• FAS 157-2, which partially defers Statement 157's effective date, and
• FAS 157-1, which excludes FASB Statement No. 13 Accounting for Leases, as well as other accounting pronouncements that address fair value measurements on lease classification or measurement under Statement 13, from Statement 157's scope.

The IASB is working on a Fair Value Measurement Project. In November 2006, the IASB issued a wrap-around Discussion Paper inviting comments on FAS 157. The Board plans to hold public roundtables on the issues in the second quarter of 2008.

Click to view the Heads Up newsletter (PDF 119k).

 

The report outlines the Committee's 12 developed proposals, conceptual approaches, and currently identified matters for future consideration. Deloitte & Touche LLP (USA) has published a Heads Up Newsletter (PDF 142k) discussing the report.

The SEC Advisory Committee's 12 proposals are:

GAAP should be based on business activities, rather than industries. As such, the SEC should recommend that any new projects undertaken jointly or separately by the FASB be scoped on the basis of business activities rather than industries. Any new projects should include the elimination of existing industry-specific guidance in relevant areas as a specific objective of those projects, unless, in rare circumstances, retaining industry guidance can be justified on the basis of cost-benefit considerations. GAAP should be based on a presumption that formally promulgated alternative accounting policies should not exist. The SEC should recommend that any new projects undertaken jointly or separately by the FASB not provide additional optionality, unless, in rare circumstances, it can be justified. Any new projects should include the elimination of existing alternative accounting policies in relevant areas as a specific objective of those projects, unless, in rare circumstances, the optionality can be justified. Additional investor representation on standards-setting bodies is central to improving financial reporting. Only if investor perspectives are properly considered by all parties will the output of the financial reporting process meet the needs of those for whom it is primarily intended to serve. The SEC should assist the FAF with enhancing its governance of the FASB, including supporting the FAF's changes outlined in its Request for Comments on Proposed Changes to Oversight, Structure and Operations of the FAF, FASB and GASB, with minor modifications regarding composition of the FAF and the FASB. The SEC should encourage the FASB to further improve its standards-setting process and timeliness, as follows: Create a formal Agenda Advisory Group that includes strong representation from investors, the SEC, the PCAOB, and other constituents, such as preparers or auditors. Refine procedures for issuing new standards by: (1) implementing investor pre-reviews designed to assess perceived benefits to investors, (2) enhancing cost-benefit analyses, and (3) requiring improved field visits and field tests Improve review processes for new standards by conducting post-adoption reviews of every significant new standard, generally within one to two years of its effective date, to address interpretive questions and reduce the diversity of practice in applying the standard, if needed. Improve processes to keep existing standards current and to reflect changes in the business environment by conducting periodic assessments of existing standards. The number of parties that either formally or informally interprets GAAP and the volume of interpretative implementation guidance should continue to be reduced. The FASB or the SEC, as appropriate, should issue guidance reinforcing the concept of materiality. The FASB or the SEC, as appropriate, should issue guidance on how to correct an error consistent with the principles outlined in the report – generally fewer restatements of prior period financial statements. The FASB or the SEC, as appropriate, should develop and issue guidance on applying materiality to errors identified in prior interim periods and how to correct these errors. The SEC should adopt a judgment framework for accounting judgments. The PCAOB should also adopt a similar framework with respect to auditing judgments.... The proposed framework applicable to accounting-related judgments would include the choice and application of accounting principles, as well as the estimates and evaluation of evidence related to the application of an accounting principle. The SEC should, over the long-term, mandate the filing of XBRL-tagged financial statements after the satisfaction of certain preconditions. The SEC should issue a new comprehensive interpretive release regarding the use of corporate websites for disclosures of corporate information. The guidance should address issues such as liability for information presented in a summary format, treatment of hyperlinked information from within or outside a company's website, treatment of non-GAAP disclosures and GAAP reconciliations, and clarification of the public availability of information disclosed on a reporting company's website.

The proposals are:

1. Creation of a 'monitoring group' of representatives of official organisations, including securities regulators, that would approve Trustee appointments and review Trustee oversight activities, including the adequacy of the annual funding arrangements as well as the overall budget.
2. Expansion of the IASB to 16 members from the present 14. While maintaining the existing Constitutional criteria for selecting members of the IASB, the Trustees will consider whether the Constitution should also explicitly ensure a minimum geographical balance. The balance they are currently considering is 4 members from Europe, 4 from the North America, 4 from Asia-Oceania, and the remaining 4 from any area.

 

Our news story of 14 February 2008 (below) announced these revisions.

Click to view IAS Plus Newsletter on Amendments to IAS 32 and IAS 1 (PDF 101k). You will find all Past IAS Plus Newsletters Here.

 

The restructuring was announced in November 2007 (see the IAS Plus News Story of 29 Nov 2007). The restructuring will transform IVSC into an independent standard setting organisation that will develop International Valuation Standards acceptable to the international capital markets. Former IASC Foundation Trustee Jens Roder and former IASC Chairman Michael Sharpe are among the seven interim IVSC trustees. Here is the Press Release on IVSC Interim Trustees (PDF 82k).

