January

IASB Disclosure Forum — Agenda

17 Jan 2013

On 28 January 2013, the IASB is hosting a public discussion forum on disclosures in financial reporting to foster dialogue between preparers, auditors, regulators, users of financial statements and standard-setters. An agenda for the forum has now been made available.

As the main objective of the forum is to get a clearer picture of the ‘disclosure problem’ and its causes, the agenda has been drawn up as follows:

 

Monday, 28 January 2013 (08:30-15:00)

Welcome and introduction

IASB and others

  • The objective of the Forum and the desired outcomes
  • Where are we now?
  • Discussion with others about the work they have done

User response — how disclosures can better meet users’ needs

  • The problem identified from a user’s perspective
  • Practical suggestions for improving the usefulness of financial reporting

Preparer response — how disclosures can be improved in practice

  • The problem identified from a preparer’s perspective
  • An example of a ‘real life’ response

Panel discussion

  • Each panel member represents a group in the financial reporting process.
  • What part of the problem does the group they represent own?
  • What can the group they represent do to facilitate improvement?

Open Forum

  • Questions and comments from audience members
  • Questions from the moderator to participants in the audience

Summary

  • Summarise the debate
  • Next steps

More information on the forum is available on the IASB's website. Our IAS Plus project page on the disclosure framework project offers more information about recent developments around disclosures.

Report from recent IFASS meeting released

17 Jan 2013

A report has been issued summarising the discussions at a meeting of the International Forum of Accounting Standard Setters (IFASS, formerly the NSS) held in Zurich on 22-23 October 2012. The meeting covered a broad range of topics, including the future relationships between the IASB and regional and national standard setters, topical issues in financial reporting, reports from regional groups and administrative matters.

The meeting was attended by representatives of standard setters from Australia, Austria, Belgium, Brazil, Canada, France, Germany, Hong Kong, India, Indonesia, Italy, Japan, Lebanon, Malaysia, Mexico, Netherlands, New Zealand, Norway, Pakistan, Peoples Republic of China, Republic of Korea, Saudi Arabia, Sierra Leone, Singapore, South Africa, Spain, Sweden, Switzerland, Syria, Taiwan, the United Kingdom, and the United States. Representatives of the European Financial Reporting Advisory Group (EFRAG), IFRS Foundation, International Accounting Standards Board and International Public Sector Accounting Standards Board (IPSASB) also attended.

Highlights from the meeting included:

  • There was much discussion on the relationship between the IASB and national and regional standard setters, and the (then) forthcoming proposals for the creation of an Accounting Standards Advisory Forum (ASAF).  There were mixed views, but overall widespread support, for  the creation of the ASAF among the participants
  • Notwithstanding the ASAF proposals, there appeared to be consensus that the IFASS should continue "at least in the near term" but that IFASS's future role would be considered at the next meeting
  • In relation to technical issues discussed:
    • There was general consensus that a complete overhaul of IAS 12 Income Taxes was not an immediate requirement
    • There was a clear interest that work should continue on the issue of business combinations under common control
    • Various views were expressed on the IPSASB Consultation Paper on public sector combinations
    • It was agreed that the group's project on unit of account should continue
    • Various topics related to disclosures were discussed, with views expressed such as "preparers and users are unhappy with the state of affairs regarding disclosure"
    • Reports on standard-setter led projects on intangible assets acquired in a business combination, goodwill amortisation and impairment, accounting for greenhouse gas emission rights, investment tax credits, and the discount rate to be applied in IAS 19 Employee Benefits, were received and debated
  • Ian Mackintosh (IASB Vice-Chairman) gave a summary of the IASB's work plan and participated in various discussions about the projects and priorities going forward.  Many of the matters discussed are similar to the matters noted in the IASB's Feedback Statement on its Agenda Consultation 2011
  • Reports from the various regional groups (AOSSG, EFRAG, GLASS and PAFA) were received
  • Various administrative matters were discussed.

