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2008

IAASB approves eight redrafted auditing standards

16 Dec 2008

The International Auditing and Assurance Standards Board (IAASB) has published seven clarified International Standards on Auditing (ISAs) and one clarified International Standard on Quality Control (ISQC), as follows:

  • International Standard on Quality Control (ISQC) 1 (Redrafted) Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements
  • ISA 220 (Redrafted) Quality Control for an Audit of Financial Statements
  • ISA 500 (Redrafted) Audit Evidence
  • ISA 501 (Redrafted) Audit Evidence-Specific Considerations for Selected Items
  • ISA 505 (Revised and Redrafted) External Confirmations
  • ISA 520 (Redrafted) Analytical Procedures
  • ISA 620 (Redrafted) Using the Work of an Auditor's Expert
  • ISA 710 (Redrafted) Comparative Information-Corresponding Figures and Comparative Financial Statements

Click for Press Release (PDF 30k).

Notes from day 1 of the IASB December meeting

16 Dec 2008

The International Accounting Standards Board is holding its December 2008 meeting at its offices in London on Monday to Friday, 15-19 December 2008.

Click to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the meeting.

Among other things, the Board agreed to propose a fast-track amendment to IFRIC 9 Reassessment of Embedded Derivatives to make clear that, on reclassification, an entity is required to assess whether an embedded derivative must be separately accounted for under IAS 39. The amendment will be effective for periods ending on or after 15 December 2008.

Newsletter on IFRIC 17 in Spanish

16 Dec 2008

Deloitte (Colombia) has published a Spanish translation of the recent IAS Plus Update newsletter on IFRIC 17 'Distributions of Non-cash Assets to Owners'.

Click for:

EC deems some local GAAPs equivalent to IFRSs

16 Dec 2008

The European Commission has adopted certain measures designating the GAAPs of the United States, Japan, China, Canada, South Korea, and India to be equivalent to International Financial Reporting Standards (IFRSs) as adopted by the EU.

Because the decision on equivalence presumes that certain steps currently in process in some of these countries will be completed, the Commission intends to review the situation in China, Canada, South Korea, and India by 2011 at the latest. The Commission will also regularly monitor the ongoing status of equivalence and report to Member States and Parliament where necessary.

As a result of the action taken by the Commission, non-EU companies listed on EU markets will continue to be able to file their financial statements prepared in accordance with their national GAAPs (the current provisions allowing the use of these GAAPs in the EU would otherwise have expired at the end of 2008).

Click for EC Press Release (PDF 86k). We have extensive information about IFRSs in Europe Here.

Notes from the financial crisis roundtable in Tokyo

16 Dec 2008

In response to the challenges caused by the current market conditions the IASB and the FASB decided to hold a series of roundtables to gather views from constituents on the most urgent accounting issues and how to approach them.

The first roundtable was held in London on 14 November 2008 (click for Deloitte Notes). The second was held at the FASB's office in Norwalk, CT USA, on 25 November 2008 (click for Deloitte Notes). Presented below are the preliminary and unofficial notes taken by Deloitte observers at the 3 December 2008 roundtable held in Tokyo. Our comprehensive credit crunch information is Here.

Notes from the IASB-FASB Global Financial Crisis RoundtableASBJ Offices, Tokyo – 3 December 2008

The IASB and FASB concluded their joint roundtables on financial reporting issues arising from the global financial crisis with two roundtables held in the offices of the Accounting Standards Board of Japan (ASBJ) on the afternoon of 3 December 2008. The objective of the roundtables was for the Boards to hear input from a wide range of stakeholders on accounting issues that may require urgent attention to help enhance investor confidence in financial markets.

The Tokyo roundtable was divided into two 2-hour sessions. IASB Board Member John Smith chaired both sessions. As in other sessions it was noted that all next steps, in response to calls from constituents, will be considered jointly by IASB and FASB and following their due process. Therefore, no decisions were taken at these roundtable meetings.

The chairman of the ASBJ, Mr Ikuo Nishikawa, welcomed participants and observers to both sessions, while at the second session Dr Takafumi Sato, Commissioner of the Japanese Financial Services Agency, made some introductory comments that included strong support for global high quality accounting standards and the harmonisation between the IASB/FASB. He did not support the recent calls to reduce standards, indicating an expectation that accounting standards would result in fair and accurate reporting of financial position by issuers and a prompt recognition of losses. He expressed a strong view that due process must be followed, and he concluded that standard setters were best placed to create solutions. These sentiments were echoed by many of the participants.

Mr Smith indicted the objective of the roundtable was hear from participants about those issues that had arisen from the global financial crisis, to identify whether the issues were convergence issues, whether any 'fixes' were urgent or whether they could be dealt with as part of a longer term project. He noted that issues raised by participants in their written submissions were very similar to those raised at the roundtables in the US and UK, that he had received a clear message that due process must be followed and, accordingly, it was most unlikely any changes to IFRS would occur prior to 31 December 2008.

Topic 1 – Impairment Issues

Key discussion points around the triggers (what and when) and measurement of impairment included:

  • The difficulty in identifying when 'significant or prolonged' had occurred, with some suggesting the test should be 'and' rather than 'or', that the temporary test in FASB should be introduced, and that entities should disclose their accounting policy for assessing significant and prolonged.
  • Suggestions that the trigger for AFS debt instruments should be credit related, not just market, with credit related loss taken to P&L and remaining loss left in OCI.
  • The difficulty in identifying trigger point for reversal of impairment losses generally , with suggestions that AFS equity reversal of impairments loss in P&L should be permitted with, perhaps, a trigger test similar to that required for impairment with some noting that the inability to reverse impairment losses caused reluctance to, or delay in, the recognition of impairment.

