February

10 years of IFRS: Reflections and expectations - Part two

15 Feb 2013

The 'Australian Accounting Review' has recently published the second part of 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.

The special edition of the Australian Accounting Review, a leading practitioner-focused journal, appeared in two parts: The first part of the forum included 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.

The second part complements 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. Among the articles is a contribution co-authored by Nadia Albu, one of the outstanding young researchers chosen recently as scholars for the Deloitte IAAER Scholarship Programme.

 

Philip Brown and Ann Tarca review the growing body of research evaluating the widespread adoption of IFRS and link the findings of academic research with feedback from practitioners about whether the hoped-for benefits of adoption are being realised. In addition, they present comments from practitioners about IFRS research and they identify areas that may be usefully explored in future research.

Beverley Jackling, Bryan Howieson and Riccardo Natoli consider the challenges educators face in their teaching following adoption of IFRS. They discuss IFRS education in Australia, the US and Romania. The authors conclude that teaching resources, educational research and Continuing Professional Development activities related to a principles-based approach to teaching IFRS are necessary for educators to enrich the learning experience of students.

Nadia Albu and Cătălin Nicolae Albu discuss the adoption of IFRS in an emerging economy, Romania. They illustrate the effect of various contextual factors, some historical, on the process and outcomes of IFRS implementation. They conclude that adoption of IFRS can follow a different pattern in emerging economies compared to developed economies.

We are grateful to the editor of the special issue, Professor Ann Tarca, for pointing it out to us.

Feedback statement on the ESMA consultation paper on materiality

14 Feb 2013

The European Securities and Markets Authority (ESMA) has published a feedback statement summarising the responses to its consultation paper 'Considerations of materiality in financial reporting'.

The apparent differing views regarding the practical application of the concept of materiality amongst preparers, auditors, possibly users of the financial reports and, in some instances, accounting enforcers led ESMA to publish the consultation paper in November 2011.

The feedback statement published today provides an overview of the views expressed by respondents to the questions in the consultation paper as well as the feedback from a public roundtable on materiality in financial reporting ESMA hosted in October 2012, and sets out ESMA’s response to the issues arising from the consultation process.

The findings of ESMA's consultation were:

  • A majority of respondents believe that the concept of materiality is generally well understood but that there is diversity in application.
  • Diversity in application was attributed to management judgement, differing perspectives and application challenges.
  • Responses included concerns about the length of disclosures, sometimes obscuring the entity’s financial position and performance.
  • There was agreement that if further guidance was required it should be addressed by the IASB, rather than by ESMA.
  • A number of respondents mentioned the need for greater consistency between accounting and auditing standards.
  • Most respondents highlighted the role of qualitative as well as quantitative aspects in materiality assessments.
  • A lists of items to be considered in materiality judgements was not considered desirable as it could not be exhaustive and is not in line with principle-based standards.
  • A majority of respondents agreed that the impact of all uncorrected misstatements should be considered when evaluating whether aggregate misstatements are material.
  • The majority of respondents were of the opinion that the principles to be applied in assessing materiality in interim and annual financial reports should be the same.

Based on this feedback, ESMA will provide the IASB and the IAASB with the outcome of the consultation and will encourage them to address the aspects of materiality that are seen to be problematic in practice.

Please click for access to the full feedback statement on the ESMA website.

The Bruce Column — Taking scholars to a global level

14 Feb 2013

A new initiative seeks to bring young scholars to the global table and enhance understanding. Robert Bruce, our regular columnist, takes a look at how it will work and the benefits it should create.

No one doubts that better understanding at a global level makes life easier, more effective, and more productive. And this works just as much in the field of accounting as any other. The profession, business, and all its support systems are inexorably becoming more global. The example of the global growth and spread of International Financial Reporting Standards, (IFRS), for example, is there for all to see. The world of academia, the teaching and research, needs to be up there also.

And that is what a new initiative seeks to do. The International Association for Accounting Education and Research, (IAAER), has got together with accounting firm Deloitte to create a scholarship programme which will start to break down the barriers. The idea is to initially take five associate professors from around the world and provide them with the means to enable them to gain a broader perspective.

