The Investment Professional is the quarterly journal of The New York Society of Security Analysts, Inc (NYSSA). The article, The Hard Sell – SEC in a Quandary over Its Push for IFRS (PDF 551k), is copyright 2009 by NYSSA and is posted on IAS Plus with their kind permission. Here is a brief excerpt:

The seemingly unstoppable juggernaut of US IFRS adoption has collided with the global financial crisis, one of the few barriers that may be capable of derailing the rush to a single international accounting standard. Adoption of IFRS in the US is now far from a given, and even the roadmap published by the US Securities and Exchange Commission in November 2008 has the potential to be sidetracked or possibly abandoned now that President Obama's administration has taken office....

From a philosophical standpoint, at the heart of the debate over IFRS adoption is the question of whether a global accounting standard is either feasible or desirable. Politically, IFRS is entangled in a change of administration in the US and the inevitable tug of war between corporations and standard setters over specific rules promulgated by the IASB. Economically speaking, the important issues involve tax questions, the costs involved in a transition to IFRS, and whether a global accounting standard will ultimately be more transparent and more valuable to investors and stakeholders.

Any mandate that would force publicly traded companies to adopt IFRS has implications far beyond technical accounting issues – the shift would virtually affect a company's entire operation. Investors need to get a handle on what the impact will be, how particular companies will handle the transition, and how their IFRS financial statements will diverge from their US GAAP statements.

The proposed changes are:

• IFRIC 9: Exclude from the scope of IFRIC 9 embedded derivatives in contracts acquired in combinations of entities or businesses under common control or in the formation of a joint venture.
• IFRIC 16: Allow entities to designate as a hedging instrument in a hedge of a net investment in a foreign operation an instrument that is held by the foreign operation that is being hedged.

We agree with the proposal to amend IFRIC 9 and urge its adoption. At this time, however, we are not ready to support the proposal to amend IFRIC 16 as it is not clear to us what fact pattern the Board has in mind and whether the rationale applies to all situations where the hedging instrument is being held by the foreign operation being hedged. Additionally, we have some concern about the proposed effective date of the IFRIC 16 amendment.

Click for:

• Deloitte's letter of comment (PDF 177k).
• More information on the ED in our 30 January 2009 story.
• All of our past letters of comment.

This new proposal reflects significant changes to the standard that the PCAOB first proposed on 26 February 2008. The proposed standard provides a framework for an engagement quality reviewer to objectively evaluate the significant judgments made by the audit engagement team and the conclusions reached in forming an overall opinion. Comments are due 20 April 2009. Click for:

• PCAOB proposal (PDF 189k).
• PCAOB press release (PDF 19k).

• clarify that the existing IFRS 7 fair value disclosures must be made separately for each class of financial instrument
• add disclosure of any change in the method for determining fair value and the reasons for the change
• establish a three-level hierarchy for making fair value measurements:
  • Level 1. quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
  • Level 2. inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices) (Level 2); and
  • Level 3. inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
• add disclosure, for each fair value measurement in the statement of financial position, of which level in the hierarchy was used and any transfers between levels, with additional disclosures whenever level 3 is used including a measure of sensitivity to a change in input data
• clarify that the current maturity analysis for non-derivative financial instruments should include issued financial guarantee contracts
• add disclosure of a maturity analysis for derivative financial liabilities

On 1 July 2009, the FASB Accounting Standards Codification is expected to become the single official source of authoritative, nongovernmental U.S. generally accepted accounting principles (GAAP):

• Replacement of existing standards. Pending approval by the FASB, after 1 July 2009, only one level of authoritative GAAP will exist, other than guidance issued by the Securities and Exchange Commission (SEC). All other literature will be non-authoritative.
• Subsequent issuance of new standards. There will also be an important change in how standards are issued after the Codification becomes GAAP. The FASB will no longer issue Statements of Financial Accounting Standards, Interpretations, FASB Staff Positions, or EITF Abstracts. Rather, all changes to GAAP, regardless of how they would have been issued currently, will be in the form of Codification Updates.

To explain the forthcoming changes, we have posted a story Major Changes to U.S. GAAP Structure Slated for July 1, 2009 (PDF 37k), published in the December 2008 issue of The FASB Report, with permission from the Financial Accounting Foundation, 401 Merritt 7, Norwalk, Connecticut, USA.

The newsletter is now organised by topic rather than by standard-setter. Topics covered in this issue include:

Fair Value Measurements

• Valuation Resource Group Discusses Four Topics at February 5 Meeting

• IASB Proposes Amendments to IFRIC Interpretations 9 and 16

• SEC Extends Comment Period on IFRS Roadmap for U.S. Issuers
• SEC Publishes 2008 Annual Report
• SEC Issues New Compliance and Disclosure Interpretations

• CAQ Reports on Lessons Learned From ICFR in Integrated Audits
• AICPA Proposes Clarifying and Converging SASs
• AICPA Issues Two Standards on Reviewing Interim Financial Information
• GAO Issues Updated Manual on Auditing Information System Controls

• COSO Issues Guidance on Monitoring Internal Control Systems
• GAO Releases Report on Troubled Asset Relief Program

Click to view:

• February 2009 edition of Accounting Roundup (PDF 234k).
• Past issues of Accounting Roundup.

• ISA 210 (Redrafted) Agreeing the Terms of Audit Engagements;
• ISA 265 Communicating Deficiencies in Internal Control to Those Charged with Governance and Management;
• ISA 402 (Revised and Redrafted) Audit Considerations Relating to an Entity Using a Service Organization;
• ISA 700 (Redrafted) Forming an Opinion and Reporting on Financial Statements;
• ISA 800 (Revised and Redrafted) Special Considerations - Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks;
• ISA 805 (Revised and Redrafted) Special Considerations - Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement; and
• ISA 810 (Revised and Redrafted) Engagements to Report on Summary Financial Statements.