News

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Capital Markets: The Players and Activities

30 May 2010

The staff of FASB's Library compiles a listing of Capital Markets: The Players and Activities with many hyperlinks to websites of the 'players'.

They recently updated their list and have kindly given us permission to post it on IAS Plus. Click to download Capital Markets: The Players and Activities as of 21 May 2010 (PDF 50k). On IAS Plus we maintain a comprehensive 'Credit Crunch' Chronology with hyperlinks to source documents.
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Heads Up on FASB's financial instruments proposals

29 May 2010

On 26 May 2010, the US FInancial Accounting Standards Board issued a proposed Accounting Standards Update (ASU) for a comprehensive new model of accounting for financial assets and financial liabilities that addresses (1) recognition and measurement, (2) impairment, and (3) hedge accounting (see our News Story of 27 May for a brief overview).

Deloitte (United States) has published a 22-page edition of the Heads Up Newsletter ( (PDF 216k) that provides an analysis of the key provisions of FASB's proposals on financial instruments. The newsletter includes a section on international convergence and has five appendices:
  • Appendix A lists financial instruments that are outside the scope of the FASB's proposed ASU.
  • Appendix B includes a decision tree illustrating the proposed classification and measurement model.
  • Appendix C includes a table comparing the classification and measurement provisions of the proposed ASU with the key provisions in IFRS 9 and the IASB's tentative decisions to date regarding the accounting for financial liabilities.
  • Appendix D contains a tabular comparison of the FASB's proposed impairment model and the IASB's exposure draft on impairments (issued in November 2009).
  • Appendix E gives an overview of the FASB's proposed approach to hedge accounting.
As the newsletter says: While this is a significant amount of reading, it's all relative; it's condensed from the FASB's 214-page exposure draft.

 

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Updated EFRAG 'endorsement status report'

28 May 2010

The European Financial Reporting Advisory Group (EFRAG) has updated its report showing the status of endorsement, under the EU Accounting Regulation, of each IFRS, including standards, interpretations, and amendments.

Click to download the Endorsement Status Report as of 28 May 2010 (PDF 58k).

Currently, the following seven IASB pronouncements await endorsement action:

  • IFRS 9 Financial Instruments
  • Amendment to IFRIC 14 Prepayments of a Minimum Funding Requirement
  • IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
  • Amendments to IFRS 1 Additional Exemptions for First-time Adopters
  • Revised IAS 24 Related Party Disclosures
  • Amendment to IFRS 1 Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters
  • Improvements to IFRSs.

You can always find the endorsement status report here.

 

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Australia model financial statements for 2010

28 May 2010

Deloitte Australia has released their model financial statements for financial years ending on or after 30 June 2010. Australian accounting standards are identical to IFRSs.

The main changes from 2009 that are illustrated in this publication are:

  • AASB 3 Business Combinations (2008)
  • AASB 7 Financial Instruments
  • AASB 8 Operating Segments
  • AASB 101 Presentation of Financial Statements
  • AASB 127 Consolidated and Separate Financial Statements (2008)
  • AASB 1039 Concise Financial Reports

The Illustrative Annual Report is released in four parts plus a summary of Key Changes at your Finger Tips:

Click for our Australia Country Page.

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Heads Up on FASB's comprehensive income proposals

28 May 2010

Deloitte (United States) has published the 27 May 2010 edition of the Heads Up Newsletter explaining the FASB's exposure draft on comprehensive income.

Both the IASB and the FASB have issued proposals to require all entities to present profit or loss and other comprehensive income (OCI) in separate sections of a single continuous statement of comprehensive income.
Click for Heads Up newsletter, Vol. 17, Issue 18: May 27, 2010, FASB Issues Proposed Guidance on Presentation of Comprehensive Income

 

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IASB invites international comments on FASB FI proposals

28 May 2010

The IASB has Invited its International Constituents to submit comments to the FASB on the FASB's Financial Instruments Proposals.

The IASB is asking their constituents to submit comment letters on the FASB proposal. Feedback will be helpful to the FASB when it re-deliberates its proposals and finalises any requirements. The IASB will use that feedback when it considers how to reconcile any differences between IFRS requirements and US GAAP. Because this project is part of the global convergence project, it is important for the FASB to receive feedback on the proposed model from the international community.
Comment letters should be submitted directly to the FASB by 30 September 2010.
Click for:

 

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Report on impairment of financial assets

27 May 2010

The IASB has posted on its website a summary of the discussions to date by the Expert Advisory Panel (EAP) on impairment of financial assets.

The EAP met on 24-25 May 2010 to discuss the operational challenges of the expected cash flow model that the IASB proposed in its November 2009 Exposure Draft Financial Instruments: Amortised Cost and Impairment. Click here to access the Summary of Expert Advisory Panel Discussions on the IASB's website.

 

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FASB proposals on financial instruments, comprehensive income

26 May 2010

The US Financial Accounting Standards Board (FASB) has issued exposure drafts (EDs) of proposed accounting standards on financial instruments and comprehensive income.

