July

Further collaboration planned between ESMA and IFRS Foundation

15 Jul 2014

The European Securities and Markets Authority (ESMA) and the IFRS Foundation announced that the two organisations will deepen their cooperation in the consistent application of IFRSs.

The IFRS Foundation and ESMA statement of protocols for cooperation on International Financial Reporting Standards published today reiterates the current relationship between the two organisations, and identifies three new areas for mutually supportive work.

In the area of standard development, ESMA currently supports the IASB through participation in working groups, submitting comment letters and coordinating the fatal-flaw review by European enforcers, when appropriate. Regarding the consistent application of IFRSs, ESMA makes submissions to the Interpretations Committee, coordinates the response from European enforcers to outreach requests from Interpretations Committee staff, and submits comment letters to the Interpretations Committee on draft interpretations and tentative agenda decisions whilst the IASB reaches out to ESMA when planning post-implementation reviews and selecting parties for input to help the IASB determine the focus of the review. The IASB also meets with the European Enforcers Coordination Sessions (EECS) regularly, while ESMA invites IASB members and staff to attend and contribute to seminars and workshops ESMA offers and consults with the IASB before issuing publications that relate to IFRS application in the EU.

The new areas of cooperation identified in the statement of protocols are the following:

  • IASB staff will interact with ESMA as part of ESMA's assessment of the IFRS Taxonomy in the context of its mission of drafting regulatory technical standards for use in electronic filings by EU listed entities.
  • IASB staff will explain what pressure points they anticipate are most likely to arise in the implementation of its new or significantly amended standards.
  • ESMA will bring to the IASB's attention emerging financial reporting issues arising from financial innovation and other new developments.

The Statement of Protocols is available on the IASB website.

Report on the progress achieved in the implementation of the EFRAG reform

14 Jul 2014

The European Commission has submitted to the European Parliament and the Council of the EU a report on the progress achieved in the implementation of the reform of the European Financial Reporting Advisory Group (EFRAG) following the recommendations provided in the Maystadt report.

The EU Regulation on the continued of financing of the IFRS Foundation and PIOB for the period 2014-2020 and of EFRAG for the period 2014-2016 had stipulated that the Commission shall submit annual reports to the European Parliament and to the Council on necessary governance reforms in the area of accounting and financial information in respect of EFRAG, taking into account, inter alia, the developments following the recommendations set out in the the Maystadt report and on the steps that EFRAG has taken to implement those reforms. The Commission has now published its first report.

In its report the Commission notes that the revised EFRAG Statutes and EFRAG Internal Rules reflect recommendations regarding the following issues included in the Maystadt report:

  • Extension of membership of the General Assembly to include National Funding Mechanisms and other private or public organisations.
  • Criteria, commitments and rights for membership of the General Assembly.
  • A minimum of two year financial commitment for members of the General Assembly.
  • Voting rights in the General Assembly, inspired by the notion that no single organisation should be able to block the operations of EFRAG.
  • Tasks of the General Assembly.
  • Nominating Committee with an advisory role on certain aspects of the nomination and selection process.
  • Profile and criteria of the Board.
  • Role of the President of the Board.
  • Responsibilities of the Board.
  • Fallback procedures for the Board for cases where no consensus can be reached.
  • Responsibilities of EFRAG TEG.
  • Profile and criteria for the membership of EFRAG TEG.

The Commission recognizes that in many cases the level of detail of these amendments goes beyond the recommendations provided in the Maystadt report. However, the Commission also notes that there were departures from the recommendations in the Maystadt report. These concern the composition of the new Board (necessitated by the fact that the European Supervisory Authorities and the European Central Bank declined to accept full membership of the Board), decision-making in the Board with a fall-back solution introduced for cases where no consensus can be reached, and combining the functions of CEO of EFRAG and Chairman of EFRAG TEG (a suggested requirement of Mr Maystadt's report that was turned into a possibility).

Overall, the Commission comes to a favourable conclusion regarding the progress made:

On the basis of the above, it can be concluded that overall EFRAG has made promising progress in implementing the reforms following the key recommendations of the Maystadt report. [...] The Commission will continue to closely monitor the implementation of the reform of EFRAG and will duly report on that to the European Parliament and the Council.

Please click for access to the full report on the European Commission's website.

IVSC consults on agenda and standards

14 Jul 2014

The International Valuation Standards Council (IVSC) has issued two consultation papers seeking input into its future work plan and the structure and scope of International Valuation Standards (IVS).

Agenda consultation

The IVSC Standards Board Agenda Consultation seeks to garner constituent views on the agenda priorities of the IVSC for the three year period commencing January 2015. The IVSC expects to give highest priority to projects that are consistent with the objectives of the IVS, which are focused on building confidence and trust in valuation assignments, narrowing differences in valuation and promoting convergence through increased use and adoption of IVS. Projects will be evaluated against established project criteria when determining whether to be added to the agenda.

