April

IASCF releases 2009 XBRL IFRS Taxonomy

03 Apr 2009

The IASC Foundation has issued the final IFRS Taxonomy 2009 and published for comment a draft of the Due Process Handbook for XBRL Activities.

The taxonomy translates IFRSs as of 1 January 2009 into XBRL (eXtensible Business Reporting Language). XBRL allows companies, regulators, investors, analysts and others to benefit from easier filing, improved access to, and comparison of financial data. Both the 2009 taxonomy and the draft Due Process Handbook for XBRL Activities may be downloaded without charge from the IASB's Website at www.iasb.org/XBRL/XBRL.htm. Click for Press Release (PDF 28k). We have an XBRL Page on IAS Plus.

 

Notes from the IASCF Monitoring Board meeting

03 Apr 2009

The Trustees of the IASC Foundation held a joint meeting with the new IASCF Monitoring Board on 1 April 2009. It was the inaugural meeting of the Monitoring Board.

Presented below are the preliminary and unofficial notes taken by Deloitte observers at the meeting.

Notes from the Joint Meeting of the IASCF Monitoring Board and IASCF Trustees -- 1 April 2009

Gerrit Zalm, IASCF Chairman, chaired this meeting, noting that this would not be the usual situation because the Monitoring Board would appoint its own chair. He welcomed the Monitoring Board members:

  • International Organization of Securities Commission (IOSCO):
    • Emerging Markets Committee: Guillermo Larain
    • Technical Committee: Hans Hoogervorst
  • European Commission: Charlie McCreevy, Commissioner for Internal Market and Services
  • Financial Services Agency (Japan): Junichi Maruyama, Deputy Commissioner for International Affairs
  • US Securities and Exchange Commission: Mary Schapiro, Chairman
  • Basel Committee on Banking Supervision [Observer]: Sylvie Matherat (Banque de France), Chair, Accounting Task Force

Mr McCreevy noted that the financial crisis had highlighted the necessity of removing 'regulatory arbitrage' through co-operation among securities regulators. Ms Schapiro stated that the SEC remained committed to the independence of financial reporting standard-setting and to the investor focus of financial reporting. In addition, as far as the capital markets were concerned, she supported the pre-eminence of investors' needs. A single set of high-quality financial reporting standards was part of that commitment, and the SEC remained committed to the goal of international convergence.

The IASCF Vice-Chairman pleaded with the Monitoring Board that they continue the apolitical nature of the Trustees: in his view, the dedication and impartiality of the Trustees had served the organisation well for the past eight years and was something worthy of preserving.

Trustees' Oversight Activities in 2008 and Priorities for 2009

Antonio Vegezzi, Chair of the Trustees' Due Process Oversight Committee, presented a review of the activities of the committee for 2008 and their priorities for 2009. He noted that the due process of the IASB was an area of concern for all the Trustees, and that the meetings of the committee were not restricted to members of the committee. The meetings and minutes are not made public, but reports of the activities of the committee are discussed with the Trustees in open session.

Members of the Monitoring Board questioned the suspension of due process in October 2008. Mr Vegezzi stated that the decision was taken by the Trustees as a whole, unanimously and after intense discussion. It was not something that was done lightly.

Sam DiPiazza noted that the Trustees took the due process of the organisation very seriously and that the due process of the IASB was 'far beyond' that of the US Financial Accounting Foundation and the FASB. He stated that 'due process is at the heart of everything that the Trustees do'.

IASC Foundation Financial Position

David Sidwell, Chairman of the Trustees' Audit Committee, reviewed the financial statements of the IASB, which had been approved at a meeting of the Audit Committee on 31 March 2009 and the audit report signed.

Looking forward, Mr McCreevy noted that the European Union would be providing funds from the main budget for the years 2011-2013, subject to the final approval of the Commission's recommendation, which was expected by the end of the current EU Parliamentary session. There was a general discussion of funding, but little beyond general support for the approach being developed by the Trustees.

