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IASB publishes proposed amendment to IFRS 1 for government loans

19 Oct 2011

The IASB has published Exposure Draft ED/2011/5 'Government Loans' (Proposed amendments to IFRS 1) for public comment.

The proposed amendment addresses how a first-time adopter would account for a government loan with a below-market rate of interest when transitioning to IFRSs. In addition, the proposed amendment adds an exception to the retrospective application of IFRS, which would then provide the same relief to first-time adopters granted to existing preparers of IFRS financial statements when the requirement was incorporated into IAS 20 in 2008. Comments are due by 5 January 2012.

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The Bruce Column – The route for the largest US corporates

19 Oct 2011

You could not have had a more persuasive group of senior corporate accountants than the panel at the Deloitte IFRS Summit in New York this week.

The Chairman of the IASB, Hans Hoogervorst, and his Vice-Chairman, Ian Mackintosh, were there to add their views on the virtues of International Financial Reporting Standards, (IFRS), and allay the fears of sceptics. But it was hearing the views from some of the most revered and respected corporations in the US which was the clincher. Ford, IBM, Cisco Systems and the Sara Lee Corporation were very clear in what they had to say.

As everyone awaits the next stage in the lengthy process of the US regulatory body, the SEC, coming to a decision which could align the US with the financial reporting system which is pretty much used by everyone else around the world, some of the largest companies are obviously finding that their patience is wearing thin. Increasingly, subsidiaries of US companies around the world are using IFRS as a basis for their local reporting, while their parent companies back home use US GAAP. It makes less and less sense and it costs them money.

The SEC has long targeted a decision by the end of the year. But Bob Kueppers, Deputy CEO, Regulatory Affairs, and Vice-Chairman of Deloitte LLP cast some doubt on a final decision by then. While he said he expected an SEC staff recommendation before the end of the year, he thinks that would then be subject to a comment period, which would mean a bit more delay. In any case, a decision by the SEC to move forward with incorporation of IFRS into US GAAP — as was suggested in their staff paper in May — may not include a voluntary use option that would allow the largest companies to choose to move swiftly to IFRS while others could take more time to adjust.

Aaron Anderson, Director IFRS Policy & Implementation at IBM, summed it up. Referring to the SEC paper issued earlier in the year he said: 'I have read the SEC proposal but I still don't know what it says', suggesting that the devil would likely be in the details of a long-term path to incorporation of IFRS into the US reporting framework. For the largest companies all this means delay. And delay at a time when corporate US is not having the best of times is hardly helpful for those companies that see the benefits of IFRS adoption.

Anderson talked of the winds of change. He talked about the creation of a centralised team. He talked of consistent adoption of IFRS with 'access all countries', the ability for executives to have access to information freely and easily. He talked of 'eliminating local flavours' and spoke of a focus on the here and now'. IFRS was at the heart of all of this.

Susan Callahan, Manager, Global Accounting Policy and Special Studies at the Ford Motor Company, pointed out that the company was 'a strong advocate of early adoption' and of how they had strong support from senior executives.

This is the story from the senior level of large companies in the US. Meanwhile the US markets are in decline. Companies around the world are increasingly raising money on stock markets other than those of the US, traditionally the largest and strongest in the world. But as Susan Callahan pointed out, US GAAP knowledge is no longer useful in other countries. Large US companies which need to raise serious money on the stock markets find that because they cannot produce accounts in a universally accepted form they cannot raise money from a wide enough pool.

This is why Hans Hoogervorst was in New York speaking at the Summit. He accepted that it was a difficult decision for the SEC. US GAAP had served the US well, he said. But the enthusiasm of the rest of the world for IFRS meant that change was needed. IFRS 'has spread like wildfire', he said. And for US investors looking to emerging markets it was a huge benefit. And he soothed those who felt that the US would be losing influence by following the rest of the world to IFRS. 'I am sure US influence will remain very strong', he said.

So it was back to the leading corporates. 'The benefits of moving to IFRS far exceeds the cost', said Susan Callahan. And Aaron Anderson pointed out the obvious 'structural benefits of having a single set of accounting standards around the world', giving one specific example of the value of a central goodwill and impairment testing model within the company.

The Summit provided an opportunity for an overall review and assessment of where the issue of IFRS in the US is at present. Everyone awaits news from the SEC, especially, it seems, some of the large multinationals, that can see a tangible benefit.

Robert Bruce October 2011


IASB issues new Interpretation on waste removal costs in surface mining

18 Oct 2011

The IASB has issued IFRIC Interpretation 20 'Stripping Costs in the Production Phase of a Surface Mine' (IFRIC 20).

The Interpretation clarifies the requirements for accounting for stripping costs associated with waste removal in surface mining, including when production stripping costs should be recognised as an asset, how the asset is initially recognised, and subsequent measurement.

Key requirements of IFRIC 20 include:

  • Stripping activity costs which provide improved access to ore are recognised as a non-current 'stripping activity asset' when certain criteria are met. This means an entity cannot immediately expense stripping costs, nor adopt a standard costing approach (sometimes referred to as a 'stripping ratio' approach) based on total expected costs to be incurred over the life of the mine
  • Normal ongoing operational stripping activities are accounted for in accordance with IAS 2 Inventories
  • When the costs of the stripping activity asset and the inventory produced are not separately identifiable, production stripping costs are allocated between the inventory produced and the stripping activity asset by using an allocation basis that is based on a relevant production measure
  • The stripping activity asset is accounted for as an addition to, or as an enhancement of, an existing asset and classified as tangible or intangible according to the nature of the existing asset of which it forms part
  • The stripping activity asset is initially measured at cost and subsequently carried at cost or its revalued amount less depreciation or amortisation and impairment losses
  • A stripping activity asset is depreciated or amortised on a systematic basis, over the expected useful life of the identified component of the ore body that becomes more accessible as a result of the stripping activity. The units of production method is used unless another method is more appropriate.