The next meeting of the IFASS will be held in Sao Paulo, Brazil on 17-18 April 2013.

Click for the full report (link to Australian Accounting Standards Board website).

CFA Institute issues second study on user perspectives on IFRS 7 disclosures

15 Jan 2013

The CFA Institute, a global association of investment professionals, has published a report entitled 'User Perspectives on Financial Instrument Risk Disclosures Under IFRS (Volume 2)', providing user insights on the disclosures of derivatives and hedging activities under IFRS 7 'Financial Instruments: Disclosures'.

The CFA Institute undertook a study regarding the quality of existing financial instruments risk disclosures, addressing credit, liquidity, market and hedging activities risk disclosures under IFRS 7. Volume 1 of the report was issued in November 2011. The newly issued Volume 2 proposes general and specific recommendations for improving these risk disclosures, including:

  • Holistic disclosures that focus on communication and not ‘mere compliance’ should be provided.
  • Materiality assessment of derivatives should be based on loss potential of derivatives and not on reported fair values.
  • Improved presentation, location, and integration of derivatives and hedging disclosures with other key risk disclosures.
  • Improved quantitative risk exposure disclosure.
  • Improved communication of derivatives use and hedging strategies.
  • Enhancement of disclosures related to effects of hedge activities on financial statements.

Click to view the full report User Perspectives on Financial Instrument Risk Disclosures Under IFRS (Volume 2) on the CFA Institute website.

Agenda for January 2013 IFRS Foundation Trustees meeting

15 Jan 2013

The IFRS Foundation Trustees will meet in Hong Kong on Thursday 24 January 2013. The meeting will consist of reports from the IFRS Foundation Chair, the IASB Chair, and the Due Process Oversight Committee. There will also be sessions on IFRS adoption in Korea and recommendations on research capability.

The meeting is open to the public and will be webcast. The complete agenda is available on the IASB's website.

Agenda for January 2013 IFRS Interpretations Committee meeting

15 Jan 2013

The IFRS Interpretations Committee will meet at the IASB's offices in London on Tuesday and Wednesday 22-23 January 2013. The meeting is open to the public and will be webcast.

The tentative agenda is available on our meeting page for the meeting.

Deloitte comment letter on EFRAG's disclosure framework Discussion Paper

14 Jan 2013

Deloitte's IFRS Global Office has submitted a letter of comment responding to the European Financial Reporting Advisory Group (EFRAG), Autorité des Normes Comptables (ANC) and the UK Accounting Standards Board (ASB) Discussion Paper (DP) 'Towards a Disclosure Framework for the Notes', issued in July 2012.

The Deloitte comment letter provides answers to specific questions presented in the DP, and also provides general feedback, broken down into several issues:

  • Objective and scope — In order to achieve the objective of improving the quality of information reported in the notes to the financial statements, Deloitte believes that it is critical that the volume of irrelevant and redundant information therein is decreased. Further, we agree that the current project should focus on the notes to the financial statements and not consider the broader issues affecting corporate reporting. The project will potentially lose its impact if it attempts to broaden its scope beyond the requirements of accounting standards.
  • Clarifying the purpose of the notes to the financial statements — The purpose of the notes to the financial statements needs to be defined and we consider the definition proposed in the EFRAG DP a good starting point. It is important that the practical implications of applying this definition are analysed further.
  • Articulation of a Disclosure Framework
    • It is suggested in the EFRAG DP that the application of the disclosure framework will not result in a significant change to the information currently required in the notes. We do not think that a disclosure framework that yields a broadly similar information set satisfies the objective of the project.
    • We are concerned that the EFRAG DP does not consider the implications of accounting standards moving towards being more principles-based and therefore placing more reliance on those preparing financial statements applying judgement on what they consider to be relevant to users of the financial statements. The standard setter needs to more clearly define relevance and materiality in the context of disclosures to provide preparers with more detailed guidance to assist in determining more appropriate disclosures.
  • Strengthening the application of materiality to disclosures — Ambiguity in practice about what information is considered necessary and sufficient to satisfy disclosure requirements contributes to the current disclosure overload problem. We think it is for the IASB and IAASB to strengthen the concept of materiality and provide more robust guidance that is acceptable to stakeholders including preparers, users, auditors, and regulators.
  • Improving communication — There needs to be greater consideration of the inherent trade-off between relevance and comparability in the communication principles outlined in the EFRAG DP. In our view, in order to enhance relevance, some level of comparability needs to be maintained to enable inter-period and inter-entity comparisons to be made.

