This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.


Heads Up Image

Heads Up newsletter on US insurance accounting

03 Jul 2006

Deloitte & Touche LLP (United States) has published a special edition of the (PDF 83k) summarising the recently issued FASB Invitation to Comment Bifurcation of Insurance and Reinsurance Contracts for Financial Reporting.

This project could significantly affect the accounting for certain insurance contracts in the United States. Though FASB's Invitation is not published jointly with the IASB, the IASB does have an Insurance Accounting Project on its agenda. FASB requests comments by 24 August 2006.

The Heads Up points out that some concepts discussed in the Invitation, if adopted, would have a dramatic impact on buyers and sellers of such kinds of insurance as group accident and health, fleet automobile, and umbrella policies. Effects could include:

  • Requiring the buyers (including non-insurance companies) of many types of insurance to perform extensive analyses to determine whether insurance risk has been transferred, and establish or update their systems to enable them to bifurcate (split) the 'risk' elements of the contracts from the 'financing' elements.
  • Requiring the 'financing' elements to be accounted for as deposits, even if there are no risk-limiting features to the contract. This would significantly change the income statement results, because the financing element would be treated as if that portion of the risk had been self-insured.
  • Changing the tax treatment of insurance and reinsurance contracts.
IFRIC (International Financial Reporting Interpretations Committee) (blue) Image

IFRIC meeting 6-7 July 2006 will be Webcast

02 Jul 2006

For the first time, a meeting of the International Financial Reporting Interpretations Committee (IFRIC) will be Webcast when the IFRIC meets in London on Thursday 6 July and Friday 7 July 2006. There is no charge for the Webcast service.

Registration is required on the IASB's Website. The agenda and running order of the meeting are set out below.

6-7 July 2006, London Thursday 6 July 2006

Friday 7 July 2006

  • IFRS 2 Share-based Payment – Employee benefit trusts in the individual or separate financial statements of the sponsor
  • IAS 39 Financial Instruments: Recognition and Measurement – Criteria for identifying 'portions'
  • Recommendations regarding requests for IFRIC agenda items
    • Valuation of electricity derivatives
    • IAS 32 Financial Instruments: Presentation – Puts and forwards held by minority interests
    • IFRS 3 Business Combinations Are puts or forwards received by minority interests in a business combination contingent consideration
    • IAS 11 Construction Contracts/IAS 18 Revenue – Allocation of profit in unsegmented contracts
    • SIC 12 Consolidation of Special Purpose Entities – Relinquishment of control
    • IAS 39 Financial Instruments: Recognition and Measurement: Definition of a derivative: – Indexation on own EBITDA or own revenue
    • IAS 32 Financial Instruments: Presentation – Foreign currency instruments exchangeable into equity instruments of the parent entity of the issuer
    • IAS 32 Financial Instruments: Presentation – Changes in the contractual terms of an existing equity instrument resulting in it being reclassified to financial liability
    • IAS 1 Presentation of Financial Statements – Whether the liability component of a convertible instrument should be classified as current or non-current
    • IFRS 2 Share-based Payment – Incremental fair value to employees as a result of unexpected capital restructurings
    • IAS 16 Property, Plant and Equipment – Revaluation of investment properties under construction
2006jun Image

Agenda project pages updated for June 2006 meeting

02 Jul 2006

We have updated the following agenda project pages to reflect the Board's deliberations at the May 2006 IASB meeting: Accounting Standards for Small and Medium-sized Entities Conceptual Framework Fair Value Measurement Financial Instruments: Comprehensive Project IAS 33 Amendments - Earnings per Share IAS 37 Amendments - Provisions Insurance Contracts - Phase 2 IAS 34 Interim Financial Reporting: Interaction with IAS 36 and IAS 39 .

Heads Up Image

Heads Up newsletter on recent US proposals

01 Jul 2006

Deloitte & Touche LLP (United States) has published the June 2006 issue of the (PDF 98k) summarising three proposals issued recently by United States standard-setters: FASB and AICPA: Invitation to Comment, Enhancing the Financial Accounting and Reporting Standard-Setting Process for Private Companies FASB: Proposed FASB Staff Position No.

FAS 126-a, Revision to the Definition of a Public Entity to Include an Obligor for Conduit Debt Securities
  • GASB: Preliminary Views, Accounting and Financial Reporting for Derivatives
  • EITF Roundup Image

    June 2006 edition of EITF Roundup

    30 Jun 2006

    We have posted the (PDF 609k), which provides an overview of the issues discussed, consensuses reached, and administrative matters discussed at the 15 June 2006 meeting of FASB's Emerging Issues Task Force.