Entities will need to consider carefully the identification of the ore body or component of ore body to which capitalised costs relate as this will determine how the asset is depreciated.

IFRIC 20 is effective for annual periods beginning on or after 1 January 2013, with early application permitted.

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German translation of the 2011 'Red Book'

18 Oct 2011

The IASB has announced the availability of a German translation of the 2011 International Financial Reporting Standards ('Red Book').

The Red Book contains the official pronouncements issued by the IASB as at 1 January 2011 and includes IFRSs with an effective date after 1 January 2011, but not the IFRSs they will replace.

The two volume set is available for purchase for €89. Click for more information (link to IASB website, details in German).

European Outreach Meetings on the IASB Agenda Consultation — all dates and places confirmed

18 Oct 2011

As reported earlier, the European Financial Reporting Advisory Group (EFRAG) will organise outreach events on the IASB consultation on its future work programme published in July 2011.

As reported earlier, the European Financial Reporting Advisory Group (EFRAG) will organise outreach events on the IASB consultation on its future work programme published in July 2011.

All dates and places have now been confirmed. Of special interest is the joint EFRAG and European Commission European Outreach Event on Friday 25 November. For further information on all events please go to the outreach project page on the EFRAG's website. Registration information is available in the invitation for each meeting.

Consultation on the future role of the UK Financial Reporting Council

18 Oct 2011

A consultation proposing the refocusing and streamlining of the United Kingdom Financial Reporting Council (FRC) was launched today by the UK Department for Business, Innovation and Skills (BIS) and the FRC.

The aim of the reforms is to create an FRC that is clearer about its role and purpose, narrowing its focus to areas of greatest concern to the operation of the capital markets and reinforcing its independence. The consultation also proposes replacing the FRC's existing seven operating bodies with two Board Committees – one focusing on Codes and Standards, the other on Conduct.

Please click for the FRC press release and access to the consultation (all links to FRC website). Responses to the consultation are invited by 10 January 2012.

IASB updates June 2011 editorial corrections to IFRSs

18 Oct 2011

The IASB has posted to its website a revised version of the batch of Editorial Corrections to IFRSs originally issued on 29 June 2011.

This batch makes editorial corrections and changes to IFRS for SMEs (issued July 2009), Conceptual Framework for Financial Reporting (issued September 2010), Bound Volume (Red Book) 2011, Bound Volume (Blue Book) 2011, IFRS 10 Consolidated Financial Statements (issued May 2011), IFRS 11 Joint Arrangements (issued May 2011), IAS 19 Employee Benefits (issued June 2011) and Presentation of Items of Other Comprehensive Income (issued June 2011).
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G20 finance ministers focus on global economic risks, reaffirm commitment to global standards

18 Oct 2011

The G20 Finance Ministers and Central Bank Governors met in Paris, France on 14-15 October 2011. The meeting was focused on "heightened tensions and significant downside risks for the global economy that need to be addressed decisively to restore confidence, financial stability and growth".

The communiqué released outlines various responses and reforms in the financial sector, including in relation to over the counter (OTC) derivatives, Basel reforms on banking regulation and reducing over-reliance on external credit ratings. The communiqué also notes the reaffirming of the "objective to achieve a single set of high quality global accounting standards", without providing any documented deadlines for achieving the objective.

The full communiqué is available on the G20 website.

IFRS Foundation's translations update

18 Oct 2011

The IFRS Foundation has announced the publication of the following translations: Albanian translation of the IFRS for SMEs Basis for Conclusions, Illustrative Financial Statements, Presentation and Disclosure Checklist.

The translations can be accessed via the IASB's IFRS for SMEs webpage. You will need to be a registered user to access the translation. Registration is free of charge.
  • French translation of IFRS 13 Fair Value Measurement and IAS 19 Employee Benefits as issued in English by the IASB in May and June 2011 respectively. The French translations are available on the French New and Revised Standards page (eIFRS subscribers only).
  • Spanish translation of the Basis for Conclusions and Illustrative Examples for IFRS 11 and IFRS 12, as issued in English by the IASB in May 2011. The Spanish translations are available on the Spanish New and Revised Standards page (eIFRS subscribers only).

    EBA publishes follow-up review of banks' transparency in their 2010 Pillar 3 reports

    17 Oct 2011

    The European Banking Authority (EBA) has published its follow-up review of bank's transparency in their 2010 Pillar 3 reports.

    This report continues a body of work carried out on an annual basis since 2008 by the predecessor of the European Banking Authority (EBA), the Committee of European Banking Supervisors (CEBS). Pillar 3 reports are of special interest because of the interaction between Pillar 3 and IFRS 7 requirements. EBA hopes to initiate a discussion on this issue.

    Overall, EBA finds "that banks have made efforts to improve their disclosures and to convey their risk profile in a comprehensive way to market participants." However, the report also finds that some of the findings from the last report published in June 2010 remain valid.

    Please click for (all links to EBA website):


    Correction list for hyphenation

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