They take effect following approval of the Institute's Council. The Council has mandated that the FASC develop standards to achieve 100% convergence with IFRSs. Except for effective date and transition, the standards are now word-for-word identical.

The ARC is expected to take a final vote around 1 October. Information can be found on the EC Accounting Website. In July, Deloitte urged that IAS 39 be adopted in its entirety, citing a number of "far reaching and damaging" consequences for the transition to IFRSs in Europe in 2005 if there is not a "fully endorsed and wholly supported standard on the recognition and measurement of financial instruments".

In my view, a sound financial reporting infrastructure must be built on four pillars: (1) accounting standards that are consistent, comprehensive, and based on clear principles to enable financial reports to reflect underlying economic reality; (2) effective corporate governance practices, including a requirement for strong internal controls, that implement the accounting standards; (3) auditing practices that give confidence to the outside world that an entity is faithfully reflecting its economic performance and financial position; and (4) an enforcement or oversight mechanism that ensures that the principles as laid out by the accounting and auditing standards are followed. The Sarbanes-Oxley Act refocused attention on these pillars and provided many useful approaches to improve the financial reporting environment. Click to Download the Text of Sir David's testimony (PDF 38k).

We have modified our Table of Use of IFRSs by Country accordingly.

 

Its members will carry the new title of certified public accountant rather than chartered accountant. New web address: www.hkicpa.org.hk.

 

The Invitation to Comment states:

Four key issues, which need to be addressed sequentially, are whether Canada should: maintain its own standard-setting capability; maintain its own GAAP or adopt either U.S. GAAP or International Financial Reporting Standards (IFRS), the standards of the International Accounting Standards Board (IASB); maintain the current strategy of working to support the international convergence of accounting standards while harmonizing with U.S. GAAP; and consider modifying current GAAP requirements to provide better information to the users of financial statements of various different types of entities through, for example, a wider application of differential reporting.

Currently, domestic Canadian companies are not permitted to use IFRSs in place of Canadian GAAP. Foreign securities issuers in Canada were permitted, starting in 2004, to use IFRSs without reconciliation to Canadian GAAP, though this amounts to only a handful of companies.

The proposals would carve out of IAS 39 two sections – the prohibition on hedge accounting for core deposits and the fair value option. The remainder of IAS 39 would be adopted. The Commission explains the carve-outs as follows:

"IAS 39 does not sufficiently take into account the way in which many European banks operate their asset/liability management particularly in a fixed interest rate environment. The limitation of hedges to either cash flow hedges or fair value hedges and the strict requirements concerning the effectiveness of those hedges make it impossible for those banks to hedge their core deposits on a portfolio basis and would force them to carry out important and costly changes both to their asset/liability management and to their accounting system.... Those provisions of IAS 39, which prevent portfolio hedging of core deposits on a fair value measurement basis, and which can be clearly identified, should not be adopted because they do not meet the conditions set out in Article 3(2) of Regulation (EC) No 1606/2002 and in particular the criteria of understandability, relevance, reliability and comparability required of the financial information needed for making economic decisions." "IAS 39 introduces an option to fair value all financial assets and liabilities. However, the IASB has recently published an Exposure Draft (a consultation paper) which proposes an amendment to IAS 39 in order to restrict the fair value option contained in the standard. The proposed amendment is a direct response to concerns expressed by the European Central Bank, by prudential supervisors as well as by securities regulators which fear that the fair value option might be used inappropriately. This proposed amendment is currently debated in public and a final version will most likely not be available before the end of 2004. The provisions in IAS 39 relating to that fair value option, which are also distinct and separable from other parts of the standard, should not be considered applicable, because of the uncertainty surrounding the final version of those provisions. As soon as the IASB has completed its work on this issue, and normally no later than by the end of 2005, the Commission will examine the resulting amendments to IAS 39 with a view to their endorsement, in the light of the conditions set out in Article 3(2).

Click to download:

• (PDF 26k)
• . In each case where the Commission is proposing a carve-out, the right-hand column provides an explanation (both IAS 39 and the related Application Guidance). (PDF 130k)

The European Financial Reporting Advisory Group (EFRAG) has submitted its Letter of Comment (PDF 25k) broadly agreeing with the proposals in IFRIC D7 Scope of SIC 12 Consolidation–Special Purpose Entities.

Specialised trading properties are individual properties, such as hotels, gas or petrol stations, and restaurants, that usually change hands in the marketplace as operating entities. They comprise not only land and buildings but also fixtures and fittings and a business component made up of intangible assets and goodwill. The ED discusses the relationship of the valuation provisions and IFRSs. Comments are requested by 31 October 2004. Click to Download the Exposure Draft (PDF 170k).

IFAC has published the Q&As in a document entitled First Time Adoption of IFRSs – Guidance for Auditors on Reporting Issues. Click to download:

• IFAC Press Release (PDF 83k)
• Q&A Booklet on IFRS Audit Issues (PDF 283k)

The UK Auditing Practice Board has proposed similar guidance. Please see our news story of 30 August 2004.