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iGAAP Financial Reporting Standards in India

09 Dec 2008

Deloitte Touche Tohmatsu India Private Limited has compiled 'iGAAP Financial Reporting Standards in India including a Comparison with IFRS' – a practical and comprehensive guide for companies based in India.

It includes a comparison of each Indian Standard with the relevant standard under IFRS. This book is the ideal one-stop reference guide financial reporting in India in view of the planned convergence of Indian GAAP with IFRSs by 2011. The book includes illustrative examples to demonstrate how the standards work in practice and provides commentary for further support in areas where Indian GAAP is ambiguous, unclear, or does not provide any guidance. iGAAP Financial Reporting Standards in India (ISBN: 9788184731347) has been published by Wolters Kluwer (India) Private Ltd, New Delhi and may be ordered from the CCH India website.


US Financial Reporting Alert in Spanish

08 Dec 2008

Deloitte (Colombia) has published the Spanish version of the Deloitte USA Financial Reporting Alert 08-17 (October 2008) – 'Accounting Considerations Related to Redemption Restrictions on Money Market Funds'.

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UK Parliament Q&A with IASB chairman

08 Dec 2008

IASB Chairman Sir David Tweedie and others gave evidence at a hearing on the banking crisis conducted by the Treasury Committee of the United Kingdom Parliament on Tuesday 11 November 2008.

The Committee has released the Uncorrected Testimony (PDF 229k) of that portion of the hearing. Evidence presented by Sir David begins at Question 185. Presented below is Sir David's response to a question about whether the IASB inappropriately caved in to political pressure to amend IAS 39 for Reclassifications of Financial Assets to allow companies to stop measuring some financial assets at fair value.

Q186 Chairman: Sir David, 'spineless' and 'caved in'. Answer?

Sir David Tweedie: I think we experienced something that, I hope, firstly, we never see again in standards setting, but I think there was just a blunt threat to blow the organisation away. That came very, very rapidly. We heard a speech by the Commissioner saying that he had legislation prepared to have a 'carve out' from part of our standards. They cannot put words in at the moment (though I suspect that might be thought about); they can only remove words, and what that would mean was they would be able to transfer out of things like the trading account into some other account – held for maturity, or whatever else – without any controls whatsoever. So companies could have taken items out of that, not at fair value, as we require, but they could have taken them out at original transaction price, for example. There were no disclosures; you would never know what had happened, and suddenly we would see all these losses flowing back in, if they did not think they had been impaired on a permanent basis. I think accounting in Europe would have been totally out of control if they had used the option to take the 'carve out'. Our problem was we originally intended to have at least a week to find out whether, in fact, we had managed to get our standards equivalent, as far as reclassification is concerned, with the United States. We did not have a week; we had only a matter of days. What we did is we contacted the American standards sector, the Securities and Exchange Commission in America, and the major accounting firms, and say: 'We think we have done it here. Is that right?' However, when we put it through – we put it through on the Monday and, if I remember rightly, the European Commission voted on the Tuesday or Wednesday – we had no time whatsoever for consultation. We explained at that meeting: 'If we find we have made a mistake, we are going to come back again'. In a way, we have got a mistake on the transition. That is what happens when you do not consult.

PCAOB report on audit firm inspections 2004-07

08 Dec 2008

The Public Company Accounting Oversight Board today released a report summarising the inspection findings of the eight domestic accounting firms that were subject to annual inspections over the past four years.

The PCAOB focuses its inspections on those areas of an audit likely to pose the most significant challenges for an auditor or to pose the most significant risk to investors of misstated financial statements. These include areas that are fundamental to any audit, such as testing of revenue, as well as areas that pose increasingly challenging issues in current market conditions, such as testing of fair value measurements. Click to download Report on the PCAOB's 2004, 2005, 2006, and 2007 Inspections of Domestic Annually Inspected Firms (PDF 107k). Here is an overview of the findings:

  • Inspectors continue to find deficiencies in important audit areas, both established and emerging. These areas include critical and high-risk parts of audits, such as revenue, fair value, management's estimates, and the determination of materiality and audit scope. These deficiencies occurred in audits of issuers of all sizes, including in some of the larger audits they reviewed. In some cases, the deficiencies appeared to have been caused, at least in part, by the failure to apply an appropriate level of professional skepticism when conducting audit procedures and evaluating audit results. In addition, even in areas where inspectors have observed general improvement, deficiencies continue to arise. The inspectors will continue to focus on the significant areas where they have encountered deficiencies.
  • In certain well-established audit areas, such as the confirmation of accounts receivable and the auditing of income tax accounts, the incidence of deficiencies encountered has declined. In certain other areas, such as the performance of analytical procedures, the nature of the deficiencies identified by inspectors has generally narrowed during the four-year period, with fewer of them relating to the overall failure to apply the governing standard and more relating to only one or a few aspects of the standard. In addition, inspectors have, in recent years, reviewed some audits of issuers whose audits had been reviewed in prior years in order to evaluate whether performance in the areas commented upon in prior years had improved. In the majority of these specific audits, inspectors observed improvement in the auditing of those areas.
  • In response to the identification, during the inspection process, of quality control deficiencies, firms have changed their audit methodologies, processes, or related quality control systems.

