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Agenda project pages updated

06 May 2005

We have updated the following agenda project pages to reflect discussions at the Board's April 2005 meeting: Conceptual Framework, Extractive Industries, Financial Instruments – Comprehensive Project, IAS 39 Fair Value Option, IAS 39 Financial Guarantees and Credit Insurance, IFRS 6 – Small Amendment, Insurance Contracts, Performance Reporting, and Short-term Convergence – IAS 12. .

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Problem with IAS 27 for UK companies

06 May 2005

The Institute of Chartered Accountants in England and Wales (ICAEW) has submitted to the IASB and others a briefing paper on a problem in applying IAS 27 Consolidated and Separate Financial Statements by companies in the United Kingdom (and, most likely, elsewhere).

IAS 27 requires investors to recognise income from a subsidiary "only to the extent that the investor receives distributions from accumulated profits of the investee arising after the date of acquisition". Any distributions received out of preacquisition profits are treated as a recovery of part of the cost of the investment. Because of the retrospective transition requirements of IFRS 1 for first-time adopters of IFRSs, "a parent company must examine all past distributions made by each of its subsidiaries to determine whether they were paid from pre-acquisition profits. Some parent companies have a substantial number of subsidiaries and will need to locate and examine data – which in some cases may no longer be available or obscured by intra-group reorganisations – from the date of the initial acquisition of the investment. In many cases this is likely to prove a highly onerous task." The ICAEW urges an early amendment to IFRS 1 to ease the burden. Click to (PDF 29k).
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Comparison of Canadian GAAP and IFRSs

06 May 2005

In April 2005, the Accounting Standards Board (AcSB) of Canada invited comments on its draft strategic plan, Accounting Standards in Canada: Future Directions.

The draft plan includes the AcSB's proposal that public companies in Canada should follow IFRSs rather than Canadian GAAP, with a five-year transition period. To give commentators on the plan a better basis for understanding the extent of change that the proposed convergence to IFRSs might entail, the AcSB staff have prepared a high-level comparison of Canadian standards and IFRSs as of 31 March 2005. AcSB staff are also developing a more detailed comparison for those interested in comparison at a technical level. That comparison is expected to be available before 31 July 2005. Click:
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EC seeks 'political accountability' for IASB

06 May 2005

In a Green Paper on Financial Services Policy (2005-2010), the European Commission sets out its financial services policy priorities for the next five years, with the goal of fostering an integrated, open, and competitive financial market "where financial services and capital can circulate freely at the lowest possible cost throughout the EU – with adequate and effective levels of prudential control, financial stability and a high level of consumer protection." The regulation requiring IFRSs for European listed companies and permitting member states to extend IFRSs to unlisted companies is part of that policy.

The Green Paper suggests that the oversight and accountability of the IASB need to be strengthened:

The debate about the future governance, funding and political accountability of global standard-setting bodies, such as the International Accounting Standards Board, are of growing political importance. The Commission considers that public oversight of these structures must be strengthened, to ensure appropriate reflection of stakeholders, satisfactory transparency, due process and sustainable financing.

Annex 1 to the paper discusses the EU-US regulatory dialogue. A key goal of the Commission is to "work towards equivalence/convergence between IAS and US-GAAP – agreeing a roadmap and timetable are now urgent." The paper notes that the Commission will wait until the end of 2006 or early 2007 before making a decision on the IFRS-equivalence of the major third-country accounting systems (Canadian, Japanese, and US). Click to download: The Commission has invited comments on its policies by 1 August 2005.
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SEC will report on off-balance-sheet items

05 May 2005

In remarks at the Spring Forum of the American Academy of Actuaries in Washington on 3 May 2005, US SEC Chief Accountant Donald T. Nicolaisen said that later this month the SEC will be releasing a report on special purpose entities, off-balance-sheet liabilities, and related matters including leases and pensions.

