SARG's role is to advise the Commission in the endorsement process of IFRSs including IFRIC Interpretations. The SARG will "assess whether EFRAG's opinions on endorsement of IFRSs and IFRICs are well-balanced and objective". The SARG will have a maximum of seven members appointed by the Commission. The Commission has now published a (PDF 22k). The Commission intends to take the following criteria into account when assessing applications:

• proven competence and technical experience, including at European and/or international level, in the accounting area, in particular in financial reporting;
• independence (that is, a person not directly involved with a private entity, organisation, association or other entity using, advising on, auditing IFRS financial statements or representing the interests of users and preparers);
• the need for balanced composition in terms of geographical origin, gender, the functions and size of entities concerned.

SARG members will be appointed in a personal capacity and must advise the Commission independently of any outside influence. The members may not participate in the work of EFRAG either before appointment to the SARG or during their term of office. Members will be appointed for a three-year renewable term. Applications are due by 29 September 2006.

• We have created a new SARG Page on IAS Plus.

75% of non-US and 71% of US respondents viewed these as key to success. The report is based on 505 responses from general partners of venture capital companies with assets under management ranging from less than US$100 million to greater than $1 billion. Of the 505 total respondents, 279 were based in the Americas, 140 in Europe, Middle East and Africa and 86 in Asia Pacific.

1 Financial Information (PDF 151k). CESR Standard 1 is aimed at developing and implementing a common approach to the enforcement of International Financial Reporting Standards (IFRSs) throughout the EU. It sets out 21 high level principles that define enforcement and describes the principles that EU member states should adopt in enforcing IFRSs, including structure of their enforcement authority; selection of financial information to be reviewed for enforcement purposes; actions available to enforcers (including, in particular, asking for public correction); cross-border coordination; and reporting by enforcement agencies. CESR's Review Panel has now completed and published its first in CESR's jurisdictions (PDF 2,630k). The Panel concludes that:

• Full implementation of CESR Standard No 1 has occurred in Belgium, Denmark, France, Greece, Italy, Norway, Portugal, and United Kingdom.
• Partial but significant implementation has occurred in Cyprus, Ireland, Malta, Spain, and Finland.
• Partial implementation, but with a significant majority of principles not fully implemented, has occurred in Czech Republic, Estonia, Germany, Luxembourg, Poland, Slovenia, and Slovakia.
• Standard 1 has not been implemented in Hungary, Netherlands, Latvia, Sweden, and Austria.
• Lithuania and Iceland did not submit a response to CESR's enquiry.

The Review Panel identified a number of specific implementation problems, which are enumerated in the report.

In 2002, GAO reported that the number of restatement announcements due to financial reporting fraud and/or accounting errors grew significantly between January 1997 and June 2002, negatively impacting the restating companies' market capitalisation by billions of dollars. The US Congress recently asked the GAO to update key aspects of its 2002 report. The 2006 report discusses (a) the number of, reasons for, and other trends in restatements; (b) the impact of restatement announcements on the restating companies' stock prices and what is known about investors' confidence in US capital markets; and (c) regulatory enforcement actions involving accounting and audit issues. Click for:

• GAO 2006 Restatements Study (PDF 1,838k)
• GAO 2006 Highlights Sheet (PDF 64k)
• GAO 2002 Restatements Study (PDF 5,270k)
• GAO 2002 Restatements Study (Zipped for faster download - 3,008k)

Selected Findings of the GAO 2006 Restatements Study

The number of annual announcements of financial restatements generally increased, from 314 in 2002 (3.7% of companies listed on NYSE, NASDAQ, and Amex) to 523 in 2005 through September (6.8% of listed companies). This constituted a nearly five-fold increase from 92 in 1997 to 523 in 2005. From July 2002 through September 2005, a total of 1,121 public companies made 1,390 restatement announcements. Industry observers noted that increased restatements were an expected byproduct of the greater focus on the quality of financial reporting by company management, audit committees, external auditors, and regulators. Cost- or expense-related reasons (including lease and tax accounting issues) accounted for 35% of the restatements, followed in frequency by revenue recognition issues. Most restatements (58%) were prompted by an internal party such as management or internal auditors. In the wake of increased restatements, the SEC standardised its disclosure requirements by requiring companies to file a specific item on the Form 8-K when a company's previously-reported financial statements should no longer be relied upon. However, between August 2004 and September 2005, about 17% of the companies GAO identified as restating did not appear to file the proper disclosure when they announced their intention to restate. These companies continued to announce intentions to restate previous financial statements results in a variety of other formats. The market capitalisation of companies announcing restatements between July 2002 and September 2005 decreased $63 billion when adjusted for market movements ($43 billion unadjusted) in the days around the initial restatement announcement. This represented about 0.4% of the market capitalisation of the major exchanges, which was $17 trillion in 2005.

