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November

Agenda for the meeting of IASB representatives with the Global Preparers Forum

06 Nov 2012

The tentative agenda is now available for the meeting of IASB representatives with the Global Preparers Forum, which is being hosted by the IASB in London on 12 November 2012.

The agenda is summarised below.

 

Agenda for the meeting

Monday, 12 November 2012 (10:15-16:15)

Agenda papers from this meeting are available on the IASB's website.

Discussions at the joint IASB-ASBJ meeting

06 Nov 2012

Representatives of the International Accounting Standards Board (IASB) and the Accounting Standards Board of Japan (ASBJ) held their sixteenth biannual meeting in London on 29 and 30 October 2012.

IASB and ASBJ discussed the following topics:

In addition, the IASB and the ASBJ discussed several research topics related to the IASB’s future agenda. The ASBJ indicated that it is willing to be actively involved in the IASB’s conceptual framework project through various activities including research.

The IASB has posted to its website a press release with a summary of the discussions.

G20 Ministers of Finance and Central Bank Governors 'concerned' about convergence

06 Nov 2012

A communiqué has been released outlining the outcomes of a meeting of the Ministers of Finance and Central Bank Governors of the Group of 20 (G20), which was held in Mexico City on 4-5 November 2012. The communiqué notes 'concern about the slow progress achieved toward a single set of high quality accounting standards'.

The Communiqué goes on to say:

We encourage the International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) to complete work promptly, and report to our next meeting.

The meeting also received a report from the Financial Stability Board (FSB), entitled Progress on Financial Regulatory Reforms, which includes a summary on accounting convergence.  The report discusses the progress made by the IASB and FASB, noting the recent moves towards closer alignment in the area of classification and measurement of financial instruments.  However, the report also laments the lack of convergence on financial instrument impairment.

The report further explains the FSB's concerns as follows:

Sound expected loss provisioning for financial institutions is critically important to financial stability.  Final IASB and FASB standards should result in improved provisioning practices that incorporate a broader range of available credit information than current practices, so as to recognise credit losses in loan portfolios at an earlier stage.  The FSB is concerned that the two boards have not developed a common model in this important area, and encourages them to renew their efforts to converge.

The FSB report also reiterates the importance of the overall IASB-FASB convergence process and requests a report from the boards by the end of June 2013.

Both the communiqué and FSB report cover many other topics related to improving the resilience of the financial system in response to the global financial crisis.  The communiqué also includes a commitment to "voluntarily self-report again in 2013 on our efforts to incorporate green growth and sustainable development policies into structural reform agendas, taking into account the outcome of the UN Conference on Sustainable Development (Rio+20)".

Click for:

29th annual ISAR meeting focuses on 'accounting infrastructure'

05 Nov 2012

The twenty-ninth session of the United Nations Conference on Trade and Development (UNCTAD) Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) was held in Geneva on 31 October-2 November 2012. The meeting focused on the institutional, regulatory and human resource requirements necessary for developing countries to fully converge with global accounting and reporting systems and saw the roll out of an 'accounting development toolkit' designed to strengthen accounting infrastructure for achieving high-quality corporate reporting. The meeting also acknowledged that accounting and reporting play an important role in addressing many environmental, social and corporate governance issues and examined current practices in sustainability reporting.

ISAR was established in 1982 and is a forum dedicated to strengthening corporate reporting, especially in developing countries.  It meets annually to build on previous sessions and discuss topical issues.  This year's session saw over 300 attendees representing government authorities, regulators, standard-setters and academia.

The Deputy Secretary-General of UNCTAD, Petko Draganov, opened the meeting by noting that good reporting is a "key foundation of transparent markets and a healthy economy" and depends on "the wider infrastructure that supports, guides and facilitates" it.  The speech went on to comment on global developments: "one of the defining characteristics of the past two decades has been the proliferation of international standards and codes in accounting, auditing, professional training, and on the disclosure of environmental, social and governance information".