Read the full comment letter.

Note: The US Financial Accounting Standards Board (FASB) also issued an Invitation to Comment on the disclosure framework in July 2012. Deloitte (United States) responded with a separate comment letter to the FASB, echoing the same themes as the Global response above.

The Bruce Column — Uncertain weather ahead

14 Jan 2013

Robert Bruce, our regular, resident, columnist takes a look at a new report on ‘The Future of IFRS’, and assesses the prospects for the year ahead.

Is there a silver lining? In London, where the IASB is headquartered, this is the gloomiest time of the year. The weather is, at best, plain grey. It is a time of the year when the name of the US brand of winter coats, London Fog, just about sums it up. At the back end of last year Hans Hoogervorst, chairman of the IASB, devoted several speeches and public appearances to expressing his worries that progress in international standard-setting could be set back by a whole range of issues such as challenges to the IASB’s independence. He was, quite deliberately, issuing warnings and implicitly urging a strengthening of support.

Even the latest comprehensive report on The Future of IFRS, from the financial reporting faculty of the Institute of Chartered Accountants in England & Wales, (ICAEW), admits that ‘not everything in the IFRS garden is rosy’. It doesn’t talk of an assured progress ahead. It talks of how ‘supporters of a single language of accounting should not be unduly dismayed by the inevitable setbacks’. It points out that ‘the current suite of IFRSs is far from perfect’.

There are several issues here which are contributing to the uncertainty. Forget the issue of what the report calls ‘the hesitancy of the US to commit to IFRS’. That, frankly, has been factored into the debate for a long time. The real issues now are different ones.

The first is the one which Hoogervorst has been speaking about recently – the influence of the regulatory community around the world. This is the back-up which he feels needs to be better felt. Or as the report puts it: ‘The IASB needs more active support, including through IOSCO, and regulators around the world need to work together more closely to deliver consistent enforcement’.

And that in turn leads on to another concern: ‘Each regulator needs to ensure that it does not stifle the exercise of professional judgement or stray into the area of general interpretation’, the report says. But regulators too are uncertain. The spread of IFRS around the world is no longer quite the shoe-in it once was. The report points out that two-thirds of the G20 countries either allow or require their listed companies to use IFRS, or national standards closely based upon them. It is all very well for the G20 countries to sign up to the idea. But if they had the political and regulatory confidence they would do more than simply endorse the idea. The report suggests that G20 countries should play a more decisive role. As well as continuing long-term support for the idea of a single set of global accounting standards the report points out that ‘ the most practical way of achieving this in the short term is for all G20 members to allow optional use of IFRS in their capital markets’.

That would be a simple and logical step. But it has not happened. And another section of the report provides the clue. In a word: complexity. ‘The complexity of IFRS reporting requirements may discourage some countries from fully embracing international standards’, says the report. ‘The IASB should strive to minimise unnecessary complexity in its standards and hold fast to the vision of principles-based standards that require a reasonable degree of judgement’.

That, as we all know, is much easier said than done. The more complex the environment the more complex standards become. And when it comes to the most fought-over topics the complexity, inevitably, becomes inextricable. The result has been a standard-setting process which produces outcomes which outsiders cannot understand and which then produce financial reporting which is less than obviously understandable. With shareholders and the investment community taking a more public interest this has made IFRS more vulnerable.