Changes include:

• a more straightforward decision making procedure, including the possibility to vote;
• a mediation mechanism between members to facilitate a rapid outcomes;
• the integration of the Review Panel into the Charter, which will permit a more thorough cross-examination of the way in which members apply the new legal framework;
• a commitment to respect data protection rules when developing databases;
• greater legal certainty of confidentiality to allow the secretariat to fully assist the members on operational issues.

CESR has also updated the (PDF 103k). CESR-Fin is the body within CESR that coordinates the operational activities of EU Member States for enforcing compliance with IFRSs. Also, John Tiner, Chief Executive of the UK Financial Services Authority, has stepped down as chairman of CESR-Fin. The new Chairman is Paul Koster, a member of the Executive Board of the Netherlands Authority for the Financial Markets. Here is the (PDF 82k).

On 20 July 2006 the IFRIC published IFRIC 10 Interim Financial Reporting and Impairment. IFRIC 10 addresses the interaction between the requirements of IAS 34 Interim Financial Reporting and impairment recognition and reversal under IAS 36 Impairment of Assetsand IAS 39 Financial Instruments: Recognition and Measurement. This newsletter summarises the Interpretation.

(PDF 56k). On 6 July 2006, as a first step in their joint project on the Conceptual Framework of financial reporting, the FASB and the IASB each published on a discussion paper setting out their preliminary views on the objective of financial reporting and the qualitative characteristics of decision-useful financial information. This newsletter summarises the views in the Discussion Paper.

You will find all Past IAS Plus Newsletters Here. You can sign up for Free Subscription by Email.

That Project is ongoing, and the draft posted is a work in progress, not a finished product. Further changes, some of which could be substantial, will be made to this draft before the IASB publishes it for public comment. The IASB has discussed earlier drafts of this ED at public meetings, and this draft reflects the cumulative, tentative decisions made by the conclusion of its meeting in July 2006. Those tentative decisions have been reported in the newsletter IASB Update. The IASB has not approved this draft. The draft is being made publicly available purely for information – to give interested parties an update on the project. The IASB does not request comments on this draft, and the staff will not be in a position to consider or respond to any comments. The IASB expects to publish an ED for public comment later this year.

ICAS supports the development of a simplified international standard for small companies (a project currently under way at the IASB), but is "opposed to what would be a third set of accounting standards applicable to medium-sized and unlisted companies. These companies should follow full IFRSs, although reduced disclosure requirements for these companies, as well as for subsidiaries, may be appropriate." ICAS is keen for the ASB to encourage the International Accounting Standards Board (IASB) to address this issue on an international level. Click for (PDF 35k).

The Act would require the US Securities and Exchange Commission (SEC), Public Company Accounting Oversight Board (PCAOB), and Financial Accounting Standards Board (FASB) to give annual testimony, beginning in 2007, updating the House Financial Services Committee on their efforts to:

• reassess complex and outdated accounting standards;
• improve the understandability, consistency, and overall usability of the existing accounting and auditing literature;
• develop principles-based accounting standards;
• encourage the use and acceptance of interactive data; and
• promote disclosures in plain English.

Rep. Michael Oxley, chairman of the House Financial Services Committee, said:

This legislation would help our nation's regulators reassess the effectiveness of their regulations governing financial reporting. The SEC, FASB, and PCAOB all have an important responsibility to increase the usefulness of financial disclosures to investors. This legislation would provide an important opportunity for congressional oversight to evaluate the efforts by the SEC, FASB and PCAOB.

The bill has now been referred to the Senate for consideration. Click for:

• (PDF 38k)
• (PDF 105k)

We have updated the following pages on this website to reflect recent standard setting activity in the Asia-Pacific region:

Australia China Hong Kong SAR Japan

Malaysia New Zealand Philippines Singapore