This edition of EITF Roundup provides an overview of the issues discussed, consensuses reached, and administrative matters at the 17-18 November 2004 meeting of FASB's Emerging Issues Task Force. Click to (PDF 476k). Links to all past issues are Here.

The International Financial Reporting Interpretations Committee will meet at the IASB's offices in London on Thursday, 2 December 2004. The agenda for the meeting is as follows:

IFRIC Interpretation 5 Rights to Interests Arising from Decommissioning, Restoration and Environmental Funds Accounting for Service Concessions – The IFRIC will consider three draft Interpretations with a view to agreeing them for publication: D11 Service Concession Arrangements - Determining the Accounting Model D12 Service Concession Arrangements - The Financial Asset Model D13 Service Concession Arrangements - The Intangible Asset Model IFRS 2 - Changes in Employee Contributions to ESPPs Scope of IFRS 2 IFRS 2 - Treasury Share Transactions and Group Transactions IAS 39 Financial Instruments: Recognition and Measurement - Reassessment of Embedded Derivatives

The Directive, which comes into force on 1 July 2005, is aimed at simplifying capital raising in Europe and is a key step in creating a single European market for financial services. The Directive requires involvement of the auditor to give assurance on historical and prospective financial information. FEE's paper provides national auditing standard setters with a framework within which standards might be developed to implement the requirements of the Directive. More information is on the FEE Website.

Members-shares in co-ops have some characteristics of equity.   They also give the holder the right to request redemption for cash, although that right may be subject to certain limitations.

IFRIC 2 gives guidance on how those redemption terms should be evaluated in determining whether the shares should be classified as financial liabilities or as equity. Under IFRIC 2, shares for which the member has the right to request redemption are normally liabilities. However, they are equity if:

• the entity has an unconditional right to refuse redemption, or
• local law, regulation, or the entity's governing charter imposes prohibitions on redemption. But the mere existence of law, regulation, or charter provisions that would prohibit redemption only if conditions (such as liquidity constraints) are met, or are not met, does not result in members' shares being equity.

Click for Press Release (PDF 23k).

 

D10 clarifies when original producers of electrical goods will need to recognise a liability for the cost of waste management relating to final disposal of waste electrical and electronic equipment by private households.

The IFRIC concluded that the event giving rise to the liability for costs of such waste is participation in the market in the period in which the original seller's market share is determined for the purposes of allocating ultimate waste management costs. It's not the original production or sale of the equipment that triggers liability recognition.

Comments are due by 11 February 2005.  Click for Press Release (PDF 24k).

 

Topics covered in this issue include a proposed FSP on income taxes, recent FASB and AcSEC meetings, EITF developments, SEC postponement of accelerated of filing dates, PCAOB's amendments to its interim auditing standards, and international developments including amendment to the scope of SIC-12. You will find past issues of Accounting Roundup Here.

US GAAP still permits LIFO, which is no longer allowed under IAS 2. Click for FASB Press Release (PDF 24k). You can download FASB Statement 151 from the FASB Website.

Click for ICAI Media Release.

He called for a "re-examination of the basics aimed at securing agreement on fundamental principles" of financial instrument accounting. He raised questions about:

• "The ability to obtain robust fair values for instruments which are not priced, even indirectly, in reasonably deep and liquid markets."
• "The economic relevance of unrealised gains and losses - particularly if they are not immediately realisable."
• "Further concerns about wider use of fair value accounting relate to the possible implications for volatility in financial markets and in the economy more widely. In my view, there is an important distinction to be drawn between accounting rules which capture accurately the volatility inevitably present in the real world, and 'spurious' volatility introduced by the accounting rules themselves."

He suggested that "despite intensive work to improve accounting standards for financial instruments in recent years, fundamental issues with financial stability implications remain to be resolved." Click to download the (PDF 121k) and a (PDF 89k).

2, An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements. AS 2 applies to audits of foreign, as well as domestic, SEC registrants. The new Q&As (nos. 30-36) address, among other things, audits of multinational companies that involve more than one auditor; audits of federally insured financial institutions; the timing of auditors' communications about weaknesses or deficiencies in internal control; audits of IT; and use of internal auditors.

• Q&A 30-36 (PDF 85k) published 22 November 2004
• Q&A 27-29 (PDF 58k) published 6 October 2004
• Q&A 1-26 (PDF 96k) published 23 June 2004