As usual this year will not be without its challenges. But no one ever said it would be easy. And as we said at the outset of this column even the faculty report suggested we should not be unduly dismayed by the inevitable setbacks. The fog may lift. The sun will probably have its moments too.

IPSASB publishes four chapters of its public sector conceptual framework

11 Jan 2013

The International Public Sector Accounting Standards Board (IPSASB) has published the first four chapters of its 'Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities'. This completes Phase 1 of the IPSASB's Conceptual Framework Project.

These four chapters lay the groundwork for (1) developing consistent and useful IPSASs and Recommended Practice Guidelines (RPGs) and (2) completing the other three phases of the Conceptual Framework project.

Specifically, the chapters discuss:

  • The role and authority of the Conceptual Framework.
  • The objectives and users of general purpose financial reporting, providing information useful to users for accountability and decision making purposes.
  • Qualitative characteristics of (and constraints on) information included in GPFRs.
  • The key characteristics of a public sector reporting entity.

Other chapters of the Conceptual Framework will be added when they are completed.

Click to view the IPSASB's Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities (link to IFAC website).

Leading European national standard-setters submit joint comment letter on the proposed ASAF

09 Jan 2013

The IFRS Foundation has posted to its website a joint letter received late last year from the national standard-setters of Germany (DRSC e.V), France (Autorité des normes comptables), the United Kingdom (Financial Reporting Council) and Italy (Organismo Italiano di Contabilitá) commenting on the proposed creation of an Accounting Standards Advisory Forum (ASAF). The standard-setters believe that the current suggested size and composition of the ASAF will require continued bilateral relationships between the IASB and national standard-setters.

The IFRS Foundation issued the proposals for the creation of the Accounting Standards Advisory Forum (ASAF) on 1 November 2012. Creation of such a forum was recommended by the Trustees' strategy review to provide technical advice and feedback to the IASB from the standard-setting community.

As such, the European national standard-setters support the IFRS Foundation's proposal to establish a stable and formalised working relationship between the IASB and the national accounting standard-setters. However, they maintain that the current proposals regarding the form of the ASAF falls short of their needs and expectations. Among other points, the standard-setters comment that it is not clear from the proposals how members of the ASAF will be appointed. They also criticize the suggested composition of the ASAF: There is a) no distinction between jurisdictions with mandatory IFRS application and non-adopters, and b) a preference given to regional bodies while these (in most cases) "do not set standards and fulfil different roles".

The standard-setters implicitly conclude that the form and size currently envisaged by the IFRS Foundation "runs the risk of [...] requiring continued bilateral relationships with the IASB, therefore defeating one of the aims of the proposal".

Please click for access to the joint comment letter on the IFRS Foundation website.

Third Global IFRS Banking Survey — Still far from land?

07 Jan 2013

Deloitte has issued its ‘Third Global IFRS Banking Survey – Still far from land?’. The survey highlights the views of 70 of the world’s major banking groups and global systemically important financial institutions (G-SIFIs) on accounting change.

Key findings are:

  • Whilst there is still significant support  for the convergence process amongst banks, the majority surveyed consider the IASB and FASB are no longer on track to achieve this;
  • Banks are putting their implementation efforts on standby as the process continues to be subject to delay;
  • There is uncertainty about the ultimate outcome of financial instruments accounting change with an increase in the number of banks considering that the new requirements cannot be implemented in a way that will increase comparability between banks internationally; and
  • The capital and pricing impacts of changes such as impairment, debt valuation adjustments and the treatment of liquidity portfolios will be significant.

Please click to download Third Global IFRS Banking Survey – Still far from land?

    Earlier survey in the series aimed at capturing the views of the banking industry:

    To accompany the survey, Deloitte will hold an interactive webcast on 20 February 2013 at 12:00pm GMT. This webcast will provide attendees with an opportunity to further explore the findings of the survey and discuss current developments and their implications. Register here for this webcast.

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