Funding and Requirements for the IASC Foundation

Miranda Corti, IASCF Director of Finance and Resources, made a presentation of the IASCF's expected resource requirements over the next five years. To meet the IASCF's objective of establishing IFRS as the global standards for financial reporting, staff resources would need to rise from 110 now to 140 by 2013, with an expense budget of about £23 million. A short discussion followed.

Proposed Trustee Nomination Process for 2009

The Monitoring Board was informed that the Trustees were likely to recommend the re-appointment of the following Trustees whose terms expire in 2009 and who are eligible for reappointment and have indicated a willingness to continue: David Sidwell, Paul Tellier, Jeff van Rooyen, and Luigi Spaventa. Two Trustees must retire (Phil Laskawy and Bertrand Collomb), and the process of advertising for their replacements would begin in April 2009. In particular, the proposed process was:

  • April 2009: the Trustees should advertise for a minimum of two positions (the two members who are term-limited) and specifically invite nominations from Europe and North America. The advertisement will be released in early April in the Economist and provide six weeks for nominations.
  • April and May 2009: the Trustees will provide the opportunity for the Monitoring Board to put forward candidates for consideration by the Trustees during the period of advertisement. Simultaneously, the Trustees will write to relevant stakeholder groups, particularly from the investor, preparer, and official communities, to seek nominations.
  • June 2009: the Nominating Committee will develop a possible shortlist of candidates, based upon the input received from the Monitoring Board and other parties, and will conduct background research where appropriate.
  • July 2009: At the Trustees' meeting, the Nominating Committee will present a recommendation to the full Trustees' meeting. Once supported by the Trustees, the Trustees would formally present nominations to the Monitoring Board for consideration. The process should be complete by September 2009.

There were no particular comments from members of the Monitoring Board on the proposed approach. However, Mr McCreevy noted that he would be consulting his European colleagues, including the EU Parliament and Member States. This comment was clearly unexpected and caused a great deal of concern, especially among Trustees. One Trustee asked whether there were other areas of the Monitoring Board's mandate that were subject to the review of the EU Parliament. Another asked whether what the Commissioner was referring to was 'consultation' or 'consent'. Mr McCreevy subsequently clarified his remarks by saying that his discussions would be informal consultations and would be restricted to EU candidates. He hoped that there would be a consensus around any candidate, but in the absence of such a consensus, the decision would rest with the Commissioner.

IFRS Adoption in Emerging Markets

Guillermo Larrain (IOSCO Emerging Markets Committee) briefed the Monitoring Board and Trustees of the results of a survey about the implementation of IFRS in emerging markets [not emerging economies]. He noted in particular that Brazil had decided to adopt (not adapt) IFRS, which was a significant move.

Sam DiPiazza observed that, in his experience, the training being undertaken in South America was impressive and that the capacity to support IFRS was already good and getting better. In addition, he had seen that principles-based judgements were 'just as robust' in emerging markets as they were in developed ones.

Response to the Financial Crisis

Sir David Tweedie introduced the IASB's responses to the financial crisis and explained in broad terms some of the issues being addressed by the IASB (most of them jointly with FASB). He stressed that this meeting should not get into technical details, but should address process issues only.

Ms Matherat (Basel Committee) stressed Basel's commitment to working with the IASB towards the 'more timely recognition of losses'. In addition, there was a need to have an audit trail from internal reporting to external financial reporting to prudential filings, but she did not elaborate what this might be.

Participants expressed various views on aspects of providing for losses in financial statements and encouraged the IASB to have an open mind as they explored the alternatives. In addition, bank regulators were encouraged to tighten the requirements about what could be distributed by banks.

A Trustee noted that it was not the loss provisioning model that had saved banks in some jurisdictions; it was the regulator actively preventing them from investing in certain asset classes that had saved them. Sir David agreed, noting that regulatory capital had been too low to cover 'unexpected' losses. Ms Matherat noted that, in her view, loan loss provisions were there to provide for expected losses; and capital provided the cushion against unexpected losses. Both had proved inadequate in the current financial crisis.

