November

SEC invites comment on IFRS 'roadmap' for USA

15 Nov 2008

The US Securities and Exchange Commission has published for comment its proposed 'Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards by US Issuers'.

Comments on the 165-page proposal are due 19 February 2009. The Roadmap sets forth several milestones that, if achieved, could lead to the required use of IFRS by US issuers in 2014. The milestones include:

  • Improvements in accounting standards based on the latest IASB-FASB MOU (the commission cites revenue recognition and financial statement presentation as two projects that, when completed should 'improve financial reporting significantly')
  • Accountability and funding of the IASC Foundation
  • Improvement in the ability to use interactive data for IFRS reporting

As part of the Roadmap, the Commission is proposing to permit early use of IFRS by a limited number of US issuers where this would enhance the comparability of financial information to investors. Only an issuer whose industry uses IFRS as the basis of financial reporting more than any other set of standards would be eligible to elect to use IFRS, beginning with filings in 2010.

TABLE OF CONTENTS OF THE SEC'S PROPOSED IFRS ROADMAP

 

  • I. OVERVIEW
  • II. THE ROLE OF IFRS IN THE US CAPITAL MARKETS
    • A. The Promise of Global Accounting Standards
      • 1. The Global Nature of Today's Capital Markets
      • 2. Potential for IFRS as the Global Accounting Standard
    • B. Past Policy Considerations Regarding IFRS
  • III. A PROPOSED ROADMAP TO IFRS REPORTING BY US ISSUERS
    • A. Milestones to be Achieved Leading to the Use of IFRS by US Issuers
      • 1. Improvements in Accounting Standards
      • 2. Accountability and Funding of the IASC Foundation
      • 3. Improvement in the Ability to Use Interactive Data for IFRS Reporting
      • 4. Education and Training
      • 5. Limited Early Use of IFRS Where This Would Enhance Comparability for US Investors
      • 6. Anticipated Timing of Future Rulemaking by the Commission
      • 7. Implementation of the Mandatory Use of IFRS
    • B. Other Areas of Consideration
      • 1. The Roles of Financial Information
      • 2. Accounting Systems, Controls and Procedures
      • 3. Auditing
      • 4. Considerations of IFRS and the IASB's Standard Setting Process
        • a. State of IFRS
        • b. Relationship to the Accounting Standard Setting Process
  • IV. PROPOSAL FOR THE LIMITED EARLY USE OF IFRS WHERE THIS WOULD ENHANCE COMPARABILITY FOR US INVESTORS
    • A. Eligibility Requirements
    • B. Staff Letter of No Objection to the Use of IFRS
    • C. Transition
    • D. Alternative Proposals for US GAAP Information
      • 1. Proposal A - Reconciled Information Pursuant to IFRS 1
      • 2. Proposal B - Supplemental US GAAP Information
      • 3. Discussion of Proposals A and B
  • V. DISCUSSION OF PROPOSED AMENDMENTS
    • A. The Use of IFRS Financial Statements in Commission Filings by Eligible Issuers
      • 1. Proposed Amendments to Rule 4-01 of Regulation S-X
      • 2. Proposed Definition of 'IFRS Issuer'
    • B. Application
      • 1. Article 13 of Regulation S-X
      • 2. Proposed Clarifying Amendments with Respect to References to IFRS as Issued by the IASB
    • C. Proposed Amendments to Item 10(e) of Regulation S-K and Regulation G
    • D. Related Disclosure and Financial Reporting Issues
      • 1. Selected Financial Data
      • 2. Market-Risk and the Safe Harbor Provisions
      • 3. Disclosure of First-Time Adoption of IFRS in Form 10-K
      • 4. Other Considerations Relating to IFRS and US GAAP Guidance
    • E. Financial Statements of Other Entities under Regulation S-X
      • 1. Application of the Amendments to Rules 3-05, 3-09 and 3-14
        • a. Significance Testing
        • b. Separate Historical Financial Statements of Another Entity Provided under Rule 3-05, 3-09 or 3-14
      • 2. Financial Statements Provided under Rule 3-10
      • 3. Financial Statements Provided under Rule 3-16
    • F. Pro Forma Financial Statements Provided under Article 11
    • G. Industry Specific Matters
      • 1. Disclosure Pursuant to Industry Guides
      • 2. Disclosure from Oil and Gas Companies under FAS 69
    • H. Application of the Proposed Amendments to Other Forms, Rules and Schedules
      • 1. Application of Proposed Amendments to Exempt Offerings
      • 2. References to FASB Pronouncements in Form 8-K
      • 3. Application of IFRS to Tender Offer and Going-Private Rules
  • VI. GENERAL REQUEST FOR COMMENTS
  • VII. PAPERWORK REDUCTION ACT
    • A. Background
    • B. Burden and Cost Estimates Related to the Proposed Amendments
    • C. Request for Comment
  • VIII. COST-BENEFIT ANALYSIS
    • A. Proposal for Early Use of IFRS by US Issuers
      • 1. Expected Benefits
      • 2. Expected Costs
    • B. Proposal A: Reconciled Information Pursuant to IFRS 1
      • 1. Expected Benefits
      • 2. Expected Costs
    • C. Proposal B: Supplemental US GAAP Information
      • 1. Expected Benefits
      • 2. Expected Costs
  • IX. REGULATORY FLEXIBILITY ACT CERTIFICATION
  • X. CONSIDERATION OF IMPACT ON THE ECONOMY, BURDEN ON COMPETITION AND PROMOTION OF EFFICIENCY, COMPETITION AND CAPITAL FORMATION
  • XI. PROPOSED AMENDMENTS TO THE CODIFICATION OF FINANCIAL REPORTING POLICIES
  • XII. STATUTORY BASIS AND TEXT OF PROPOSED AMENDMENTS

