This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.


Notes from the Sept 2009 IASB meeting day 2

17 Sep 2009

The IASB is holding its September 2009 monthly Board meeting at its offices in London on Tuesday to Friday, 15-18 September 2009.

Click to go to the preliminary and unofficial Notes taken by Deloitte Observers at the first day of the meeting.

IFRS for SMEs in Spanish is released

17 Sep 2009

The IASB has posted on its website the IFRS for Small and Medium-sized Entities in Spanish (NIIF para las PYMES).

The three files – Standard, Basis for Conclusions, and Guidance – are available for free download; registration is required (IASB website).


Heads Up on FASB oil and gas ED

17 Sep 2009

Deloitte United States has published a Heads Up Newsletter discussing the FASB's recently issued Exposure Draft (ED) of a proposed Accounting Standards Update, Oil and Gas Reserve Estimation and Disclosures.

The purpose of the ED is to align the current reserve estimation and disclosure requirements of Accounting Standards Codification Topic 932, Extractive Industries - Oil and Gas, with the requirements in the SEC's final rule, Modernization of the Oil and Gas Reporting Requirements (PDF 629k, link to SEC website), which was issued in December 2008. The proposed amendments would be effective for annual periods ending on or after 31 December 2009. The IASB has a research agenda project on Extractive Industries.
Click for Heads Up Newsletter: FASB Proposes to Modernize Oil and Gas Company Reporting.


EU memo for G20 addresses IFRSs

17 Sep 2009

The European Commission has released a memorandum in conjunction with the upcoming meeting of G20 leaders titled European Commission Calls for United EU position for G20 Summit in Pittsburgh.

On IASB-related issues, the Commission noted:

"The EU should also seek a renewed commitment from the G20 to accelerating the pace of delivery on accounting standards and non-cooperative jurisdictions. It is vital that the IASB delivers on appropriate reform of the accounting rules to ensure that financial stability concerns are fully taken into account to reduce pro-cyclicality in the system. Convergence to high quality accounting standards remains a top priority of the EU, in particular as regards financial instruments. The EU therefore needs to secure a strong political commitment to balanced convergence towards high quality standards no later than 2010. Regarding non-cooperative jurisdictions, a roadmap should be agreed to complete the work, including clear milestones for evaluating their compliance."

Click for memorandum: European Commission Calls for United EU position for G20 Summit in Pittsburgh (PDF 21k).

IASCF Trustees' letter to G20 leaders

16 Sep 2009

The Trustees of the IASC Foundation, the oversight body of the International Accounting Standards Board (IASB), have written to the leaders of the G20 countries in connection with their meeting on 24-25 September in Pittsburgh, Pennsylvania USA.

The purpose of the letter is to inform the leaders of G20 countries of the progress that the IASC Foundation and the IASB have made in response to the G20's recommendations on accounting standards agreed at the Leaders Summits in Washington in November 2008 and in London in April 2009. An appendix to the letter includes a detailed report of specific steps the IASC Foundation and IASB have taken in response to the financial crisis. Click for:


Notes from the Sept 2009 IASB meeting day 1

16 Sep 2009

The IASB is holding its September 2009 monthly Board meeting at its offices in London on Tuesday to Friday, 15-18 September 2009.

Click to go to the preliminary and unofficial Notes taken by Deloitte Observers at the first day of the meeting.

Deloitte IFRS for SMEs newsletter in Spanish

16 Sep 2009

Deloitte (Colombia) is publishing a series of Spanish language bulletins about the new IFRS for SMEs.

We have previously posted Bulletins No 1 through 9 – links can be found Here. We have now posted No 10:
  • Bulletin No 10 (15 September 2009) continues the discussion from the Bulletins 5-9 on the treatment of financial instruments in the IFRS for SMEs. It addresses measurement of financial instruments. Click to   Download Bulletin 10 (PDF 175k).
We have many resources in Spanish Here.


'Eligible hedged items' endorsed in the EU

16 Sep 2009

The European Union has endorsed the amendment to IAS 39 Financial Instruments: Recognition and Measurement titled Eligible Hedged Items for use in the European Union.

