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Study explores the political dimensions of IFRS adoption

25 Aug 2011

A recent paper from Harvard Business School explores the international political dynamics of how countries approach the adoption of International Financial Reporting Standards (IFRS).

The draft working paper, The international politics of IFRS harmonization, draws on field studies in Canada, China and India to derive a 'framework' to analyse how international politics can shape a specific country's strategies with IFRS adoption. Whilst international politics is not the only or even the deciding element in understanding the growth of IFRS, the author of the paper argues it is likely to be important.

The paper outlines two principal dimensions that can be used to characterise the response by a specific jurisdiction to IFRS:

  • proximity to existing political powers at the IASB
  • the jurisdiction's own potential political power at the IASB.

Jurisdictions are classified as either 'high' or 'low' in each dimension, which then produces a matrix of predicted responses to IFRS. The table below summarises these outcomes, along with cited examples of countries falling in each category:

25 August 2011

The paper explores the major political challenges for the IASB, the way forward for the IASB and the theoretical implications of the international political dynamics of IFRS harmonisation. In particular, the paper explores the interplay between the current debates around 'convergence versus adoption' and the IASB's expanding geographical diversity away from its traditional European power base to include emerging powers such as China. In addition, the paper argues restructuring the IASB's structure to include fewer Americans may temper enthusiasm for IFRS in the United States, which ironically may make IFRS less attractive worldwide.

Click to access the draft working paper (link to SSRN). We have posted this article with the kind permission of the author, Karthik Ramanna.

IASB proposes consolidation exemption for 'investment entities'

25 Aug 2011

The International Accounting Standards Board (IASB) has published Exposure Draft ED/2011/4 'Investment Entities', proposing to define 'investment entities' as a separate type of entity that would be exempt from the consolidation accounting requirements in IFRS 10 'Consolidated Financial Statements'.

The proposals arise from the consultation process around the issue of IFRS 10, where many respondents questioned the usefulness of the financial statements of investment entities if IFRSs continued to require the consolidation of entities that an investment entity controls.

In summary terms, the exposure draft proposes:

  • criteria for an entity to qualify as an 'investment entity' (see below)
  • an investment entity to measure its investments in controlled entities at fair value through profit or loss in accordance with IFRS 9 Financial Instruments (exceptions would apply to investees providing services that relate only to the entity's own investment activities, and investment entities that take control of collateral as a result of defaults related to its investments)
  • additional disclosures to enable users to evaluate the nature and financial effects of its investment activities
  • not to permit a parent of an investment entity to retain fair value accounting applied by its subsidiary, unless the parent itself qualifies as an investment entity, i.e. the parent would consolidate all entities in the group
  • amendments to IAS 28 Investments in Associates and Joint Ventures to require an investment entity to measure its investments in associates and joint ventures at fair value through profit or loss in accordance with IFRS 9 (replacing the concept of 'venture capital organisation, mutual fund, unit trust and similar entities' with 'investment entity')
  • entities which apply the investment entity guidance early would also be required to apply all aspects of IFRS 10, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities and IAS 28 (as amended in 2011).

Proposed 'investment entity' criteria

Under the proposals in ED/2011/4, an investment entity is an entity that meets all of the following criteria:

  • Nature of the investment activity. The entity's only substantive activities are investing in multiple investments for capital appreciation, investment income (such as dividends or interest), or both
  • Business purpose. The entity makes an explicit commitment to its investors that the purpose of the entity is investing to earn capital appreciation, investment income (such as dividends or interest), or both
  • Unit ownership. Ownership in the entity is represented by units of investments, such as shares or partnership interests, to which proportionate shares of net assets are attributed
  • Pooling of funds. The funds of the entity's investors are pooled so that the investors can benefit from professional investment management. The entity has investors that are unrelated to the parent (if any), and in aggregate hold a significant ownership interest in the entity
  • Fair value measurement. Substantially all of the investments of the entity are managed, and their performance is evaluated, on a fair value basis
  • Disclosures. The entity provides financial information about its investment activities to its investors. The entity can be, but does not need to be, a legal entity.

