News

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Hans Hoogervorst addresses Economic and Monetary Affairs (ECON) Committee of the European Parliament

03 Oct 2011

In a recent address to the ECON Committee of European Parliament, the IASB chairman, Hans Hoogervorst, discussed two main topics: the importance of the IASB's relationship with Europe and his observations on the role of accounting standards and the financial crisis.

Mr Hoogervorst noted that Europe's adoption of IFRSs in 2005 has led to the IASB becoming the global standard-setter with many countries having followed Europe's by adopting IFRSs. He noted that he is optimistic for a positive decision by the US Securities and Exchange Commission to incorporate IFRSs into US standards, but a negative decision would not stop the progress of IFRS adoption throughout the world, though it would delay it.

In regards to the relationship between accounting standards and the financial crisis, Mr Hoogervorst noted that "in many cases there was insufficient transparency for investors to be fully aware of the risks they were taking". Mr Hoogervorst noted that the accounting profession will need to improve transparency to contribute to the long-term stability of financial markets, and further stated the following:

Transparency does not always paint a pretty picture. Much of the current economic volatility is deep-rooted. The CEO of Deutsche Bank recently said "volatility is the new normality". The days of 'risk-free assets' are long gone, if ever they existed.

If volatility is indeed the new normality, how should accounting standard-setters respond? Should we artificially shield investors from learning of this underlying economic volatility? Or should accountants try to describe, as accurately as possible and with full transparency, this new normality? Most people I speak with believe that financial reporting should tell it how it is, rather than how we would like it to be. If the emperor really has no clothes, then it is the responsibility of financial reporting to say so, no matter how unpopular the truth may be.

There is however one important caveat to this. Asking accountants to describe economic volatility is one thing, but we should be careful that in doing so financial information does not become the source of economic volatility. For that reason the IASB has always remained pragmatic about which measurement techniques to adopt. We know there is no one right answer and therefore we have always employed a mixed measurement approach, combining historic cost with fair value. That is why we have recently completed the reform of our fair value measurement standard that provides new guidance on illiquid markets. It is why we are proceeding with caution in the reform of financial instruments accounting. Our upcoming hedge accounting rules will prevent artificial accounting volatility to companies who hedge their risks. Accounting should not mask volatility, but neither should it be the source of it.

Please click for Hans Hoogervorst speech (link to IASB website).

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Audit alert on audit risks in certain emerging markets

03 Oct 2011

The US Public Company Accounting Oversight Board (PCAOB) has issued a Staff Audit Practice Alert to discuss the auditor's responsibilities regarding the risk of fraud when auditing companies with operations in emerging markets.

Staff Audit Practice Alert No. 8 Audit Risks in Certain Emerging Markets discusses examples of conditions that may indicate greater fraud risks, procedures auditors should perform to address fraud risks and other items auditors should consider when performing an audit of an entity with operations in emerging markets.

Click to download PCAOB Staff Audit Practice Alert No. 8 (PDF 113k).

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European Outreach Meetings on the IASB Agenda Consultation

30 Sep 2011

The European Financial Reporting Advisory Group (EFRAG), in partnership with European National Standard Setters, will organise outreach events on the IASB consultation on its future work programme published in July 2011. The events will be held throughout Europe in October and November.

A Brussels event will be organised by EFRAG and the European Commission. The purpose of the events is stimulating debate in Europe and collecting European views. Please click for more information in the EFRAG press release (link to EFRAG website).
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Speech of ESMA Chair on transparency touches on the valuation of sovereign debt

30 Sep 2011

In a speech entitled Market Transparency – Does it prevent crisis? given at the Austrian Financial Market Authority Supervision Conference in Vienna, Steven Maijoor, Chairman of the European Securities and Markets Authority (ESMA), spoke about similarities between the credit crunch and the current European sovereign debt crisis and how transparency can be an answer to the lack of trust in banks and markets. .

"At the beginning of the crisis, in 2007 and 2008, a lack of transparency regarding exposures to subprime mortgages created a situation of uncertainty about the financial positions of banks," Maijoor says in his speech and continues "in the more recent months of the financial crisis a lack of transparency from banks on their exposures to sovereign debt and related instruments are generating new suspicions about the conditions of individual banks."