In response to the fact that "accounting infrastructure is a complex set of institutions and regulatory requirements",  Mr Draganov outlined the 'accounting development toolkit' as a practical response to the needs of member States.  The toolkit is designed to addresses the full range of accounting and reporting issues in a systematic way, and sets priorities for policy makers in strengthening and further developing their accounting infrastructure.

Nine countries have pilot-tested the toolkit: Brazil, China, Côte d’Ivoire, Croatia, Mexico, South Africa, the Netherlands, Russia and Vietnam, and feedback during the session was largely positive.  Feedback from the pilot programme will be use to further improve the toolkit for use by member states.

Mr Draganov also discussed the important role that accounting and reporting play in addressing many environmental, social and corporate governance issues, noting "[w]hat we measure affects what we do, and if our measurement is flawed, our decisions will be ill informed".  Mr Draganov called on member states and others to support the paragraph 47 of the outcome document from the Rio+20 United Nations Conference on Sustainable Development which encourages companies to integrate sustainability information into their reporting cycle.

Michael Prada, Chairman of the IFRS Foundation Trustees, gave a key note speech at the session, which outlined the importance of global accounting standards, provided a summary of some of the key achievements of the International Accounting Standards Board (IASB), and discussed the process of strengthening the institutional arrangements underpinning the IFRS Foundation.

Mr Prada went on to discuss the regulatory and institutional arrangements around the implementation of IFRS, noting the importance of global consistency in application to avoid "individual flavours" of IFRS but also stating that the "IASB does not have a mandate or the resources to enforce and monitor application of the standards that it creates". To his mind this is a role for governments and regulators in individual jurisdictions.

However, Mr Prada acknowledged his belief that IOSCO can "play a leading role in monitoring the implementation of global accounting standards".  He  believes this role has been enhanced through IOSCO's recent restructure, and discussed the recent moves by the IASB and IOSCO to co-operate more closely, which at a technical level may involve IOSCO's new policy committee on accounting, auditing and financial reporting.

Mr Prada also discussed the Emerging Economies Group (EEG), the objectives and use of the IFRS for SMEs, and the possible adoption of IFRS in the United States where he reiterated his comments that it was "clear from the analysis that there are no insurmountable issues that stand in the way of the US moving to IFRS".

Numerous other speakers from various organisations also participated in the conference.  The agenda, papers and other information from the conference are available on the UNCTAD website.

Click for press release (link to UNCTAD website).

10 years of IFRS: Reflections and expectations

02 Nov 2012

The 'Australian Accounting Review' has recently published a special edition that marks the 10th anniversary of the International Accounting Standards Board (IASB) with research papers exploring the impact of IFRS on standard setting, financial reporting practice and accounting education from the perspectives of standard setters, practitioners and academics. Among the articles are contributions by Warren McGregor, IASB Board member for ten years, Kevin Stevenson, AASB Chairman, and Paul Pacter, IASB Board member and former IAS Plus webmaster.

The special edition of the Australian Accounting Review, a leading practitioner-focused journal, appears in two parts: in the September and December 2012 issues.

The first part of the forum includes a set of papers reflecting on the IASB's activities over the past 10 years, the relationship of the IASB with national standard setters, and two papers providing background and insights into the important question of if, and how, the United States may adopt IFRS.

 

Warren McGregor, IASB Board member for the first ten years of the IASB's existence, describes how the IASB evolved from "a type of accounting 'think tank' with a mandate to develop high-quality accounting standards that could be adopted on a voluntary basis by countries around the world" into a body that had to learn to deal "with the politics and other pressures that accompany attempts to change accounting practices in highly controversial areas".

Kevin M. Stevenson, AASB Chairman and former member of the IASB staff, analyses the changing relationship between the AASB and other national standard setters and the IASB. He critically looks at the attempts that are made to establish more formal links with domestic and regional groupings of standard setters as evidenced by the IFRS Foundation's proposals for the creation of the Accounting Standards Advisory Forum (ASAF) published on 1. November 2012.

