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UK ASB unanimously favours accepting IAS 39 in Europe

14 Jun 2004

In its Response to EFRAG's request for comments on whether IAS 39 should be endorsed for use in Europe, the UK Accounting Standards Board expressed the unanimous view of its members that: In the absence of a standard on the recognition and measurement of financial instruments, those dependent on a high quality of financial reporting – the investors in the international capital markets, and their investment analysts – would regard information provided by EU listed companies as potentially inconsistent and lacking in transparency.

That would have very damaging consequences and would seriously undermine the integrity of financial reporting within the EU. Although we recognise that concerns about the standard remain, our view is that none is of sufficient significance to outweigh the benefits that would result from adoption of IAS 39 in time for application from 1 January 2005.
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Update on IAS 39

13 Jun 2004

Following several days of discussions among representatives of the IASB and representatives of the European Commission, the IASB has posted on its website an Update on IAS 39 as of 11 June 2004. The announcement outlines the steps the Board has already taken to address the concerns of European bankers about IAS 39 and its current consideration of two additional issues: Presentation of cash flow hedges in the balance sheet and statement of changes in equity. A proposal put forward by the European Banking Federation for a new type of hedge accounting for hedges of interest rate margin. The announcement also indicates that the Board will ask its new international working group on financial instruments to: Examine a number of fundamental questions about financial instruments accounting,. Explore ways to improve and simplify existing requirements. Examine broader questions on the application and extent of fair value accounting. .

Following several days of discussions among representatives of the IASB and representatives of the European Commission, the IASB has posted on its website an Update on IAS 39 as of 11 June 2004.

The announcement outlines the steps the Board has already taken to address the concerns of European bankers about IAS 39 and its current consideration of two additional issues:

  • Presentation of cash flow hedges in the balance sheet and statement of changes in equity.
  • A proposal put forward by the European Banking Federation for a new type of hedge accounting for hedges of interest rate margin.
The announcement also indicates that the Board will ask its new international working group on financial instruments to:
  • Examine a number of fundamental questions about financial instruments accounting,.
  • Explore ways to improve and simplify existing requirements.
  • Examine broader questions on the application and extent of fair value accounting.
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IAS 33 e-learning module due out shortly

12 Jun 2004

In the next week or so, the e-learning module for IAS 33 Earnings per Share will be added to the 20 modules already available in Deloitte's popular IFRS e-Learning programme.

We will, of course, announce it here. After that, probably by the end of July, we will release modules on IAS 12, IAS 19, IAS 32/39 (part 1 of 3), and IFRS 1. You can access all available modules by clicking the IFRS e-Learning 'light bulb' on the IASPlus home page or by clicking Here. Deloitte is making our IFRS e-Learning programme available in the public interest without charge.
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Exposure drafts expected from IASB and IFRIC

11 Jun 2004

The following proposals are expected to be issued for public comment by the IASB and IFRIC by the end of this month: IFRIC D7 Employee Benefit Plans with a Promised Return on Contributions or Notional Contributions IFRIC D8 Members' Shares in Co-operative Entities IFRIC D9 Scope of SIC-12 Amendments to IAS 39 and IFRS 4 Financial Guarantees and Credit Insurance Amendments to IAS 39 Transition and Initial Recognition Amendments to IAS 39 Foreign Currency Cash Flow Hedge Accounting of Forecast Intragroup Transactions .

The following proposals are expected to be issued for public comment by the IASB and IFRIC by the end of this month:

  • IFRIC D7 Employee Benefit Plans with a Promised Return on Contributions or Notional Contributions
  • IFRIC D8 Members' Shares in Co-operative Entities
  • IFRIC D9 Scope of SIC-12
  • Amendments to IAS 39 and IFRS 4 Financial Guarantees and Credit Insurance
  • Amendments to IAS 39 Transition and Initial Recognition
  • Amendments to IAS 39 Foreign Currency Cash Flow Hedge Accounting of Forecast Intragroup Transactions
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EFRAG proposes to recommend endorsement of IFRIC 1

11 Jun 2004

The European Financial Reporting Advisory Group (EFRAG) is seeking comments on its draft letter to the European Commission proposing to recommend adoption of IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities for use in Europe.

