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July

SEC report on work plan for IFRSs

13 Jul 2012

The Securities and Exchange Commission (SEC) has issued a Final Staff Report 'Work Plan for the Consideration of Incorporating International Financial Reporting Standards into the Financial Reporting System for U.S. Issuers'. The report summarises the observations and analyses the staff has learned in the areas covered by the SEC's Work Plan.

The Final Staff Report describes the potential impact of any incorporation of IFRS into the financial reporting system for US issuers.

As directed in February 2010, the SEC staff developed a work plan to "consider specific areas and factors relevant to a Commission determination as to whether, when, and how the current financial reporting system for U.S. issuers should be transitioned to a system incorporating International Financial Reporting Standards."

A more detailed summary of the SEC report will be available soon on IASPlus.

Click for (links to SEC website):

Notes from the July IFRS Foundation Trustees meeting

13 Jul 2012

Deloitte observer notes are now available from the IFRS Foundation Trustees meeting held in Washington D.C. on 12 July 2012. The meeting consisted of a report from Mr Hoogervorst that reviewed the past quarter's major projects, a report on the results of the June IFRS Advisory Council meeting from Mr Cherry, a report from Mr Sidwell of the Due Process Oversight Committee on his Committee activities over the last quarter, and a report from Dr Pacter on IFRS for SME over the past years. In the afternoon there was a joint Monitoring Board and Trustees meeting.

A listing of some of the topics discussed at the meeting follows (click through to access detailed Deloitte observer notes for each topic):

Thursday, 12 July 2012 (10:20-15:00)

FASB issues an invitation to comment on disclosure framework

12 Jul 2012

The Financial Accounting Standards Board (FASB) has issued an Invitation to Comment, Disclosure Framework. The Invitation to Comment is the first step in gathering input from stakeholders on ways to improve the effectiveness of disclosures in notes to financial statements of public, private, and not-for profit organisations.

In the Invitation to Comment, the FASB outlines the following:

A decision process that could aid the Board in establishing disclosure requirements that address relevant information and only relevant information

Flexible disclosure requirements that could be adapted by each reporting organization to focus on information that is relevant in its specific circumstances

A judgment framework that could help each reporting organization determine which disclosures are relevant in its specific circumstances

Organization and formatting techniques that could make the information users need easier to find and understand.

In addition, disclosure requirements for interim period financial statements are discussed.

Comments are due by 16 November 2012.

This announcement coincides with the discussion paper on a disclosure framework for IFRSs issued jointly by European Financial Reporting Advisory Group (EFRAG), the Autorité des Normes Comptables (ANC) in France, and the Financial Reporting Council (FRC) in the United Kingdom. The FASB has cooperated with the staffs of the EFRAG, the ANC, and the FRC as the FASB invitation to comment and the joint discussion paper were created, and will continue to meet with them periodically and share information as their respective projects proceed.

Click for (links to FASB web site):

IASB and FASB to host webcasts on Leases project

12 Jul 2012

Webcasts by the IASB and the FASB will be held on Thursday, 19 July 2012 to provide an update on the lessee and lessor accounting proposals, focusing on the decisions reached at the joint board meeting in June 2012. There will be a joint webcast at 4pm UK time and an IASB only webcast at 9am UK time.

Details of the webcasts are provided below:

Topic: Leases - lessee and lessor accounting proposals
Date and time: Thursday, 19 July 2012 16:00 GMT+1 and 09:00 GMT+1
More information and registration: Click Here

Click for:

European discussion paper 'Towards a Disclosure Framework for the Notes'

12 Jul 2012

The European Financial Reporting Advisory Group (EFRAG), the Autorité des Normes Comptables (ANC) in France, and the Financial Reporting Council (FRC) in the United Kingdom have published a discussion paper 'Towards a Disclosure Framework for the Notes' that sets out key principles that are required for an effective disclosure framework.

The desire to reduce the volume of disclosure requirements in International Financial Reporting Standards (IFRSs) is widespread and numerous reports and suggestions have been published on the matter: In April 2011 the Accounting Standards Board (ASB) of the United Kingdom Financial Reporting Council (FRC) published a much noted report Cutting Clutter: Combating clutter in annual reports and in July 2011 the Institute of Chartered Accountants of Scotland (ICAS) and the New Zealand Institute of Chartered Accountants (NZICA) released a report entitled Losing the excess baggage — reducing disclosures in financial statements to what's important that was prepared in response to a request from the IASB and outlines recommendations on which existing IFRS disclosures can be amended, reduced or eliminated.