IASB Chairman Sir David Tweedie floated the idea of removing the recycling option (treat all AFS securities as trading) as this would overcome many of the impairment difficulties with all movements being recorded in P&L. This proposal did not receive much support although an IOSCO .member noted that IOSCO members were divided on the issue

There was no apparent appetite by participants for a quick fix in this area before 31 December 2008, with general agreement that any review should be comprehensive and longer term, although there was some support for a review of the impairment and measurement of AFS securities in the short term, with a shorter than normal due process.

Topic 2 – FV Measurement

Most participants felt the guidance issued by the expert advisory panel measuring fair value in an illiquid market was useful, with some suggesting a need for greater guidance around the use of discount rates. Others noted the difficulties auditors face in obtaining sufficient appropriate evidence to support valuations in illiquid or inactive markets.

Some participants commented on user misunderstanding about what was meant by fair value, and suggested the IASB develop ways to educate users about FV and why FV is used for financial reporting.

In terms of disclosure, some suggested a need for more guidance on what and when to disclose information, with mixed views on whether the IASB or industry groups were the best suited to produce illustrative disclosures. Some participants expressed concern with the ever increasing disclosure requirements which tends to reduce understandability of financial statements.

Topic 3 – Other Issues

CDOs. Not a great deal of support for anything to be done in relation to CDOs.

Hedging. Strong support for a total review and rethink on hedging accounting requirements, with a desire for simplification of the rules. Agreed any review would need to be comprehensive, it needed to have high priority, and probably could not be done in the short term and may need to be incorporated into any review of classification (see below).

Simplification of Classification. There was a fair degree of support for permitting redesignation out of the FV option, for example when there is a change in conditions for original designation. However, there was no agreement about the criteria to be applied to permit such reclassification. General agreement that this area need to be reviewed and was a long term project.

Pro-cyclicality. Mr Smith noted that accounting standards should show information to the market, good or bad. The was general agreement with that view, however the IASB was encouraged to review their approach in relation to provisioning which is based on an as incurred model, while many regulators require the application of an expected loss model for prudential purposes. The IASB indicated that it would appreciate gaining a better understanding of the expected loss model, referred to by some as dynamic provisioning.

Future Issues. Participants encouraged the IASB to give appropriate consideration to the following topics: hyper-inflation, foreign exchange translation, and definition of an active market.

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

IASC Foundation appoints a new Trustee

15 Dec 2008

The IASC Foundation (IASCF) has appointed Scott Evans as a Trustee of the IASCF beginning 1 January 2009.

Mr Evans is Executive Vice President, Asset Management and Chief Executive Officer of TIAA-CREF Investment Management LLC in the United States. He replaces David Shedlarz who is to retire as a Trustee at the end of his term. Click to view the press release (PDF 61k).

Two IAS Plus newsletters in Chinese

15 Dec 2008

Deloitte (China) has published two special edition IAS Plus Newsletters in Chinese.

Click for:

Our CAS Plus Website has more information in Chinese.

IFRS presentation and disclosure checklist 2008

15 Dec 2008

We have posted the PDF version of Deloitte's IFRS Presentation and Disclosure Checklist for the Year Ended 31 December 2008. The checklist is formatted to allow the recording of a review of financial statements, with a place to indicate yes/no/not-applicable for each presentation and disclosure item.

SEC Financial Reporting Manual

14 Dec 2008

The Division of Corporation Finance of the US Securities and Exchange Commission has released a new version of its Financial Reporting Manual.

This 267-page manual is an informal reference document for SEC staff and provides general guidance only. The SEC has made it available on its public website. Topics covered in the Division of Corporation Finance Financial Reporting Manual include:

  • Registrant's financial statements
  • Other financial statements required
  • Pro forma financial information
  • Smaller reporting companies
  • Foreign private issuers & foreign businesses
  • Related party matters
  • Non-GAAP measures of financial performance, liquidity and net worth
  • Management's discussion and analysis of financial position and results of operations (MD&A)
  • Reverse acquisitions and reverse recapitalizations
  • Effects of subsequent events on financial statements required in filings
  • Tender offers
  • Employee stock benefit plans
  • Multi-jurisdictional disclosure system

Click to view the Financial Reporting Manual (link to SEC website).

Proposal to change IFRS 1 effective date

13 Dec 2008

The IASB has added to its December 2008 meeting agenda a project to change the effective date of the restructured version of IFRS 1 'First-time Adoption of International Financial Reporting Standards' that the Board released on 25 November 2008.

This new version of IFRS 1 supersedes the previous version effective for annual periods beginning on or after 1 January 2009. Unfortunately, paragraphs 36, 37, and 39 of the new IFRS 1 make reference to IFRS 3 Business Combinations (revised 2008) and IAS 27 Consolidated and Separate Financial Statements (revised 2008), both of which are not effective until 1 July 2009. Therefore, technically the guidance on the topics covered in the three cited paragraphs is not valid from 1 January to 1 July 2009. To fix that problem, the IASB staff has proposed that the Board amend IFRS 1's effective date to 1 July 2009.

See our 25 November 2008 story on the release of the restructured version of IFRS 1.

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.