The Deloitte IAAER Scholars are drawn from all around the world, Brazil, Indonesia, Poland, Romania and South Africa, and the idea is that their bursaries will enable them to increase their exposure to internationally recognised accounting scholars, best practices in accounting and business education and research, and a global peer network. In the words of Professor Donna Street, the director of research and educational activities for the IAAER: ‘We want young scholars who can network with international established scholars, policy makers and standard-setters, to help them develop an international way of thinking. Often’, she says, ‘people don’t understand that we all face the same or similar problems. We want to encourage the emerging scholars to think globally, not locally, and learn that we are all in this together’.

And the scholars themselves see not just greater contact with ideas and people around the world but also positive benefits back home. ‘My participation can contribute to the internationalization of the Brazilian accounting profession, which will benefit our capital market in the long run’, says Fernando Murcia of the University of Sao Paulo. ‘Learning first hand from leading accounting scholars about the new frontiers of accounting standards, in particular IFRS, will have a great impact on my country’ says Supriyadi, an associate professor at the Gadjah Mada University in Indonesia. ‘Indonesia has just completed it s first year of IFRS implementation, and as the standards continue to develop it is important that we provide considered input into this process’.

One of the most useful parts of the program is that each Scholar will be assigned a mentor of global reputation to enhance the experience. People like Mary Barth of Stanford University who was previously a highly-respected Board member at the IASB is participating, for example. ‘This really breaks down the door’, says Professor Street. ‘Mentors will be so important’.

The programme will also go some way to closing the divide which often exists between the academic community and the accounting profession. It will have the effect of influencing and changing curricula. ‘The greater the connection with real-world practice and practitioners the more that is being taught and researched can be enriched’, says Professor Street. ‘Being in regular contact with the practice world will help scholars understand how they can get resources, and then utilize that experience and knowledge for their teaching purposes’.

It is a small start but there is no doubt that opening doors for people all around the world brings about change

ACCA outlines policy positions on public sector reporting

14 Feb 2013

The Association of Chartered Certified Accountants (ACCA) has released an updated paper outlining its policy positions on a range of themes for public services. In addition to a number of other themes, the paper supports the use of accrual accounting and sustainability reporting in the public sector, and puts forward policies and recommendations in these areas.

The paper, Setting high professional standards for public services around the world, sets out ACCA’s policies for members, employers and a wide range of external stakeholders with an interest in public services. It includes objectives such as setting out criteria for achieving strong public financial management, good governance and a strong ethical culture in the public sector.

Financial reporting

In relation to financial reporting, the paper notes that transparent financial reporting is imperative from a public accountability perspective. It takes that view that governments should aim "to provide financial information based on international accounting standards to improve both transparency and accountability and to get a tighter grip on fiscal management".

On the question of which standards should be applied by governments, the paper takes the view that the development of global accounting standards is the main responsibility of the IASB.  It however also supports the development of International Public Sector Accounting Standards (IPSAS) by the International Public Sector Accounting Standards Board (IPSASB), but does so in the context of the IPSASB interpreting IFRS accounting standards for the public sector.

The paper makes the following observation:

In our view there should not be any conflict between IFRS and IPSAS standards for use in the public sector. IPSAS standards have an important role to play in dealing with specific public sector issues for which there is no IFRS, such as service concessions: grantors, revenue and non-exchange transactions, presentation of budget information in financial statements and disclosure of financial information about the general government sector.

The paper outlines the approach taken by governments in various jurisdictions, and notes that there is a cash-based IPSAS that is followed by some countries, but that "in the long term the accruals basis of accounting is the right way forward for accounting for public funds as it increases transparency and accountability."

Furthermore, the paper expresses the view that the audit of financial statements is essentially the same in the private and public sectors, and accordingly supports the adoption and implementation of International Standards on Auditing (ISAs) for public bodies.

Sustainability reporting

On the topic of sustainability reporting and corporate social responsibility (CSR), the paper puts forward the view of a need to be aware of the differences between the private and public sectors for sustainability reporting.  The paper goes on to note the rationale for government sustainability reporting can be driven by many different factors, such a requirement imposed by donor organisations, or that the existing frameworks such as that produced by the Global Reporting Initiative (GRI) provide incentives to "embrace sustainability reporting ... to act as an example for the private sector" .