The agenda consultation outlines a number of existing projects that are expected to continue into 2015, and requests information about the extent to which difficulties are encountered as a result of a lack of a globally recognised valuation standard on those topics:

  • Extractive industries (mining and quarrying and extraction of energy resources such as oil and gas)
  • Forestry (valuation of forests or woodland used primary for timber production under IAS 41 Agriculture)
  • Trade related/going concern property (specialised buildings such as hotels and other structures designed for a specific business activity)
  • Specialised public sector assets (assets for which there are seldom active markets, typically held by public sector entities for public service purposes)
  • Derivatives (equity derivatives, fixed income, with later consideration of credit, foreign exchange and commodity derivatives)
  • Funding valuation adjustments (reflecting the cost of funding an uncollaterised instrument or position)
  • Valuation for resolution and recovery (when entities are in financial difficulty).

In addition, the consultation paper encourages suggestions for other projects to be added to the IVSC agenda.

IVS structure and scope

A separate consultation paper, Structure and Scope of the International Valuation Standards, seeks constituent feedback on how the IVSC can ensure that IVS are presented in the clearest possible manner, and what changes might be required to the structure of IVS to improve their clarity.

Issues discussed in the consultation paper include:

  • Should the word "standard" be reserved solely for rules that are intended to be mandatory?
  • Different views as to what is meant by "mandatory" in the context of standards
  • An apparent lack of clarity as to what constitutes a 'Technical Information Paper' (TIP) and its relationship with the other parts of the standards
  • Whether the IVSC should issues commentaries, guidance and information to support the concepts, principles and requirements in IVS.

The consultation paper also compares and contrasts four sets of international standards used in financial markets, namely International Financial Reporting Standards (IFRS), Engagement Standards issued by the International Auditing and Assurance Standards Board (IAASB), the International Standards of Actuarial Practice (ISAPs) and the Global Investment Performance Standards (GIPS). The consultation paper seeks feedback on aspects of the way these standards are presented that the IVSC should consider in improving the presentation and clarity of IVS.

 

Both consultation documents are open for comment until 10 October 2014. Click for (links to IVSC website):

Agenda for July 2014 IASB meeting

11 Jul 2014

The International Accounting Standards Board (IASB) will meet at its offices in London on 22–24 July 2014. Part of the meeting will be held jointly with the Financial Accounting Standards Board (FASB) to discuss the leases project. Additionally, the IASB will discuss the disclosure initiative, insurance contracts, annual improvements (2012-2014 cycle), issues from the IFRS Interpretations Committee, the conceptual framework, the research programme, and rate-regulated activities.

The full agenda for the meeting, dated 11 July 2014, 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.

IFRS Foundation Trustees reappointed

11 Jul 2014

The Trustees of the IFRS Foundation have announced the reappointment of six current Trustees of the IFRS Foundation.

With the approval from the IFRS Foundation Monitoring Board, the following Trustees have been reappointed:

  • Michel Prada (Chairman of the Trustees, Europe),
  • Ronald Arculli (Asia-Oceania),
  • Chandrashekhar Bhaskar Bhave (Asia-Oceania),
  • Sir Callum McCarthy (Europe),
  • Marco Onado (Europe), and
  • James Quigley (North America).

All reappointments will be serving their second three-year term, which will become effective on 1 January 2015 and expire on 31 December 2017.

For more information, see:

ICAEW and IFRS Foundation Financial Institutions IFRS Conference announced

11 Jul 2014

The IFRS Foundation, along with the Institute of Chartered Accountants in England and Wales (ICAEW), will be hosting a IFRS conference for financial institutions in London on 8 December 2014 to discuss key Standards and current IASB projects.

Speakers at the conference in include Ian Mackintosh, Vice-Chairman of the IASB, other IASB members, senior IASB technical staff, and other IFRS experts.

The programme for the conference features a panel discussion and two rounds of break-out sessions:

Financial Institutions IFRS Conference, London, 8 December 2014
Welcome

Panel discussion: accounting for the financial crisis

IFRS implementation break-out session: Financial instruments - classification and measurement IFRS implementation break-out session: Financial instruments - impairment
IASB project break-out session: Financial Instruments - macro hedge accounting IASB project break-out session: Insurance contracts IASB project break-out session: Leases

More information on the conference is available on the ICAEW website.

India may apply IFRS converged standards from 2016-2017

11 Jul 2014

The Indian Minister of Finance, Arun Jaitley, has proposed in his maiden budget speech that Indian companies apply Indian Accounting Standards (Ind AS), which are substantially converged with International Financial Reporting Standards (IFRS), from 2016-2017 financial years, with voluntary adoption permitted from a year earlier.

India originally intended to converge with IFRSs in a phased approach beginning in 2011, but transition to Ind AS was subsequently postponed without any announced transition date from the Indian government prior to this proposal. In preparation for adoption of Ind AS, the Indian Ministry of Corporate Affairs (MCA) initially notified 35 Ind AS that are converged with, but not identical to, IFRSs, and subsequently amendments and additions have been made to Ind AS to reflect those made by the International Accounting Standards Board (IASB).