IASCF seeks comments on Constitution review

08 Dec 2008

The Trustees of the International Accounting Standards Committee Foundation (IASCF) have issued for comment a discussion document on the second part of the five-yearly review of the IASCF Constitution.

The document addresses constitutional issues that were not covered in the first part of the review. Some of the issues on which the IASCF seeks comment are:

  • whether the section of the constitution dealing with governance of the Foundation, which now mentions only the IASCF, should also refer to the new monitoring group proposed under part 1 of the Constitution Review
  • geographical mix of Trustees
  • effectiveness of Trustee oversight activities
  • funding arrangements
  • the IASB's agenda-setting procedures
  • the IASB's existing due process procedures
  • the possible need for 'fast track' due process procedures
  • principles-based approach to standards
  • whether the IASB should set standards for not-for-profit entities and the public sector
  • procedures and composition of the Standards Advisory Council

Comments are due by 31 March 2009. The Trustees expect then to continue their consultations in a series of round-table meetings to encourage further debate and comment from stakeholders around the world. The Trustees plan to conclude the second part of the review at their meeting in October 2009. The amendments to the Constitution would take effect on or after 1 January 2010. Click for:

IFRS presentation and disclosure checklist for 2008

08 Dec 2008

We have posted Deloitte's IFRS Presentation and Disclosure Checklist for 2008 (Word version). 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.

The checklist is a Microsoft Word File Zipped (502k).

Note that none of the new and revised Standards and Interpretations included in this checklist for the first time is effective for annual periods beginning 1 January 2008 (although early adoption is permitted for most). Therefore, for entities with year-ends of 31 December 2008 that have not elected to adopt any of these Standards or Interpretations in advance of their effective dates, and that would prefer to defer the move to the new terminology introduced by IAS 1(2007), it may be preferable to complete the 2007 release of the Presentation and Disclosure Checklist, which includes all of the Standards and Interpretations effective for accounting periods beginning 1 January 2008. The only change will be that IFRICs 11, 12 and 14, which were not effective for accounting periods beginning 1 January 2007 and, therefore, were shown in shaded text in the 2007 checklist, are effective for periods beginning 1 January 2008 and, therefore, where applicable, they should be completed.

Our various IFRS model financial statements and related checklists, including translations, are always available here.

Newsletter on recent revisions to IFRS 1

08 Dec 2008

Deloitte's IFRS Global Office has published a special edition of our IAS Plus Update Newsletter 'Revisions to IFRS 1 on First-time Adoption of IFRSs'.

Frequent amendments to IFRS 1 since its original release in 2003 had made the standard more complex and less clear. The new version of IFRS 1 just issued retains the substance of the previous version, but within a changed structure. It replaces the previous version and is effective for entities applying IFRSs for the first time for annual periods beginning on or after 1 January 2009. Earlier application is permitted.

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IFRIC meeting for January 2009 is cancelled

07 Dec 2008

The IASB has announced that the meeting of the International Financial Reporting Interpretations Committee (IFRIC) scheduled for 8 and 9 January 2009 has been cancelled. Because of IFRIC's recent progress, there were not sufficient agenda items for the IFRIC to consider to warrant a meeting.

Regarding items discussed at IFRIC's November 2008 meeting, the announcement said:

A near-final draft based on Interpretation D24 Transfers of Assets from Customers (formerly 'Customer Contributions') will be posted for comment on the IASB's website by the end of the week commencing 8 December.

Regarding IFRIC's project on the treatment of voluntary prepaid contributions under a minimum finding requirement in accordance with IFRIC 14, the staff will present the proposed amendment to the Board at its January meeting. The proposed amendment approved by the Board will also be discussed with the Pensions Working Group at its meeting in January.

IFRSs gaining acceptance among US CPAs

06 Dec 2008

The US accounting profession increasingly believes that international accounting standards will be implemented in the United States and is beginning to prepare for the change, according to a survey conducted by the American Institute of Certified Public Accountants.

The survey shows a significant and positive shift in the number of firms and companies that are starting to prepare for eventual adoption of IFRSs.

  • 55% of CPAs at firms and companies nationwide now say they are preparing in a variety of ways for adoption of IFRS, an increase of 14 percentage points from 41 percent who were preparing for change according to an AICPA survey in April 2008.
  • 65% of CPAs say they have some knowledge of IFRS but need to learn more.