Closing the debate, Sir David outlined the IASB's proposals for replacing IAS 39, to which there was general agreement. Although welcoming the intent to replace IAS 39 'in months, not years' (Sir David's words), Mr McCreevy observed that the IASB had yet to give the Commission Services an adequate response to their letter sent in late October 2008. Sir David noted that this letter had been discussed with a broad range of constituents, and the IASB had received a strong message that the items in that letter were not imperative when compared to fixing IAS 39 as a whole. Mr McCreevy and Sir David 'agreed to differ' on this point.

This summary is based on notes taken by observers at the Joint Monitoring Board and IASCF Trustees meeting and should not be regarded as an official or final summary.

Monitoring Board elects chair, approves charter and MoU

03 Apr 2009

The IASCF Monitoring Board held its first meeting, jointly with the Trustees of the IASC Foundation, on Wednesday 1 April 2009 in London.

Monitoring Board elects chair, approves charter and MoU

Mr Hoogervorst

The Monitoring Board members participating in the meeting with the IASCF were Hans Hoogervorst, Chair of the Netherlands Authority for Financial Markets; Guillermo Larrain, Chairman of the IOSCO Emerging Markets Committee and the Superintendencia de Valores y Seguros of Chile; Junichi Maruyama, Deputy Commissioner for International Affairs of the JFSA; Mary Schapiro, Chairman of the US SEC; European Commissioner Charlie McCreevy; and Sylvie Matherat, representative of the Basel Committee on Banking Supervision. At the meeting, the Monitoring Board:

  • Elected Hans Hoogervorst, Chair of the Netherlands Authority for Financial Markets, as its first Chairman for a two-year term
  • Adopted a Charter (PDF 390k) setting out the Monitoring Board's role and duties, organisation, membership, and meeting requirements, among other things
  • Approved a Memorandum of Understanding Between the Monitoring Board and IASCF (PDF 360k) defining the role of the Monitoring Board and its relationship with the IASCF Trustees
The Charter defines the Monitoring Board's mission as follows:
  • To cooperate to promote the continued development of International Financial Reporting Standards as a high-quality set of global accounting standards;
  • To monitor and reinforce the public interest oversight function of the IASCF while preserving the independence of the IASB. In that regard:
    • To participate in the selection and approval of IASCF Trustee appointments; and
    • To advise the IASCF Trustees with respect to the fulfillment of their responsibilities, in particular with respect to regulatory, legal and policy developments that are pertinent to the IASCF's oversight of the IASB and appropriate sources of the IASCF's funding;
    • To discuss issues and share views relating to International Financial Reporting Standards, as well as regulatory and market developments affecting the development and functioning of those standards.

The MoU states the purpose of the IASCF Monitoring Board as follows:

The primary purpose of the IASCF Monitoring Board is to serve as a mechanism for formal interaction between capital markets authorities and the IASCF, thereby facilitating the ability of capital market authorities that allow or require the use of IFRS in their jurisdictions to effectively discharge their mandates relating to investor protection, market integrity, and capital formation. The IASCF Monitoring Board will help ensure the public accountability of the IASCF by monitoring and reinforcing the public interest oversight function of the IASCF, as well as to promote the continued development of IFRS as a high-quality set of global standards.

Click for IASCF Monitoring Board Press Release (PDF 48k).

Practical insights on converting to IFRSs

02 Apr 2009

An article in the April 2009 issue of Financial Executive magazine presents the views of senior financial officers of two companies, Deutsche Telekom National Grid, who were responsible for making their company's transition to IFRSs.

Both executives emphasise the importance of a stable platform of accounting standards before embarking on an IFRS conversion. The article reviews the steps each company took in making the transition and the internal changes – both practical and mindset changes – that were involved. The article is copyright by Financial Executives International and is posted on IAS Plus with their kind permission. Click to download the article IFRS in Three Years Possible... But Only with a Stable Platform (PDF 73k). We have added a link to this article on our First-time Adoption Page.