Section 401 of the Sarbanes-Oxley Act requires the SEC to study the filings by issuers and their disclosures to determine the extent of off-balance sheet transactions (including assets, liabilities, leases, losses, and the use of special purpose entities) and whether generally accepted accounting rules result in financial statements of issuers reflecting the economics of such off-balance sheet transactions to investors in a transparent fashion.

 

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Deadline for replies to SME questionnaire is extended

05 May 2005

In response to requests from constituents, the IASB has extended until 30 June 2005 the deadline for replies to the staff questionnaire on accounting standards for small and medium-sized entities (SMEs).

The questionnaire seeks views on whether any of the accounting recognition and measurement principles in International Financial Reporting Standards should be modified for SMEs. Click to Download the IASB Press Release (PDF 42k). Click here for More Information about the Questionnaire.
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SEHK adopts IFRS transition disclosures

04 May 2005

The Stock Exchange of Hong Kong has adopted IFRS Transition Disclosure Requirements for initial listing documents and circulars.

These disclosures relate to the impact of the transition in Hong Kong, as of 1 January 2005, to accounting standards that (except for effective dates) are word-for-word equivalents of IFRSs.

Click to view IFRS Transition Disclosure Requirements (PDF 49k).

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New illustrative examples on 'service concessions'

04 May 2005

On 3 March 2005, the International Financial Reporting Interpretations Committee (IFRIC) released for public comment Three Related Draft Interpretations: D12 Service Concession Arrangements – Determining the Accounting Model D13 Service Concession Arrangements – the Financial Asset Model D14 Service Concession Arrangements – the Intangible Asset Model The draft Interpretations contain examples illustrating the application of the two accounting models.

For illustrative purposes, the examples are based on simplified assumptions – most notably, that the concessions last for a period of only 10 years. In practice, service concessions typically last for longer periods and have more complicated fact patterns than those illustrated in the draft Interpretations. A group of constituents suggested that it would be useful for commentators to see the impact of the proposals on a more life-like example. The IFRIC agreed, and the illustrations prepared by those constituents can be Downloaded Here (ZIP 122k). Comment deadline is 31 May 2005.
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FAF annual report discusses international convergence

04 May 2005

The 2004 Annual Report of the Financial Accounting Foundation (PDF 1.88mb, link to the FASB website), under which FASB operates, discusses international convergence of accounting standards in numerous places, including an interview with FASB Chairman Robert H.

Herz. Mr. Herz notes that "the FASB's standard-setting activities are guided by three key objectives: (1) improvement of financial reporting, (2) simplification of the accounting literature and the standard-setting process, and (3) international convergence." Several of the interview Q&A; relate to convergence, including this one:

How are constituents responding to the prospect of international convergence of accounting standards?

Broadly speaking, I think we are hearing two different points of view on convergence. The first is: 'Why is international convergence taking so long?' which comes from many of the professional users, such as global equity analysts and institutional investors, many foreign-based multinationals, and some U.S.-based global companies. The other is: 'I'm in favor of convergence, but make them do it our way,' which is the response from many U.S. preparers.

We are trying to get on with it in a systematic way together with our colleagues at the IASB through coordinating our agendas, through joint projects on major subjects, through working together to improve the conceptual framework, and through proposing changes on both sides to reduce the number of specific areas of differences between U.S. GAAP and international standards. But convergence clearly means change, and we do need to make sure we adhere to thorough due process so that we ensure that it's not just convergence for the sake of convergence, but also helps improve the quality of the accounting standards and resulting financial reporting. Convergence is a process and a destination with many stations along the way.

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US SEC and Japan FSA discuss global convergence

04 May 2005

US SEC Chairman William H.

Donaldson and Japan Minister of State for Financial Services Tatsuya Ito met on 3 May 2005 in Washington and discussed, among other things, expanding the use of high-quality global accounting standards. The SEC's Announcement (PDF 30k) said that "Chairman Donaldson and Minister Ito affirmed their support for the convergence of accounting standards and agreed that dialogue between the US Financial Accounting Standards Board (FASB) and the Accounting Standards Board of Japan (ASBJ) is an important element in the overall convergence program."

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