    You will find past issues Here. Issues covered in the June 2006 edition include:
    • Issue No. 05-1 Accounting for the Conversion of an Instrument That Becomes Convertible Upon the Issuer's Exercise of a Call Option*
    • Issue No. 06-1 Accounting for Consideration Given by a Service Provider to Manufacturers or Resellers of Equipment Necessary for an End-Customer to Receive Service From the Service Provider
    • Issue No. 06-2 Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43 Accounting for Compensated Absences*
    • Issue No. 06-3 Disclosure Requirements for Taxes Assessed by a Governmental Authority on Revenue- Producing Transactions*
    • Issue No. 06-4 Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split- Dollar Life Insurance Arrangements
    • Issue No. 06-5 Accounting for Purchases of Life Insurance - Determining the Amount That Could Be Realized in Accordance With FASB Technical Bulletin No. 85-4 Accounting for Purchases of Life Insurance
    • Issue No. 06-6 Application of EITF Issue 05-7, 'Accounting for Modifications to Conversion Options Embedded in Debt Instruments and Related Issues' * Final Consensus Reached
    IASC Foundation (blue) Image

    Notes from IASCF trustees' meeting

    29 Jun 2006

    The trustees of the International Accounting Standards Committee Foundation met on Wednesday and Thursday, 28 and 29 June 2006, at the Grand Hyatt Hotel, Berlin, Germany.

    A portion of the meeting on Wednesday afternoon was open to public observation. Presented below are the preliminary and unofficial notes taken by Deloitte observers that the open meeting:

    Public Portion of IASCF Meeting, 28 June 2006

    The Chairman of the IASB updated the Trustees on IASB activities. He pointed out that the Board's work programme would reflect its three main objectives pursued:

    • convergence with US GAAP,
    • getting more countries to use IFRSs, and
    • the SME project.

    Convergence with US GAAP

    The Chairman said that while the two Boards have a common base from which they are looking at the issues, they acknowledged the need to update and converge their conceptual frameworks – a project that the Boards are pursuing in stages. Due process steps will be taken on a chapter-by-chapter basis rather than for the entire framework. On each chapter the Board will first publish a Discussion Paper, then an Exposure Draft, and lastly a final version of the chapter. Of the eight chapters envisaged by the Board, the one on measurement seems to be the one that elicits most concerns from constituents. To address these, the Board plans to hold public round-tables early in 2007.

    Convergence projects are classified as short-term (resolvable by the end of 2007) and medium- to longer-term (after 2007). The IASB has already issued two Exposure Drafts on short-term projects – segment reporting and borrowing costs. EDs on three more – income taxes, joint ventures, and impairment – are likely towards the end of the year.

    Under the Memorandum of Understanding agreed between the IASB and the FASB in February, the Boards expect to have made progress on each of the longer-term projects by 2008. For some projects, this may mean simply an agenda decision, whilst for others some due process document or considerable progress is expected. The Chairman briefly described each of the longer-term projects and said that only two of them are likely to be finalised by the end of 2007 – business combinations and the fair value measurements. Regarding the latter, the Board has decided not to issue the forthcoming FASB statement on Fair Value Measurement as an Exposure Draft, but rather as a Discussion Paper. Comments received will be fed into an ED at a later stage.

    Other convergence activities

    In addition to seeking convergence with US GAAP, the Chairman reported that the Board had also launched convergence projects with its Chinese, Canadian, and Japanese counterparts. He remarked that he had received a further request from India to initiate a convergence project with the IASB.

    Amendments to IFRSs

    The Chairman said that at its June meeting the Board made two important decisions about the frequency of standard issuances or amendments:

    • Any pronouncement to be published would foresee at least a one-year implementation period. This means that even a standard that is finished before year-end 2007 would not become effective before January 1, 2009.
    • If the Board detects a flaw in its literature, that flaw will be put on a list of amendments that will be published as an 'omnibus amendments draft' on a yearly basis.

    With those two decisions, the Board hopes to have adequately addressed the concerns expressed by preparers.

    Use of IFRSs

    As regards the second objective, the Chairman pointed out that there were some 100 countries that were using IFRSs already. He expressed the hope of increasing that number by another 50 in the next few years.