The survey results are based on 1,495 AICPA-member respondents, who took an online survey between 22 September and 2 October 2008. The margin of error was less than plus-or-minus 3 percentage points. Click for:

Notes from the financial crisis roundtable in US

05 Dec 2008

In response to the challenges caused by the current market conditions the IASB and the FASB have 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. Presented below are the preliminary and unofficial notes taken by Deloitte observers at the 25 November roundtable. Our comprehensive credit crunch information is here.

Notes from the IASB-FASB Global Financial Crisis Roundtable
FASB Offices, Norwalk, CT
25 November 2008

On 25 November 2008, the IASB and the FASB held a public roundtable at the FASB offices in Norwalk, CT on the subject of reporting issues arising from the global financial crisis. The objective of the roundtable 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 main topics discussed were (1) impairment of financial assets, (2) fair value option, (3) fair value measurements, and (4) disclosures. The following are some of the highlights from the roundtable.

Impairment of Financial Assets

Much of the roundtable discussion focused on issues with the current impairment models related to debt securities. Several issues identified include:

  • The purpose of 'impairment' in financial reporting is not well understood. There is no unified definition and there are multiple models depending on the type of financial asset.
  • Triggering events are not well understood. Some believe that management intent should play a significant role in whether a triggering event has occurred. Others indicate that management intent changes and is subjective; as such, management intent should not be a factor when determining whether an asset is impaired.
  • Once impairment is deemed appropriate, the use of multiple impairment models for recognition in the financial statements creates complexity and makes it difficult for users to understand the financial statements. For example, loans receivable are carried at amortised cost less impairment for credit loss, but securitised loans, which may have the same economic characteristics as loans receivable, are written down to fair value.

Roundtable participants shared several views on how some of these issues could be address. Some Users of the financial statements were proponents of full fair value with changes in fair value reflected in the income statement. They indicated that this would take away issues related to triggering events and multiple impairment models. Others (some preparers and auditors) suggested a model that was proposed by the AICPA Center for Audit Quality (CAQ) in their Comment Letter to the SEC on Fair Value (PDF 119k). Under that model the debt security would be carried at fair value on the balance sheet with credit losses recognised currently in income and other changes in the fair value recognised in other comprehensive income. The credit loss would be calculated on the basis of changes in expected cash flows in a manner similar to the Statement 114 model. Under that proposal other comprehensive income would be displayed on the income statement so the components of change in fair value are in the same statement. These proponents indicated that it would give users of the financial statement information regarding expected cash flows of the debt security as well as other changes in fair value.

These two suggestions sparked debate about what is appropriate to be recorded in earnings. While the debate was interesting, it did not solve the issue of what is causing the lack of confidence in financial institutions. Some indicated that the lack of confidence was of result of investors not trusting what companies have reported in their balance sheet. They indicated the real issue is lack of transparency necessary for investors to make investment decisions. Several analysts suggested that additional disclosure of what the entity is holding and how management estimated the fair value are necessary. One suggestion was a table, by class of investment, which would include: cost, current fair value, implied value or other measure that the company feels is appropriate, a description of how fair value is calculated including significant inputs, a description of how implied value was calculated, and why the company believes the other measurement is appropriate. Members of the both Boards indicated that it would probably be easier to get a short term project completed that deals with disclosure than one that tries to address the multiple issues related to impairment.

Fair Value Option

Participants were asked whether they believed that the fair value option should continue to be irrevocable. Most agreed that the option should be irrevocable. They indicated that they liken it to an anti-abuse provision which keeps people from applying it to an instrument when it is beneficial and reversing the application when fair value is detrimental. Some indicated that the reason the option was initially elected may no longer be valid as a result of changes in the business. For example, if the option was selected to alleviate an accounting mismatch that no longer exists, then some believe the election should be revocable.

Fair Value Measurements

Several participants indicated that the measurement guidance in the whitepaper issued by IASB's Expert Panel was very useful and that it would be good for the Boards to codify the information into authoritative guidance. One participant asked for guidance on measuring alternative investments, such as investments in closed end hedge funds. The participant indicated that the FASB staff and FASB's Valuation Resource Group had previously discussed the difficulties in measuring these investments and whether net asset value was the appropriate measurement under Statement 157. Others indicated any short term guidance should solely focus on helping the capital markets recover and transparency.


Several participants commented on the disclosure suggestion noted above. They indicated that disclosure would be a good start but they would also like to see forward looking information, sensitivity to changes in inputs, and uncertainties in the estimate.

Others stated that the level 3 rollforward provides a significant amount of good information, and they would like to see that information for all levels within the hierarchy.

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

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