Click to download Draft Letter on IFRIC 1 (PDF 35k). EFRAG needs comments by 10 July 2004.
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PCAOB adopts rules for oversight of non-US firms

10 Jun 2004

The US Public Company Accounting Oversight Board (PCAOB) has adopted rules relating to oversight of non-US public accounting firms that audit companies registered with the US SEC.

The rules set out a framework under which, with respect to non-US audit firms, the PCAOB could implement the provisions of the Sarbanes-Oxley Act by relying, to an appropriate degree, on a non-US oversight system. SEC approval is required before the new rules take effect. Click for: The PCAOB's new rules summarise the Board's oversight approach as follows:

The Board's rules on inspections (PCAOB Rules 4011 and 4012) provide a foreign registered public accounting firm an opportunity to minimize the unnecessarily duplicative administrative burdens of dual oversight by requesting that the Board rely – to an extent deemed appropriate by the Board – on inspections of the registered firm under the home country's oversight system. Under the Board's rules, a firm would first provide the Board with a one-time statement asking the Board to rely on a non-US inspection. At an appropriate time before each inspection of a non-US firm that has submitted such a statement, the Board would determine the appropriate degree of reliance based on information about the non-U.S. system obtained primarily from the non-US regulator regarding the independence and rigor of the non-US system. The Board would also base its decision on its discussions with the appropriate entity or entities within the oversight system concerning the specific inspection work program for the non-US firm's inspection at hand. The more independent and rigorous a home country's system, the higher the Board's reliance on that system. A higher level of reliance translates into less direct involvement by the Board in the inspection of the non- US registered public accounting firm.

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FEE urges EU rule on corporate social responsibility reporting

09 Jun 2004

The European Federation of Accountants (FEE) has asked the European Commission's Multi-stakeholder Forum to give Corporate Social Responsibility (CSR) reporting the same level of recognition as financial reporting.

CSR reporting typically sees corporations reporting on their economic, social and environmental impacts. Click for (PDF 22k). You can download the report from the FEE Website.
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Basel Committee release on IAS 39 and regulatory capital

09 Jun 2004

The Basel Committee has posted on its website a Press Release (PDF 18k) announcing the Committee's recommendations to national bank regulators that two amounts that are reported in equity under IAS 39 not be considered part of a bank's Tier I or Tier II capital for regulatory purposes: The cumulative fair value gains and losses on cash flow hedges of financial instruments measured at amortised cost Gains and losses arising from changes in an institution's own credit risk as a result of applying the IAS 39 fair value option to its liabilities. The release also notes that "application of the fair value option may raise other, additional supervisory concerns with respect to regulatory capital." .

The Basel Committee has posted on its website a Press Release (PDF 18k) announcing the Committee's recommendations to national bank regulators that two amounts that are reported in equity under IAS 39 not be considered part of a bank's Tier I or Tier II capital for regulatory purposes:

  • The cumulative fair value gains and losses on cash flow hedges of financial instruments measured at amortised cost
  • Gains and losses arising from changes in an institution's own credit risk as a result of applying the IAS 39 fair value option to its liabilities.
The release also notes that "application of the fair value option may raise other, additional supervisory concerns with respect to regulatory capital."
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Ian Mackintosh named Chair of the UK ASB

09 Jun 2004

Ian Mackintosh, a member of the Standards Advisory Council and the IASB's SME Advisory Panel, has been appointed as Chairman of the UK Accounting Standards Board effective 1 August 2004 for a three year term.

Mr. Mackintosh has chaired the IFAC Public Sector Committee and was Deputy Chair of the Australian Accounting Standards Board. (PDF 63k).
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We have posted the latest Accounting Roundup newsletter

08 Jun 2004

Deloitte (United States) has published the 7 June 2004 edition of (PDF 162k).

This newsletter briefly describes key regulatory and professional developments that have recently occurred and provides links to locations where additional information can be found on each topic. This issue includes updates on activities of FASB, GASB, SEC, and IASB. You will find past issues Here.

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