2012

Notes from the February IASB meeting

28 Feb 2012

The IASB is holding its regular monthly meeting on 27 February – 2 March 2012 in London, part of it a joint meeting with the FASB. We have posted Deloitte observer notes from the impairment session held on Tuesday.

Click through for direct access to the notes:

Tuesday, 28 February 2012

Notes from the remaining sessions on Monday (insurance contracts) and Tuesday (insurance contracts and classification and measurement of financial instruments) will be posted soon.

You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

IVSC to tackle valuation of derivative instruments

28 Feb 2012

The International Valuation Standards Council (IVSC) has launched a project on the valuation of financial derivatives.

The types of derivative instrument that will be addressed by the project are equity derivatives, fixed income derivatives, credit derivatives, foreign exchange derivatives, commodity derivatives and hybrid derivatives. The intention is to examine the factors that influence the value of these instruments and how these are reflected in the models most commonly used for valuing them.

The IVSC Standards Board has formed an expert working group comprising of representatives of some of the major banks including UBS, Deutsche Bank and HSBC, independent consultants and buy side investors to advise it on the project.

An exposure draft is anticipated in the (Northern) autumn of 2012. Click for more information (link to IVSC website).

EFRAG report on implementation of IFRS 10, IFRS 11 and IFRS 12

27 Feb 2012

The EFRAG has issued a feedback report regarding field-tests on implementing IFRS 10, IFRS 11 and related disclosures in IFRS 12.

The field-tests were conducted by members of EFRAG and the European National Standards Setters. The tests were conducted in two separate questionnaires which gathered feedback from participates on issues arising from implementation of the new requirements and the estimate of expected costs and benefits preparers experienced.

Participants described certain benefits related to the implementation of IFRS 10 and 11, including (1) IFRS 10 provided "a single basis for consolidation and a uniform approach for all types of entities including 'special purpose entities'" and (2) IFRS 11 would eliminate "the existing accounting option for interests in jointly controlled entities."

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Update on Ukraine’s IFRS transition

24 Feb 2012

In June 2011 the changes in law "On accounting and financial reporting in Ukraine" were signed by the President of Ukraine. In accordance with such changes, public interest entities (Public Joint Stock companies, banks, insurance companies, and other companies that operate in financial markets) are required to prepare financial statements in accordance with IFRS.

The Cabinet of Ministers of Ukraine may provide an additional list of entities subject to reporting under IFRS.

In December 2011, the National Bank of Ukraine, Ministry of Finance and Ministry of Statistics issued a joint letter clarifying the adoption of IFRS in Ukraine. Banks are required to use 1 January 2011 as date of transition to IFRS. All other entities subject to IFRS adoption may choose either 1 January 2011 or 1 January 2012 as a date of transition to IFRS. Financial statements for 2011 are to be prepared based on Ukrainian Accounting Standards. All other entities may voluntary choose IFRS as their reporting framework.

Click for our Ukraine country page

AAOIFI issues two drafts on Islamic accounting

24 Feb 2012

The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) is an Islamic international autonomous non-for-profit corporate body that prepares accounting, auditing, governance, ethics and Sharia'a standards for Islamic financial institutions and the industry. Recently, the AAOIFI has published an exposure draft (ED) and a consultation paper.

The ED topic is about the proposed standard for a new investment in real estate. The consultation paper discusses the revision of two existing standards for investment accounts. Islamic financial transactions are particularly influenced by the consideration of the interest prohibition; conventional accounting standards are therefore sometimes difficult to apply to those financial transactions. Comments for both drafts are due 8 April 2012.

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IFRS Foundation appoints Ronald Arculli as a Trustee

23 Feb 2012

The Trustees of the IFRS Foundation have announced the appointment of Ronald Arculli as a Trustee.

Mr Arculli currently serves as the chairman of Hong Kong Exchanges and Clearing Limited, which operate the Hong Kong Stock Exchange. In addition, he is a member of the Hong Kong government's executive council.

Mr Arculli term is effective immediately and will end on 31 December 2014. He is allowed to renew his term once.

Click for IFRS foundation press release (link to IASB website).

IASB and FASB to host webcast on revised revenue exposure draft

23 Feb 2012

A one-hour webcast by the IASB and the FASB will be held on 29 February 2012 to discuss the main issues from the outreach on the revised exposure draft Revenue from Contracts with Customers (November 2011).

Details of the webcast are provided below:

Topic: Revised exposure draft Revenue from Contracts with Customers (November 2011)
Date and time: Wednesday, 29 February 2012 16:00 GMT
More information and registration: Click Here

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Update on accounting and financial reporting requirements in Kosovo

22 Feb 2012

A new law on accounting, financial reporting and auditing has been approved in Kosovo. The law introduces laws defining which companies will apply which accounting standards, and it defines the powers of responsibilities of the newly formed Kosovo Council for Financial Reporting (KCFR).

Presented below are the main points of the new law.