 

Do not confuse investor reporting and prudential regulation

02 Apr 2009

The European Contact Group (ECG) – a European forum of representatives of the six largest international accounting networks, including Deloitte – has written to Charlie McCreevy, the European Commissioner for Internal Market and Services, concerning 'dynamic provisioning' for determining appropriate bank provisions for loan losses.

The ECG letter characterises various dynamic provisioning proposals into two general categories:
  • Improvements to or changes from the 'incurred loss' model employed by current IFRSs, and
  • Introduction of a 'buffer fund' to address economic cyclicality

Regarding the first type, the ECG supports the current projects of IASB and FASB to improve impairment recognition for debt and equity instruments, including possibly replacing the 'incurred loss' model by an 'expected loss' model. But ECG does not support proposals to introduce into financial reporting intentional excessive conservatism that could undermine the ability of financial statements to give a true and fair view of financial position and financial performance for the period.

Regarding the buffer fund approach, ECG notes that while this may be something that bank regulators may wish to consider for prudential regulation purposes, incorporating this into financial reporting standards is wholly inappropriate. "Applying a mixture of financial and prudential accounting in the financial statements will damage the transparency, consistency and comparability of financial statements to the detriment of capital market users."

On 25 March 2009, FEE, the Federation of European Accountants, published a Policy Statement with a similar message. Also, EFRAG made essentially the same point in its Letter to the Joint IASB Financial Crisis Advisory Group (PDF 76k):

One of the issues that is being much debated at the moment is the relationship between general purpose financial reporting and prudential reporting. While there are links between the general purpose financial reporting and prudential reporting and there are advantages to be gained the closer general purpose financial statements and the prudential returns are to each other, the information needs of capital market participants are not the same as those of prudential regulators. Therefore, we think it is fundamentally important that it is recognised that those different information needs mean different financial reporting objectives, and that could mean different reporting.

Deloitte response to IASCF Constitution Review Part 2

02 Apr 2009

Deloitte Touche Tohmatsu has submitted a letter of comment in response to the invitation to comment from the IASC Foundation on the Review of the IASCF Constitution: Identifying Issues for Part 2 of the Review.

Among the ideas expressed in the letter:

Deloitte Touche Tohmatsu Suggestions for IASCF Constitution Review Part 2

  • 'Principles-based' standards. The Constitution should require that "the IASB should develop financial reporting standards that are based on 'clear principles'. We would use the phrase 'clear principles' in the Constitution in preference to 'principles-based', for which there is no consensus on what that phrase means".
  • IASB due process. The IASB should amend its Due Process Handbook to require the IASB to:
    • give constituents an opportunity to comment on the IASB's agenda and relative priorities
    • substantively redeliberate a preliminary view included in a discussion paper if there is a substantial un-orchestrated level of opposition to it
    • make a preliminary assessment of the practical and cost/benefit consequences of a particular approach before committing itself to that approach
    • conduct field tests when a proposal would change current practice in an untested way
  • Fast track changes to standards. We do not support creating a separate 'fast track' procedure for changes to IFRSs
  • Standards for not-for-profit entities and public sector entities. The IASB's primary function at present is 'private sector' financial reporting standards. We believe that this responsibility remains appropriate and should not change at this time. The IPSASB should be encouraged to continue to develop public sector standards based on IFRSs. In due course, although not as a current priority, the IASB should address issues in financial reporting by not-for-profit entities.
  • Collaboration. The Constitution should not be amended to encourage or require IASB collaboration with any specific organisations. The Constitution already permits such collaboration, and the IASB has been doing so quite successfully with a range of organisations.
  • Monitoring Board. The Constitution should be amended to incorporate several of the principles set out in the Memorandum of Understanding between the IASCF and the new Monitoring Board – specifically that the MoU does not alter the terms of the relationship between the Trustees and the IASB; nor does it alter the Trustees' responsibilities as described in the Constitution.
  • Standards Advisory Council. The Trustees develop criteria that will allow them to assess how effectively the IASB engages with and responds to the Standards Advisory Council.
  • Funding. We are firmly in favour of a principle that those parties who use the IASC Foundation 'works' (IFRSs and related documents) should bear the burden of funding the IASC Foundation's standard-setting activities. We believe that this is best left in the hands of local financial market regulators, who in turn should be responsible for raising the money from their constituents, including but not necessarily limited to preparer companies.
  • IASCF openness. 'Many of the criticisms being levelled at the IASCF and the Trustees in particular stem from a lack of transparency and understanding around what they do and how they do it. We encourage the Trustees to prepare a document that explains their operating procedures and how they exercise their oversight functions.'
  • IASCF CEO. We favour appointing a CEO of the IASCF, one who is not a member of the IASB or the IASB/IFRIC staff
Click here for more information about 2008-2009 Constitution Review on IAS Plus.