Click for Commission Regulation No 839/2009 of 15 September 2009 as published in the Official Journal (PDF 820k). EFRAG has updated their Endorsement Status Report (PDF 119k) to reflect this endorsement.
Click for IAS 39 summary page.

We comment on financial instruments ED

15 Sep 2009

Deloitte Touche Tohmatsu has submitted comments on the IASB Exposure Draft Financial Instruments: Classification and Measurement.

The ED is the first part of a three-phase project to replace IAS 39 Financial Instruments: Recognition and Measurement. The other two phases of the IAS 39 project are addressing Impairment and Provisioning and Hedge Accounting. Additionally, the Board's project on Derecognition of Financial Instruments will also result in amendments to IAS 39. The IASB plans to complete the replacement of IAS 39 during 2010, although mandatory application will not be before January 2012. The Classification and Measurement ED proposes that a financial asset or financial liability should be measured at amortised cost if two conditions are met:
  • The instrument has basic loan features
  • The instrument is managed on a contractual yield basis
A financial asset or financial liability that does not meet both conditions would be measured at fair value. You will find more information about the Proposals in the ED Here.

An excerpt from our letter of comment on the ED: Assessing the relative merits of the replacement to IAS 39 in parts clearly limits our ability to evaluate the proposals comprehensively as there are many areas that are yet to be finalised with which the classification and measurement proposals will interact. We therefore look forward to the issue of EDs on the other aspects of this project in order for us to understand and fully assess the replacement to IAS 39 in its entirety....

We support the IASB's approach for a mixed measurement model for both financial assets and financial liabilities. We believe amortised cost is a meaningful measurement attribute for certain financial instruments in certain circumstances when it is accompanied by fair value disclosures. Focusing on whether financial instruments have basic loan features and how the entity manages those instruments is a meaningful approach to determining whether an instrument can be measured at amortised cost. We have specific concerns and recommendations about how to make the amortised cost criteria more relevant and meaningful which are included in the appendix to this letter.

Click to download Our Comment letter (PDF 141k). All past letters comment are Here.


Notes from the North American financial instruments roundtable

15 Sep 2009

The IASB and the US FASB jointly held a Roundtable on Financial Instruments – Classification and Measurement at the FASB's offices in Norwalk, Connecticut, on Monday, 14 September 2009. Participating in the discussion were representatives of the FASB and the IASB and a range of their constituents, including banks, insurers, broker-dealers, audit firms, financial analysts, and insurance and securities regulators.

FASB Technical Director Russ Golden chaired the session. At the table were FASB Board members Bob Herz, Tom Linsmeier, Mark Siegel, and Larry Smith, and IASB Board members Steve Cooper (by video link), Patrick Finnegan, Jim Leisenring, Patricia McConnell, and John T Smith. Presented below are notes taken by Deloitte observers at the roundtable. No decisions were reached at this meeting. Our project summary is Here. Our notes from the 10 September 2009 London roundtable are Here.

Notes from the Financial Instruments Roundtable - 14 September 2009, Norwalk, CT

Measurement Categories

Participants expressed mixed views on the relative merits of fair value versus amortized cost measurement for items not managed on a fair value basis. One participant suggested that it is always better to measure on a fair value basis than on an amortized cost basis as fair value captures the potential risks and market volatilities inherent in financial instruments compared to amortized cost which has proven to be a less relevant measurement attribute to users of financial statements who are interested in what the net assets of an entity is worth at a given point of time.

A couple of participants from banks indicated support for a two-pronged test for amortized cost measurement based on a business model and instrument terms somewhat similar to that proposed by the IASB. However, they emphasized that the primary test should be an entity's business model (e.g., whether an item is managed on a contractual yield basis or on a fair value basis) and that the characteristics of the financial instrument (e.g., whether the instrument should be eligible for amortized cost measurement when the variability in its cash flows is considered) should be secondary.

Some questioned whether accounting based on an entity's business model is rigorous enough. Business models change over time. An entity that intends to hold a financial instrument for collection and payment of contractual cash flows might go bankrupt depending on the asset quality. In addition, the same company might have different desks managed on different bases.

Representatives from insurers and insurance regulators expressed concern about the potential for unintended consequences if a new financial instruments standard is developed without consideration of accounting for the liabilities of insurance companies. In particular, they were concerned that the accounting rules might suggest an accounting mismatch even if there is an economic match of assets and liabilities.