Mr Stevensons article is balanced with a contribution by Jessica Lion, an IASB staff member, presents the IASB's perspective in the debate around the relationship between the IASB and the national standard setters. In her article she looks at the benefits and challenges of a "complex but vital relationship to both the global and the domestic standard setter" and how the benefits can be maximised.

Paul Pacter, IASB Board member, regrets that "[i]n 2011, the International Accounting Standards Board (IASB) was so engrossed in progressing some major projects toward completion, along with a change of board leadership, that an important milestone passed by without much celebration – our 10th anniversary". His contribution lists and honours the IASB's achievements over the past 10 years.

The forum concludes with two papers focusing on the role of the US in developing global standards over the last 10 years. Holger Erchinger outlines recent developments at the US Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB) in relation to the possible adoption of IFRS and shows how the SEC's 2010 IFRS Work Plan led via the SEC staff paper exploring the 'condorsement' approach for IFRS adoption in the US to the SEC final staff report published in July 2012.

Donna L. Street complements Mr Erchinger's paper by delving more deeply into forces shaping US decisions about IFRS and the implications of possible adoption models. Her strong conclusion is that "[t]he SEC leadership has repeatedly voiced support for one set of globally accepted accounting standards. Since the rest of the world will not adopt US GAAP, IFRS is realistically the only visible road to global standards".

We are grateful to the editor of this special issue, Professor Ann Tarca, for pointing it out to us. The second part of the forum, to be contained in the December issue, will complement the first by exploring the adoption of IFRS in a developing economy, IFRS educational issues and initiatives, and practitioners’ reflections on the impact of IFRS together with suggestions for future research.

Australian standard setter concerned about investment entities amendments

02 Nov 2012

The Australian Accounting Standards Board (AASB) has tentatively decided to delay adoption in Australia of the IASB's recently issued investment entities amendments until after due process is undertaken for additional note disclosures 'in response to concerns about the loss of consolidation information that would result from the IFRS amendments'.

The tentative decision was made at a meeting of the AASB held on 31 October and 1 November 2012.  The AASB Action Alert (link to AASB website) issued summarising the meeting outlines the concerns about the investment entity amendments and outlines a tentative decision that a forthcoming Australian-specific exposure draft "should propose disclosure of the three primary financial statements that would be produced under full consolidation".

The AASB staff paper (link to AASB website) discussed at the meeting canvasses a number of options that the AASB could have taken in relation to investment entities amendments.  The paper includes the possibility of not adopting the investment entity amendments at all, which would undermine the ability of Australian investment entities to claim compliance with IFRS.

In the paper, the staff note that, no matter which approach the AASB adopts in relation to investment entities, the AASB will need to compromise one or other of its policies.  The paper notes that the IFRS amendments are inconsistent with the AASB's stated policy of 'transaction neutrality' which states that the AASB "considers that the fundamental nature of the elements of financial statements (assets, liabilities, income and expenses) and their qualitative characteristics are generally unaffected by different business models".

The paper also notes that an approach other than making the amendments in line with the IFRS amendments would compromise the AASB's policy of only modifying IFRS for not-for-profit entities.  The AASB has progressively removed Australia-specific requirements from its standards in relation to for-profit entities in implementing this policy.

In relation to the option of requiring additional disclosures tentatively chosen by the AASB, the paper notes that it "signals the significant concern of the AASB that the amendments are contrary to the core accounting principle of control".  Concerns about structuring opportunities are also noted.

In response to these and other concerns, the Basis for Conclusions introduced into IFRS 10 Consolidated Financial Statements by the investment entities amendments notes the following:

 

The Board acknowledges these arguments, but notes that the exception to consolidation has been introduced in response to comments from users that the most useful information for an investment entity is the fair value of its investments. Users also commented that consolidated financial statements of an investment entity may hinder users’ ability to assess an investment entity’s financial position and results, because it emphasises the financial position, operations and cash flows of the investee, rather than those of the investment entity.