Mr Jaitley's budget speech, delivered on 10 July 2014, stated the following as part of the planned initiatives for the financial sector and capital markets:

There is an urgent need to converge the current Indian accounting standards with the International Financial Reporting Standards (IFRS). I propose for adoption of the new Indian Accounting Standards (Ind AS) by the Indian companies from the financial year 2015-16 voluntarily and from the financial year 2016-17 on a mandatory basis. Based on the international consensus, the regulators will separately notify the date of implementation of AS Ind for the Banks, Insurance companies etc. Standards for the computation of tax would be notified separately.

The interaction of accounting standards and the Indian tax system has been one of the key concerns about India's adoption of accounting standards converged with IFRS. Proposed amendments to the relevant tax codes released as part of the budget papers propose removing references to "accounting standards" in relation to the computation of income, instead permitting the Central Indian Government to notify 'income computation and disclosure standards' to be followed when determining tax liabilities.

The full text of the speech is available at indiabudget.nic.in/ub2014-15/bs/bs.pdf.

Inaugural Tommaso Padoa-Schioppa Memorial Lecture

10 Jul 2014

The first Tommaso Padoa-Schioppa Memorial Lecture took place during the IFRS Foundation Trustees' meeting held on 9 July 2014 in London. Michel Prada, Chairman of the IFRS Foundation, delivered the opening remarks, Mario Draghi, President of the European Central Bank, gave the keynote speech and Richard Portes, Tommaso Padoa-Schioppa Chair at the European University Institute, responded with closing remarks.

The IFRS Foundation Trustees, the European University Institute and the Padoa-Schioppa family have established the Tommaso Padoa-Schioppa Memorial Lecture to honour the memory of Mr Padoa-Schioppa and to promote discussion on the importance of high quality financial reporting to global economic development.

In his opening remarks, Mr Prada noted Tommaso Padoa-Schioppa's professional achievements but also reminded the audience of the personal charm, warmth and charisma of the late Chairman of the IFRS Foundation.

During his keynote speech, Mr Draghi spoke about sovereignty as a positive concept and fiscal and structural policies within a monetary union. He recognised the significant progress made in the last ten years towards International Financial Reporting Standards (IFRS) becoming global standards and called upon policymakers in Europe to "progress swiftly in the adoption of IFRS 9".

In his closing remarks, Mr Portes picked up Mr Draghi's point that the financial crisis had led to fragmentation and renationalisation and called for a reversal of the disintegration of the past five years.

The following documents are available on the IASB's website:

New 'IFRS as global standards' publication

10 Jul 2014

The IFRS Foundation has published 'IFRS as global standards: a pocket guide 2014'. The guide provides an overview of the adoption of IFRS in 130 countries and other jurisdictions around the world.

The summaries on the use of IFRS are based off information obtained by national standard-setters and other organisation that have responded to a survey by former IASB member, Paul Pacter.

The pocket guide sells for £15 plus shipping (academic, developing country, and volume discounts apply). You will find ordering details here.

ESMA publishes final accounting enforcement guidelines

10 Jul 2014

The European Securities and Markets Authority (ESMA) has published its final Guidelines on the enforcement of financial information published by listed entities in the European Union (EU). The aim of the guidelines is to strengthen and promote greater supervisory convergence in existing enforcement practices amongst EU accounting enforcers.

ESMA published a consultation paper on the proposed guidelines in July 2013 and received 32 responses to it. Some responses had been very critical, especially regarding the relationship between the guidelines and the European Transparency Directive, the impression that ESMA seemed to want to assume the role of a standard-setter and the perception that ESMA was assuming an interpretative role. The suggested scope of the proposed guidelines had also been viewed critically by respondents.

The final report ESMA Guidelines on enforcement of financial information published today provides an overview of the feedback received from stakeholders and the ESMA Securities and Markets Stakeholder Group (SMSG) and ESMA's responses. The final guidelines, which reflect ESMA's consideration of the comments received, are presented in an annex to the report.

In response to the comments regarding the need to ensure that ESMA and European enforcers do not interfere with standard-setters' role, ESMA confirms that the role of the enforcers is restricted to regularly bringing to the attention of the standard-setters issues in accounting standards which have come to the enforcers' attention in the course of their work. ESMA also confirms it's view that materiality for enforcement purposes should be the same as defined in the relevant reporting framework. To avoid misunderstandings, ESMA has decided to adjust some terms used, such as 'unlimited scope' and 'focused' examinations in the enforcement process or the description of the actions taken by enforcers when infringements are discovered. As respondents provided extensive comments on whether the financial information provided in prospectuses should be in the scope of these guidelines, ESMA has decided to address this matter separately as part of its work related to the Prospectus Directive.

The guidelines will now be translated into the official languages of the EU. The final texts will be published on ESMA's website and will become effective two months after that publication.

Please click for access to the final report on the ESMA website.

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