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Ian Mackintosh speaks at US conference

09 Dec 2014

At the annual American Institute of Certified Public Accountants (AICPA) Conference on Current SEC and PCAOB Developments being held in Washington DC this week, IASB Vice-Chairman, Ian Mackintosh participated in a panel discussion and delivered prepared remarks. In the subsequent discussion, Mr Mackintosh reflected on the statement made earlier in the conference by US SEC Chief Accountant, James Schnurr on the possibility of permitting voluntary supplementary use of IFRSs in the United States.

In his prepared remarks, Mr Mackintosh's discussed the global success of IFRS and noted the increasing relevancy of IFRS to many American companies. He discussed the convergence project, stressing the importance of the almost-finished leases project and stated, "Convergence was not a perfect process but it was a good one and we achieved a great deal. The similarities between the two sets of Standards are bigger than the differences."

During the question and answer portion of the panel session, Mr Mackintosh discussed Mr Schnurr's earlier remarks on the possibility of permitting voluntary supplementary use of IFRSs in the United States. He stated that he was pleased that the discussion was back on the agenda and that Mr Schnurr had worked so diligently, catching up to speed in the two months since taking on the role of Chief Accountant. However, Mr Mackintosh cautioned that this marks only restarting the discussion; and success of the possible fourth approach would depend upon the number of registrants who would volunteer to provide the IFRS supplementation.

Mr Mackintosh's prepared remarks are available on the IASB's website. His comments on Mr Schnurr's speech were provided by Deloitte observers.

FASB and FAF comment on voluntary disclosure of IFRS information

09 Dec 2014

The Financial Accounting Foundation (FAF) and the Financial Accounting Standards Board (FASB) have issued a statement welcoming a possible voluntary disclosure of IFRS-based financial reporting information in addition to US GAAP-based information.

At the annual American Institute of Certified Public Accountants (AICPA) Conference on Current SEC and PCAOB Developments, Jim Schnurr, Chief Accountant of the US Securities and Exchange Commission (SEC), mentioned yesterday voluntary disclosure of IFRS-based financial reporting information as one example of how IFRS could be incorporated into the US reporting system. He also indicated that in this context reconsidering the SEC's current thinking that IFRS-based measures are "non-GAAP" financial measures might be required. The statement published by FAF and FASB comments:

We also believe it makes sense to explore whether there are ways to remove barriers that might exist for companies that voluntarily choose to offer investors a second set of financial statements prepared in accordance with International Financial Reporting Standards (IFRS). We believe that voluntarily providing IFRS information on a supplemental basis, subject to audit, SEC review and other regulatory scrutiny, could be an important tool in fostering further convergence of Generally Accepted Accounting Principles (GAAP) and IFRS.

The full statement is available on the FAF website.

2015 IFRS 'Blue Book' now available

09 Dec 2014

The IFRS Foundation has published '2015 IFRS Consolidated without early application' - the 'Blue Book'.

This volume (nicknamed the "Blue Book") contains all official pronouncements that are mandatory on 1 January 2015. It does not include IFRSs with an effective date after 1 January 2015.

The following are the main changes made since 1 January 2014:

The Blue Book sells for £70 plus shipping (academic, developing country, and volume discounts apply). The publication can be purchased through the IASB web shop.

Summary of November GPF meeting now available

09 Dec 2014

Minutes of the meeting of the Global Preparers Forum (GPF) with representatives of the International Accounting Standards Board (IASB) held in London on Thursday, 6 November 2014 are now available. The meeting discussed a broad range of topics, including a number of IASB active and research projects, and IFRS Interpretations Committee issues.

The following are some of the highlights of the matters discussed at the meeting:

