FASB issues amendments concerning investment companies

07 Jun 2013

The FASB has issued Accounting Standards Update (ASU) No. 2013-08, ‘Financial Services—Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements’. The ASU clarifies the characteristics for determining whether a public or private company is an investment company and sets measurement and disclosure requirements for an investment company.

The main provisions provided in this ASU are:

1. Change the approach to the investment company assessment in Topic 946, clarify the characteristics of an investment company, and provide comprehensive guidance for assessing whether an entity is an investment company

2. Require an investment company to measure noncontrolling ownership interests in other investment companies at fair value rather than using the equity method of accounting

3. Require the following additional disclosures: (a) the fact that the entity is an investment company and is applying the guidance in Topic 946, (b) information about changes, if any, in an entity’s status as an investment company, and (c) information about financial support provided or contractually required to be provided by an investment company to any of its investees.

On convergence with IFRSs, the ASU guidance is generally similar to the IASB Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27); however, differences exists in certain characteristics, scope, and the accounting and reporting requirements. The FASB states, “The guidance under IFRS requires a controlled investee to be present for a company to be eligible for the investment entity exception to consolidation guidance. In contrast, longstanding U.S. GAAP has provided comprehensive accounting and reporting guidance for investment companies.”

The ASU is effective for fiscal periods beginning after 15 December 2013.

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EFRAG issues feedback statement on the questionnaire on subsequent measurement of goodwill

07 Jun 2013

In July 2012, the European Financial Reporting Advisory Group (EFRAG) and the Italian standard setter Organismo Italiano di Contabilita (OIC) issued a questionnaire on impairment requirements for goodwill. The results of the survey, which are intended as input to the IASB's post-implementation review of IFRS 3 'Business Combinations', were made available today in the form of a feedback statement.

EFRAG comes to the conclusion that the results of the study indicate that information on goodwill is used in many different manners and that there are many different views on how to measure goodwill after initial recognition.

These results are not surprising considering that respondents already had different opinions on what goodwill normally consisted of or thought the calculation of it unverifiable. This uncertainty led some respondents to claim that they did not use the information on goodwill presented in financial statements at all, some said they used the goodwill figure differently in their analysis depending on what they thought goodwill included, some use specific criteria for assessing the overall reliability of the financial information on goodwill, and some consider other information together with reported goodwill figures or correct the figures.

Therefore, the survey seems to suggest that not only the subsequent measurement of goodwill would need further discussion and several respondents suggested alternative methods for accounting for goodwill altogether.

Please click for access to the feedback statement on the EFRAG website.

'Towards implementing European Public Sector Accounting Standards'

07 Jun 2013

On 29-30 May 2013 a conference bringing together high-level stakeholders and decision makers from public sector accounting, auditing and statistics was held in Brussels to discuss the future development of harmonised government accounting standards in Europe. Participants discussed the development and implementation of European Public Sector Accounting Standards (EPSAS) as a means of enabling economic governance in the context of the current economic situation based on transparent and comparable accruals accounting data.

The conference followed a report assessing the suitability of the International Public Sector Accounting Standards (IPSAS) for the Member States of the EU that was published in March 2013 and used information from the feedback received on the public consultation on the suitability of  IPSAS for application in the EU.

Overall, two conclusions were drawn in the report: (1) it seemed that IPSAS cannot easily be implemented in EU Member States as it stands currently and (2) the IPSAS standards represent a suitable framework for the future development of EPSAS.

The Brussel discussions of the findings and proposals of the report were structured into four sessions:

  • Session 1 'The political context – sovereign debt crisis, economic governance, transparency and trust in fiscal data' discussed the current economic and political context and the joint efforts that are needed to move forward and to reinstall the transparency and trust on fiscal data of the European Union as a whole and of each particular Member State in particular.
  • In Session 2 'Fiscal transparency and public accounting' technical and academic interventions highlighted the need for having strong and reliable harmonised accruals accounting systems providing improved international acceptance and legitimacy.
  • Session 3 -'Suitability of IPSAS and national experiences of reforms' saw interventions and sharing of views of experts from national administrations on reform experiences and successful implementation of accruals accounting in the public sector.
  • Session 4 'Accounting standards, governance, the way forward' was a roundtable on lessons learnt, best practices and suggestions concerning accounting standards, future governance for harmonised European public sector accounting standards and the next steps to be taken, including the development of a road map.
    The discussions in session four were based on two core proposals by the Statistical Office of the European Union (Eurostat): (1) The "two-legs" principle with strong EU governance, independent from the IPSASB, and the IPSAS as the starting point, but non-binding, for EPSAS and (2) a governance structure in the form of an organisation inspired by the EU legislative process, a core body composed of one representative from each member state, and two expert working groups (one on standards, one on interpretation).