Both relate to joint projects with the IASB. The IASB has already:

and is working on projects on hedge accounting, and statement of comprehensive income(exposure drafts expected shortly).
Overview of the FASB proposals

Financial instruments

  • The accounting would be based on the characteristics of the financial instrument and how assets and liabilities are used in the business. Classification determined at acquisition or issuance; reclassification not permitted.
  • Financial assets that have variable cash flows or that are regularly traded would be accounted for at fair value, with value changes reflected in net income (regardless of business strategy). This would include all derivatives.
  • Also, changes in the fair value of equity securities, certain hybrid instruments, and financial instruments that can be contractually prepaid in such a way that the holder would not recover substantially all of its investment also would be recognised in net income each reporting period (regardless of business strategy).
  • For financial assets that are held for collection of cash:
    • Both amortised cost and fair value measures would be presented in the balance sheet
    • FV changes arising from interest accruals, credit impairments and reversals, and realised gains and losses would be recognised in net income
    • Other FV changes recognised in other comprehensive income
    • The asset side of the balance sheet would show loans receivable as follows:
      Loans:  
      Amortised cost XXX
      Allowance for credit losses (XX)
      Residual FV adjustment (XX)
      Fair value XXX
  • Equity could be presented as follows:
    Common stock XXX
    Retained earnings XXX
    Accumulated OCI, excluding fair value changes XXX
    Equity excluding FV changes YYY
    Fair value changes on financial instruments (XX)
    Total comprehensive equity ZZZ
  • The scope of this ED includes investments in equity securities when the investor has significant influence over the investee but the operations of the investee are unrelated to the investor's consolidated operations. This means that such investments would no longer be accounted for by the equity method.
  • Financial liabilities would be accounted for similarly to financial assets, reflecting how financial assets and liabilities are managed together. Bank core deposit liabilities would be remeasured each period using a current value method that reflects the economic benefit that an entity receives from this lower cost, stable funding source; some may qualify for remeasurement through other comprehensive income (OCI). Some financial liabilities that would otherwise be at fair value would be eligible for an 'amortised cost option' to avoid an 'accounting mismatch' between recognised assets and liabilities.
  • Loans and other debt instruments in the held for collection or payment category will be tested for impairment using a single model for estimating credit losses. The proposal would remove the existing 'probable' threshold for recognising impairments on loans, resulting in an 'expected loss' model.
  • Hedge accounting criteria would be simplified:
    • An entity could continue to designate particular risks in financial items as the risks being hedged in a hedging relationship, with only the effects of the hedged risks reflected in net income each reporting period.
    • The 'shortcut method' and the 'critical terms match' method would be eliminated.
    • An entity would no longer be able to discontinue hedge accounting simply by removing a hedging designation. Hedge accounting would be discontinued only if the criteria for hedge accounting are no longer met or the hedging instrument expires, is sold, terminated, or exercised.
  • Effective dates and transition:
    • Currently estimated to be 2013
    • Non-public entities with less than $1 billion in total consolidated assets would be allowed a four year deferral beyond the effective date from certain requirements relating to loans and core deposits.
    • An entity would apply the proposed guidance by means of a cumulative-effect adjustment to the statement of financial position for the reporting period that immediately precedes the effective date. Early adoption would be prohibited.
Comprehensive income
  • FASB proposes to require presentation of total comprehensive income and its components in two parts – net income (referred to as 'profit or loss' in IFRSs) and other comprehensive income (OCI) – in a single, continuous statement of financial performance.
    • Presentation of financial performance in two separate financial statements would be prohibited.
    • Paragraph 220-10-45-10A of the proposal identifies 11 types of gains and losses that are currently reported as items of OCI under US GAAP.
    • An entity that has no items of OCI would not be required to present comprehensive income.
  • The proposal would not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.
  • The proposal would not affect the calculation of earnings per share.
  • If adopted, the proposal would be:
    • Effective at same time as financial instruments changes
    • Applied on a fully retrospective basis to improve comparability between reporting periods. Early adoption would be permitted, because compliance with the proposed amendments is already permitted.

Comment deadline on both EDs is 30 September 2010. FASB plans to hold roundtable meetings on 12 and 21 October 2010 to collect further input.

The EDs may be downloaded without charge from FASB's website. Appendix A of the FASB ED contains a detailed comparison of the FASB proposals and the financial instruments model currently being developed by the IASB.

FASB has also published a briefing document (PDF 1,339k) about the financial instruments proposal, along with a podcast featuring an in-depth audio interview with FASB Chairman Robert Herz about financial instruments. The FASB will also be hosting a live webcast on the financial instruments proposal on 30 June.

Click for FASB news release (PDF 49k).

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Exposure Draft on statement of comprehensive income

26 May 2010

The IASB has published for public comment an exposure draft (ED) proposing to require that all entities present profit or loss and other comprehensive income (OCI) in separate sections of a single continuous statement.

This would amend IAS 1 Presentation of Financial Statements, which currently allows entities a choice of presenting results of operations either (a) in a single, continuous statement similar to the proposal in the ED or (b) in two separate statements – an income statement and a statement of comprehensive income. Other proposals in the ED include:
  • Items of OCI should be grouped on the basis of whether they will eventually be 'recycled' (reclassified) into the profit or loss section of the statement of comprehensive income.
  • Income tax on items presented in OCI would be allocated between items that might be subsequently 'recycled' and those that will not be 'recycled', if the items in OCI are presented before tax (which is an option).
  • The title of the statement of comprehensive income would be changed to 'Statement of profit or loss and other comprehensive income' when referred to in IFRSs, though entities could use another title (such as 'statement of comprehensive income').
The proposals were jointly developed with the US Financial Accounting Standards Board (FASB), which is also seeking public comment on changes to the presentation of OCI as part of their recent financial instruments proposals (see our earlier story).

The comment deadline on ED/2010/5 Presentation of Items of Other Comprehensive Income is 30 September 2010. Click for IASB Press Release (PDF 100k). Link to IAS Plus Project Page.

 

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IASB webcast on leases

26 May 2010

On Thursday 10 June, IASB staff will host a live web presentation to provide an update on the IASB's project on Accounting for Leases.

Participants will have an opportunity to submit questions. There's no charge, but you must register:
  • Webcast Topic: IASB project on accounting for lease contracts
  • Date and Time: Thursday, 10 June 2010, 10:00am and repeated at 15:00pm London time
  • More Information and Registration: Click Here (IASB's website)

 

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