  • IFRS taxonomy. Some concern was expressed that the IASB's new approval process for taxonomy updates as new standards or amendments are issued may be seen by some regulators as an endorsement of those taxonomy elements and lead to restrictions on where and how information is disclosed in financial statements
  • Leases. In addition to concerns raised about the IASB and FASB proposals for leases being significantly different, there was a suggestion the IASB should form a transition resource group on leases because of possible different interpretations of some areas of application of the forthcoming standard
  • Foreign exchange restrictions in hyperinflationary economies. GPF members shared their experiences with this topic, particularly since the third official exchange rate mechanism was introduced in Venezuela earlier this year. There was a suggestion that some kind of blended or weighted average rate might best reflect the economics of the situation in some cases, and that a narrow-scope amendment to IAS 21 The Effects of Changes in Foreign Exchange Rates may be needed to allow entities to reflect the economics of exchangeability in these situations
  • Foreign exchange translation of revenue. The meeting discussed a recent IFRS Interpretations Committee issue where an entity enters into a foreign currency sales contract and receives a non-refundable payment in advance of the delivery of goods or services. Over half of the GPF members had experience of sales contracts under which payments were received in advance, and most of these member record revenue in profit or loss using the exchange rate at the date of revenue recognition, with only a few using the rate at the date of the advance cash receipt (considered consistent with US GAAP and with treating the deferred revenue as a non-monetary item)
  • Research agenda. There were some suggestions about involving preparers in technical decisions arising at the research stage of projects to provide guidance on operability, and it was noted it would be more important to involve prepares at an earlier stage if there is a significant cost or cost benefit consideration associated with the project
  • Emissions trading schemes. GPF members noted a variety of approaches are being used to account for emissions trading schemes.  Many stressed that when looking at how to account for a scheme, the unit of account should be the scheme as a whole, rather than an approach similar to that in withdrawn IFRIC 3 Emission Rights which focused on individual components at a point in time. Many accrue a liability through the period, typically based on the expected cost of the additional allowances required. Options on how to account for surplus allowances were also discussed
  • Equity method of accounting. The majority of GPF members preferred the equity method of account to either cost or fair value, but there was some discussion as to whether the equity method is appropriate for all associate entities, perhaps requiring a review of the meaning significant influence. Some members considered the equity method useful where the business model means the operations of the investee are 'embedded' within the operations of the investors, but it may not be appropriate if the holding is temporary or the investment is not held for the purpose of the business. Difficulties in applying the equity method were discussed, including the need to obtain information to determine elimination entries, and whether elimination entities should be required (as prices are negotiated on an arm's length basis)
  • Disclosure initiative. GPF members discussed cohesiveness in presentation and disclosure of financial statements and disclosure of cash flow information. There was support for including a communication principle in IFRS to promote the linkage of information in financial statements, but there was some caution that cohesiveness should not be prescriptive requiring the classification and grouping of information in a particular way. GPF members gave cost and benefit perspectives on the disclosure of some key cash flow measures, with most stating additional disclosures about cash flows would require systems changes and would be a cost burden.

The full report is available on the IASB website.

Agenda for December 2014 EEG meeting

08 Dec 2014

The International Accounting Standards Board's Emerging Economies Group (EEG) is meeting in Jakarta, Indonesia on 11-12 December 2014. The meeting will be hosted by the Indonesian Financial Accounting Standards Board and will discuss a number of issues, including accounting for extractive industries, non-financial assets and foreign currency convertible bonds.

The agenda for the meeting is summarised below:

Thursday, 11 December 2014 (09:00-20:00)

  • Address by hosting country (Indonesia)
  • Address by EEG Chair (Wayne Upton)
  • Accounting for extractive industries (presentations and discussions)
  • Accounting for foreign currency convertible bonds (FCCBs)
  • Welcome dinner

Friday, 12 December 2014 (09:00-13:00)

  • IASB updates
  • Non-financial assets
  • Administrative issues - topics and venues for meetings next year
  • Discussion and approval of the communiqué
  • Summary of the meeting
  • Working lunch

Agenda papers for the meeting are available on the IASB website.

SEC officials discuss another potential alternative for using IFRS in the United States

08 Dec 2014

At the annual American Institute of Certified Public Accountants (AICPA) Conference on Current SEC and PCAOB Developments, Jim Schnurr, Chief Accountant of the US Securities and Exchange Commission (SEC) and Julie Erhardt, Deputy Chief Accountant of the SEC, discussed the possible path toward IFRS in the United States. Both mentioned potential IFRS alternatives, including the voluntary disclosure of IFRS-based financial reporting information in addition to the US GAAP-based information used for SEC filings.

At the US Chamber of Commerce conference last week, Mr Schnurr outlined three previous alternatives regarding the use of IFRS in the United States, including: (1) the outright adoption of IFRSs, (2) providing US registrants with the option to file IFRS financial statements, and (3) the so-called "condorsement" approach". During today's speech, Mr Schnurr provided an example of how IFRS could be incorporated in the US reporting system:

[W]e understand that some domestic issuers may, now or in the near future, prepare IFRS-based financial information in addition to the U.S. GAAP based information that they use for purposes of SEC filings. However, regulatory constraints may dissuade some issuers from providing this information, as current SEC rules would consider IFRS-based information to be a “non-GAAP” financial measure for a domestic issuer. Should IFRS-based information continue to be considered “non-GAAP” financial measures subject to the requirements for such measures, or should it be thought of differently? Under this line of thinking, issuers that do not believe IFRS-based information would be beneficial to investors would not be forced to undertake what we understand to be, in some cases, significant implementation costs. 