 

 

President Bush: accounting must show 'true value'

14 Nov 2008

In a speech on financial markets and the world economy yesterday in New York, US President George W Bush said that the purpose of tomorrow's meeting of the G20 Heads of State is to address the current crisis, and to lay the foundation for reforms that will help prevent a similar crisis in the future.

President Bush said that discussions among the Heads of State and leaders of the World Bank, the International Monetary Fund, the United Nations, and the Financial Stability Forum will focus on five key objectives:

  • understanding the causes of the global crisis,
  • reviewing the effectiveness of our responses thus far,
  • developing principles for reforming our financial and regulatory systems,
  • launching a specific action plan to implement those principles, and
  • reaffirming our conviction that free market principles offer the surest path to lasting prosperity.

President Bush said, 'While reforms in the financial sector are essential, the long-term solution to today's problems is sustained economic growth. And the surest path to that growth is free markets and free people.' He specifically cited the need of accounting standards for financial instruments that tell investors their 'true value':

One vital principle of reform is that our nations must make our financial markets more transparent. For example, we should consider improving accounting rules for securities, so that investors around the world can understand the true value of the assets they purchase.

Click to view the full text of President Bush's speech (PDF 67k).

Webcast on income taxes and IFRSs

14 Nov 2008

Deloitte (United States) has organised a webcast on Income Tax Implications of Converting from US GAAP to IFRSs – It's Not Just About Accounting. The webcast will be hosted by Rita Benassi, Partner (Deloitte Tax LLP) on Monday, 24 November 2008 from 2:00 pm - 3:00 pm EST (19:00 GMT).

Many tax executives are grappling with the tax accounting considerations of converting from US GAAP to IFRSs but haven't given much thought to other tax-related issues. The webcast will discuss:

  • Global tax planning that considers how each foreign jurisdiction has or will adopt IFRSs.
  • US-centric complexities of converting to IFRSs, including accounting methods, state tax issues, and potential challenges of reporting earnings and profits of foreign subsidiaries.
  • Tax operational considerations, such as professional development, data collection, and software.

