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Deloitte comment letter on the IFRS Foundation draft review

09 Oct 2012

Deloitte’s IFRS Global Office has submitted a letter of comment to the IFRS Foundation on its draft review 'IFRS Foundation Constitution—Drafting Review: separating the role of the IASB Chair and the Executive Director.'

We support the IFRS Foundation’s change to separate the role of IASB Chair and the Executive Director and commend them for acting quickly to implement the change recommended by both the Trustees’ Strategy Review Report and the IFRS Foundation Monitoring Board governance review.

The comment letter notes the following:

[W]e support the changes to the IFRS Foundation's Constitution, subject to our proposed changes that aim to reinforce the separation between the IFRS Foundation Executive Director and the IASB Chair.

Please click for access to our comment letter.

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Agenda for October IASB meeting

09 Oct 2012

The IASB will meet in London on 15-19 October 2012. Topics to be discussed include insurance contracts, macro hedge accounting, financial instruments, revenue recognition, confirmation of due process before the issue of exposure drafts on IAS 28 and the 2011-2013 cycle of annual improvements, and consideration of a recommendation to suspend the project on IAS 8 effective dates and transition. A number of sessions will be held jointly with the FASB.

The full agenda for the meeting, dated 8 October 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.

EFRAG endorsement status report 8 October 2012

08 Oct 2012

The European Financial Reporting Advisory Group (EFRAG) has updated its report showing the status of endorsement, under the EU Accounting Regulation, of each IFRS, including standards, interpretations, and amendments.

The updated report reflects that the Accounting Regulatory Committee (ARC) has voted in favour of the adoption of the Amendments to IFRS 1 Government Loans.

Click to download the Endorsement Status Report as of 8 October 2012.

You can find all past endorsement status reports here.

IOSCO to consider 'larger role' in IFRS

08 Oct 2012

The Board of the International Organization of Securities Commissions (IOSCO) has agreed to consider an IFRS Foundation request to play a larger role in global efforts to further the international adoption and implementation of International Financial Reporting Standards (IFRS).

The IOSCO Board, which was formed as part of a restructure of IOSCO earlier this year, agreed to consider the move in response to a request in a meeting with Michel Prada, the Chairman of the Trustees of the IFRS Foundation, "as a means to improve the comparability and integrity of financial statements across the globe".

IOSCO’s Committee on Multinational Disclosure and Accounting will take up the proposal.  The Committee was previously a standing sub-committee of the IOSCO Technical Committee which has now been subsumed within the IOSCO Board.  The proposals would extend the previously stated responsibilities of the Committee, which include monitoring the development and interpretation of IFRS, providing comments on proposed standards and interpretations, and promoting consistent regulatory interpretation and enforcement of IFRS.

The development was announced by IOSCO as part of outlining the outcomes of the IOSCO Board's inaugural meeting held on 3-4 October 2012.  The meeting also saw discussion on work mandated by the G20 Leaders and the Financial Stability Board (FSB) on regulatory reform, together with other projects, including such topics as global legal entity identifiers, over-the-counter derivatives, regulation of money market funds and oil price reporting.  The meeting also considered emerging market perspectives and noted support for the possible creation of an IOSCO Foundation.

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

France moves forward with accounting for emission rights on basis of the business model

04 Oct 2012

The French standard setter Autorité des normes comptables (ANC) has adopted on 4 October 2012 regulation 2012-03 on the accounting for Greenhouse Gas (GHG) emission rights and regulation 2012-04 on the accounting under French GAAP for energy saving certificates.

Under these regulations, GHG emission rights and energy saving certificates are accounted for differently based on the entity’s business model.  Under the “production” or “energy saving” business models, the GHG emission rights and energy saving certificates are considered as “administrative” raw materials consumed by GHG emissions or energy sales.  Accordingly, an asset (raw materials valued at cost) is recognised when GHG emissions or energy sales are lower than emission rights or energy saving certificates held. A liability is recognised when GHG emissions or energy sales are higher than emission rights or energy saving certificates held. Under the “trading” business model, GHG emission rights and energy saving certificates are recognised as inventory at cost (subject to depreciation) until sold.

