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IASB work plan update

15 Sep 2011

The latest IASB work plan timetable, as of 14 September, has been released and shows revised 'current best estimates' for its progress.

The IASB has updated the expected timetable for Financial Instruments: Impairments to be for the fourth quarter of 2011 or 2012 (previously targeted in the fourth quarter of 2011).

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EFRAG invites companies to participate in the field-testing of new standards

15 Sep 2011

The European Financial Reporting Advisory Group (EFRAG) will conduct field-testing of the new requirements on joint arrangements (IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities) and the new requirements on consolidation (IFRS 10 Consolidated Financial Statements and IFRS 12 Disclosure of Interests in Other Entities), all published by the IASB in May 2011. The purpose of the field-testing is to identify potential implementation and application difficulty, and to estimate the effort required to implement and apply the new requirements.

The findings of the field-testing will be used by EFRAG in developing its technical and its cost and benefit assessment of the new standards against the EU endorsement criteria.

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Norway and US regulators enter into a cooperative agreement

14 Sep 2011

The Financial Supervisory Authority of Norway (Finanstilsynet) and the Public Company Accounting Oversight Board of the United States (PCAOB) have entered into a cooperative agreement, which "provides a basis for the resumption of joint inspections of PCAOB-registered accounting firms that are located in Norway and that audit, or participate in audits, of companies whose securities trade in U.S. markets".

Also, the agreement includes provisions governing the sharing of confidential information between both regulators.

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Japanese standard setters reflect on 10 years of achievement, and the future

14 Sep 2011

July 2011 marked the tenth anniversary of the establishment of the Japanese Financial Accounting Standards Foundation (FASF) and the Accounting Standards Board of Japan (ASBJ).

The President of the FASF (Toshitaka Hagiwara) and Chairman of the ASBJ (Ikuo Nishikawa) have both written articles to commemorate the anniversary, in which they provide an assessment of the past achievements of the organisations, and commentary on the challenges going forward, including Japan's possible adoption of IFRSs.

The retrospectives discuss Japan's convergence projects, the 'Tokyo Agreement' with the AASB, liaison with the IASB and FASB, role in establishing the Asian-Oceanian Standard-Setters Group (AOSSG), and other topics.

Toshitaka Hagiwara (FASF President) made the following remarks (ASBJ translation):

Although the current Japanese economic situation is severe, the accounting system as an infrastructure of the capital market is about to face a major turning point. The [Financial Services Agency] is deliberating the use of IFRSs in Japan and its outcome will have potentially significant effects both domestically and globally. This is an issue that our constituents need to collectively deal with in order to enhance global competitiveness of Japan.

Ikuo Nishikawa (ASBJ Chairman) commented as follows (ASBJ translation):

Given the current situation of the ongoing discussions on the use of IFRSs, the primary issue would be how to proceed with convergence of Japanese GAAP with IFRSs... If Japan wants to have the Japanese views incorporated into the IFRSs based on the consideration of what are the issues in implementing IFRSs, an approach that starts with converging Japanese GAAP with the IFRS would not suit such a purpose. To this end, we need to fully understand global trends, properly analyze the information, specify the issues to be delivered from Japan and then raise those issues to the IASB at an appropriate time. Success at the international negotiation table depends on strong support by domestic constituents.

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New Zealand considers a new accounting standard framework

14 Sep 2011

The New Zealand External Reporting Board (XRB) has released three documents outlining proposals for a new Accounting Standards Framework for New Zealand.

The proposals include a multi-standard framework, where the standards to be applied would depend on the nature and classification of the entity. In summary terms, the new structure would operate as follows:

  • For-profit entities. 'NZ IFRS', converged with International Financial Reporting Standards (IFRSs), supplemented by additional New Zealand specific standards, and harmonised as appropriate with Australia, applied as follows:
    • 'Full NZ IFRS' for 'Tier 1' entities, with some entities, which will continue to be required to make an explicit and unreserved statement of compliance with IFRSs. This would apply to entities with public accountability, with some entities being 'deemed' to be publicly accountable
    • 'Reduced Disclosure Requirements' (RDR) for 'Tier 2' entities, consistent with the approach adopted in Australia and replacing the existing New Zealand differential reporting framework. This would require the same recognition and measurement requirements as full NZ IFRS (Tier 1) but would allow reduced disclosures (and so would not result in New Zealand adopting the IFRS for SMEs)
  • Public benefit entities (PBE). The establishment of a set of NZ PBE standards based on International Public Sector Accounting Standards (IPSAS) modified as appropriate for New Zealand circumstances and not-for-profit entities. The application of the standards would be based on a three tier structure, with the third tier (the smallest entities) using a simple reporting approach.