Learn what converting to IFRSs entails beyond tax accounting and how your company can smooth the transition. Click here for information about the webcast including a link for registration.

Newsletter on financial statement presentation DP

13 Nov 2008

Deloitte's IFRS Global Office has published a special edition of our IAS Plus Newsletter explaining the Joint IASB-FASB Discussion Paper (DP) on financial statement presentation.

The DP was published on 16 October 2008, with comments requested by 14 April 2009. The DP sets out the two Boards' preliminary views on how best to portray assets, liabilities, income, expense, cash flows, and related information in financial statements. It is not about how those items are recognised or measured. Click to view our IAS Plus Newsletter explaining the DP on Financial Statement Presentation (PDF 208k).

 

G20 finance ministers favour global standards

13 Nov 2008

The G20 Finance Ministers and Central Bank Governors met in Sao Paulo, Brazil, on 8-9 November 2008. The meeting focussed primarily on the causes of and policy responses to the global financial crisis, as prelude to the upcoming G20 Heads of State meeting in Washington on 15 November.

The Final Communique (PDF 84k) of the meeting mentioned accounting as follows: "We also agreed that financial institutions should have common accounting standards".

 

Agenda for G20 summit will include accounting

13 Nov 2008

A press briefing on the upcoming G20 Summit on Financial Markets and the World Economy, to be hosted by US President George W Bush, was conducted by Daniel Price, Assistant to the President for International Economic Affairs, and David McCormick, US Under Secretary of the Treasury.

  • Mr Price provided an overview of the structure of the summit and 'what some of our objectives are and how we think it will go'.
  • Secretary McCormick then reviewed 'a number of those areas where we believe there is sufficient common ground that leaders may be in a position to take some near-term decisions and some near-term actions'.

Among the areas Secretary McCormick touched on were global accounting standards and financial reporting by financial institutions. Click to download the full text of the press briefing (PDF 63k). Here is an excerpt about global accounting standards and financial reporting:

Global accounting standards
Within those four areas that Dan laid out – transparency and accountability, sound regulation, integrity in our financial markets, and international cooperation – there are a number of topics that leaders might touch on. One under the area of transparency and accountability would be global accounting standards. This has been an area that's gotten a lot of attention, and by creating a more aligned and ultimately convergence of global accounting standards, that reduces a huge burden on businesses and ensures a level playing field in terms of how we measure the performance of different businesses.

Financial reporting by financial institutions
There's been a lot of discussion up until this point about the complexity and the opaqueness of some of the products, the financial services products that have been developed. So the role of regulators in enhancing the transparency of those complex products will certainly be an area that I suspect will be touched on, and then the importance of financial reporting, and financial reporting in a way that captures all the activity under a financial institution, both on balance sheet and off balance sheet activity. These are the kinds of themes that we would expect to be touched on under the broader heading of transparency and accountability.

Click here for Comprehensive Credit Crunch Information.

Accounting by sovereign wealth funds

13 Nov 2008

Deloitte Touche Tohmatsu has published "Minding the GAPP: Sovereign Wealth, Transparency, and the 'Santiago Principles'". This booklet explains the generally accepted principles and practices (GAPP) for Sovereign Wealth Funds (SWFs) that were agreed to by an International Working Group of SWFs in September 2008.

SWFs are special-purpose investment funds owned by a national government to hold, manage, or administer assets to achieve financial objectives. Assets under management by SWFs globally have recently been estimated at $3.6 trillion, and some sources forecast that this could grow to as much as $9 trillion by 2012. Two of the new GAPP principles relate to financial reporting and auditing:

GAPP 11. Principle
An annual report and accompanying financial statements on the SWF's operations and performance should be prepared in a timely fashion and in accordance with recognized international or national accounting standards in a consistent manner.

GAPP 12. Principle
The SWF's operations and financial statements should be audited annually in accordance with recognized international or national auditing standards in a consistent manner.

Click to download Minding the GAPP: Sovereign Wealth, Transparency, and the 'Santiago Principles' (PDF 2,720k).

