Agenda for special 4 May joint 2010 IASB-FASB meeting

30 Apr 2010

The IASB and FASB will hold a special joint meeting for on Tuesday, 4 May 2010, 12:30-15:45pm London time, at the IASB's offices in London.

You can access the agenda on our 4 May 2010 IASB meeting page. We will also post Deloitte observer notes on this page as they are available.

Implications of changes in UK reporting for US companies

30 Apr 2010

Many US companies are closely following the IFRS statements of the Securities and Exchange Commission, and have geared their internal efforts in response.

However, companies often have given less consideration to recent statutory developments elsewhere that may have more imminent implications. For example, the United Kingdom Accounting Standards Board is expected to issue an Exposure Draft soon, effective as early as 2012, that would require subsidiaries in the UK to shift their reporting from UK GAAP to an IFRS-based reporting regime. This shift could have tax, system, and other implications, and the required comparative periods could begin as early as 2011. To help clients understand and respond to these developments, Deloitte (United States) has published a briefing document titled IFRS: Changes in the UK Statutory Reporting Environment. This document that summarises key issues related to IFRSs and the UK statutory reporting environment, including:
  • Overview of the proposal from the UK Accounting Standards Board (ASB) to replace UK GAAP with an IFRS-based reporting regime
  • Impact of these statutory reporting developments on UK subsidiaries of U.S. companies
  • Timeline considerations for this potential change
  • Steps that US companies should take in light of these developments
Click to download IFRS: Changes in the UK Statutory Reporting Environment – Potential Implications for US Companies (PDF 188k).


Proposed assurance standard on pro forma information

29 Apr 2010

The International Auditing and Assurance Standards Board (IAASB) has proposed a new International Standard on Assurance Engagements (ISAE) that addresses the process of compiling pro forma financial information included in prospectuses.

The proposed standard, Assurance Reports on the Process to Compile Pro Forma Financial Information Included in a Prospectus, deals with information that illustrates the potential impact of an event or transaction on an issuer's financial information. It provides guidance on an auditor's procedures when reporting on whether the process of compiling pro forma financial information has been properly followed. Click here for IAASB Press Release (PDF 22k), which includes a link to download the proposal from the IAASB's website. Comments are due by 30 September 2010.


Egypt developing SME standard based on IFRS for SMEs

29 Apr 2010

The Egyptian Society of Accountants and Auditors is presently developing an exposure draft of a proposed Egyptian Accounting Standard for SMEs.

The exposure draft is based on the IFRS for SMEs but is expected to propose several differences, including differences in the areas of leases and distributions of profits to employees. The Board of the Egyptian Society of Accountants and Auditors expects to release the proposed EAS for SMEs in 2010. However, the effective date for implementation has not yet been decided. We have created a new Egypt Country Page on IAS Plus.


IASB proposes to amend IAS 19 for defined benefit plans

29 Apr 2010

The International Accounting Standards Board (IASB) has published for public comment an exposure draft (ED) of proposed amendments to IAS 19 'Employee Benefits'.

The proposals would amend the accounting for defined benefit plans through which some employers provide long-term employee benefits, such as pensions and post-employment medical care. In defined benefit plans, employers bear the risk of increases in costs and of possible poor investment performance.

The ED proposes improvements to the recognition, presentation, and disclosure of defined benefit plans. The ED does not address measurement of defined benefit plans or the accounting for contribution-based benefit promises.

Among the amendments proposed to IAS 19 are:

  • Immediate recognition of all estimated changes in the cost of providing defined benefits and all changes in the value of plan assets. This would eliminate the various methods currently in IAS 19, including the 'corridor' method, that allow deferral of some of those gains or losses.
  • A new presentation approach that would clearly distinguish between different types of gains and losses arising from defined benefit plans. Specifically, the ED proposes that the following changes in benefit costs should be presented separately:
    • service cost – in profit or loss
    • finance cost (ie, net interest on the net defined benefit liability) – as part of finance costs in profit or loss
    • remeasurement – in other comprehensive income
    The effect of presenting these items separately is to remove from IAS 19 the option for entities to recognise in profit or loss all changes in defined benefit obligations and in the fair value of plan assets.
  • Improved disclosures about matters such as:
    • the characteristics of the company's defined benefit plans
    • the amounts recognised in the financial statements
    • risks arising from defined benefit plans
    • participation in multi-employer plans
Comment deadline on the ED Defined Benefit Plans is 6 September 2010. Click for IASB Press Release(PDF 100k).


User views sought on impairment of financial assets

29 Apr 2010

The IASB is seeking input from users of financial statements on the proposals in its November 2009 Exposure Draft on recognition and measurement of impairment of financial assets carried at amortised cost.

The exposure draft proposes to move from the 'incurred loss' model currently in IAS 39 to an 'expected loss' model (or, more precisely described, an 'expected cash flow' model). The feedback will assist the Board in its deliberations by helping it to better understand the views and preferences of investors and analysts. Two versions of the questionnaire are available:
  • The abridged version has 15 questions and is in an easy-to-use survey format.
  • The comprehensive version contains detailed examples and asks for comprehensive responses about the proposal.

The questionnaire closes on 30 June 2010.

El IFRS para PYMES en su bolsillo

28 Apr 2010

Deloitte (Colombia) has published El IFRS para PYMES en su bolsillo – the Spanish translation of IFRS for SMEs in Your Pocket, which was published earlier this month.