The IASB is undertaking this project jointly with the FASB with the objective of improving existing US GAAP requirements and achieving convergence in the accounting for these types of entities. The FASB is expected to issue equivalent proposals shortly.

Comments on the exposure draft are due by 5 January 2012. Click for:


EFRAG invites companies to participate in the field-testing of the forthcoming revised proposals on Revenue Recognition

25 Aug 2011

The European Financial Reporting Advisory Group (EFRAG), in partnership with European National Standard Setters and in close coordination with the IASB, will conduct field-testing of the revised IASB proposals on revenue recognition, which are expected to be published by the end of September 2011. The purpose of the field-testing is to identify potential implementation and application concerns, and to estimate the effort required to implement and apply the proposals.

Please click for EFRAG press release (link to EFRAG website) and our summary of the decisions to date in the IASB's project on revenue recognition.


New issue of the IASB's Investor Perspectives

24 Aug 2011

In April 2010, the Trustees of the IFRS Foundation and the IASB launched a programme to enhance investors' participation in the development of International Financial Reporting Standards (IFRSs).

One of the enhancements is a newsletter for investors entitled Investor Perspectives. A new edition is now available. Patricia McConnell, an IASB Board member, writes about the changes to pension accounting:

All Investor Perspectives are archived on the IASB's website.

Agenda for the September 2011 IFRS Interpretations Committee meeting

24 Aug 2011

The agenda has been released for the IFRS Interpretations Committee meeting to be held in London on Thursday and Friday 8 and 9 September 2011. The agenda is reproduced in full below (times are London time, GMT+1).

Agenda for the Interpretations Committee Meeting
Thursday and Friday, 8 and 9 September 2011
Thursday 8 September (10:00h-16:45h)
  • Introduction
  • Active Committee Project: IAS 37 Provisions, Contingent Liabilities and Contingent Assets and IFRIC 6 Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment – Use of IFRIC 6 by analogy
  • Review of tentative agenda decisions from the July meeting
    • IFRS 3 Business Combinations – Business combinations involving newly formed entities: factors affecting identification of the acquirer
    • IFRS 3 Business Combinations – Business combinations under common control
    • IFRS 3 Business Combinations – Acquirer in a reverse acquisition
    • IAS 27 Consolidated and Separate Financial Statements – Group reorganisations in separate financial statements
  • Items for continuing consideration
    • IFRS 3 Business Combinations – Definition of a business
    • IFRS 11 Joint Arrangements – Acquisition of an interest in a joint operation
  • New items for initial consideration
    • IFRS 1 First-time Adoption of IFRSs – Transition requirements relating to government loans
  • Administrative session
    • Committee work in progress

Friday 9 September (09:00h-13:00h)
  • New items for initial consideration
    • IAS 12 Income Taxes – Clarification of circumstances in which presumption of manner of recovery of investment property can be rebutted
    • IAS 7 Statement of Cash Flows – Classification of cash payments for deferred and contingent consideration
    • IAS 16 Property, Plant and Equipment - Recognition of insurance recoveries
    • IFRS 10 Consolidated Financial Statements - Transitional requirements
    • IAS 12 Income Taxes - Recognition of deferred tax for single assets in a corporate entity

Upcoming Dbriefs webcasts on the leases project and sustainability

24 Aug 2011

Deloitte (United States) is hosting two Dbriefs webcasts in early September on global financial reporting topics: Sustainability reporting and leases.

  • Sustainability reporting — This webcast will discuss the significant progress being made in global efforts to develop integrated sustainability reporting guidelines, covering the work of the International Integrated Reporting Committee (IIRC), the Global Reporting Initiative (GRI), Carbon Disclosure Project, and other topics
  • Leases project — This webcast will discuss recent deliberations and tentative decisions of the IASB and FASB in the leases project, how the boards' decision to re-expose their proposals will impact the timeline to finalise the project, and the boards' next steps.