The XRB proposes that the new for-profit framework be in place in time for it to be early adopted from 1 July 2012, the PBE framework so far as it applies to public sector entities be effective for financial years beginning on or after 1 July 2013, and the PBE framework for not-for-profit entities be effective for financial years beginning on or after 1 July 2014 (with early adoption allowed).

The proposals for public benefit entities differ from that proposed by the antecedent Accounting Standards Review Board (ASRB) which suggested the adoption of IPSAS without modification. The consultation papers explain the change in approach as follows:

The Discussion Document proposed that "pure" IPSAS be adopted as part of the PBE Accounting Standards. A key reason for this was to reduce standard setting costs. A number of respondents raised concerns about some technical aspects of IPSAS as well as the lack of standards on certain topics. The IPSAS Working Group also identified a small number of key technical areas that would need to be considered including the potential unsuitability of the IPSAS government business enterprise definition; the IPSAS definition of control; and the optional requirement to report heritage assets.

Some respondents also expressed concerns about the IPSASB governance and funding arrangements...

Given these factors, the XRB Board considers that it is premature to be confident that the risks surrounding the adoption of "pure" IPSAS have been adequately mitigated... The XRB Board will continue to monitor the development of IPSAS. A move to "pure" IPSAS is an aspiration over the longer term.

The New Zealand Commerce Minister Simon Power has also announced complimentary proposals to simplify the financial reporting framework for small and medium-sized businesses and registered charities.

Closing date for submissions on the XRB proposals is 16 December 2011. Click for:


Updated IAS 34 compliance checklist

13 Sep 2011

Deloitte's IFRS Global Office has published an updated checklist of the requirements of IAS 34 Interim Financial Reporting, formatted to allow the recording of a review of interim financial statements, with a place to indicate yes/no/not-applicable for each item.

The checklist addresses the requirements of IAS 34 at 30 June 2011.

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GRI and ISO co-operate on sustainability

13 Sep 2011

The Global Reporting Initiative (GRI) and the International Organization for Standardization (ISO) have signed a Memorandum of Understanding (MoU) to increase their co-operation on sustainability matters.

GRI has developed a widely used sustainability reporting framework ("G3.1", with work commenced on the fourth generation guidelines, "G4"). GRI also participated in the development of ISO 26000 Social Responsibility, published by the ISO in November 2010.

The MoU is intended to leverage the activities of the two organisations related to reporting and benchmarking by business and on sustainable development by sharing information on ISO standards and GRI programs, teaming up with other partners, participating in the development of new or revised documents, joint promotion and communication.

Click for GRI press release (link to GRI website).

Agenda for the regular September IASB meeting

12 Sep 2011

The IASB's regular monthly meeting is scheduled for 19-22 September 2011 in London, part of it a joint meeting with the FASB.

You can access the agenda on our September 2011 IASB meeting page.  We will also post Deloitte observer notes on this page as they are available.

IIRC issues Discussion Paper on Integrated Reporting, proposes a new approach to corporate reporting

11 Sep 2011

The International Integrated Reporting Committee (IIRC) today released a Discussion Paper 'Towards Integrated Reporting – Communicating Value in the 21st Century'.

The IIRC seeks to bring together world leaders from the corporate, investment, accounting, securities, regulatory, academic, civil society and standard-setting sectors to develop a new approach to reporting.

The Discussion Paper is the first step in the development of an 'International Integrated Reporting Framework', with an exposure draft expected to be published in 2012. It seeks to build on existing developments in reporting such as the international convergence of accounting standards, sustainability guidance published by organisations such as the Global Reporting Initiative (GRI), and the IASB's IFRS Practice Statement Management Commentary.

