2008 (PDF 136k). You will find Past IAS Plus Newsletters Here.


European Commission recommends endorsement of revised IAS 23

27 May 2008

The European Commission has published the Effect Study Report: Endorsement of IAS 23 Borrowing Costs.

The Commission did this study under its agreement with the European Parliament that 'effect studies' should be prepared for new accounting standards and interpretations up for endorsement in the European Union. The study is a combination of a survey of opinions expressed to the IASB, EFRAG, and the Commission and a staff analysis of the costs and benefits of applying the capitalisation model that is mandated by the revised IAS 23.

With respect to preparer opinions the report states:

  • A majority of respondents prefer the capitalisation method and/or support the endorsement of the standard.
  • Even among capital intensive companies that would be affected most by the revised IAS 23, the EC's consultation and other reports reveal that these companies generally prefer to apply the capitalisation method.
Benefits of the capitalisation model include:
  • Increased comparability because one of the current options is eliminated
  • Including borrowing costs in the cost of the assets is a better conceptual approach than expensing
Costs of adopting IAS 23 Revised:
  • For those European companies currently expensing borrowing costs, the revised IAS 23 will impose an added cost and complexity.
  • However, this affects a relatively small percentage of companies because most do not have any qualifying assets. 'The capitalisation of borrowing costs is of relevance only for those companies that are asset capital-intensive.' And 'the main part of these costs will be related to the first implementation of the revised standard and therefore not recurring.'
Commission conclusion and recommendation:
  • The revised IAS 23 should be endorsed in the European Union as the benefits of its endorsement will outweigh the costs.

Click to view Effect Study Report: Endorsement of IAS 23 Borrowing Costs (PDF 151k)

SEC proposes to require XBRL data for 8,000 mutual funds

26 May 2008

The US Securities and Exchange Commission has voted unanimously to propose that more than 8,000 mutual funds trading in the United States be required to label data in their public filings using XBRL computer tags.

This would let "investors get access to key information about fees, performance, and strategies through interactive data, which would permit comparison shopping among thousands of funds with all the ease of conducting an Internet search". Some mutual funds already have been filing interactive data on a voluntary basis. The SEC's rule proposal would require all mutual funds to provide data-tagged information beginning with registration statement filings that become effective after 31 December 2009. A mutual fund also would be required to post the interactive data on its website, if it maintains one.


SEC signs IFRS info-sharing protocols with four countries

25 May 2008

The US Securities and Exchange Commission has signed protocols enabling it to share information with financial regulators in four European countries on the application of International Financial Reporting Standards.

The four countries are Belgium, Bulgaria, Norway, and Portugal. These agreements are based on a prototype agreement previously adopted by the SEC and the Committee of European Securities Regulators (CESR) – among many others. As capital markets globalise, securities regulators are developing information-sharing arrangements to enable cross-border regulation. Click for SEC Press Release (PDF 47k). Here is a link to the SEC Web Page detailing their cooperative arrangements with foreign regulators.


Plan for adoption of IFRSs in Argentina

24 May 2008

The Federacion Argentina de Consejos Profesionales de Ciencias Economicas (professional accountancy body in Argentina) has developed a plan for implementing International Financial Reporting Standards (IFRSs) for all companies whose securities are publicly traded.

The plan has been presented to the Argentinian Securities Commission, which would have to approve the plan. The plan calls for adoption of IFRSs in annual financial statements of public companies by first quarter 2011. Starting first quarter 2010, companies would have to disclose the expected impact of IFRSs on their operating results and equity. Click to Download the Argentina IFRS Plan (PDF 313k in Spanish).

Notes from day 4 of the IASB's May 2008 meeting

23 May 2008

The International Accounting Standards Board held its monthly meeting on Tuesday to Friday 20-23 May 2008 at the Board's offices in London.

Click here to go to the Preliminary and Unofficial Notes Taken by Deloitte Observers at the meeting.


IFRS Insights newsletter from Deloitte (United States)

23 May 2008

Deloitte & Touche LLP (United States) has launched a new publication, IFRS Insights, in response to the growing need among US companies for current information on IFRS developments, and the increasing demand for insights regarding IFRS implementation.

Today, there is a heightened sense of urgency around the use of IFRS in the United States. As companies await further action from the Securities and Exchange Commission (SEC), including an anticipated announcement about when public companies will have the option of using IFRSs for SEC reporting purposes, financial executives in the US are now asking more questions about IFRS and its far-reaching effects on their companies. Our new publication IFRS Insights address those issues by providing news on the latest developments on IFRSs, practical suggestions for companies addressing IFRSs, updates on the regulatory environment, and references to relevant tools and resources. Click to download the Inaugural Edition (May 2008) of IFRS Insights (PDF 427k).


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