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Introduction message from the new chairman of the IFRS Foundation Trustees

04 Jan 2012

The IASB has posted to its website an introduction message from the new chairman of the IFRS Foundation Trustees, Michel Prada.

He speaks about his previous work and his dedication to the development of global financial reporting standards. He warns about "uncertainty and ambiguity" in markets and says that the financial crisis should not impede efforts toward global accounting standards. He is committed to "managing the delicate balance between independence, legitimacy and public accountability" in his role as chairman. Please click Mr Prada's introduction message on the IASB's website.

Michel Prada became the new chairman of the IFRS Foundation Trustees effective on 1 January 2012. Please see our earlier story for more information about his appointment.

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Deadline reminder – IASB exposure drafts on investment entities and government loans

04 Jan 2012

We remind you that comments on two IASB exposure drafts are due on 5 January 2012.

The two exposure drafts are:

  • Exposure Draft ED/2011/4 Investment Entities – published on 25 August 2011 and proposing to define 'investment entities' as a separate type of entity that would be exempt from the consolidation accounting requirements in IFRS 10 Consolidated Financial Statements. Those wishing to participate in the upcoming roundtables must have submitted a comment letter on the proposals
  • Exposure Draft ED/2011/5 Government Loans (Proposed amendments to IFRS 1) – published on 20 October 2011 and designed to address how a first-time adopter would account for a government loan with a below-market rate of interest when transitioning to IFRSs.
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Yong Li and Marco Onado appointed as Trustees of the IFRS Foundation

03 Jan 2012

The Trustees of the IFRS Foundation have announced the appointment of Yong Li and Marco Onado as Trustees of the IFRS Foundation.

Yong Li is President of the Chinese Institute of Certified Public Accountants and a Vice Minister to the Ministry of Finance of the People’s Republic of China. President Li is a former Executive Director of the World Bank and a former First Secretary of the Chinese delegation to the United Nations.

Marco Onado is a Senior Professor of Financial Institutions at the Bocconi University in Milan, Italy. He is also Chairman of Pioneer Global Asset Management, a global investment manager. Professor Onado is a former Commissioner of the Commissione Nazionale per le Società e la Borsa (CONSOB), the Italian securities and markets regulator.

The appointments begin immediately and will expire in three years. The terms are renewable once. Please click for IASB press release (link to IASB website) and our overview of Trustees working currently for the IFRS Foundation.

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New publications from Deloitte Brazil

31 Dec 2011

Deloitte (Brazil) has published Brazilian editions of IFRS Model Financial Statements for 2011 (without early application) and IFRS Compliance, Presentation and Disclosure Checklist 2011, both in Portuguese.

Click for:

Also, Deloitte (Brazil) has published Demonstraçães financeiras Exercïcio de 2011 — Uma nova cultura para a contabilidade brasileria — IFRS Guidance Financial Statements for 2011 (PDF 884k, 84 pages).

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Deloitte 2011 Corporate Responsibility Report

30 Dec 2011

Deloitte has published its 2011 Corporate Responsibility Report, reflecting Deloitte's wider outlook on corporate responsibility, and acknowledging that Deloitte's most significant impacts on society result from the work that member firms do for their clients.

The Deloitte 2011 Corporate Responsibility Report has been checked by the Global Reporting Initiative (GRI) as Application Level B, and also serves as Deloitte's Communication on Progress to the United Nations Global Compact for 2010-2011.

Click for access to the report.

More information about the report is available on our deloitte.com website.

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French standard-setter calls for research on the assessment of accounting standards

30 Dec 2011

Autorité des Normes Comptables (ANC), the French standard-setter, has issued a call for papers aimed at stimulating academic research on the issue of the assessment of accounting standards.

The ANC is seeking to develop useful inputs into the standard setting process. Whilst the ANC expects research projects may deal with assessments of accounting standards before or after they come into force, it has emphasised assessments that occur before a standard has mandatory application. One of the possible types of projects cited is the implementation of the assessment process proposed to standards currently under development by the IASB, including areas such as revenue recognition, leases, insurance contracts and financial instruments.

Researchers interested in participating in the project (and possibly gaining ANC funding) must submit their proposals by 15 March 2012. Click for press release (link to ANC website).

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The Bruce Column — Looking ahead to the defining decision of 2012

29 Dec 2011

As 2011 draws to an end two significant speeches were made in Washington - both looking toward 2012. Robert Bruce, our resident, regular columnist assesses their importance.

In the early days of December two significant speeches were delivered in Washington. The first came from the Chief Accountant of the SEC, Jim Kroeker, the second from the Chairman of the IASB, Hans Hoogervorst. They come from different standpoints. But you could detect common ground and also, and perhaps more important, a serious desire to increase the landmass of that common ground.