2009 illustrative annual report from Deloitte Australia

01 Apr 2009

Deloitte Australia has released their Illustrative Annual Report for financial years ending on or after 30 June 2009. Australian accounting standards are identical to IFRSs.

The main changes from 2008 that are illustrated in this publication are:
  • the changes to the ASX corporate governance principles and recommendations
  • AASB 8 Operating Segments (early adoption) (identical to IFRS 8)
  • Interpretation 13 Customer Loyalty Programmes
In releasing the new illustrative report, Deloitte Australia notes:

Our objective in this publication is to encourage you to 'tighten the screws' on your disclosures in your financial report. In current market conditions users will seek more information around going concern status and liquidity positions. It may be timely to revisit current disclosures and to ensure that the current market conditions are taken into account. Impairment of assets is also of interest to users of financial reports. Directors should ensure that their review processes are robust and transparent and that the disclosure in financial reports reflects both technical compliance with the disclosure requirements and provides meaningful information to make decisions and understand the entity's business.

The Illustrative Annual Report is released in four parts:
  • Section A – What's new in Financial Reporting? (PDF 393k). Provides a summary of the changes to pronouncements, as well as links to where you can find further information that may be helpful.
  • Section B – Illustrative Annual Report (PDF 1,083k). Accounting Standard AASB 101 Presentation of Financial Statements (identical to IAS 1) requires that the entity include in the notes to the financial statements an explicit and unreserved statement of compliance with IFRSs. If the auditor is of the opinion that the financial report complies with IFRSs, the auditor's report so states.
  • Section C – Illustrative Concise Report (PDF 880k). Australian Corporations Law permits an entity to fulfil its annual reporting obligation to shareholders by providing a 'concise financial report for the year drawn up in accordance with accounting standards made for the purposes of this paragraph'. In August 2008 the Australian Accounting Standards Board adopted AASB 1039 Concise Financial Reports (Available Here).
  • Section D – Reporting Obligations (PDF 250k). Contains useful information on the requirements to prepare, audit, and lodge financial reports, as well as reporting deadlines, under Australian laws and regulations.

FCAG letter to the G20

01 Apr 2009

The Financial Crisis Advisory Group (FCAG) has issued a letter for distribution to the members of the G-20 meeting in London tomorrow.

The FCAG was established by the IASB and the US FASB to advise the two boards about standard-setting implications of the global financial crisis and potential changes to the global regulatory environment. The letter explains the mission of the FCAG and its progress to date. The letter notes that the FCAG expects to issue its report in July 2009. Click for FCAG Letter to the G20 (PDF 45k).

 

IPSASB proposes to adopt IAS 41 for the public sector

01 Apr 2009

IFAC's International Public Sector Accounting Standards Board (IPSASB) has published an exposure draft ED 36 Agriculture.

This ED is part of the IPSASB's global convergence program, scheduled for completion by 31 December 2009, to substantially converge International Public Sector Accounting Standards (IPSASs) with IFRSs approved at 31 December 2008. ED 36 proposes an IPSAS that converges with the IAS 41 Agriculture, with limited changes to ensure consistency with other IPSASs. These changes include an acknowledgement that, in some jurisdictions, biological assets may be sold or transferred for nominal amounts. You can download ED 36 from IFAC's Website. Comment deadline is 30 June 2009.

 

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.