The investment entities consolidation exemption has been contentious in the Australian context for some time.  In October 2011, the AASB Chairman, Kevin Stevenson, took the unusual step of issuing a press release highlighting the IASB's (then)  investment entity proposals may "depart from the concept of control and lead to unjustified changes in requirements".

The AASB is expecting to issue an exposure draft on its proposed additional disclosures before the end of 2012.  Click for access to the AASB Action Alert (link to AASB website).

IFRS Foundation issues proposal to establish an Accounting Standards Advisory Forum

01 Nov 2012

The IFRS Foundation has issued for public comment proposals for the creation of the Accounting Standards Advisory Forum (ASAF), which was recommended by the Trustees' strategy review to provide technical advice and feedback to the IASB from the standard-setting community.

The role of the ASAF is create a more streamlined and formal representation of national and regional issues to be incorporated into the due process of a standard-setting workflow. The IFRS Foundation would like participating national standard setters to formally commit to:

  1. supporting the IFRS Foundation in the development of a single set of high quality globally accepted accounting standards,
  2. encouraging input from jurisdictions/regions during the consultation process,
  3. supporting consistent application of IFRSs by jurisdiction and in the region,
  4. adopting the use of IFRSs as issued by the IASB,
  5. having the resources and capabilities to have an active role in the work of the ASAF.

A Memorandum of Understanding is to be signed by the members of the ASAF and the IASB to formalise these commitments.

The ASAF will be comprised of 12 members, whom will have a term of two years. Composition of the members will be based on achieving geographical balance:

  • Africa: 1 seat
  • Americas: 3 seats
  • Asia-Oceania: 3 seats
  • Europe (including non-EU): 3 seats
  • World at large: 2 seats

The ASAF will meet four times a year with the representatives of the IASB to discuss relevant issues, with one of the meetings being combined with the annual conference for WSS.

The IFRS Foundation believes some of the advantages of the creation of the ASAF are:

  • The IASB has a single contact instead of many bilateral relationships.
  • The ASAF has a larger forum than the current bilateral relations, which will provide the IASB a wider access to information from jurisdictions and further improve the quality of the final standards.
  • One of the key demands of the strategy review by the trustee is satisfied.
  • The IASB standards are supported by an even larger group of users, promoting their further adoption and uniform application.
  • The establishment of the ASAF requires no changes to the structure of the IFRS Foundation.
  • The ASAF could be a useful complement to the International Forum of the standard setter in the field of accounting (International Forum of Accounting Standard Setters, IFASS).
  • The ASAF would encourage multilateral discussions.

The risk of the creation of the ASAF are:

  • The standard-setting process could drag on.
  • It would be difficult to find a composition of the ASAF, which will satisfy all interested parties. This could mean that national standard setters, which are not represented in the ASAF develop, no sense of belonging to the body.
  • There is a risk that the group becomes too large and immobile.
  • It might need for additional staff and resources arise.
  • It might be difficult to control the discussion and to reach agreement.

Comments are due by 17 December 2012.

Click for (links to IASB website):

New IFRS for SMEs training modules in Arabic

01 Nov 2012

Arabic-language translations of Module 27 'Impairment of Assets' and Module 31 'Hyperinflation' of the IFRS for SMEs training material are now available.

In total, 30 Arabic-language modules are available for download from the IFRS Foundation website and they can be accessed here.

The IFRS Foundation is developing 35 stand-alone training modules - one for each section of the IFRS for SMEs. The modules are free-to-download. Currently, training modules are available in English, Arabic, Russian, Spanish, and Turkish.

November IASB education sessions cancelled

01 Nov 2012

The education sessions originally scheduled to be held on Thursday 15 and Friday 16 November have been removed from the IASB meetings diary.

The content of the education sessions will now be incorporated into the IASB meeting sessions scheduled for the week beginning 19 November 2012.

Correction list for hyphenation

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