However, on the latter point, the paper sounds a note of caution:

Although lessons from private sector sustainability reporting and CSR are valuable, an understanding of the importance of sustainability action and reporting in public services should take account of the nature of the purpose, motivations and responsibilities of public services, rather than attempting to adopt wholesale an approach to reporting that may be more appropriate to the private sector.

Click for access to these items on the ACCA website:

Summary of the January 2013 Trustees' meeting

13 Feb 2013

The IFRS Foundation Trustees' have announced the summary of the conclusions for their meeting held in Hong Kong on Thursday 24 January 2013.

The summary of the meeting consists of the following reports:

  • Trustees' Executive session
    Some of the topics discussed during this session revolved around the Trustees' international strategy, the challenges occurring by the lack of a decision by the US Securities and Exchange Commission in regards to the adoption of IFRSs in the United States, the G20's objective, funding of the organisation, feedback on the November 2012 proposal to create the Accounting Standards Advisory Forum, and the strategy proposals for developing XBRL for the IASB.
  • IASB Chairman
    Hans Hoogervorst provided an update on the IASB's current activities. Some of the report discussed the current state of the convergence projects with the FASB. A final standard on revenue recognition is expected to be issued mid-2013. Exposure drafts on leases and insurance contracts are expected in the first half of 2013. On the impairment project, an exposure draft on the IASB 'three-bucket' model is expected as soon as possible, with the aim to finalise impairment requirements in 2013.
  • Due Process Oversight Committee Chairman
    Scott Evans discussed the events from the January 2013 DPOC meeting which had topics covering the revisions to the Due Process handbook, the Feedback statement and Due Process Protocol. The Trustees have approved all three items for publication. Other items reported on were reviews of (1) process regarding educational materials, (2) IASB's current technical activities, (3) web site improvements, (4) approval of Darrel Scott as chair of the SMEIG, and (5) correspondence.
  • Korean experience of IFRS adoption
    A presentation and report was provided detailing the efforts Korea went through during their adoption to IFRSs.
  • Monitoring Board representatives meeting
    An update was provided on the progress made in following up the recommendations of the review of the governance of the organisation.
  • Regional outreach activity
    The Trustees hosted jointly with the Hong Kong Institute of CPAs a panel discussion on the future of financial reporting. A video of the discussions is available on the IASB website.

The full summary of conclusion of the IFRS Foundation Trustees' meeting is available on the IASB website.


Deloitte IAAER Scholarship Programme launched

13 Feb 2013

Deloitte (DTTL) and the International Association for Accounting Education and Research (IAAER) today announced the Deloitte IAAER Scholarship Programme, naming five associate professors from Brazil, Indonesia, Poland, Romania and South Africa as the programme’s inaugural scholars.

Mentors will be assigned to each scholar to support them as they increase their exposure to internationally recognised accounting scholars, best practices in accounting and business education and research, and a global peer network.

Ongoing mentorship is a critical element of the Deloitte IAAER Scholarship Programme and some well-known and highly accomplished accounting experts have volunteered their support. These include former member of the Financial Accounting Standards Board, Katherine Schipper (Duke University); former member of the International Accounting Standards Board, Mary Barth (Stanford University); Chika Saka (Kwansei Gakuin University); Sidney Gray (University of Sydney); and Ann Tarca (University of Western Australia).

The scholars, who must be a sitting lecturer, assistant, or associate professor holding a PhD (or comparable degree) in a faculty that teaches accounting, auditing, or financial reporting, are chosen for three years and attend IAAER co-sponsored conferences, workshops, and consortia as well as the IAAER World Congress.

In the long term, the programme aims at supporting better accounting education and improving the quality of financial reporting and auditing. The next round of scholarships will open in 2016, with applications considered in 2015.

Please click for more information on the Deloitte Global website.

Agenda for the upcoming Capital Markets Advisory Committee (CMAC) meeting

13 Feb 2013

The Capital Markets Advisory Committee (CMAC) is meeting in London on 7 March 2013. The tentative agenda for the meeting (as of 12 February 2012) is now available.