In her speech, Ms Erhardt examined IFRS-readiness of investors, issuers, and securities regulators today compared to 10 years ago, when the SEC staff began to look at whether accepting IFRS financial statements from foreign private issuers without a reconciliation to US GAAP should be recommended to the Commission. She concluded that members of these three groups are ready for the most part; they have sophisticated knowledge and experience with IFRSs though some groups (particularly retail investors) may not be "as comfortable" with IFRS as US GAAP. Ms Ernhardt discussed the SEC staff and its acceptance of IFRS financial statements from foreign private issuers without reconciliation to US GAAP:

I believe . . . that foreign private issuers may be subject to different disclosure requirements from those of U.S. issuers because effectively in exchange for this differential disclosure U.S. investors are able to achieve international diversity in their investment portfolios by buying and selling securities of foreign companies within the protections of the U.S. capital markets system.  As a point of fact I do not think this differential disclosure line of thinking would apply in considering whether to provide an IFRS reporting option to U.S. issuers, although of course other lines of thinking would come into play in considering this. 

Both speakers echoed that the IFRS dialog should continue in the United States. Mr Schnurr stated that he hoped to be ready in the "next few months" to discuss with the SEC Chair and Commissioners all of the alternatives and the related problems and concerns to reach a final recommendation. He stated:

Chair White and I both recognize that any continued uncertainty around IFRS results in uneasiness for investors across the globe. Therefore, it is a priority of mine to bring a recommendation to the Commission in the near future with the hope of resolving, or at least lessening, this uncertainty.

Both speeches are available on the SEC's website:

IASB publishes editorial corrections

08 Dec 2014

The International Accounting Standards Board (IASB) has published its third batch of editorial corrections for 2014. The corrections impact consequential amendments, stand-alone standards, and the IASB's "A Guide Through IFRS 2014", "2014 IFRS (Blue Book)", and "2014 IFRS (Red Book)".

Editorial corrections to consequential amendments affect the following standards:

Editorial corrections affect the following individual pronouncements:

Editorial corrections to the 2014 IFRS (Red Book), A Guide through IFRS 2014 and 2014 IFRS (Blue Book) affect the following standards:

Editorial corrections do not change the meaning or application of pronouncements, but instead correct inadvertent errors.  Full details of the editorial corrections are available on the IASB website.

We comment on IOSCO's non-GAAP financial measures proposals

06 Dec 2014

Deloitte Touche Tohmatsu Limited has responded to the International Organization of Securities Commissions' Consultation 'Proposed Statement on Non-GAAP Financial Measures'. We support addressing the issue of non-GAAP financial measures at a global level as it is pervasive, and believe it is in the best interests of global securities markets if the proposed statement applied consistently in all IOSCO jurisdictions and is not overlaid with local guidance.

The comment letter makes a number of additional points, including:

  • For the proposed statement to have maximum effect, we encourage IOSCO to develop a common definition of 'non-GAAP financial measure' and to determine which such measures should be subject to the common discipline
  • It is important for the efficient operation of global capital markets that national and regional guidance is consistent and does not contradict the requirements of globally-recognised financial reporting frameworks
  • We agree that the proposed statement should apply to 'any non-GAAP financial measure wherever the measure is disclosed outside of the financial statements' as it recognises standard-setters' responsibility in relation to financial statements, and is a way of achieving consistency in the use of non-GAAP financial measures across the annual report as a whole, but suggest that IOSCO works with the IASB to clarify what is considered to be an 'IFRS measure'
  • We encourage IOSCO to determine a consistent scope, application and enforcement of the proposed statement, as it is assumed that it would encompass information on websites and other non-regulated information, and some securities market regulators regulate press releases and web-based material, but others do not.

Read the full comment letter in our publications section.

Agenda for December 2014 IASB meeting

05 Dec 2014

The International Accounting Standards Board (IASB) will meet at its offices in London on 16 December 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 IFRS for SMEs, IFRS IC issues, the post-implementation review of IFRS 3, and the disclosure initiative.

The full agenda for the meeting, dated 5 December 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.