 

The Accounting Standards Board (AcSB) of Canada proposes to that all Canadian publicly accountable enterprises must adopt Canadian IFRS equivalents by 1 January 2011. As CSA rules refer to Canadian generally accepted accounting principles established by the AcSB, the CSA is considering the need for amendments to those rules and is seeking feedback on three main issues:

• Use of IFRSs by domestic issuers before 1 January 2011. CSA members are leaning toward allowing the use of IFRSs starting in 2009, two years ahead of the AcSB's mandatory changeover.
• Use of US GAAP by domestic issuers. Currently, Canadian companies that are registered with the US SEC are allowed to use US GAAP rather than Canadian GAAP. The CSA members have tentatively concluded not to allow a domestic issuer to use US GAAP starting in 2009 except existing US GAAP users could continue doing so for up to five years (that is, through 2013).
• Reference to IFRSs instead of Canadian GAAP in CSA securities rules. The AcSB's current plan is to import IFRSs into Canadian GAAP and to continue using the term 'Canadian GAAP'. The CSA members do not agree with that terminology and believe that the auditor's report should refer to IFRSs as adopted by the IASB rather than to Canadian GAAP. CSA acknowledges that changes to some laws may be required.

Comments on the Concept Paper should be sent by 13 April 2008. Click to:

• CSA Concept Paper (PDF 62k)
• CSA Press Release (PDF 131k)

IFRSs will replace Canada's current national GAAP for those enterprises. These include listed companies and other profit-oriented enterprises that are responsible to large or diverse groups of stakeholders. The official changeover date is for interim and annual financial statements relating to financial years beginning on or after 1 January 2011. Private companies (non-publicly accountable enterprises), and not-for-profit organisations are not required, but are permitted, to adopt IFRSs in 2011. Click for AcSB Press Release (PDF 50k).

 

Under the current requirements of IAS 32, if an issuer can be required to pay or transfer cash or another financial asset in return for redeeming or repurchasing a financial instrument, the instrument is classified as a financial liability.

As a result of the amendments, some financial instruments that currently meet the definition of a financial liability will be classified as equity because they represent the residual interest in the net assets of the entity.

The amendments have detailed criteria for identifying such instruments, but they generally would include:

• Puttable instruments that are subordinate to all other classes of instruments and that entitle the holder to a pro rata share of the entity's net assets in the event of the entity's liquidation. A puttable instrument is a financial instrument that gives the holder the right to put the instrument back to the issuer for cash or another financial asset or is automatically put back to the issuer on the occurrence of an uncertain future event or the death or retirement of the instrument holder.
• Instruments, or components of instruments, that are subordinate to all other classes of instruments and that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation.

The Board also amended IAS 1 Presentation of Financial Statements to add new disclosure requirements relating to puttable instruments and obligations arising on liquidation.

The amendments result from proposals that were in an Exposure Draft published by the Board in June 2006. The amendments are effective for annual periods beginning on or after 1 January 2009, with earlier application permitted.

Click for IASB Press Release (PDF 51k).

 

IPSAS 25 Employee Benefits. IPSAS 25 sets out the reporting requirements for the four categories of employee benefits dealt with in the IASB's IAS 19 Employee Benefits. These are short-term employee benefits, such as wages and social security contributions; post-employment benefits, including pensions and other retirement benefits; other long-term employee benefits; and termination benefits. The new IPSAS also deals with specific issues for the public sector, including the discount rate related to post-employment benefits, treatment of post-employment benefits provided through composite social security programs, and long-term disability benefits. IPSAS 25 is effective for reporting periods beginning on or after 1 January 2011. IPSAS 26 Impairment of Cash-Generating Assets. Some public sector entities (other than government business enterprises, which would already be using full IFRSs) may operate assets with the main purpose of generating a commercial return (rather than providing a public service). IPSAS 26, which is based on IAS 36 Impairment of Assets, applies to such assets. It sets out the procedures for a public sector entity to determine whether a cash-generating asset has lost future economic benefit or service potential and to ensure that impairment losses are recognised in its financial reports. Non cash-generating assets, those used primarily for service delivery, are addressed separately in IPSAS 21 Impairment of Non-Cash-Generating Assets. IPSAS 26 is effective for reporting periods beginning on or after 1 April 2009.

Click for Press Release (PDF 99k).

The IASB is a member of the Working Group. The report discusses the Working Group's views to date on current conditions in the global financial system and the causes of and weaknesses revealed by recent market turbulence. The report proposes broad policy directions for strengthening the resilience of key elements of the financial system in six areas:

• supervisory framework and oversight;
• underpinnings of the originate-to-distribute model;
• the uses and role of credit ratings;
• market transparency;
• supervisory and regulatory responsiveness to risks; and
• authorities' ability to respond to crises.

The policy proposals address a number of accounting and auditing issues. Here are two examples:

Financial institutions need to improve the usability of disclosed information about risk exposures and valuations, including those related to structured products and off-balance sheet vehicles. Investors, industry representatives, and auditors should work together to identify the types of relevant and useful disclosures, including those about valuation methodologies and the key valuation assumptions and drivers of changes in value. Authorities should encourage market-led improvements in market transparency and disclosure standards. But a more prescriptive approach by securities market regulators, bank supervisors, and accounting standard setters may prove necessary if these are inadequate.

Click to view Interim Report (PDF 49k).