The questionnaire seeks views on whether any of the accounting recognition and measurement principles in International Financial Reporting Standards should be modified for SMEs. Click to Download the IASB Press Release (PDF 42k). Click here for More Information about the Questionnaire.

These disclosures relate to the impact of the transition in Hong Kong, as of 1 January 2005, to accounting standards that (except for effective dates) are word-for-word equivalents of IFRSs.

Click to view IFRS Transition Disclosure Requirements (PDF 49k).

For illustrative purposes, the examples are based on simplified assumptions – most notably, that the concessions last for a period of only 10 years. In practice, service concessions typically last for longer periods and have more complicated fact patterns than those illustrated in the draft Interpretations. A group of constituents suggested that it would be useful for commentators to see the impact of the proposals on a more life-like example. The IFRIC agreed, and the illustrations prepared by those constituents can be Downloaded Here (ZIP 122k). Comment deadline is 31 May 2005.

Herz. Mr. Herz notes that "the FASB's standard-setting activities are guided by three key objectives: (1) improvement of financial reporting, (2) simplification of the accounting literature and the standard-setting process, and (3) international convergence." Several of the interview Q&A; relate to convergence, including this one:

How are constituents responding to the prospect of international convergence of accounting standards? Broadly speaking, I think we are hearing two different points of view on convergence. The first is: 'Why is international convergence taking so long?' which comes from many of the professional users, such as global equity analysts and institutional investors, many foreign-based multinationals, and some U.S.-based global companies. The other is: 'I'm in favor of convergence, but make them do it our way,' which is the response from many U.S. preparers. We are trying to get on with it in a systematic way together with our colleagues at the IASB through coordinating our agendas, through joint projects on major subjects, through working together to improve the conceptual framework, and through proposing changes on both sides to reduce the number of specific areas of differences between U.S. GAAP and international standards. But convergence clearly means change, and we do need to make sure we adhere to thorough due process so that we ensure that it's not just convergence for the sake of convergence, but also helps improve the quality of the accounting standards and resulting financial reporting. Convergence is a process and a destination with many stations along the way.

Donaldson and Japan Minister of State for Financial Services Tatsuya Ito met on 3 May 2005 in Washington and discussed, among other things, expanding the use of high-quality global accounting standards. The SEC's Announcement (PDF 30k) said that "Chairman Donaldson and Minister Ito affirmed their support for the convergence of accounting standards and agreed that dialogue between the US Financial Accounting Standards Board (FASB) and the Accounting Standards Board of Japan (ASBJ) is an important element in the overall convergence program."

The expansion was aimed at bringing more preparers and users of SME financial statements as well as others with particular SME expertise onto the IASB's advisory group. Last month, the IASB released a staff questionnaire seeking views on possible modifications of the recognition and measurement principles in IFRSs for use in IASB standards for SMEs. Click for SME Project Information.

This issue includes:

• FASB developments - including a proposed FSP on warrants on redeemable shares and proposed DIG guidance on FAS 133
• EITF developments - including a proposed amendment to an EITF Issue on the equity method)
• GASB developments - including Concepts Statement 3 Communication Methods in General Purpose External Financial Reports that Contain Basic Financial Statements and preliminary views on pollution remediation obligations
• SEC developments - including a final rule on first-time application of IFRSs and deferral of the compliance date for FAS 123R)
• PCAOB developments - including a proposed standard on reporting on elimination of a material weakness
• International developments - including amendment of IAS 39 hedge accounting provisions, extension of the comment period on the IFRIC draft interpretation on service concessions, and the staff questionnaire on recognition and measurement principles for small entities).

All past issues of Accounting Roundup are Here.

The proposed amendment would clarify that an entity that both (a) adopts IFRSs for the first time before 1 January 2006 and (b) applies IFRS 6 before that date is exempted not only from providing comparative prior-period disclosures but also from applying the recognition and measurement requirements of IFRS 6 in the prior comparative period. The Board hopes to issue the final amendment before 30 June 2005.

To help inform users of financial statements about the change to IFRSs, AASB 1047 requires disclosure of:

• any known or reliably estimable information about the quantified impacts on the financial report had it been prepared using IFRSs; or
• if such impacts are not known or reliably estimable, a statement to that effect. In this case AASB 1047, suggests that entities should also update their disclosures made in 2004 about the management of the transition to IFRSs and the explanation of the key differences in accounting policies expected to arise.

To the extent that an entity knows or is able to reliably estimate the quantitative impact of some, but not all of the key accounting policy changes, ASIC believes that disclosure should comprise the quantified impacts of those accounting policy changes that can be reliably estimated and a narrative explanation of any unquantifiable items. Click to download (PDF 37k).

 

While FEE supports the Commission's overall objectives, the briefing note expresses some concerns:

• The location of the corporate governance statement and related audit implications cause 'serious problems' that may inhibit development of disclosure.
• The need to clarify the types of 'arrangements' that must be disclosed (including beneficial interests, special purpose entities, and off-balance-sheet arrangements).
• Disclosure requirements for related party transactions should not go beyond IAS 24. In addition, we wish to share some observations on the internal control disclosure requirement proposed.
• At this stage, FEE believes that disclosures about risk management and internal control should be limited to a description of the main features of a company's internal controls over financial reporting.