EFRAG/ANC/FRC have now joined the ranks by publishing Towards a Disclosure Framework for the Notes, however, the European approach is far more comprehensive. The discussion paper does not suggest removing or changing disclosures, it suggests principles for a new framework for disclosures. This step moves the debate about disclosures from a discussion about more or less disclosure to "how to improve the quality of what is disclosed to better serve the objective of financial reporting". As with all of EFRAG's Proactive Work the discussion paper is intended to stimulate debate and to influence future standard-setting developments by providing timely and effective input to early phases of the IASB’s work.

In introducing the problem of the disclosure overload and general deterioration in the quality of notes EFRAG/ANC/FRC make out five reasons for the development:

  • the attempt to increase transparency and compensating for shortcomings of recognition and measurement principles by adding disclosure requirements,
  • increasing complexity of transactions and financial reporting requirements,
  • difficulty of applying materiality judgements to disclosures,
  • a safety thinking of preparers, auditors and regulators that leads to providing as many disclosures as can be thought of, and
  • time pressure in relation to publishing financial statements that prevents careful consideration of disclosures.

According to EFRAG/ANC/FRC, these reasons form a complex set of behaviours that needs to be changed. They need to be tackled comprehensively to ensure the problem is not just relocated between the parties involved. Therefore, they suggests developing a disclosure framework that ensures that disclosure requirements under International Financial Reporting Standards (IFRS) are based on sound principles and yield relevant information for users of financial statements.

In the discussion paper EFRAG/ANC/FRC list five points that need to be considered when developing the framework:

  • the purpose of the notes since this drives what information should be included in the notes in the first place,
  • principles for identifying what information should be included in the notes,
  • the form of disclosure requirements, i.e. detailed disclosure requirements that require specific items to be disclosed or more principle based requirements that require greater judgement and consideration of an entity’s circumstances,
  • materiality considerations so that the only information disclosed is the what is necessary to understanding an entity’s financial performance and position, and
  • key features of effective communication that deal with the way disclosures are organised and presented.

All of these aspects are discussed comprehensively in separate chapters which also offer links to examples provided on the EFRAG website. The discussion paper also includes detailed questions on all matters presented. It can be accessed through the press release on the EFRAG website or directly through this link. Comments are requested by 31 December 2012.

The discussion paper is the result of a project that was carried out in cooperation with the US Financial Accounting Standards Board (FASB). In August 2011, EFRAG and FASB had formally agreed to work together on their respective projects to develop a disclosure framework, with a view to creating a consistent framework for both United States and international GAAP. The FASB has also issued an Invitation to Comment on a suggested disclosure framework.

Notes from the July IFRS Interpretations Committee meeting

11 Jul 2012

Deloitte observer notes are now available from the IFRS Interpretations Committee meeting held in London on 10 July 2012. The Committee continued its consideration of non-monetary contributions to associates or joint ventures, reviewed a number of examples illustrating the classification of cash flows, and considered whether amendments are required to IFRS 3 in relation to continuing employment. The Committee also considered whether to undertake projects on regulatory assets and liabilities (deciding against) and accounting for contribution based promises under IAS 19 (to be further considered), and also considered a number of other issues.

A full listing of all of the topics discussed at the meeting follows (click through to access detailed Deloitte observer notes for each topic):


Tuesday, 10 July 2012 (10:00-16:15)

Introduction

Items for continuing consideration

Review of tentative agenda decisions published in March IFRIC Update

New items for initial consideration

Review of issues previously referred to the IASB

Administrative session

Click here to go to the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

Agenda for July IASB meeting

09 Jul 2012

The IASB is meeting in London on 16-20 July 2012 and has publicly released the agenda for the meeting. The IASB will hold a number of IASB-only and education sessions in addition to joint meetings with the FASB. In addition to various discussions on the core projects (insurance contracts, revenue recognition, financial instruments and leases), the meeting will discuss other projects such as the proposed exemption from consolidation for investment entities, and accounting for other net asset changes of an associate. The IASB will also discuss a number of reports on the activities identified in the Due Process Handbook.

The full agenda for the meeting, dated 6 July  2012, can be found here.  We will post any updates to the agenda, and our Deloitte observer notes from the meeting, on this page as they are available.

IFRS Foundation conference in Dubai announced

06 Jul 2012

The IFRS Foundation announced the dates for its conference Dubai on 12 and 13 September 2012. The conference will feature IASB members and technical staff providing updates on the IASB's active projects and future plans.