Hoogervorst talked of his experience on the Financial Crisis Advisory Group. 'Through the traumatic experience of this crisis', he said, 'I became convinced more than ever that the best protection available to investors is transparency. Indeed, without transparency there cannot be enduring stability'. Then he went on to talk of his passion for the goals of the IASB. These he defined as: 'To develop and sustain, first and foremost for investors, a single set of globally accepted and high quality accounting standards. These standards must be set independently and then consistently applied and enforced'.

Then he pointed out to his American audience that: 'These goals may sound familiar'. Why? 'They are almost identical to those of the FASB'. He drew parallels. FASB's principles were deeply embedded in the IASB. The SEC had helped establish the framework which set up the IASB. Paul Volcker, a giant in US financial history, had become the first Chairman of the IASB's trustees. When it was agreed in 2002 that the work of IASB and FASB should move towards convergence a US Board member at the IASB became Chair of the FASB.

Then he looked back. When the FASB was set up in 1973 the world was a different place. As he said: 'Market participants on either side of a transaction were mainly located in the same jurisdiction. Investors and preparers could speak the same financial reporting language'.

But all that had changed: 'Since then', he said, 'and especially in the last 20 years, the world's capital markets have integrated and become more interdependent. US investors seek investment returns and diversify risk on an international basis. US companies seek to raise capital on markets around the world, while US capital markets seek to attract international listings'.

The result was inevitable. 'The emergence of interconnected financial markets explains the momentum gathering behind the move to global accounting standards. Investors need comparable, reliable financial reporting around the world. For global investor protection, we need a global accounting language'.

Jim Kroeker was optimistic but cautious with his words. He said that 'there is reason to be quite encouraged'. But the process of assessing the whole issue was taking longer. But that didn't mean that they were discouraged. 'I believe that the passage of a grain of sand in the hour glass of time is not nearly as critical as ensuring that we take this opportunity to establish a strong and lasting framework'.

And that framework had five points to it. It should 'demonstrate a high level of support for US commitment to continued development and use of global consistent high quality accounting standards'. It should 'provide both in fact and in substantive operation clear US authority over standards applicable in the US capital markets'. It should 'provide for and facilitate a strong US voice in the process of establishing global accounting standards'. It should 'be responsive to the economic and other impacts of change'. And finally it should 'consider whether to retain "US GAAP" as the basis for US financial reporting, thereby mitigating the costs and complexity of introducing a new set of standards under regulatory regimes, contractual documents, and US laws under which compliance with US GAAP is often specifically contemplated'.

All that sounds fine and feasible.

And Hoogervorst agreed. 'I recognise the challenges and significant pressures facing the SEC in making its decision', he said. 'The US is the largest and most liquid national capital market in the world. So, transitional concerns have to be carefully considered. The SEC must believe that this is the right decision for the US. From an investor protection and capital formation standpoint, I believe it is'.

And he gave an example of why this is so. 'US investors now seek and should seek investment returns on a global basis', he said. 'For example, in its submission to the SEC, CalPERS made the point that they currently invest in 47 markets around world. If the SEC is to protect CalPERS in this international environment it must be an active participant in the development and global enforcement of IFRS'. And how would that come about? 'For that to happen', said Hoogervorst, 'the SEC needs skin in the game'.

But let us leave the final word with Paul Beswick, Jim Kroeker's deputy, from a post to the SEC's website in connection with the same conference. 'We are in the process of drafting a final report that summarizes all of our efforts to complete the 2010 Work Plan', he said. 'The staff is drafting the report to provide our insights on what we have learned during the last almost two years of work. I would hope that the staff could get the final report out as soon as practicable in 2012'.

Hope springs eternal as we come up to the new year.

Robert Bruce
December 2011

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IESBA proposes changes to the Code of Ethics for Professional Accountants to address conflicts of interest

28 Dec 2011

The International Ethics Standards Board for Accountants (IESBA) is proposing changes to its Code of Ethics for Professional Accountants to provide additional guidance to professional accountants in business and in public practice concerning conflicts of interest, and to make revisions to provide more comprehensive guidance in identifying, evaluating, and managing conflicts of interest.