    IFRS for Small and Medium-sized Entities (SMEs)

    The Chairman reported that work towards an SME Exposure Draft was in its final stage and is planned for completion in September. He noted the following key decisions that the Board had made:

    • the standard should cover all transactions usually expected to occur in an SME environment;
    • the SME book should be self-contained;
    • if a transaction occurring is not dealt with in the SME book, an SME should try to develop its accounting policy by using the principles in the SME book. Only when an SME could not derive a policy by following this path, it would be referred back to the full IFRSs;
    • the Board will describe the type of entities for which the standard is intended to apply. However, it will be left to the discretion of the individual jurisdiction to decide which entities should/could apply the SME standard.
    • All but three chapters of the SME draft standard are completed, the ones requiring further work being financial instruments, income taxes, and pensions. In response to a question from the Trustees, the Chairman said that an audit report would explicitly refer to the accounting regime used, that is, full IFRSs or IFRSs for SMEs.

    Principles-based standards

    The Chairman reiterated the Board's full support for principles-based accounting standards. He said that FASB and IASB had agreed to try to formulate 'overriding principles' that would leave no room for exceptions. From these, the individual accounting principles would be derived. If, for whatever reason, the FASB decided to add guidance in their version of the agreed-upon pronouncements, a mechanism would have to be installed to prevent these from flowing into the IFRSs.

    The Chairman of the Trustees thanked the IASB Chairman for his report and asked for comments from the Trustees. The Trustees discussed the issues presented and had several follow-up questions for the Chairman. There was overall support for what the Chairman had presented. In response to a question whether he could see any problems or hindrances on the way to pursue the agenda presented, the IASB Chairman reminded the Trustees that out of the eleven major convergence projects, only two would have to be completed by the end of 2007. He acknowledged that the agenda is ambitious but feasible and not overburdening the resources at hand. The only concern he expressed is that the next SEC Chief Accountant may be someone who would not feel bound to what had been agreed with the former Chief Accountant. No decisions were taken.

    Report of the Chairman of the Standards Advisory Council (SAC)

    The SAC Chairman reported on the SAC meeting held on Monday and Tuesday, 26 and 27 June 2006. Among the points he noted:

    • The SAC members had showed full support for the SME project.
    • They had given their approval for pensions and leasing projects to be added to the agenda.
    • They seemed to be less sympathetic to taking a related parties project on the agenda (see below).
    • SAC members expressed some disappointment about the long timeframe envisaged for the big issues to be resolved, although the SAC members acknowledged that this was partly due to the restricted number of staff available.
    • SAC discussed the IFRS brand, strategy, interpretation of IFRSs, and funding/staffing issues in closed session. With regard to strategy, a small working group will be formed to define 'effectiveness' (in terms of the Board's way to tackle its agenda) and to put forward ideas of how it could be measured.

    Few questions were asked, and no decisions were taken.

    IASB agenda proposals

    The IASB Chairman said that three issues would be put forward for consideration, namely:

    • amendment to IAS 24 Related Party Disclosures;
    • Revision of IAS 19 Employee Benefits; and
    • Revision of IAS 17 Leases.

    The first of the three issues had been brought to the Board's attention by China and Japan. The basic question put forward had been how IAS 24 could be applied in a jurisdiction where most/many companies are state-owned and engage in transactions with each other. If all of those transactions must be disclosed – as the current IAS 24 requires – a huge amount of information of questionable benefit will be included in the notes to the financial statements. The Pensions and Leases projects are included in the MoU and would require an agenda decision. The Chairman pointed at the necessity to look at both issues, since the current literature allow entities to exclude substantial liabilities from the balance sheet.

    The Trustees debated the issue for some time. A strong majority favoured moving Pensions and Leases to the active agenda, although not all Trustees saw the immediate need for a decision at this stage. With regard to the Related Party issue one Trustee remarked that it would be preferable to deal with the issue as well since it would support the Board in achieving its second major goal (namely to increase the number of countries using IFRSs).

    The Chairman of the Trustees then asked the Vice Chair of the IASB to give a brief overview about the current stage of IFRIC's project on service concession arrangements. The Vice Chairman pointed out that despite considerable progress being made some 'noise' was expected as soon as the final interpretation would be published. One of the Trustees claimed that even the revised interpretation would be unacceptable in his jurisdiction, as 30 to 40 percent of all listed entities would be forced to go out of business if the draft Interpretations are issued unchanged.

