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PCAOB defers some audits of non-US audit firms

05 Dec 2008

The US Public Company Accounting Oversight Board (PCAOB) has adopted an amendment to an existing rule and has issued for public comment a separate proposed amendment to that rule. Both amendments relate to the timing of certain inspections of registered non-US audit firms.

The PCAOB also invited public comment on possible courses of action to address circumstances in which the PCAOB might be unable to complete an inspection because of a firm's concern that doing so may violate the firm's local law. Click for PCAOB news release (PDF 24k).


Alert on credit crunch and pension measurements

05 Dec 2008

Deloitte (United States) has published a Financial Reporting Alert that addresses the impact that the volatile financial markets and the broadening market decline may have had, and could have, on an entity's pension and other postretirement benefit calculations and disclosures.

Considerations for this financial reporting season include:

  • Balance sheet impact – asset valuation and funding status
  • Discount rate, including:
    • Issues relating to bond yield and bond selection when a company uses a hypothetical bond portfolio rather than a yield curve to support the discount rate to measure their postretirement benefit obligations
    • Use of index rates in selecting a discount rate
  • Expected long-term rate of return
  • Measurement of 2009 pension cost – the effect that decreases in plan assets and changes in postretirement benefit obligations could have on the computation of the gain or loss amortisation component of fiscal 2009 pension cost
  • Measurement date for plan assets and benefit obligations
  • Disclosures

The Financial Reporting Alert (PDF 62k) also discusses future considerations after this financial reporting season.

Two IAS Plus Newsletters in Spanish

05 Dec 2008

Deloitte (Colombia) has published two Spanish translations of recent IAS Plus Newsletters.

Click for:

Agenda for December 2008 IASB meeting

05 Dec 2008

The International Accounting Standards Board will hold its December 2008 meeting at the IASB's offices, 30 Cannon Street, London on Monday to Friday 15-19 December 2008. The meeting is open to public observation and will be webcast.

The tentative agenda is shown below.

Monday 15 December 2008 (afternoon only)


Tuesday 16 December 2008


Wednesday 17 December 2008 (afternoon only)


Thursday 18 December 2008


Friday 19 December 2008 (morning only)

FASB Codification will be US GAAP 1 July 2009

05 Dec 2008

The US Financial Accounting Standards Board (FASB) is alerting constituents that, on 1 July 2009, the FASB Accounting Standards Codification is expected to officially become the single source of authoritative nongovernmental US GAAP, superseding existing FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force, and related literature.

After that date, only one level of authoritative GAAP will exist. All other literature will be considered non-authoritative. 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.

Newsletter and Alert in Spanish

04 Dec 2008

Deloitte (Colombia) has published Spanish translations of two recent English language publications.

Click for:

Consolidated text of EU-IFRSs is now available

04 Dec 2008

In our 6 November 2008 news story, we reported that the European Commission adopted the consolidated text of all IFRSs in force in the European Union (EU), bringing together all IFRS endorsed from 29 September 2003 to 15 October 2008.

Our story had said that the EC's new consolidated text 'will be available in all official EU languages'. The various language consolidated texts have now been published in the EU Official Journal and posted:

Note that the consolidated text as adopted by the EC does not include the implementation guidance and bases for conclusions that the IASB issues with its Standards.

Broad support among CFOs for global standards

03 Dec 2008

The International Standards Project (a joint research project of Duke University, USA, and Oxford University, UK) has published 'Research Report Assessing the IASB', a survey of the views of 749 financial executives about IFRSs and the IASB.

Principal researchers are Professors Tim Buthe (Duke) and Walter Mattli (Oxford). The survey participants were mostly CFOs and chief accounting officers of companies listed on the major stock exchanges of the United States (NYSE), Germany (Frankfurt), France (Paris-Euronext), and the United Kingdom (London). Among the topics studied are:

  • costs-benefit assessment of IFRS
  • general desirability of the shift from domestic to international financial reporting standards
  • current strengths and weaknesses of IASB standard-setting
  • emerging issues, including the desirability of 'fair value' or 'mark-to-market' accounting rules.

Click to download the Report from IAS Plus (940kb), posted with the kind permission of Buthe and Mattli. For more information about the International Standards Project, see their website.

Assessing the IASB: Key Survey Findings
  • Financial executives overwhelmingly expect financial reporting standards to be increasingly set at the international level, and a clear majority of participants approves of this trend.
  • More than 1 in 3 nonetheless questions whether truly global accounting rules and practices are achievable given the differences in legal environments and business cultures across countries.
  • Large majorities of both US and European corporate finance executives see the IASB as moving toward full fair value accounting, but only few approve of this trend.
  • Americans assess key aspects of IASB standard-setting much more favourably than Europeans, including IASB due process, transparency, accessibility, inclusiveness, and accountability.
  • Clear majorities of both US and European financial executives believe that the quality and effectiveness of the IASB's International Financial Reporting Standards (IFRS) is high. At the same time, many also consider the complexity and cost of implementation of IFRS to be high or very high, and almost 60 percent respondents believe that the costs of switching to IFRS so far outweigh the benefits.
  • Listed companies that expect to be affected by a forthcoming IASB standard but nonetheless fail to communicate their views to the IASB often explain their inaction by saying they do not believe their comments would lead to any changes in the provisions of the draft standard.
  • US firms that do get involved in IASB standard-setting assess important methods or channels of involvement quite differently from their European counterparts. For example, 93 percent of American financial executives consider submitting comment letters effective; only 51 percent of Europeans consider them effective. Similarly diverging assessments apply to field tests and oral testimony at public hearings.
  • Overwhelming majorities say early involvement in the standard-setting process is key.

Paul Cherry is named as new SAC chair

03 Dec 2008

The Trustees of the International Accounting Standards Committee Foundation (IASCF) have appointed Paul Cherry as Chairman of the Standards Advisory Council (SAC) for three years beginning on 1 January 2009.

Mr Cherry is the Chairman of the Canadian Accounting Standards Board, from which he will step down at the end of March 2009. Previously, he chaired the Standing Interpretations Committee – the predecessor of IFRIC under the former IASC. He succeeds Professor Nelson Carvalho, whose term as SAC chair expires at the end of this year. The IASCF Trustees are in the final stages of selecting two vice-chairs and the full membership of the SAC, and expect to announce their appointments in the coming weeks. Click for press release (PDF 45k).

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