Integrated reporting aims to combine the different strands of reporting (financial, management commentary, governance and remuneration, and sustainability reporting) into a coherent whole that explains an organisation's ability to create and sustain value. The focus of an Integrated Report would be a broader explanation of performance than traditional reporting, by describing and measuring where practicable, the material components of value creation and, more importantly, demonstrating the links between an organisation's financial performance and the social, environmental and economic context in which it operates.

The IIRC believes an Integrated Report should be an organisation's primary reporting vehicle, replacing rather than adding to existing requirements. Under the IIRC's vision, much information currently produced (including detailed financial reporting information, operational data and sustainability information) would move to an online environment enabled by technology, reducing clutter in the primary report so that report can focus only on the matters the organisation considers most material to long-term success.

The table below provides an overview of the proposed Framework:

The IIRC's Proposed International Integrated Reporting Framework

Guiding principles

The following guiding principles would underpin the preparation of an Integrated Report:

  • Strategic focus – providing insight into the organisations' strategic objectives, and how those objectives relate to its ability to create and sustain value over time and the resources and relationships on which the organisation depends
  • Connectivity of information – shows the connections between the different components of the organisation's business model, external factors that affect the organisation and its performance depend
  • Future orientation – management's expectations about the future, as well as other information to help report users understand and assess the organisation prospects and the uncertainties it faces
  • Responsiveness and stakeholder inclusiveness – insight into the organisation's relationships with its key stakeholders and how and to what extent the organisation understands, takes into account and responds to their needs
  • Conciseness, reliability and materiality – providing concise, reliable information that is material to assessing the organisation's ability to create and sustain value in the short, medium and long term.

Content elements

The guiding principles should be applied in determining the content of an Integrated Report, based on the following key elements:

  • Organisational overview and business model – the organisation's mission, principal activities, markets, products and services, it's business model, value drivers and critical stakeholder dependencies, and its attitude to risk
  • Operating context, including risks and opportunities – a more in-depth description of material issues, the process for determining which issues it considers material, and how the material issues affect the organisation's ability to create and sustain value over time
  • Strategic objectives and strategies to achieve those objectives – risk management arrangements related to key resources and relationships, linkages and what makes the organisation unique and able to realise value in the future, such as the extent to which sustainability considerations have been embedded into its strategy and give it a competitive advantage
  • Governance and remuneration – the organisation's governance structure, how it supports the strategic objectives of the organisation and relates to the organisation's approach to remuneration
  • Performance – a concise and connected assessment of how the organisation has performed against its strategic objectives and related strategies, including KPIs, organisational impacts (both positive and negative) on resources and relationships, and significant external factors impacting performance
  • Future outlook – opportunities, challenges and uncertainties the organisation is likely to encounter in achieving its strategic objectives and the resultant implications for its strategies and future performance.

Resources and relationships - the "capitals"

In order to assist in understanding the concepts underlying the Discussion Paper, it contains the following example resources and relationships that can be conceived as different forms of "capital":

  • Financial capital – pool of funds available to produce goods and provide services, obtained through financing or generated through operations or investments
  • Manufactured capital – manufactured physical objects, e.g. buildings, equipment and infrastructure
  • Human capital – people's skills and experience and their motivations to innovate
  • Intellectual capital - intangibles that provide competitive advantage including intellectual property, brand and reputation
  • Natural capital – an organisation's activities may impact positively or negatively on natural capital such as water, land, minerals and forests, and biodiversity and eco-system health
  • Social capital - institutions and relationships established within and between each community, group of stakeholders and other networks to enhance individual and collective well-being.
The Discussion Paper notes the development of Integrated Reporting will require a change in established thinking about decision making and reporting, and identifies regulatory change as one of many challenges. The IIRC is conducting a two-year pilot programme, commencing in October 2011, to test and further develop the International Integrated Reporting Framework (see our earlier story).

If, and until, Integrated Reporting is the primary report for all organisations, the report outlines a number of possible alternate pathways to integrated reporting, including combining the sustainability report with the management commentary or the full annual report, publishing a separate integrated report, modifying sustainability reports or adopting integrated reporting internally to underpin management information.

The IIRC is calling for comments on the Discussion Paper to be submitted by 14 December 2011. Click for:


Correction list for hyphenation

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