Among the sections of interest from an IFRS perspective:

• 3.3.1 Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI)
• 4.3.2 Key issues relating to the Islamic capital market, which describes, among other things, how IFRSs are used by Islamic financial institutions.

Two excerpts relating to accounting:

"In some cases, Islamic financial institutions encounter accounting problems because the existing accounting standards such as International Accounting Standards (IASs), Generally Accepted Accounting Principles (GAAPs) or domestic standards, were developed based on conventional institutions, conventional product structures or practices, and may be perceived to be insufficient to account for and report Islamic financial transactions. Shariah compliant transactions may not have parallels in conventional financing and therefore, there may be significant accounting implications. For example, in the case of Mudharabah contracts, the transaction is neither equity nor liability in nature as the depositor does not assume the rights of an equity holder (i.e., shareholder) of the Islamic financial institution and neither is he guaranteed of returns. Hence, from an Islamic accounting viewpoint, a Mudharabah account may be presented as an 'investment account', appearing as a separate line item from equity or liability on the balance sheet." "The current approach to developing financial standards for Islamic transactions is to benchmark against international standards such as International Accounting Standards (IASs) to ensure consistency with globally accepted standards and modifying them, where necessary, in order to ensure financial statements present fairly the financial position, financial performance and cash flows of the Islamic financial institution.... This can be seen as a response to the growth and increasing maturity of the Islamic capital market that requires more specific disclosure and standards that address the specific features of Islamic products and services. Hence, international Islamic financial institutions such as AAOIFI have begun to set international Islamic accounting standards for Islamic financial institutions which are likely to be used by the global Islamic financial services industry."

Click for Islamic Capital Market Fact Finding Report (PDF 611k).

The agenda below reflects a revision to the one originally announced by IFRIC, which we had noted on 20 July:

AGENDA OF THE IFRIC MEETING 29 JULY 2004 Service Concession Arrangements – IFRIC will discuss three draft interpretations: D10A Service Concession Arrangements - Determining the Accounting Model D10B Service Concession Arrangements - The Receivable Model D10C Service Concession Arrangements - The Intangible Asset Model D5 Applying IAS 29 Financial Reporting in Hyperinflationary Economies for the First Time IFRS 2, IAS 19, and Employee Benefit Trusts – SIC 12 Exemption for Equity Compensation Benefits Constitution of an Obligating Event by Future Market Share – IFRIC will consider a draft interpretation proposing that if an obligation for the cost of waste management, such as that under EU Directives 2002/96/EC and 2003/108/EC on Waste Electrical and Electronic Equipment, depends on future market share, the IAS 37 obligating event for recognising a provision is the future participation in the market. The obligation does not arise when the products are put onto the market.

The third Webcast was run on Thursday 22 July 2004 and covered certain aspects of IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement. To access the recording Click Here. The recording of each session will be available on this website for a period of at least 3 to 4 weeks from the date of the presentation. Links to past sessions may be found on our United Kingdom Page.The recording is no longer available online.

The comment deadlines on the following two IASB exposure drafts are 31 July 2004:

• Proposed Amendments to IAS 19 Employee Benefits: Actuarial Gains and Losses, Group Plans and Disclosures
• Proposed Amendments to IFRS 3 Business Combinations: Combinations by Contract Alone or Involving Mutual Entities

The guidance warns against complacency that there are not many differences between UK GAAP and IFRSs:

It is easy to make a high-level comparison of UK GAAP and IFRS and conclude that there are few major differences; however there are many important detailed differences, many of which will be discovered only by a thorough analysis of a company's transactions and exposures. Matters that need to be considered include: changes brought by the move to IFRS will mean a major change in the actual format of the accounts; differences in definitions may mean that items previously classified in one way will need to be classified differently; some items that are not recognised under UK GAAP are recognised as assets or liabilities under IFRS, whilst others may cease to be recognised; some items may have to be measured differently in the accounts of an individual subsidiary and in the consolidated accounts; more extensive disclosure requirements will result in greater data capture needs; and some changes in accounting policies may require accounting systems to give different information.