This 45-page guide to the IFRS for SMEs is similar to Deloitte's very popular IFRSs in Your Pocket guide to full IFRSs. IFRS for SMEs in Your Pocket takes each section of the IFRS for SMEs, summarises its requirements, and highlights differences with full IFRS requirements. There is also a chronology of the development of the IFRS for SMEs and a discussion of how the IFRS for SMEs differs from full IFRSs. Click to download:


Agenda for 6-7 May 2010 IFRIC meeting

28 Apr 2010

The IFRS Interpretations Committee (IFRIC) will meet at the IASB's offices in London on Thursday and Friday 6 and 7 May 2010 (morning only on 7 May).

You can access the agenda on our May 2010 IFRIC meeting page.

ECB concerns about fair value, convergence

28 Apr 2010

Gertrude Tumpel-Gugerell, member of the Executive Board of the European Central Bank (ECB), spoke on Elements for intervention on accounting issues at a conference in Paris on Paris on 27 April 2010.

Click to Download Ms Tumpel-Gugerell's Remarks (PDF 56k).
Here are several excerpts in which she presents the views of the ECB on fair value measurement, impairment, and convergence:

Fair value measurements

First, in our view fair value accounting does not provide decision-useful information to investors if the intention of an entity is to hold the assets until maturity or to settle the liabilities at their nominal amount at maturity. In these cases, recognising interim fair value changes simply heightens the volatility of the financial accounts, without providing actual 'information content'. This is typically the case for the loan book of commercial banks.

Moreover, the ECB does not agree that an entity is required to record a gain when the fair value of its own debt falls due to a decrease in its creditworthiness. The rationale being that the entity could buy back the debt and realise the profit. However, in reality and especially in times of distress, an entity does not have readily available the extra cash to buy back their debt....

Second, with regard to its application, fair value accounting poses certain operational challenges, namely when markets become illiquid and reliable market prices are no longer available. What is the use of marking-to-market when there is no market? The relevance and reliability of fair values based on market prices require a functioning market where prices adequately reflect the underlying fundamentals of the financial instrument. When the market is significantly disrupted, the use of market values may be utterly meaningless....

Hence the ECB is of the opinion that fair value measurement should only be required if it is consistent with the institution's business model and the characteristics of the particular underlying asset or liability.

Impairment of financial assets

Pre-crisis provisioning practices delayed the recognition of credit losses inherent in loans. Accounting rules require a specific trigger event, such as a default in payment to take place before allowing an entity to create provisions for credit losses. As a result, major write-offs usually accumulate during severe downturns when the inherent credit losses actually materialise, adding further stress to the financial system.

Hence, a more forward-looking provisioning methodology should be developed. This has also been a recommendation of the G20 Leaders. In this context, the ECB welcomes the recent IASB proposal for an expected cash flow approach. Despite some operational challenges that need to be resolved before its final adoption, this approach allows for a timelier recognition of expected credit losses, thereby contributing to mitigating pro-cyclicality. In this context, it should be noted that the Basel Committee has recently developed an approach which aims at reducing the complexity of the IASB's approach. The ECB urges the IASB to work together with the Basel Committee with a view to developing a workable solution to a more forward-looking provisioning approach.

This is also a good example of where the objectives of high quality accounting and safeguarding financial stability complement each other.

On that note, let me finally underline that the ECB acknowledges the work of the IASB and welcomes the progress that has been achieved in the accounting framework. We look forward to continuing the intense dialogue with the IASB on the remaining phases of the financial instruments project, as well as other accounting areas that may be of importance from a regulatory perspective.


For all these reasons, the ECB welcomes the ongoing efforts of the accounting standard setters to achieve fully compatible, high-quality accounting standards in a direct response to the G20 request. However, we are concerned to hear that the FASB and the IASB are still far from reaching a consensus on key accounting concepts, such as the classification and measurement of financial instruments. The IASB has confirmed a 'mixed measurement model' that measures financial instruments both at amortised cost and fair value. In contrast, the US standard setter, the FASB, is determined to move towards a 'full fair value model', claiming that only fair value provides decision-useful information to investors.

I have already mentioned in my intervention how the financial crisis has blatantly revealed the flaws with this measurement and how in certain circumstances, namely when markets are dislocated, applying full fair value accounting to the financial statements of the banking sector raises financial stability concerns and does not provide decision-useful information to investors.

Just to re-emphasise, the ECB strongly opposes a full fair value approach. In this context, convergence should not come at the expense of high-quality accounting standards.

Finally, with regard to recent assertions made by the IASB and FASB that convergence is on track, I would like to highlight that we are not so optimistic. In this regard, putting in place a reconciliation mechanism that simply discloses figures at amortised cost and fair value for each item on the balance sheet would certainly not achieve the aim of convergence.

Proposed improvements to public sector standards

27 Apr 2010

The International Public Sector Accounting Standards Board (IPSASB) has published exposure draft (ED) 44 Improvements to International Public Sector Accounting Standards (IPSASs).

ED 44 includes proposals to to maintain alignment of IPSASs with IFRSs, as well as other general improvements. Click for IPSASB Press Release (PDF 20k) which includes a link to download ED 44. Comments on the proposals are due 30 June 2010.


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