SEC may propose a new approach to IFRS in the United States

04 Dec 2014

At a recent conference on the future of financial reporting hosted by the United States Chamber of Commerce, Mr Jim Schnurr, Chief Accountant at the Securities and Exchange Commission (SEC), provided some insights into the possible way forward for International Financial Reporting Standards (IFRSs) in the United States, suggesting that another approach to IFRSs in the United States may be forthcoming in the near future. He also gave some views on the revenue recognition and leases convergence projects.

SEC plans for IFRS

In his opening comments regarding where he was spending his time, Mr Schnurr noted "the first thing" he has been working on is IFRSs. He reflected on comments earlier in 2014 from Mary Jo White, SEC Chair, about moving forward on the consideration of the use of IFRSs by United States companies before moving onto his personal observations around what the possible next steps might be.

In a theme that was often repeated during the course of the discussion, Mr Schnurr noted that "first and foremost... any counsel or recommendations I give would need to be in the best interests of U.S. investors." Having said that, he went on to put forward his belief that the United States is "still committed to one set of global standards", but that this commitment had to be considered in the context of the needs of U.S. investors.

Recalling the move by the SEC in 2007 to allow foreign companies to submit IFRS financial statements without a reconciliation to U.S. GAAP, Mr Schnurr noted "very significant changes in the landscape" since that time, including many standards being more closely aligned in many respects between the IASB and FASB, whilst others are more diverged. However, he went on to say:

There does not appear to be what I call a significant demand... that the U.S. investor is looking for a significant increase in the use of IFRS by U.S. registrants

Mr Schnurr then went out to outline three previous alternatives regarding the use of IFRS in the United States, including:

  • The outright adoption of IFRSs, termed "turning the keys over to the IASB"
  • Providing U.S. registrants with the option to file IFRS financial statements
  • The so-called "condorsement" approach suggested by Paul A. Beswick (SEC Deputy Chief Accountant)

Mr Schnurr noted that each of these alternatives has legal, statutory and practical implications that would need to be considered. He then went on to say that after spending the past eight weeks since commencing the SEC Chief Accountant role looking into alternatives and discussing them with SEC Commissioners, that he hoped "in the not too distant future, we might be able to go public with another possible option that we could get feedback on".

Revenue recognition

The discussion then moved onto the converged revenue standards recently issued by the IASB and FASB, and the number of implementation issues that were arising. Mr Schnurr noted there were many issues arising from U.S. preparers, which he saw broadly fell into three 'buckets':

  1. Issues that may require amendments to the standards. These included some areas where Mr Schnurr believes the IASB and FASB may need 'to have another shot at the clarity we are trying to achieve', specifically singling out upfront versus over time recognition of revenue associated with licences
  2. Issues arising from an 'over technical' reading of the standards. These types of issues arose where people were incorrectly inferring the IASB and FASB were trying to introduce a different model to ordinary revenue transactions (such as splitting the sale and delivery of a good into multiple performance obligations). A process was needed to deal with these types of questions to eliminate diversity
  3. Issues falling between the first two 'buckets'. These are the issues that may require some interpretative guidance.

From the perspective of the number of issues arising specifically in the U.S. context, Mr Schnurr expressed some concern about the volume of issues, and noted the importance of consistency in outcomes for identical transactions, which he saw as an underlying strength of the U.S. markets. He noted he had no issues with entities applying reasoned judgements in developing accounting policies for revenue recognition, but that if diversity in practice arose, that this may indicate that the standard was not "sufficiently articulated".

Returning to early comments about the importance of U.S. investors, Mr Schnurr noted that the FASB and SEC would want to eliminate this sort of diversity, and that it may be that the FASB diverged from the converged standard in this context. Turning to the global perspective later in the session, Mr Schnurr put forward his view that if the revenue recognition project resulted in diversity within industries and across industries on a global basis, that this would be considered 'a failure'.

Leases project

In answering an audience question regarding the leases project, Mr Schnurr responded to concerns regarding the lack of convergence between the FASB and IASB in this area. He noted that in his view, U.S. investors were happy for leases to be on balance sheets, but that they considered straight line expensing from the income statement perspective as preferable. Accordingly, the FASB is responding to these needs in its proposals and the best interests of U.S. investors "trumps convergence" in his mind.


A webcast of the session is available on the U.S. Chamber of Commerce website (Mr Schnurr's session begins at approximately 2:07:00).  Mr Schnurr is scheduled to speak at the 2014 AICPA Conference on Current SEC and PCAOB Developments being held on 8-10 December 2014 in Washington D.C..

Correction list for hyphenation

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