Click for (PDF 36k).

The IASB has Posted on its Website the 81 comment letters it has received on the Exposure Draft of Proposed Amendments to IAS 39 Financial Instruments: Recognition and Measurement: The Fair Value Option.

Also, EFRAG has invited comments on its draft comment letters on two additional documents:

• ED of Amendments to IAS 39: The Fair Value Option (PDF 1,244k)
• ED of Amendments to IAS 19: Actuarial Gains and Losses, Group Plans and Disclosures (PDF 55k)
• ED of Amendments to IFRS 3: Combinations by Contract Alone or Involving Mutual Entities (PDF 48k)
• IFRIC D6 Multi-employer Plans (PDF 58k)

Draft comment letters: (download from EFRAG's website www.efrag.org)

• ED of Amendments to IAS 39: Financial Guarantee Contracts and Credit Insurance (comments due 24 September 2004)
• IFRIC D9 Employee Benefit Plans with a Promised Return on Contributions or Notional Contributions (comments due 27 August 2004)

 

The Commission will seek public comment on alternative methods and the costs and benefits associated with tagged data. In addition, the Commission will consider a staff proposal to accept voluntary supplemental filings of financial data using eXtensible Business Reporting Language (XBRL). This voluntary program would enable the Commission staff to further investigate the types of data tagging currently available in the marketplace. The Commission may propose a rule this fall that would, if adopted, establish the voluntary program beginning with the 2004 calendar year-end reporting season.

• Click for SEC Press Release.
• Information about XBRL (a system for tagging data) can be found on the XBRL International Website. IASB commercial director Kurt Ramin chairs the XBRL International Steering Committee.
• An exposure draft dated 15 June 2004 International Financial Reporting Standards (IFRS) General Purpose Financial Reporting for Profit-Oriented Entities (GP) can be found Here.
• Other XBRL financial reporting taxonomies can be found Here.
• The 10th XBRL International Conference, Financial Reporting Goes Global: XBRL and IFRS Working Together, will be held 15-17 November 2004 in Brussels. Click for More Information.
• The European Commission has granted €1,000,000 to accelerate the development and adoption of XBRL in Europe. Press Release (PDF 110k).

IAS 32 would then deal only with financial instruments presentation matters. ED 7 Financial Instruments: Disclosures would require disclosures in the following areas, among others:

• Disclosure of the significance of financial instruments for an entity's financial position and performance (this would incorporate many of the requirements previously in IAS 32)
• Qualitative and quantitative disclosures about exposure to risks arising from financial instruments. The qualitative disclosures describe management's objectives, policies, and processes for managing those risks. The quantitative disclosures provide information about the extent to which the entity is exposed to risk, based on information provided internally to the entity's key management personnel. Together, these disclosures provide an overview of the entity's use of financial instruments and the exposures to risks they create
• Disclosures about credit risk, including credit enhancements and the fair value of and other information about collateral received
• Disclosures about interest rate risk, which would include both cash flow interest rate risk and fair value interest rate risk. Sensitivity analyses for interest rate and foreign exchange rate risks would be required
• Disclosures about market risk, including information about asset quality and the liquidity of the markets in which a financial asset might be disposed.
• Disclosures about other risks, sometimes called residual value risks, that underlie financial instruments and that are not captured by the other disclosures
• Details about an entity's own equity; qualitative information about the entity's objectives, policies, and processes for managing capital; whether during the period it complied with any capital targets set by management and any externally imposed capital requirements; and if it has not complied, the consequences of such non-compliance.

ED 7 would delete the current IAS 30 disclosures about contingencies, commitments, and general banking risks.

Click for the IASB Press Release (PDF 31k). ED 7 will be available for public download from www.iasb.org starting 2 August 2004.

Comment deadline is 22 October 2004. The Board expects to issue a final standard in early 2005. It would be mandatory for financial periods beginning on or after 1 January 2007. Early adoption will be encouraged, and therefore that standard could be applied by 2005 first time adopters.

 

We have combined our notes for all three days in a Separate Page.