 

Agenda for the meeting

Thursday, 7 March 2013

  • Welcome
  • IASB and IFRS Interpretations Committee activities (work plan update)
  • overview of the ASAF’s role in the standard setting process
  • Conceptual Framework
    • Elements of financial statements
    • Reporting entity
    • Measurement
    • Presentation
    • Disclosure
  • Insurance contracts
  • Financial instruments: Classification and measurement (Limited reconsideration of IFRS 9)

New IAS Plus page on Research and Education

12 Feb 2013

We have created a new page on IAS Plus that is tailored to help users easily locate academic accounting material and resources relevant for educational research that is available on IAS Plus and other useful sites.

Primarily, our new page is aimed at offering easy access to material already on our site. However, we also aim at broadening our horizon with and contributing to, to a certain degree and over time, research focused contributions to the international accounting debate supporting the IFRS Foundation’s objective of developing a single set of high quality global accounting standards and our endeavour to reinforce it.

Researchers have often pointed out how standard-setting can benefit from academic research:

  • Academic research is generally grounded in theory which prevents it from being biased
  • Researchers are guided by their research results and not by the wish to transport a certain opinion as their main incentive is to build their own reputation and that of their institution
  • Peer review ensures that researchers are judged by the quality and rigour of their research, not by the results of it
  • Research is always innovative – researchers are constantly looking for relevant and interesting new research questions.

It is for the same reasons that we believe that not only standard-setting will benefit from academic research but also our IAS Plus readership: Supplementing our daily news with information about research will offer our users an additional base of neutral, independent material that will fit well with our aim of providing readers with up-to-date unbiased information about international financial reporting.

At the same time we are well aware that IAS Plus is a page many students and researchers turn to as they value the wealth of our repository of comprehensive accounting information offering a library of news, developments and publications going back to December 2000 and summaries of standards and corresponding e-learning.

The new education and research page aims at being a new central landing page for education-related information on IAS Plus. From a single page it offers access to our standard summaries, our e-learning, our webcasts and podcasts, the library of accounting research papers we are in the process of building up and will continue to add to, and a list of useful links including IASB educational material and free IFRS resources on the European Commission website.

Access to our new site is available through the link below and through the Resources menu item at the top of each IAS Plus page.

Agenda for February 2013 IASB meeting

08 Feb 2013

The International Accounting Standards Board has released the agenda for its meeting to be held on 18-22 February 2013, which includes education sessions and a joint meeting with the FASB. Topics to be discussed include unit of account for fair value measurements, an IFRIC update, the annual improvements 2010-2012 project in regards to IFRS 2, IFRS 8, and IFRS 13, novation of derivatives, bearer biological assets (IAS 41), guide for micro entities in applying the IFRS for SMEs, matters arising from the IFRIC, and education sessions and continuing discussion on many major projects (conceptual framework, revenue recognition, leases and insurance contracts).

The full agenda for the meeting, as of 8 February 2013, 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 and FRC publish feedback statement on income tax discussion paper

08 Feb 2013

The European Financial Reporting Advisory Group (EFRAG) and the United Kingdom Financial Reporting Council (FRC) have posted a feedback statement on Discussion Paper (DP) ‘Improving the Financial Reporting of Income Tax’. The feedback statement provides a summary of the main issues received from respondents along with the EFRAG’s and FRC’s responses to those issues.

Issued in December 2011, the DP’s objective was to stimulate debate on the accounting for income tax. The EFRAG and FRC received 29 comment letters regarding the DP, primarily from accounting organisations, national standard setters, preparers and business associations. The most supported proposals in the DP were (a) effective tax reconciliation; (b) improved disclosure on deferred tax assets and tax losses; and (c) recognition and measurement of uncertain tax positions. The least supported proposals by respondents were (a) reconciliation of the tax paid with the current tax expense; (b) discounting of deferred tax assets and liabilities; (c) disclosure on uncertain tax positions; and (d) disclosure that involves forward-looking and ‘entity-sensitive’ information.

The feedback provided will be used by the EFRAG and the FRC when meeting with the IASB on discussions for the improvement to IAS 12.

The press release and the feedback statement are both available on the EFRAG website.

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