We welcome the IASB's continuing efforts to deal with certain amendments to IFRSs in an efficient and effective manner and are pleased to note that the proposed amendments address discrete areas where differences in interpretation or possible conflicts between IFRSs have been identified.

The following is an excerpt from the letter:

We are generally in agreement with the intentions of the proposed amendments, but are concerned that some amendments (in particular, those to IFRS 1 First-time Adoption of International Financial Reporting Standards) may have unintended consequences. These unintended consequences arise principally from ambiguous drafting which... include inconsistencies between the Basis of Conclusions and the actual wording of the amendment. In addition, we note that the amendments introduce a number of terms (for example, 'required comparative period' and 'additional comparative information') for which a formal definition is not provided. This could also contribute to a lack of clarity over the scope and effect of the proposed amendments. The use of clearly defined terms will become more important as IFRSs are applied in new jurisdictions as terms in common use in one jurisdiction may be unfamiliar in another and also because any lack of clarity is likely to be exacerbated upon translation of IFRSs into another language.

Comments on ED/2011/2 close on 21 October 2011. Click for our Comment Letter on ED/2011/2 (PDF 42k).

The penalty orders follow on from an earlier decision on 27 June 2011 where the Court found directors had breached their duties when they signed off on financial reports that failed to disclose significant matters.

The Centro case includes allegations brought by the Australian Investments and Securities Commission (ASIC) over two financial reporting matters: the classification of liabilities (between current and non-current) and the disclosure of guarantees given.

Under the Australian Corporations Act 2001, financial statements are required to comply with Australian Accounting Standards (equivalent to IFRSs) and directors are required to approve the financial statements. Accordingly, non-compliance with Accounting Standards or the approval processes is a contravention of the law. In the most recent judgement, the Court refused the directors' applications to be exonerated from their contraventions and made declarations that all directors and the Chief Financial Officer contravened the law.

The Centro case considered the obligations of directors in relation to Australian financial reporting, including the extent to which directors can rely on management and external advisers, the degree of financial literacy required of directors, and the approval process for financial statements. It has been the matter of considerable debate in Australia.

Click for ASIC announcement (link to ASIC website).

The first, Boards and Risk: A Summary of Discussions with Companies, Investors and Advisers, summarises these discussions held over the last six months. The second, Effective Company Stewardship: Next Steps, outlines the responses received by the FRC to its original discussion paper and summarises the future actions that the FRC intends to take. In these reports, the FRC notes that there is one common issue to be addressed: "audit is not meeting user and/or public expectations and . . . there is a need for greater transparency about the judgements made by management and auditors in the course of preparing and auditing financial statements".

Click for (all links to FRC website):

• FRC press release
• Boards and Risk: A Summary of Discussions with Companies, Investors and Advisers
• Effective Company Stewardship: Next Steps

 

IFRS for SMEs adopted: In July 2011, the Parliament of Mauritius adopted amendments to the Companies Act 2001 to permit the following classes of companies to use the IFRS for SMEs as issued by the International Accounting Standards Board (IASB):

• a private company, other than a small private company, or public company, which does not qualify as a public interest entity as defined in the Financial Reporting Act; and
• any group of companies which does not qualify as a public interest entity under the Financial Reporting Act.

According to Finance Bill 2009 enacted in February 2010 small state owned companies were already allowed to use the IFRS for SMEs. Please click for Act No. 20 of 2011 containing the July 2011 amendments (link to Mauritius Parliament website).

IFRS for SMEs training modules: The IFRS Foundation Education Initiative has developed a training module for Section 2 of the IFRS for SMEs Concepts and Pervasive Principles. Ultimately, the IFRS for SMEs training material will include 35 stand-alone modules – one for each section of the IFRS for SMEs. Currently, 24 modules are available. Please click for access to all training modules on the IASB's website.

IFRS for SMEs translated: Macedonian and Polish translations of the IFRS for SMEs have been completed and available for free download on the IASB's website. Translation into the following languages are still in process: Albanian, Hebrew, Japanese, Kazakh, Khmer, Mongolian, Serbian, Ukrainian.