    Report from IFRIC Chairman

    The Chairman of the IFRIC pointed out that most requests for interpretation were received on the subjects of financial instruments, leases, revenue recognition, and share-based payments. He said that IFRIC actually spends most of his time on issues that are not taken to the agenda, mostly because the submitter sought implementation guidance and not an interpretation. The IFRIC Chairman told the Trustees that the IFRIC will seek to enhance its process in a number of ways:

    • All future IFRIC meetings will be webcast and stored on the IASB's website, starting with IFRIC's July 2006 meeting.
    • IFRIC plans to keep its constituents informed as to the stage of due process for each issue submission. The Chairman of the IFRIC pointed out that all of IFRIC's decisions not to take an issue on the agenda were already available on the IASB's website by IAS/IFRS concerned, although the references would not be kept updated.

    Although most Trustees seemed to agree with IFRIC's procedure in dealing with the issues, some concerns were raised with regard to the number of 'non-interpretations' issued, since other 'interpretive bodies' might fill the gap and issue guidance they believed to be correct. The Chairman acknowledged that this was a known issue.

    This summary is based on notes taken by observers at the IASCF Trustees' meeting and should not be regarded as an official or final summary.

    United Kingdom Image

    UK FSA voluntarily reports using IFRSs

    27 Jun 2006

    The United Kingdom Financial Services Authority (FSA, the securities and banking regulator) has chosen voluntarily to report under International Financial Reporting Standards starting with the financial year ending 31 March 2005. A report from the FSA shows the greatest impact of IFRSs was in the areas of leases, employee benefits, and intangible assets.

    Click for (PDF 185k).
    PIOB (Public Interest Oversight Board) (lt gray) Image

    New page for Public Interest Oversight board

    26 Jun 2006

    We have st up a new page on IAS Plus for the Public Interest Oversight Board (PIOB), which was formed last year to oversee the work of those committees of the International Federation of Accountants (IFAC) that have public interest responsibilities, namely: International Auditing and Assurance Standards Board International Accounting Education Standards Board International Ethics Standards Board for Accountants Their respective Consultative Advisory Groups IFAC's Compliance Advisory Panel (CAP). We have put a permanent link to our PIOB page among the 'Key Groups' at the bottom of the right-hand column on this page, as well as on our IFAC Page. .

    We have st up a new page on IAS Plus for the Public Interest Oversight Board (PIOB), which was formed last year to oversee the work of those committees of the International Federation of Accountants (IFAC) that have public interest responsibilities, namely:

    • International Auditing and Assurance Standards Board
    • International Accounting Education Standards Board
    • International Ethics Standards Board for Accountants
    • Their respective Consultative Advisory Groups
    • IFAC's Compliance Advisory Panel (CAP).
    We have put a permanent link to our PIOB page among the 'Key Groups' at the bottom of the right-hand column on this page, as well as on our IFAC Page.
    News default Image

    Insurance regulators comment on IASB measurement issues

    26 Jun 2006

    The International Association of Insurance Supervisors (IAIS) has published its second set of observations on Issues Arising as a Result of the IASB's Insurance Contracts Project - Phase II (PDF 164k).

    The IAIS "believes that it is most desirable that the methodologies for calculating items in general purpose financial reports can be used for, or are substantially consistent with, the methodologies used for regulatory reporting purposes, with as few changes as possible to satisfy regulatory reporting requirements." The issues paper comments on measurement issues common to both general purpose financial reporting and regulatory reporting for consideration by the IASB.
    SEC (US Securities and Exchange Commission) (dark gray) Image

    Regulatory implications of cross-border exchange mergers

    25 Jun 2006

    In a speech at the Harvard Business School titled (PDF 66k), US SEC Chairman Christopher Cox discussed the heightened importance of uniform securities regulation and global accounting and auditing standards.

    An excerpt:

    National regulation will still be important. Indeed, it will be more important than ever, in order to protect investors from the new opportunities for fraud, unethical trading practices, and market manipulation that truly international markets could create. But equally important will be cooperation among national regulators. If national regulators don't cooperate with one another, and update their own rules and practices, the combination of global exchanges could serve as a robust new means for the unscrupulous to circumvent laws and regulations and to hide illegal activities from surveillance....

    There are still many areas of significant difference between our standards and those of other countries. For example, we have different accounting and auditing standards, and, importantly, different liability standards. But the key to success going forward is to recognize that harm to investors will be minimized if we agree to adhere to high quality securities regulation and there is a strong degree of cooperation and coordination among regulators.

    Click for on cross-border exchange mergers (PDF 35k).

    Correction list for hyphenation

    These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.