Among other requirements, the proposals would:

  • include a description of circumstances that might create a conflict of interest for the professional accountant, together with examples of such circumstances
  • require the professional accountant to take into account whether a reasonable and informed third party, weighing all the specific facts and circumstances available to the professional accountant at that time, would be likely to conclude that compliance with the fundamental principles is compromised
  • requires the professional accountant to understand the nature of the relationships and services in identifying whether a conflict of interest exists or may be created
  • require conflicts of interest within a network of firms to be evaluated when the professional accountant has reason to believe that a conflict of interest exists because of interests or relationships that another firm in the network has with a client
  • expand on the guidance in the Code regarding the nature of safeguards that may be available to manage conflicts of interest within firms
  • replace existing guidance for professional accountants in business, addressing circumstances in which conflicts of interest might arise when performing professional activities that compromise compliance with the fundamental principles and requiring the professional accountant in business to take steps to identify, evaluate, and manage those situations.

Click for IESBA press release (link to IFAC website).

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Business Accounting Council of Japan continued its discussion over IFRS

27 Dec 2011

Following on from the meeting on 10 November 2011, the Business Accounting Council of Japan (BAC) met on 22 December to continue discussions on IFRS.

  • 10 November — The deliberation centered around relationship between a consolidated financial statement and a separate financial statement such as the use of potentially different accounting standards for each of them. The discussions also included relationship between the accounting standards and other related matters such as corporate laws and taxation. Majority appears to have supported a weak or no link between consolidated and separate financial statements, while some preferred consistency between two statements.
  • 22 December — The main topic was “accounting that contributes to economic activities”, which is the third item of 11 “specific aspects” proposed in August. Other topics touched on during the session included the comment letter by the ASBJ on IASB’s three-yearly agenda consultation and recent developments in the U.S. such as issuance of two SEC staff papers for the workplan (issued in November) and a speech by the SEC staff at the AICPA annual conference in earlier December. Related materials (in Japanese) are expected to be posted to the FSA’s website.

At both sessions, divergent views were expressed by members and no formal decision was made. In addition, during the one in December, a question was asked with regard future deliberation schedule at the BAC. The FSA responded that 1) remaining 8 items among 11 “specific aspects” are to be discussed, and 2) it is still possible that the decision be made in 2012; however, depending on the progress of future deliberations, a conclusion may not be reached within 2012.

The date of the next meeting, where the BAC is expected to review results of research visits to North America, Europe and Asia conducted during November to December, is yet to be announced.

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Update on Russia's IFRS transition

27 Dec 2011

On 25 February 2011, the Russian government signed off an IFRS endorsement procedure. According to the procedure, on 25 November 2011 the Russian Ministry of Finance has endorsed all existing IFRSs, SICs and IFRICs for use in Russia, except for IFRS 9-13 and IFRIC 20.

In its further endorsement decisions for particular standards, the Ministry of Finance will rely on recommendations of a non-governmental expert committee (the National Council on Financial Reporting Standards) and consultations with the Central Bank and the Federal Committee on Securities Markets (FCSM). The supervisory functions over IFRS implementation in Russia are delegated to the FCSM (the Central Bank – for banks).

Consolidated financial statements under IFRS will be required for public interest entities (PIEs). PIEs are defined as: companies with securities traded at stock exchanges, banks and insurance companies. However, the scope of the law is in fact broader as it indicates that “if other Russian laws require preparation/filing/publication of consolidated financial statements, such statements should be prepared according to IFRS.” Therefore, for example, those PLCs that issued their shares by means of open subscription (public offering) to a wide group of investors – even if the shares are not traded – will fall under the requirement to prepare consolidated financials under IFRS.

The date of transition to IFRSs will be 1 January 2011, with the first full set of IFRS financial statements covering 2012 calendar year (with 2011 comparatives), for the following entities (if first-time adopters):

  1. Lending agencies (banks, etc.)
  2. Insurance companies
  3. Issuers with securities traded on stock exchanges
  4. Issuers with non-traded securities — with prospectuses registered by the FCSM for:
    1. public offerings (open subscription) of securities, or
    2. private sale (closed subscription) of securities to > 500 investors

Issuers in category 4 having less than 500 shareholders may be exempt from the requirement to prepare consolidated financial statements if exemption is approved by >3/4 of shareholders and by the FCSM.

For issuers in category 3 but:

  1. Only due to traded bonds; or
  2. Already preparing financial statements under US GAAP

the date of transition to IFRSs will be 1 January 2014, with the first full set of IFRS financial statements covering 2015 calendar year (with 2014 comparatives).

Under Russian Law the consolidated annual IFRS financial statements should be audited, presented to the shareholders and filed with the FCSM (or the Central Bank for banks) within 120 days from the year end (approximately by May 1 of the following year). There is also a requirement to publish (e.g., in the Internet) such financial statements.

Please note that IFRSs in Russia do not replace national financial reporting standards – preparing consolidated financial statements under IFRSs does not lift the requirement to prepare standalone financial statements under the Russian statutory rules.

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