Financial reporting requirements

  • Large business organisations and all business organisations registered as limited liability companies or shareholder companies in Kosovo, shall apply International Financial Reporting Standards (IFRS), including interpretations, recommendations and guidance issued by the International Accounting Standard Board, as approved by the Kosovo Council for Financial Reporting (KCFR)
  • Consolidated financial statements of relevant business organisations shall be in accordance with Directive 78/660/EEC of EU and IFRS
  • Financial statements shall be audited by statutory audit firms or auditors that are licensed to carry out statutory audits by the KCFR
  • All statutory audits in Kosovo, which include all audits required under this law, and external independent audits of other business or not-for-profit, socially owned or publicly owned enterprises or other entities as mandated by other applicable laws in Kosovo shall be carried out in accordance with the International Standards of Auditing (ISAs), and related interpretations, guidance and pronouncements of the International Auditing and Assurance Standards Board (IAASB), and by auditors that are approved by the KCFR to carry out statutory audits

KCFR functions and responsibilities

  • To draft and approve Kosovo Accounting Standards in accordance with International Accounting Standards IAS/IFRS and relevant EU directives
  • Supervise and implement Auditing Standards in accordance with ISA and relevant EU directives
  • Licensing and keeping register of auditors as well as of the audit firms and professional associations of accounting and auditing
  • Adoption of the standards of professional ethics, internal quality of auditing firms
  • Supervise continuous education, quality assurance and disciplinary system

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Latest batch of editorial corrections to IFRSs released by the IASB

22 Feb 2012

The IASB has posted to its website a new batch of 'Editorial Corrections to IFRSs.'

This batch makes editorial corrections and changes to the Bound Volume (Red Book) 2011, Bound Volume (Education) 2011, Bound Volume (Education) 2010, Bound Volume (Blue Book) 2012, Bound Volume (Blue Book) 2011, IFRS 9 Financial Instruments (issued November 2009), IFRS 10 Consolidated Financial Statements (issued May 2011), IFRS 12 Disclosure of Interests in Other Entities (issued May 2011), IAS 19 Employee Benefits (issued June 2011), Disclosures — Transfers of Financial Assets (issued October 2010), Presentation of Items of Other Comprehensive Income (issued June 2011), and Mandatory Effective Date of IFRS 9 and Transition Disclosures (issued December 2011).

Access the editorial corrections on the IASB's website.

The Bruce Column — Independence, eligibility, and the IASB

21 Feb 2012

Independence and accountability have always been the big issues for the IASB and the IFRS Foundation. Now the Foundation’s Monitoring Board has produced a report which deals with the most sensitive issues. Robert Bruce, our regular resident columnist takes a look.

The question which has faced the IASB from its outset is how to square the circle of independence and accountability. The answer has always been to show more rigorous governance. The better the governance the less wriggle-room there will be for critics. And the latest in these efforts is the report on the review of the IFRS Foundation’s governance by its Monitoring Board (the securities markets authorities responsible for monitoring the activities of the IFRS Foundation).

The process itself was rigorous. Its aim was to assess whether the current governance arrangements promoted  ‘the primary mission of the International Accounting Standards Board, (IASB), of developing high quality, understandable, enforceable and globally accepted accounting standards, and provide for both the accountability and independence of the IASB’.  To achieve this, a series of proposals for governance improvements were published last year, a full consultation period ensued, responses were considered, and roundtables were held around the world.

One of the more obvious concerns was that the crossroads where independence, ownership, influence and other issues could collide should be properly defined. For example, the elusive goal of ‘financial stability’ which motivates prudential supervisors should not be a motivation, necessarily, of standard setters.

All this has been clarified in the report. ‘While there were some strong calls for the involvement of prudential authorities in the monitoring process’, says the report, ‘a larger number of respondents cautioned that financial stability should not be regarded as a primary objective of financial reporting, and that inputs from such standpoint should be made to the standard-setter through other existing channels. Considering the diversity of views and also the possible undesirable effect any changes to the current set-up would have on stakeholders’ perceptions, the Monitoring Board concluded that the status quo should be maintained’.

Overall the report is governed by a simple statement. The aim is ‘to increase understanding and introduce greater clarity’, and a whole variety of measures are introduced to achieve just that. But there is one which contains a degree of political diplomacy. And this is the membership of the Monitoring Board. This will continue on the same basis. ‘Full membership of the Monitoring Board will continue to be confined to capital markets authorities, defined as those authorities responsible for setting the form and content of financial reporting for use in the capital markets in respective jurisdictions’.  And membership is to be expanded from the current five seats to eleven, by including additional capital markets authorities, ‘primarily from major emerging markets’. . But they are also to ‘refine the existing membership criterion’. At present members need to have a strong commitment to: ‘supporting the development of high quality international accounting standards’. But now that commitment has been refined ‘to call for demonstration of this commitment through domestic use of IFRSs in the jurisdiction’s capital market and participation by the jurisdiction in Foundation funding. To become and/or remain a member, all permanent members must meet that criterion, and will be assessed for their eligibility on a regular basis’.

This answers the persistent gripe of countries around the world which see countries participating in the IFRS decision-making process while not using IFRS. Now if you want a seat at the table you have to be in the game as well. So what of the prominent current absentees from the actual playing-field, like Japan and the US, who hold two of the current five seats? Well, like so much in accounting, it is all about the timing.

The report, with a degree of deftness, makes this clear. ‘The first assessment of eligibility will start in early 2013’, it says. And, ‘during early 2012, the Monitoring Board intends to develop and document in its Charter a definition for the criterion “use of IFRSs”’. In other words the development of the criteria and the first assessment will not begin until after the point, hopefully, when the SEC makes it reasonably clear what happens with IFRS in the US. And Japan has long been expected to follow suit. The report itself was, after all, produced by the IOSCO secretariat in Japan.

This report is a clever and helpful piece of work. And by putting independence, understanding and clarity at its centre it has shown that its heart is in the right place.

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