Several participants emphasized that users of financial statements often look for both fair value and amortized cost information for the same financial instruments. As long as users obtain the information they need in a timely manner in some form, it matters less how the line between different measurement categories is drawn for accounting purposes. Some user representatives suggested that preparers of financial statements should provide two sets of balance sheets: one on a fair value basis and one on an amortized cost basis. An IASB Board member asked whether the Board should require presentation of fair value information within parentheses on the face of the balance sheet or in a prominent comprehensive note disclosure. Presentation of fair value information within parentheses on the face of the balance sheet might obviate the demand for an approach in which financial instruments are measured at fair value on the balance sheet but changes in fair value are recognized in other comprehensive income (OCI), which is a key component of the FASB's tentative model.

One participant suggested that a fair value through OCI approach might be appropriate for items with more uncertainty in valuation because it reflects assets at fair value on the balance sheet without distorting the income statement with earnings volatilities.

One participant called for a detailed study of the usefulness of current fair value disclosures for financial instruments. Some potential limitations of current fair value disclosures that were noted include (1) the fact that an entry price notion rather than an exit price notion is used to prepare these disclosures, (2) portfolio valuation issues, and (3) the robustness of their preparation. A Board member indicated that based on feedback from users of financial statements, it is evident that information in the footnotes is not as rigorous as information on the face of the financial statements. Another participant highlighted the need to require information about fair value on the face of the financial statement to ensure that such information is communicated to investors in companies' earnings releases.

Investments in Equity Instruments

An IASB Board member explained that the option to elect fair value through OCI for equity instruments with no recycling of gains and losses on realization was intended, in part, to avoid the need for complex impairment tests. However, many participants instead favored recycling upon realization. There was no support for a lower-of-cost-or-market approach for such equity investments.

Representatives from insurers suggested that the distinction between realized and unrealized gains and losses is important in a long-term insurance business. If a portfolio of equity securities is held over the long term to support long-term insurance liabilities, short-term variations in fair value may mean little. Therefore, those changes in fair value should not be included in net income.

Users suggested that measures of comprehensive income are becoming more and more important. Analysts typically make adjustments on the basis of reported net income, but a better approach might be to start with comprehensive income.

Securitisation Tranches

Banking representatives expressed concern about the IASB model for securitisation tranches. In particular, they questioned why only the most senior tranche should qualify for amortized cost measurement and why all other tranches should be accounted for at fair value. One suggestion was that mezzanine tranches should also qualify for amortized cost measurement if the cash flows are reasonable to predict and the yield at acquisition is commensurate with the risk. Another suggestion was that tranches that are at least rated investment grade should qualify for amortized cost measurement.

Embedded Derivatives

Some participants expressed support for the IASB's proposal to eliminate the current accounting approach to embedded derivatives over the FASB's proposed model which does not eliminate the complexity associated with evaluating the clearly-and-closely related criterion. However, one participant suggested that an option to bifurcate an embedded derivative should be retained for financial liabilities until the issue of own credit risk in liability measurements is resolved.

Own Credit Risk in Liability Measurements

Several participants expressed unease about reflecting the impact of changes in own credit risk in fair value measurements of nonderivative financial liabilities, such as senior unsecured debt. Also, some participants expressed concerns about implications of reflecting the impact of changes in own credit risk in fair value measurement of structured product liabilities where issuers generally hedge their exposures except their own credit risk.


Participants asked how the FASB and the IASB plan to arrive at a convergence solution for financial instruments. Since the IASB plans to issue a new classification and measurement standard, with early adoption permitted for 2009 year-end financial statements, participants questioned how convergence will be possible unless the FASB accepts without changes what the IASB has already issued. One IASB Board member suggested that the year-end 2009 deadline for the IASB is in response to political demands, but that early adopters of the new standard should anticipate further changes to the standard as the IASB and the FASB work together to issue one converged standard. The FASB chairman suggested that the FASB will need to carefully assess whether convergence is in the best interest of U.S. investors in this area. While some participants expressed preference to the IASB's proposed approach over the FASB's, they urged the IASB to take time to deliberate with the FASB prior to finalizing the classification and measurement standard.

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


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.