Transparency on financial performance and positions will restore trust into markets and banks, Maijoor claims, and IFRSs have contributed to both the quality and quantity of the information provided as part of the financial statements presented by listed companies. However, IFRSs need to be applied correctly to serve the end of transparency, and national supervisory authorities and ESMA have to and will ensure consistent enforcement across the EU.

As you will understand, we are currently looking at how banks are applying IFRS for the valuation of sovereign debt. It is very important for ESMA that financial institutions apply IFRS correctly, and are consistent in their valuations of sovereign debt exposures. This especially holds for the upcoming annual financial statements.

In July 2011, ESMA published a public statement on disclosures related to sovereign debt to be included in IFRS financial statements.

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IASB provides update on expected release of documents in the coming months

30 Sep 2011

The IASB has announced more definitive timing of the expected release of documents from a number of its current projects.

In a work plan update provided in the most recent IASB Update, the IASB notes the expected timing as follows:

Expected timingPronouncements to be issued
Mid-October 2011
  • Release of IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine (summary of draft Interpretation)
  • Narrow-scope exposure draft amending IFRS 1 First-time Adoption of International Financial Reporting Standards to allow for the prospective application of paragraph 10A of IAS 20 Accounting for Government Grants and Disclosure of Government Assistance for first-time adopters (project summary)
November 2011
December 2011
First quarter 2012

The update does not extend to other projects for which pronouncements may be issued before the end of 2011 under the previously announced work plan, e.g. financial instruments impairment and insurance contracts.

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AASB issues standards on comprehensive income and post-employment benefits, proposes related RDR disclosures

29 Sep 2011

The Australian Accounting Standards Board (AASB) has issued the following pronouncements.

AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive Income

Implements equivalent amendments to those made by the IASB to IAS 1 Presentation of Financial Statements to revise the way other comprehensive income is presented.

The amendments to AASB 101 Presentation of Financial Statements:

  • Preserve the amendments made to AASB 101 in 2007 to require profit or loss and OCI to be presented together, i.e. either as a single 'statement of profit or loss and comprehensive income', or a separate 'statement of profit or loss' and a 'statement of comprehensive income' – rather than requiring a single continuous statement as was proposed in the exposure draft
  • Require entities to group items presented in OCI based on whether they are potentially reclassifiable to profit or loss subsequently, i.e. those that might be reclassified and those that will not be reclassified
  • Require tax associated with items presented before tax to be shown separately for each of the two groups of OCI items (without changing the option to present items of OCI either before tax or net of tax).

AASB 2011-9 is applicable from 1 July 2012, with early adoption permitted.

 IFRS in Focus Newsletter, AASB announcement (link to AASB website)
AASB 119 Employee Benefits (September 2011)
AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119
AASB 2011-11 Amendments to AASB 119 (September 2011) arising from Reduced Disclosure Requirements

Equivalent to the revised IAS 19 Employee Benefits issued by the IASB, with revised requirements for pensions and other postretirement benefits, termination benefits and other changes.

The key amendments include:

  • Requiring the recognition of changes in the net defined benefit liability (asset) including immediate recognition of defined benefit cost, disaggregation of defined benefit cost into components, recognition of remeasurements in other comprehensive income, plan amendments, curtailments and settlements (eliminating the 'corridor approach' permitted by the existing AASB 119)
  • Introducing enhanced disclosures about defined benefit plans
  • Modifying accounting for termination benefits, including distinguishing benefits provided in exchange for service and benefits provided in exchange for the termination of employment and affect the recognition and measurement of termination benefits
  • Clarifying various miscellaneous issues, including the classification of employee benefits, current estimates of mortality rates, tax and administration costs and risk-sharing and conditional indexation features
  • Incorporating other matters submitted to the IFRS Interpretations Committee.

AASB 119 (September 2011) and AASB 2011-10 are applicable from 1 January 2013, with early adoption permitted. AASB 2011-11 is applicable from 1 January 2013, with early adoption permitted.

 IFRS in Focus Newsletter, AASB announcement (link to AASB website)
Exposure Draft ED 218 Presentation of Items of Other Comprehensive Income: Tier 2 Proposals

Analyses the new and substantively modified disclosure requirements arising from AASB 2011-9 that were not included in the requirements of IAS 1 Presentation of Financial Statements at the time IFRS for SMEs was issued, proposing those disclosures be retained in the Tier 2 disclosure requirements ('Reduced Disclosure Requirements' or 'RDR')

As a 'simplified' exposure draft, only adverse comments need to be submitted to the AASB, with any such comments due by 5 December 2011.