Full details of the webcasts are provided below:

Topic: Sustainability Reporting Update: One Big Global Family?
Date and time:
Wednesday, 7 September 2011 at 2:00pm-3:00pm United States Eastern Daylight Time (GMT-05:00)
Host: Eric Hespenheide, Partner – Deloitte & Touche LLP
More information: Click Here
Registration: Click Here


Leases: A Comprehensive Update on the Joint Project
Date and time: Thursday, 8 September 2011 at 2:00pm-3:30pm United States Eastern Daylight Time (GMT-05:00)
Host: Bob Uhl, Partner – Deloitte & Touche LLP
More information: Click Here
Registration: Click Here

IFRS Foundation's translations update

23 Aug 2011

The IFRS Foundation has recently announced the publication of the following translations:

  • Hebrew translations of the 2010 IFRSs, the Amendments to IAS 12 Deferred Tax: Recovery of Underlying Assets, the Amendments to IFRS 1 Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters, the Amendments to IFRS 7 IFRS Disclosures – Transfers of Financial Assets and the Improvements to IFRSs published by the IASB in May 2010.
  • French translations of the the Amendments to IAS 12 Deferred Tax: Recovery of Underlying Assets, the Amendments to IFRS 1 Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters, the Amendments to IFRS 7 IFRS Disclosures – Transfers of Financial Assets, IFRS 9 (2010) Financial Instruments and the Conceptual Framework (as of September 2010).
  • Spanish translations of the June 2011 Amendments to IAS 1 Presentation of Financial Statements and of IFRS 10 Consolidated Financial Statements.

All translations are available on the IASB's New and revised standards webpage (eIFRS subscribers only).

IFRS Foundation updates IFRS XBRL Taxonomy for IAS 1 and IAS 19 amendments

22 Aug 2011

The IFRS Foundation has published an eXtensible Business Reporting Language (XBRL) IFRS Taxonomy 2011 interim release incorporating the requirements of Presentation of Items of Other Comprehensive Income (Amendments to IAS 1) and IAS 19 Employee Benefits, which were issued by the IASB in June 2011.

Click for more details (link to IASB website). Our dedicated XBRL page is Here.

AASB seeks user perspective on improvements to IFRS 3 and IAS 38

19 Aug 2011

The Australian Accounting Standards Board (AASB) has launched a survey of users of financial statements on the initial accounting for intangible assets acquired in business combinations under IFRS 3 Business Combinations and IAS 38 Intangible Assets (or similar GAAP).

The IASB considered a project proposal on intangible assets at its December 2007 joint meeting. The IASB decided that although a project on intangible assets was not urgent, it was an important project that should remain on the research agenda and asked the IASB staff to discuss the future of the project 'offline' with AASB staff and other national standard setters. In addition, the IASB Chairman at that time suggested that the research continue under the aegis of the National Standard Setters (NSS) group, with the IASB being involved through its usual representation as part of this group.

The survey of financial statements users follows on from a similar survey of preparers, advisors, auditors and regulators launched earlier this year and a separate Discussion Paper on intangible assets released in November 2008.

The survey is open until 15 December 2011. Click for access to the AASB survey (link to external website). More information is available in this AASB press release (link to AASB website).

Canadian banks ask regulators to remember existing reforms when setting reform timetable

19 Aug 2011

The Canadian Bankers Association (CBA) has noted that regulators should carefully monitor the total regulatory burden.

In a pre-budget submission to the Canadian House of Commons Standing Committee on Finance, the CBA notes that one of the most significant challenges for the Canadian banking sector over the next few years will be the implementation of numerous global and domestic regulatory, capital and liquidity reforms (such as Basel III). The submission argues too rapid an adoption of reform may place Canadian banks at competitive disadvantage, noting the implementation of other reforms as well as Canada's current transition to IFRSs:

Click for CBA submission (link to CBA website) and our Canada country page.

Correction list for hyphenation

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