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Three FT stories on IASB in Europe

03 Feb 2004

Yesterday's edition of the Financial Times (2 February 2004) contained three stories about the adoption of IFRS in Europe: US warns Europe on accounting rules. In this front page story, Donald Nicolaisen, chief accountant of the US Securities and Exchange Commission, "warned the European Union not to water down controversial accounting rules on derivatives, fearing that it could endanger global accounting convergence....

The IASB is under intense pressure from the European Commission for further concessions on its derivatives rules, known as IAS 39, because EU banks fear they could inject strong volatility into their accounts."
  • French call IASB to account. "French banks have warned that the long-standing goal of convergence between US and international accounting standards must not thwart suitable accounting rules on derivatives for the European Union.... French banks want significant changes to the IASB's derivatives rules, known as IAS 39, which are based on US equivalents."
  • A convenient fudge to keep the dividends up. Nice people, those folk at the IASB. "The IASB is expected to require pension fund surpluses and deficits to appear on the face of the accounts. At current levels of pension fund deficits this could lead to a big reduction in distributable profits in the EU." The writer goes on to say: "I hear the IASB is now planning to borrow a fudge from the UK's FRS 17 on pensions. This standard applies to group accounts, but adoption by subsidiary companies is not mandatory. The law on distributability, in contrast, applies to single companies, but not to the group. So it would be possible, for example, even if the group accounts showed a company to be technically insolvent after including the pension fund deficit, to pay a dividend."
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    Special newsletter edition summarises improvements to IASs

    03 Feb 2004

    We have posted a (PDF 154k) of our IASPlus newsletter highlighting some of the more significant changes to IFRS that resulted from the issuance of 13 revised International Accounting Standards (IASs) by the Board in late December 2003. A separate global newsletter to be published shortly will address the changes to IAS 32 and IAS 39. .

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    IASB regional standard setters meeting in Malaysia

    02 Feb 2004

    The Malaysian Accounting Standards Board (MASB) will host an International Accounting Standards Board Regional Standard Setters Meeting in Kuala Lumpur on 3 March 2004. This regional event will bring together key personnel of standard setters in ASEAN (Association of Southeast Asian Nations) for a meeting and dialogue with IASB Chairman Sir David Tweedie and liaison Board member Warren McGregor.

    Click for More Information.
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    Update on IFRS as part of EC Financial Services Action Plan

    02 Feb 2004

    In an (PDF 101k) at the Edinburgh Finance and Investment Seminar on 29 January 2004, Frits Bolkestein, the EC Commissioner of Internal Markets, Taxation and Customs spoke about progress toward implementing the European Commission's Financial Services Action Plan.

    Regarding IFRS he said:

    The decision to move to a common system for financial reporting for EU listed companies has been one of the boldest and most significant steps under the FSAP. For the first time, European investors will be able to compare "like with like" when reading annual accounts. On IAS 39, we are aware of profound concern regarding the prospects for reaching a satisfactory solution. The Commission is doing everything in its power to find a viable solution. Failure could have significant consequences for our long-term objective of facilitating the emergence of a global financial reporting standard.

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    Recommendations for valuing real estate under IFRS

    31 Jan 2004

    The European Public Real Estate Association (EPRA) has published its (PDF 565k) regarding the valuation of real estate under International Financial Reporting Standards.

    The EPRA recommendations are supported by the (PDF 138k). EPRA's recommendations state:

    1. General items: EPRA is neither an accounting body nor a valuation body. As from 2005, EPRA members will have to report in accordance with International Financial Reporting Standards (IFRS). The Best Practices Recommendations provide a framework for:

    • Specific additional guidance for real estate companies within the IFRS framework;
    • Uniform performance reporting and presentation between real estate companies;
    • Additional disclosure guidance.
    2. Accounting and valuation principles: for all areas where IFRS is not specific enough for real estate companies, the Best Practices Recommendations provide tailored guidance, aiming for uniform accounting and valuation principles amongst our members. 3. Presentation of accounts: as IFRS, to some extent, is "format free" regarding the presentation of the balance sheet, profit & loss accounts and cash flow statements, the Best Practices Recommendations propose standard formats for the presentation of these accounts. 4. Notes and additional disclosure: making the performance of real estate companies insightful requires additional notes and disclosure items, based upon uniform recommended standards. 5. Draft recommendations: at current, several areas for which EPRA wishes to issue recommendations, need further research and consulting of EPRA members as well as of the IASB before final recommendations can be issued.
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    Investment group urges European support for IFRS and IASB

    29 Jan 2004

    In a letter published in the Financial Times on 23 January 2004, the United Kingdom Society of Investment Professionals has decried the political controversy that has arisen regarding adoption in Europe of IAS 32 and IAS 39 (financial instruments).

    The group also condemned what it sees as attacks on the IASB's standard setting process. We have posted the (PDF 6k) with the kind permission of its authors.
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    EFRAG proposes to endorse improved IASs

    28 Jan 2004

    The European Financial Reporting Advisory Group is seeking comments on its Proposed Letter to the European Commission supporting adoption in Europe of the 13 "improved" IASs that were issued by the IASB in December.

    Comments are due by 24 February 2004.
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    Japanese government agency comments to British FSA

    27 Jan 2004

    Following up on our news story of yesterday: Today the Financial Services Agency of the Government of Japan (the Japanese securities regulator) has written to the UK Financial Services Authority requesting the UK government -->"to continue to allow Japanese issuers with a primary listing or a secondary listing on the LSE to use Japan GAAP as equivalent to IAS (or US GAAP)" -->.

    The Japan FSA went on to say: "If Japanese issuers were required to prepare their financial statements in accordance with IAS, and not allowed to use Japan GAAP, this could discourage their financial activities within the City and other EU markets, encourage their delisting from the LSE and other EU securities exchanges, and shift the focus of Japanese financing efforts outside Japan to non-EU markets." Click for Full Text of Japanese Government Letter to UK (PDF 25k).
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    New IAASB framework for assurance engagements

    27 Jan 2004

    IFAC's International Auditing and Assurance Standards Board has issued a revised Assurance Framework and International Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements Other Than Audits or Reviews of Historical Financial Information.

    The Framework defines and describes the elements and objectives of an assurance engagement, and identifies engagements to which International Standards on Auditing (ISAs) and ISAEs apply. It provides a frame of reference for practitioners and others involved with assurance engagements, such as those engaging a practitioner and the intended users of an assurance report. Click for Press Release (PDF 41k).
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    Japan will urge London to continue to allow Japanese GAAP

    26 Jan 2004

    Today's issue of the Yomiuri Shimbun, Japan's main business newspaper, has Reported that representatives of Japanese business organisations will go to London to try to convince the UK Financial Services Authority (FSA) not to go ahead with its proposal to require foreign companies listed on the London Stock Exchange to prepare financial statements using only US GAAP or IFRS.

    Currently, non-UK listed companies may report using their national GAAP. The EU accounting regulation requiring EU listed companies to adopt IFRS in 2005 does not apply to non-EU companies listed on EU exchanges, but individual EU countries can extend the requirement to such companies. The FSA has issued a Consultation Paper (PDF 318k) in which FSA said:

    "With the introduction of IAS..., there will be consistency amongst all EU listed issuers that produce consolidated accounts. We believe that it is in the interests of investors for there to be consistency between all equity issuers with primary listings. So, we propose that overseas non-EU issuers should be required to report in either IAS or US GAAP."

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