 AASB announcement (link to AASB website)
Exposure Draft ED 219 AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13: Tier 2 Proposal

Sets out the disclosures in AASB 13 Fair Value Measurement and the disclosures amended in other Australian Accounting Standards arising from AASB 13 from which it is proposed entities applying Tier 2 disclosure requirements should be exempt.

Comments are due to the AASB by 5 December 2011.

 AASB announcement (link to AASB website)
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Upcoming Dbriefs webcast: Important IFRS Developments

29 Sep 2011

A Global Financial Reporting Dbriefs Webcast is scheduled to be held on Tuesday, 18 October 2011, discussing the unprecedented pace of standard-setting developments at the International Accounting Standards Board (IASB).

The topics to be covered include:

  • The IASB's timeline for the issuance of exposure drafts and new accounting standards
  • An update on the revenue recognition project
  • Recent developments including the issuance of the IASB's agenda consultation and the exposure draft on investment entities.

Full details of the webcast are provided below:

Topic: IFRS: Important Developments
Date and time: Tuesday, 18 October 2011
9:00-10:00am London time (GMT +1), which is 4:00-5:00pm Hong Kong Time (GMT +8)
Host: Randall Sogoloff, Leader – Global IFRS Communications
Presenters: Philip Barden, Partner – UK IFRS Centre of Excellence
More information: Click here
Registration: Click here

Access to recordings and other materials from past webcasts is available on our IFRS Webcasts page.

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EFRAG draft comment letter on the IASB's ED Investment Entities

29 Sep 2011

The European Financial Reporting Advisory Group (EFRAG) has issued its draft comment letter on IASB's ED Investment Entities.

In August 2011 the IASB issued the Exposure Draft Investment Entities. The ED provided criteria and guidance to determine whether an entity is an investment entity. The draft proposed that an investment entity measure its investments in controlled entities at fair value through profit or loss in accordance with IFRS 9 Financial Instruments.

EFRAG believes that the parent of an investment entity should be permitted to retain the fair value accounting that is applied by its investment entity subsidiary to controlled entities. EFRAG also encourages IASB to carry out an impact assessment to better understand better the practical implications of any amendments to IAS 28 Investments in Associates and Joint Ventures.

Please click for EFRAG's press release containing a link to the draft comment letter (link to EFRAG website).

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Agenda for IFRS Advisory Council Meeting

29 Sep 2011

The IFRS Advisory Council is meeting in London on 10-11 October 2011.

The agenda for the meeting is set out below.

IFRS Advisory Council Meeting Agenda
10-11 October 2011, London
Monday, 10 October 2011
  • Welcome and Chairman’s preview
  • Overview of last four months
  • IASB activities (financial instruments, insurance contracts, leases and revenue recognition)
  • Trustees review of the IFRS Interpretation Committee
  • Trustees due process oversight committee
  • Trustee strategy review and Monitoring Board review
  • Raising the profile of the Council / working with the Trustees
  • The IASB’s agenda consultation
  • How to deal with the conceptual issues at stake at the present juncture

Tuesday, 11 October 2011

  • Insurance contracts
  • Revenue recognition
  • XBRL update
  • World Bank review of standards
  • IFRS 'branding'
  • IFRS Foundation education activities

Click for access to the full agenda and agenda papers (link to IASB website).

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Upcoming United States Accounting Roundup webcast

28 Sep 2011

Deloitte (United States) is hosting a IFRS quarterly accounting roundup webcast in late September.

The webcast will discuss accounting, standard setting, and reporting developments for the quarter, recent positions on accounting and reporting of the FASB, IASB, SEC, and PCAOB, and other hot topics.

Full details of the webcast are provided below:

Topic: Quarterly Accounting Roundup: An Update of Important Developments
Date and time: Thursday, 29 September 2011 at 2:00pm-3:30pm United States Eastern Daylight Time (GMT-04:00)
Host: Bob Uhl, Partner – Deloitte & Touche LLP
More information: Click Here
Registration: Click Here

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