The GHG emission rights regulation shall be applied for annual periods beginning on or after 1 January 2013 and the energy saving certificates regulation shall be applied for annual periods beginning on or after 1 January 2014. Earlier application for annual periods beginning on or after 1 January 2012 is permitted for these two regulations.

Full texts of the regulations are available on the ANC website (French language only):

The new regulations follow from the ANC discussion paper Accounting for Emissions Trading Schemes Reflecting Companies’ Business Models published in May 2012.

Agenda for the October 2012 IFRS Foundation Trustees meeting

03 Oct 2012

The IFRS Foundation Trustees will meet in Brussels on 12 October 2012. The meeting will consist of reports from the IASB Chair, the Due Process Oversight Committee, the Education and Content Services Committee, and the IFRS Advisory Council chair.

The agenda is available here.

Japan's BAC resumes deliberations on IFRS

03 Oct 2012

The Business Accounting Council of Japan (BAC) met on 2 October 2012 to resume its deliberations over the possible use of IFRSs in Japan. This BAC meeting was the first one after the issuance of the interim discussion paper on 2 July. No consensus was formed at the session.

During the session, BAC member reviewed and exchanged views on developments around IFRS since the last BAC meeting in June. Matters reviewed include 1) the final report by the U.S. SEC Staff issued in July, 2) recent IASB activities, and 3) responses to Invitation to Comment on IASB/IFRS IC due process handbook. On future courses, a FSA official commented that matters identified in the interim discussion paper would be continued to be considered in future. It was clarified that such matters include identification of acceptable/unacceptable requirements in IFRSs and accumulation of voluntary use of IFRS, leading to evaluation of merits and issues in using IFRS, among others. The official also mentioned that additional understanding of effects in countries that adopted IFRS such as Canada and Korea would be obtained.

The handouts for the meeting as well as minutes are expected to be posted to the FSA website (Japanese only).

The next session is yet to be scheduled.

Click for our previous article on the BAC's interim discussion paper on IFRS.

IASB podcast on insurance contracts

03 Oct 2012

The IASB has made available a podcast on the current state of debate in the IASB/FASB joint project on insurance contracts. The podcast, by Darrel Scott (IASB member) and Andrea Pryde (Technical Principal) report on developments in the project following the September 2012 joint IASB/FASB meeting.

In particular, this podcast focuses on the boards' transition requirements for the forthcoming Standard and the IASB decision on targeted re-exposure of Insurance Contracts proposal.

To listen to the podcast, please click here (link to IASB website).

The Bruce Column — Interview with Paul Volcker

02 Oct 2012

Robert Bruce interviews Paul Volcker, the most influential central banker of our era, about the state of global financial reporting.

Paul Volcker (118x110)Paul Volcker has been arguably the most influential central banker of our era. As Chairman of the US Federal Reserve from 1979 to 1987 he was the architect of the great economic buoyancy which led to the prolonged growth curve of financial services across the following twenty years. And now, with the ‘Volcker Rule’ plan to curb banks’ proprietary trading almost up and running, he is still at the heart of efforts to bring stability to the markets. Back in 2001 he also found time, and enthusiasm, to chair the trustees at the inception of the IASB and to strongly influence the development of IFRS across the following five years. In the words of the New York Times: ‘In what would have been retirement years for anyone else he became Chairman of the group overseeing the IASB and guided it to a level of independence that outraged French bankers.’ Having supported the endeavours of Sir David Tweedie, the IASB Chairman throughout those years, he returned this September to speak at the annual conference of the Institute of Chartered Accountants of Scotland, where Tweedie is currently President.

Talking with him after he had delivered his speech it was obvious that his efforts and hopes, even at the age of 85, are undimmed. His view of the achievement of the IASB and IFRS remains unchanged and resolutely determined. ‘The IASB has done a terrific job developing credible international standards’, he says. And he reiterated the fundamentals. ‘The enormous complexity and range of the economic and financial world in the twenty-first century only reinforces the need for common accounting standards around the globe, for strong professional discipline in applying those standards, and for a framework of professional independence amid conflicting financial and political pressures’.

