OIA promotes investor protection in the global capital market by advancing international regulatory and enforcement cooperation, promoting the adoption of high regulatory standards worldwide, and facilitating technical assistance programs to strengthen the regulatory infrastructure in emerging market countries. The office also seeks to facilitate cross-border securities transactions, while working to minimise the extent to which international borders can be used to avoid regulatory compliance or escape detection and prosecution of fraudulent securities activities. Using OIA staff's specialised knowledge of international markets and foreign law and regulations, the office provides the Commission and staff with advice and assistance in international enforcement and regulatory matters. On the OIA website there is information about the SEC's various international program activities, including in the areas of SEC rulemaking, multilateral policy initiatives, international enforcement cooperation, and technical assistance. There is also find information about the SEC's cooperative arrangements with foreign regulators.

The IASB's Insurance Working Group will meet at the Crowne Plaza London City Hotel, London, on Thursday and Friday 29-30 June 2006. The agenda (details on IASB's Website):

Insurance – 29-30 June 2006, London Thursday 29 June Project planning The Board's preliminary conclusions so far Presentation by the [European] CFO Forum, Group of North American Insurance Enterprises and four Japanese life insurance companies International Association of Insurance Supervisors Estimating cash flows Friday 30 June Policyholder continuation and cancellation options Margins – risk margins and profit margins Participating contracts Unit-linked payments Performance reporting, including presentation of premium

They also reached tentative conclusions on several other issues that will be exposed for public comment. Deloitte & Touche (United States) has prepared an (PDF 161k, previously known as EITF Flash) summarising the discussions at the meeting. Issues on which consensuses were reached are the following:

• Accounting for Conversion of an Instrument that Becomes Convertible upon the Issuer's Exercise of a Call Option
• Accounting for Sabbatical Leave and Other Similar Benefits
• How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (that is, Gross versus Net Presentation)

Past issues of EITF Snapshot and EITF Flash are Here.

An ASX consultation found significant market agreement with the ASX's view that such prompt reporting is both desirable for shareholder protection reasons as well as appropriate given international practice and trends. This means:

• Listed entities with 31 December financial year ends will need to report their half yearly results to 30 June 2006 by 31 August 2006 and full-year results by 28 February 2007. Approximately 200 listed entities are in this category.
• The nearly 1,400 listed entities with 30 June year ends will need to report their half yearly results to 31 December 2006 by 28 February 2007 and their full-year results by 31 August 2007.

Click for (PDF 73k).

The purpose of the Roundtable is to identify cases where the accounting treatment in Europe under IFRSs is so divergent, significant, and widespread as to warrant 'common concern' among the different groups of participants (preparers, auditors, national standard setters, regulators). When such issues of common concern are identified, the Roundtable will generally recommend referring them to IFRIC, though circumstances could also arise where the matter should be addressed directly to the IASB Board. The Roundtable itself will not make any interpretations.

We have formed a Roundtable Web Page on IAS Plus that includes background information and summaries of Roundtable meetings.

The Roundtable held its first meeting in May 2006 at which it considered 11 issues. Roundtable members concluded that three issues are of common concern, one of which (de facto control) should be further discussed at the Roundtable's next meeting. The other two are already on IFRIC's agenda; the Commission will monitor and work with IFRIC on these.

 

The International Financial Reporting Interpretations Committee (IFRIC) will meet at the IASB's offices in London on Thursday 6 July and Friday 7 July 2006. The list of topics to be discussed has been released, but not yet the running order:

6-7 July 2006, London Draft Interpretations to be approved for publication: IAS 19 Post-employment Benefits - The effect of a minimum funding requirement on the asset ceiling – review of text of a Draft Interpretation Customer Loyalty Programmes - review of text of a Draft Interpretation Discussion of previously published Drafts: IFRIC D12-14: Service Concession Arrangements IFRIC D17 - IFRS 2: Group and Treasury Share Transactions Issues papers: Employee Benefit Trusts (Consideration of various difficulties arising in practice in the separate or individual financial statements of an entity sponsoring an employee benefit trust established in connection with a share-based payment arrangement within the scope of IFRS 2); Guidance on Identifying Agency Arrangements (Proposal for new agenda item considering inter alia possible criteria for distinguishing agency from sub-contracting and other arrangements); Financial Instruments - Eligibility of 'portions' of exposures for hedge accounting IFRIC Agenda Decision IAS 17 Leases – Recognition of contingent rentals (Comments due by 26 June). IFRIC Tentative Agenda Decisions Various items, including those deferred from the May meeting and others subsequently reviewed by the Agenda Committee.