The conference website offers a wealth of information around the conference and the opinions voiced, including speaker biographies, abstracts, full texts of speeches, videos of speeches, presentation slides, and background papers. Please click for access to the conference website (link to European Commission website).

New issue of the European Conceptual Framework newsletter regarding the outcome of the ASAF meeting

05 Jun 2013

The European Financial Reporting Advisory Group (EFRAG), the French Autorité des Normes Comptables (ANC), the Accounting Standards Committee of Germany (ASCG), the Organismo Italiano di Contabilità (OIC) and the UK Financial Reporting Council (FRC) have published the fourth issue of their newsletter series ‘Keep up with getting a better framework’ informing European constituents on the latest developments regarding the progress of the Conceptual Framework project with the IASB and other stakeholders.

The fourth issue of the newsletter takes a look at the discussions held during Accounting Standards Advisory Forum (ASAF) meeting in April 2013 and the impact certain discussions had in the IASB’s tentative decisions on the conceptual framework project.

Specifically, this newsletter considered the following issues:

  • measurement;
  • presentation in the statements of profit or loss and comprehensive income;
  • uncertainty;
  • the role of the business model;
  • the unit of account;
  • additional issues ASAF members wanted to be considered in the Conceptual Framework; and
  • the comment period for the IASB discussion paper.

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IFRS Foundation publishes jurisdiction profiles on the application of IFRSs

05 Jun 2013

The IFRS Foundation has posted to its website a collection of 66 'jurisdiction profiles' detailing information about the adoption of International Financial Reporting Standards (IFRSs) and the IFRS for SMEs in all of the G20 jurisdictions and 46 other jurisdictions.

The starting point for the profiles were the answers provided by standard-setting and other relevant bodies in response to a survey that the IFRS Foundation conducted between August and December 2012 on the application of IFRSs around the world and to which to date the 66 jurisdictions responded. Respondents answered questions regarding the commitment in support of moving towards a single set of high quality global accounting standards, the state of IFRS adoption (for domestic and foreign companies), the endorsement process and translations. The survey also extended to the adoption of the IFRS for SMEs.

The profiles drafted by the Foundation on the basis of the information provided were circulated for comment to the original respondents, regulators, international audit firms, and others. We are proud to have been able to help the IFRS Foundation with this ambitious project, which is led by Paul Pacter, former IASB member and former webmaster of IAS Plus who originally set up our popular table on the use of IFRSs around the world which has been supplemented recently by the more detailed table on the use of IFRSs by the G20 jurisdictions.

On basis of the information provided in the profiles, the IFRS Foundation comes to the following observations regarding the adoption of IFRSs around the world:

  1. There is almost universal support for IFRS as the single set of global accounting standards. 95% of the 66 jurisdictions have made a public commitment of support for a single set of high quality global accounting standards and with the exception of Switzerland every jurisdiction stated that IFRSs should be that single set of standards.
  2. More than 80% of the profiles state that IFRSs have been adopted for all are almost all public companies.
  3. The jurisdictions that have adopted IFRSs claim to have made very few modifications to the standards. The modifications are mostly described as limited, temporary of of little impact.

In a speech on the posting of the profiles and the information they provide, Hans Hoogervorst, the IASB Chairman, was very encouraged by the results and concluded from then on the general adoption of IFRSs around the world:

This is only a subset of the information provided by this first batch of profiles and there is no reason to believe the remaining profiles to be published will tell a very different story.