The arguments are, he suggests, unarguable. ‘If we really believe in open international markets and the benefits of global finance, then it can’t make sense to have different accounting rules and practices for companies and investors operating across national borders’, he said.

The remaining sticking point is, of course, the attitude of Volcker’s own country, the United States. The momentum which was created in the early days of the IASB, post the Enron collapse and scandal, has become dissipated by politics, and the feeling that America in general is drawing in its horns. The political will, despite the exhortations of the G20, is seen to be lacking. Volcker shares this view. ‘It is a little bit disappointing that the US in contrast has adopted a standoffish approach’, he says. ‘I’m a little puzzled’.

He points to ‘the enthusiasm of American international companies’. For some there is no desire for the status quo. And he sees it as damaging to American businesses to be on the outside of a global system. ‘Why create another problem for ourselves?’ he asks. ‘In the long-term they would be better off’.

It is not just about the long-term prospects for American multi-nationals. It is about reform within the United States itself. He draws the lessons of the last decade and sets them in context. ‘Substantial progress has been made with most countries, beginning in Europe, pledging allegiance to IFRS. But as disappointing to me as to the standard-setters, it is now the United States that, contrary to earlier indications appears to be a reluctant dragon. That can’t make sense’, he says. ‘The United States outside a broader international consensus would be an anomaly, counter to the basic interest of businesses, of investors, or of disciplined enforcement of consistent standards’.

He thinks that sticking to the status quo will only damage American business. ‘The day has long since gone when the United States could claim, with some justice, that it alone, with its long established GAAP, had “best practices” characterised by strong, comprehensive, and well enforced standards’, he says. The balance has changed. Joining in would bring America advantages. Continuing to stay out would not. ‘By now a great deal of progress has been made to achieve agreement on consistent, high quality and enforceable standards’, he says. ‘That convergence will help both the US and other standard setters in withstanding the pressures that inevitably arise to meet particular national or financial interests’.

He has long memories of the amount of cash spent by companies lobbying to stop changes in accounting rules for stock options, for example. ‘People argue wrongly that standards are above politics’, he says. ‘There is plenty of evidence that politicians bring pressure to bear’.

And he also feels that being part of the wider world would shake up the standard-setting process in America for the better. He thinks it is time for change. ‘Within the United States itself there is also much restiveness about the inscrutable detail of GAAP’, he says. ‘There have been too many incidents of weak and negligent practices, of conflicts of interest and political pressure, to any longer justify claims that “made in America” has exclusive superiority’.

He suggested that central bankers tend to be pessimists by nature. But he did express a degree of guarded optimism about the outcome for truly global IFRS. ‘I can only hope that the clear interest repeatedly expressed by the G20 itself in common accounting standards can be made operational in practice’, he said, ‘resolving the few issues that remain open and overcoming the recent hesitation in the United States itself’.

He applies his long experience and accumulated wisdom to the issue. ‘The basic argument is strong enough that if the rest of the world stick to IFRS the US will look odd’, he said. ‘Ultimately it will get done’.

IASB updates work plan for recent decisions, new projects

02 Oct 2012

The International Accounting Standards Board (IASB) has publicly released a revised work plan updating the expecting timing of various due process steps in its projects. There are a large number of changes, with deliverables for some projects being deferred, and a number of new projects included for the first time, reflecting recent board decisions. We've prepared a summary of the changes, together with a listing of the projects where a due process document is expected in the near future.

Summary of changes

The following is a summary of the changes in the revised work plan, which is dated 1 October 2012:

Due process documents expected before the end of 2012

The following due process documents are expected to be issued by the end of 2012 (this includes those items already noted above in some cases):

Click for IASB work plan as of 1 October 2012 (link to IASB website). We have updated our project pages to reflect the updated work plan and other known developments.

Correction list for hyphenation

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