FASB Chairman Robert H Herz also testified. Sir David updated the committee on the work of the IASB in general, the use of IFRSs globally, the February 2006 joint IASB-FASB memorandum of understanding, the SEC 'roadmap', and progress toward convergence of IFRSs and US GAAP. He then commented on pension accounting – here is an excerpt:

Accounting standard-setters often hear that accounting should not change behaviour, but there is a case, I fear, that poor accounting has led to neglect or mismanagement of pension resources. The numbers are staggering, and the emergence of large pension deficits are not confined to the United States. The overall deficit for the European companies in the Dow Jones STOXX 50 was €116 billion at 31 December 2004 and for the UK FTSE 100 was £37 billion at July 2005. The SEC staff estimated in June 2005 that the overall deficit for active US filers might be $201 billion. [Citations omitted] For a long time, companies and investors failed to give proper attention to a growing problem of increasingly unhealthy pension programmes, and the accounting shares some of the blame. The international standard, IAS 19 Employee Benefits, and US GAAP obscure reality by permitting gains and losses to be smoothed over time with the result that income and expense may be under or overstated. the asset or liability in the balance sheet may be under or over stated.

Click to download:

• (PDF 121k)
• (PDF 137k)

Many of the new provisions deal specifically with audit firms.

Public reports of audit firms. Firms that audit public interest entities must provide a detailed public report that gives an insight into the audit firm and the network to which it belongs, including information about quality assurance reviews, policies on continuing education, and a fee break-down.

Independent audit committees. Required. They must monitor the financial reporting process and the statutory audit.

Registration of auditors and audit firms. Member states must ensure that each statutory auditor and audit firm is identified in an electronic public register and that the registration information is kept updated. For audit firms, the register must show size of the firm and owners and members of the management of the audit firm.

Independence. Clearly defined. Auditor/firm can not be involved in any way in decision-making of the audited entity.

Quality assurance and auditing standards. All statutory auditors and audit firms are subject to a system of quality assurance and subject to public oversight.

Audit standards. Statutory audits must be carried out in accordance with international standards on auditing.

Investigations and sanctions. Member states must organise effective systems of investigation and sanctions, which may be civil, administrative, or criminal.

Competent authorities. Member states must designate competent authorities responsible for approval, registration, quality assurance, inspection, and discipline for the purposes stipulated by the directive. They must cooperate with each other.

Public oversight. Member states must handle this with integrity and independence.

Appointment, dismissal, and communication. Various principles established, including one whereby the statutory auditor or audit firm can only be dismissed if there is a significant reason why the statutory auditor cannot finalise the audit. The reasons for dismissal or resignation must be disclosed.

Registration of non-EU audit firms. Auditors and/or audit firms from non-EU countries that issue audit reports in relation to securities traded in the EU must be registered in the EU and be subject to member state systems of oversight, quality assurance, and investigations and sanctions. Only auditors or audit firms that meet quality criteria equivalent to the directive can be registered. The directive allows for exemption from registration, oversight, quality assurance, and investigations and sanctions only if audit firms from non-EU countries are subject to equivalent systems of registration and oversight.

Fees. Audited companies must disclose total fees paid to the statutory auditor or audit firm, broken down by fees for audit services, other assurance services, tax services and other non-audit services.

Local adoption. Member states are required to adopt provisions to comply with the new directive within two years of its entry into force.

The report discusses a number of implementation and regulatory issues relating to the adoption of IFRSs by European banks, including the following:

• IFRS "provides CEBS with a unique opportunity to promote greater consistency in supervisory approaches across the EU"
• "On 16 December 2005, CEBS published final guidelines establishing a standardised framework for consolidated financial reporting for credit institutions (FINREP). The framework has been designed for banks that use IFRS for their published consolidated financial statements and that have to provide similar information in the periodic reports... The introduction of IAS/IFRS has been a source of concern to supervisory authorities, notably because of concerns that these standards could jeopardise the criteria that regulatory own funds have to fulfil. CEBS subsequently undertook an analysis of a sample of institutions' financial data... The analysis of the aggregate sample data confirmed that the Guidelines neutralise the negative impact on credit institutions' regulatory own funds that IAS/IFRS were observed to have at transition."
• "CEBS has now published most of the guidelines related to the implementation of the CRD and IFRS. When all of these guidelines have been finalised, CEBS will compile a compendium or Guidebook of standards, guidelines, advice, and other CEBS work. This Guidebook will be aimed at both supervisors and market participants, with the principal objective of promoting consistent implementation of EU legislation and convergence of supervisory practices."

SEC Chairman Christopher Cox said: "This is a giant leap for America's 90 million investors toward tapping the full potential of the Internet to provide customized financial information. This new full-text search capability will give investors and analysts instant access to the specific information they want."

The new search tool can be found at www.sec.gov/edgar/searchedgar/webusers.htm.