He also rang a hopeful note that future adopters or jurisdictions that adopt each new pronouncement through an endorsement process will have little reason to make changes to IFRSs as issued by the IASB:

Even when our constituents disagree with part of our standards, they almost always resist the temptation to alter them. Local adjustments are viewed with suspicion by investors, so most jurisdictions will simply take IFRS in full. Also, most of our constituents accept that if local adaptations were to become rife, the benefits of having a global standard would be undermined.

Nevertheless, Hoogervorst also reflected on what remains to be done. Most obvious to him is the fact that some large and important economies have not yet (fully) adopted IFRS: Japan, the United States, and China. He also stated that "adoption in itself is not enough" and that proper and consistent application of the standards is equally important.

Further information

On the IASB website:

On IAS Plus:

SEC representatives stress importance of international standard-setting

02 Jun 2013

In speeches delivered at the 32th Annual SEC and Financial Reporting Institute Conference in Pasadena, Paul A. Beswick, the Chief Accountant at the US Securities and Exchange Commission (SEC), and the SEC's Commissioner Elisse B. Walter spoke about why the U.S. needs a strong IASB and on the topic of high-quality financial reporting.


Paul Beswick

Among the topics Paul Beswick focused on were "Why the U.S. needs a strong IASB and what are we doing about it" and "Definition of a successful implementation of an accounting standard".

In his remarks Beswick claimed that the US has a vested interest in IFRSs simply because it is heavily invested in companies that prepare their financial statements using IFRS. Stressing the trust the SEC places in the IASB he highlighted that the SEC accepts IFRSs as issued by the IASB (for foreign private issuers) without any sort of ongoing endorsement mechanism or suitability test while most other large jurisdictions have some sort of endorsement mechanism in place. According to Beswick, "this represents a significant amount of confidence placed in the IASB as an institution, and its governance, to produce high-quality accounting standards".

Still, there are a number of things the SEC does to protect investors who are investing in entities with financial statements utilising IFRSs within US markets which, as Beswick claims, "are also network benefits to the global financial reporting community at large". These are:

  • helping to ensure that the IASB’s standards are the highest quality standards possible (e.g. through being a member of the IFRS Monitoring Board)
  • observing the IASB standard setting process
  • following all of the IASB’s standard setting projects and providing feedback on them where appropriate
  • participating in working groups of the IASB, and
  • helping to ensure that IFRSs are consistently applied.

Beswick also pointed at the fact the US (through the FASB) is also a member of the IASB’s new Accounting Standards Advisory Forum (ASAF).

Turning to convergence and the joint projects of the FASB and IASB, Beswick stressed that successful implementation of accounting standards is also a paramount part of convergence.

I think a successful implementation is when the standards are applied consistently among registrants and their auditors to the benefit of investors. To the extent there are judgments applied, the standards should result in those judgments being clearly disclosed to investors so they can factor that into their analysis.

In this context Bewswick also said he was encouraged by the FASB's plans to create a transition resource group to facilitate implementation of the standards. As Russell Golden, incoming FASB Chairman explained later in the day, the groups will focus on issues related to education, amendments, and interpretation and will include FASB and IASB members as well as representatives from preparer, auditor, and investor communities. Generally, Beswick remarked that he thought it would be helpful for the FASB and the IASB to provide long implementation periods on the joint projects given the amount of effort that will be required to implement them successfully.

Please click for the full text of Paul Beswick's speech on the SEC website.


Elisse Walter

Later in the day, during a keynote luncheon speech, Elisse Walter also commented on the FASB-IASB convergence projects that she called a positive development that will serve investors the world over. Noting that convergence does not stop at publishing harmonised standards she rang a hopeful note regarding IFRSs and the US:

And, finishing the convergence projects is, of course, not the end of the story for the United States and IFRS. I continue to look forward to a day when there is one set of global accounting standards.

Similar to Paul Beswick she claimed that successful implementation is the first hurdle to clear and she made out four pillars that would support a successful implementation:

  • training across all constituents at all levels
  • resources that companies devote to updating their financial reporting systems in the wake of these changes
  • identification of interpretative issues (e.g. through the envisaged implementation group), and
  • focusing on investor understanding.

Please click for the full text of Elisse Walter's speech on the SEC website.

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