We have updated our Database of Statistics that, we believe, provide clear evidence of the globalisation of the world's capital markets and of the need for global financial reporting standards.

EFRAG supports the amendments and proposes to recommend their adoption for use in Europe. Comments are due by 14 October 2005.

Over 40 delegates attended, including observers from HK SAR, Macau SAR, and the IASB. The delegates discussed recent developments in the three countries' accounting standards and convergence issues, including obstacles and specific measures to address some of them. The three countries' accounting standard setters reached the following consensus set out in a published (PDF 21k) posted on the websites of the three standard-setters:

• China Accounting Standards Committee
• Accounting Standards Board of Japan
• Korea Accounting Standards Board

First, the three parties recognise that the international convergence of accounting standards is the irreversible trend under the economic globalisation, and the three countries support the efforts by the IASB to develop a single set of high-quality and globally-acceptable accounting standards. In the meantime, the parties believe that convergence is not equal to being identical. The international convergence of accounting standards shall be a market-driven gradual process and this process shall be two-way interactions between national accounting standard setters and the IASB, giving considerations to special local environments.

Secondly, the three parties have confirmed that they shall work for the resolution of practical issues encountered in their respective accounting standard setting and international convergence efforts that should be continuously tested in their respective capital markets. That shall, on the one hand, be helpful to set the national accounting standards and on the other hand, to identify major obstacles and issues the countries encounter in the international convergence process and to communicate with the IASB to contribute to the improvements of the International Financial Reporting Standards (IFRSs).

Thirdly, the three parties have decided to set up a joint working group composed of their technical staff. The primary task of the working group is to carry out joint research on main technical issues confronted by the three countries in their standard setting and international convergence. The joint working group may meet on a non-regular basis and produce research results for the discussion at the Three Countries' Accounting Standard Setters' Meeting and as inputs to the IASB.

EFRAG supports the interpretation and proposes to recommend its adoption for use in Europe. EFRAG requests comments by 30 September 2005.

The standards also say that the best evidence of fair value for employee stock options is observable market prices of identical or similar instruments in active markets. Some US companies have proposed to design and issue in the market financial instruments that replicate the terms and conditions of employee stock options, for the purpose of obtaining a market-based value of the employee options. At the request of the Office of the Chief Accountant of the US SEC, the SEC's Office of Economic Analysis (OEA) has prepared a report on the potential use of such instruments for valuing employee stock options as an alternative to modelling. The OEA report concludes:

The main conclusion of our analysis to date is that instruments that track the future flows of net obligations facing the company or net receipts by its employees under the option grant can yield reasonable estimates of fair value as defined in Statement 123R. Further, our analysis indicates that instruments that replicate the terms and conditions of employee stock options or other share-based compensation do not produce reasonable estimates of fair value.

Based on the OEA report, the Chief Accountant of the SEC issued a public statement that concluded:

Replicating all of the terms and conditions of employee stock options with a market instrument is difficult. I also recognize that there may be alternative ways to provide an adequate estimate of the fair value of an employee stock option. As noted in the memo from OEA, there already are several methods that have been considered. Broadly speaking, my staff and I, with help from OEA, have become comfortable that it should be possible to design instruments whose transaction prices would be a reasonable estimate of the fair value of underlying employee stock options using either of the methodologies that seek to track returns to holders of options or the obligations of the issuer of those options. Further, while I recognize alternative views and new facts are possible, at this point, we have significant doubts based on OEA's views, as to whether it would be possible to design an instrument that would achieve the measurement objective of Statement 123R by relying on similar contractual terms and conditions. That is primarily because of the difficulties inherent in replicating the employer-employee relationship in an issuer-investor arrangement.

Click to download:

• (PDF 37k)
• (PDF 44k)
• (PDF 70k)

In both cases EFRAG supports the IASB standards and recommends their adoption for use in Europe. EFRAG requests comments by 30 September 2005.

• Amendment to IAS 1 Presentation of Financial Statements - Capital Disclosures (PDF 22k).
• IFRS 7 Financial Instruments: Disclosures (PDF 22k). With respect to IFRS 7, EFRAG's request for comment states: "EFRAG has noted that there appears to be considerable interest around Europe in having IFRS 7 endorsed in time to be available for use in 2005 financial statements, provided that application in 2005 would not be mandatory." IFRS 7 is effective 1 January 2007, with earlier application encouraged.

 

APRA is the prudential regulator of the Australian financial services industry. It oversees banks, credit unions, building societies, and insurance companies, among others. Australia has adopted national GAAP that starting in 2005 is virtually equivalent to IFRSs. The paper deals with the treatment of eligible Tier 1 capital instruments and securitisation for authorised deposit-taking institutions and general insurers. APRA is proposing to de-couple the definition of capital instruments eligible for Tier 1 capital from Australian accounting standards. At the same time, it is proposing to harmonise its approach to innovative capital instruments with the decisions of the Basel Committee on Banking Supervision and regulatory practice in major jurisdictions. APRA is also proposing to de-couple the assessment of securitised assets for capital adequacy purposes from the accounting treatment of these assets. Comments are due 28 October 2005. Click to download the APRA's new discussion paper, (PDF 134k). Please see our 27 February 2005 News Story for details about the first APRA discussion paper and an earlier overview paper.

Nicolaisen will leave the Commission in October 2005 to return to the private sector. Mr. Nicolaisen joined the Commission as Chief Accountant in September 2003 and has led numerous initiatives to improve financial disclosure, strengthen the audit process, and rebuild investor confidence. Click for (PDF 34k).

The purpose of the guide would be to help auditors around the world understand, comply with, and apply ISAs when conducting SME audits. Click for IFAC Announcement (PDF 76k), which includes a link to download the IFAC request for proposals. Proposals are due 18 November 2005.

This newsletter, published by Deloitte & Touche LLP (United States), summarises recent accounting and financial reporting developments and provides Internet links to related content. This edition includes:

• FASB developments, including three proposed amendments to Statement 140 (derecognition); a final FSP on freestanding financial instruments originally issued as employee compensation; a proposed FSP on accounting for guaranteed investment contracts, and summaries of recent FASB meetings.
• GASB developments, including an Implementation Guide on Post-employment Benefits Other Than Pensions.
• SEC developments, including recommendations of the SEC Advisory Committee on Smaller Public Companies; the SEC's XBRL programme; and swearing in of Christopher Cox as SEC Chairman.
• International developments, including IFRS 7 Financial Instruments: Disclosures; amendment of IAS 1 for capital disclosures; financial guarantee contracts; and IASB's proposed technical corrections policy.
• Adoption dates and deadlines – an eight-page chart of significant adoption dates and deadlines for the FASB, EITF, GASB, AICPA/AcSEC, SEC, PCAOB, and IASB/IFRIC.

You will find links to all past issues Here.