The conference will feature presentations by Ian Mackintosh, Vice-Chairman of the IASB and other IASB members, senior IASB technical staff, and IFRS experts. The conference will provide an update on the active projects and plans of the IASB. Some of the highlights of the conference topics include the following:

  • IASB update — Progress and plans:
    • Update on IASB’s future agenda consultation
    • Current agenda projects
    • Recently issued standards
    • Interpretations and annual improvements
    • Post-implementation reviews
  • Islamic finance considerations in applying IFRSs
  • Financial instruments — Replacement of IAS 39
  • Eight break-out sessions
  • Four special interest sessions (New IFRSs & IFRS for specific situations)

There will also be pre-conference special interest sessions from 9:00 to 12:00 on 12 September 2012 on the first-time adoption of IFRSs and extractive industry issues.

Additional conference details, including registration, are available here.

EFRAG draft comment letter on Draft Interpretation on put options

06 Jul 2012

The European Financial Reporting Advisory Group (EFRAG) has issued its draft comment letter on IFRS Interpretations Committee (Committee) Draft Interpretation DI/2012/2 'Put Options Written on Non-controlling Interests'. In the comment letter, EFRAG acknowledges that different practices are used in accounting for the subsequent measurement of the financial liability that is recognised in a parent entity’s consolidated financial statements for an non-controlling interests (NCI) puts. However, EFRAG believes that the scope of the Draft Interpretation is too narrow, and does not address all relevant aspects of accounting for derivatives written over non-controlling interests.

EFRAG has a number of significant concerns regarding the proposals and the use of Interpretation to resolve the issue of put options, without addressing wider diversity in practice on accounting for NCI puts and transactions with NCI. EFRAG recommends that the issues be addressed in a manner consistent with existing IFRS:

Overall, we believe that the Draft Interpretation should address the complexity and broad range of issues arising from transactions with NCI, including NCI puts, in a manner that is consistent with the principles underlying IFRS 3, IFRS 10/IAS 27, IAS 32 and IFRIC 17 as this would result in a more robust and principles-based solution.

The draft comment letter also includes an eight page appendix outlining EFRAG's concerns regarding the proposals and the use of an Interpretation to resolve the issue.

EFRAG members did not reach a consensus on the accounting specified in the Draft Interpretation, which requires changes in the measurement of the NCI put liability to be recognised in profit or loss. EFRAG also invites constituents to comment on members' three distinct views:

  • That remeasurement in profit or loss is always appropriate (the approach taken by the IFRS Interpretations Committee);
  • That remeasurement in profit or loss is not appropriate and that changes should be recognised in equity; and
  • That remeasurement in profit or loss is appropriate in some circumstances.

Comments on the letter are invited by 19 September 2012.

Click for:

  • The draft comment letter can be downloaded via the press release on EFRAG's website.
  • Our May 2012 story for more information on DI/2012/2 Put Options Written on Non-controlling Interests.
  • Deloitte's IFRS in Focus newsletter analyzing the Committee's Draft Interpretation on put options.

EFRAG draft comment letter on Draft Interpretation on levies

06 Jul 2012

The European Financial Reporting Advisory Group (EFRAG) has issued its draft comment letter on IFRS Interpretations Committee (Committee) Draft Interpretation DI/2012/1 'Levies Charged by Public Authorities on Entities that Operate in a Specific Market'. In the comment letter, EFRAG acknowledges that the consensus is consistent with the principles in the Conceptual Framework and IAS 37. However, EFRAG believes that the Draft Interpretation should also address the accounting for levies due only if a minimum revenue threshold is achieved.

EFRAG does not see a conceptual reason why the rationale explained in the Basis for Conclusions of the Draft Interpretation would not also apply to levies due only if a minimum revenue threshold is achieved. That is, in EFRAG's view, the generation of revenue prior to reaching the threshold is necessary, but not sufficient to create an obligation which would give rise to the recognition of a liability. Consequently, EFRAG believes that the Interpretations Committee should explain why this would not apply in the case of levies that are due only if a minimum revenue threshold is achieved.

Furthermore, EFRAG recommends that the IASB make clearer that the scope of the Draft Interpretation is very broad and includes within its scope the majority of payments to public authorities (e.g. property tax).  Other matters discussed in the draft comment letter include such topics as the treatment of levies that are not non-reciprocal transfers or have multiple elements, how fixed fee levies should be treated, and various suggestions to clarify the wording and intent of the Draft Interpretation.

Comments on the letter are invited by 22 August 2012. The draft comment letter can be downloaded via the press release on EFRAG's website.

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