IASCF Trustees letter to G20 Heads of State

13 Nov 2008

The Trustees of the IASC Foundation (IASCF) have sent a letter to participants at the upcoming G20 Meeting on 15 November in Washington, DC.

The letter, which was signed by IASCF Chairman Gerrit Zalm,

  • informs the leaders of G20 countries of the role that the IASB is playing in addressing issues emanating from the credit crisis, and
  • outlines steps being taken to enhance the public accountability of the IASCF.

The Trustees wrote the letter because issues of accounting standards and the credit crisis and the governance of the IASB may be on the meeting's agenda. Click to download the Trustees' letter to the G20 (PDF 416k). Here is an excerpt:

Most of the world's developed and emerging economies – including nearly all of the G20 members – have made commitments to IFRSs. The IASB has been actively engaged in promoting common standards over the world and in particular in ensuring convergence among major economies. The success so far achieved should not be compromised by actions that would weaken the independence of the standard-setting process....

My fellow Trustees and I understand the extraordinary circumstances facing policymakers today. Our organisation is committed to acting in an urgent and responsible manner to help restore confidence in financial markets. Broad international adoption of IFRSs, combined with the actions described above, means that the IASB is helping to ensure a globally consistent response on financial reporting issues. We urge the G20 nations to support our efforts in a manner that reinforces the IASB's efforts and the organisation's independence.

IFRSs y US GAAP: Una comparación de bolsillo

13 Nov 2008

Deloitte & Touche Ltda. (Colombia) has published 'IFRSs y US GAAP: Una comparación de bolsillo 2008'. This is the Spanish translation of 'IFRSs and US GAAP: A Pocket Comparison (2008)'.

IFRSs y US GAAP: Una comparación de bolsillo 2008 (PDF 327k) compares IFRSs and US GAAP as of 30 June 2008. While this 76-page comparison is comprehensive, it does not attempt to capture all of the differences that exist or that may be material to a particular entity's financial statements. Our focus is on differences that are commonly found in practice. We are pleased to grant permission for accounting educators and students to make copies for educational purposes.

 

IOSCO letter to G20 Heads of State

13 Nov 2008

The International Organization of Securities Commissions (IOSCO) has sent a letter to the G20 Heads of State as input to their upcoming discussions in Washington on 15 November.

The letter reviews IOSCO's work toward high quality global securities regulation, noting that one of the four main areas in which IOSCO has focussed its work is 'international financial reporting standards and the accountability of the standard setter to the community of national authorities responsible for reporting by public companies'. Attached to the letter is a Statement by IOSCO Regarding Accounting Standards and Governance. Click to download IOSCO's letter to the G20 (PDF 98k). Below is an excerpt from the statement on accounting standards.

IOSCO also supports the development and use of robust, internationally accepted, and consistently applied financial reporting standards. To achieve such standards, the standard setting process must be accountable and subject to appropriate consultation. In this regard, IOSCO strongly supports International Financial Reporting Standards (IFRS) as developed by the International Accounting Standards Board (IASB).

The job of developing and maintaining high quality standards that provide transparency to investors relies to a critical extent on independent accounting standards setters, including the IASB. Standard setters will be best able to produce high quality standards if they are able to exercise independent judgment, relying on their skills, experience and due process, without undue political pressure and taking into account the views of all stakeholders. In this light, IOSCO stands ready as a community of capital market authorities to support accounting standards setters in their roles.

At the same time, IOSCO members are those with direct responsibility for protecting investors in our markets. To fulfill this duty, IOSCO members must have a means of ensuring that accounting standard setters are working in the best interests of investors. IFRS is being used in more and more jurisdictions around the world. It is critical for securities regulators that allow or require the use of IFRS in their jurisdictions (or are considering doing so) to maintain a balance between protecting the independence and integrity of the IASB as the standard setter for IFRS, while ensuring that the IASB is accountable for producing standards in the best interests of investors.

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