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EU will require foreign audit firms to register

15 Feb 2006

In a (PDF 93k) to the US Chamber of Commerce in Washington last week, EU Internal Market Commissioner Charlie McCreevy cited eliminating the SEC's accounting reconciliation requirement between IFRSs and US GAAP as one of the four most pressing Transatlantic regulatory matters.

He also outlined the progress that has been made in capital market reforms in the EU. He indicated that the EU shortly will adopt regulations requiring registration of foreign audit firms that perform audits in the EU. An excerpt:

Take auditing for example. The EU has just put the finishing touches to its new directive on Statutory Audit (the 8th Directive). During its implementation one of the key challenges will be the question of registration of third country audit firms in the EU by 2008. All third country audit firms, including US ones, auditing foreign companies listed in the EU will have to be registered with EU oversight bodies - unless their home country oversight bodies can be considered as equivalent.

Similarly, EU firms auditing SEC registrants will face inspections from the PCAOB in 2006 and 2007. The new EU directive provides for cooperation with the PCAOB on access to audit working papers. These are tricky issues where the EU and the US must have close and pragmatic cooperation or willingness to 'agree to agree' as Bill McDonough, former chairman of the PCAOB, put it. Both sides have to deliver. And both sides must be willing to respect each other's rules and limitations. Deepening cooperation is the name of the game.

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EFRAG recommends IAS 21 amendments

14 Feb 2006

EFRAG has recommended that the European Commission endorse, for use in Europe, the recent Amendments to IAS 21 The Effect Of Changes in Foreign Exchange Rates - Net Investment in a Foreign Operation.

Click for EFRAG Letter (PDF 18k).
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EFRAG letter to IASB on SME project

14 Feb 2006

The European Financial Reporting Advisory Group (EFRAG) has written to IASB Board Vice Chairman Tom Jones, who chairs the Board's SME Working Group, recommending that the Board change its approach to developing an exposure draft of an IFRS for Small and Medium-sized Entities (SMEs).

Here is an excerpt from EFRAG's Letter (PDF 33k):

EFRAG wants to express its full support for the comments you made in your introduction to the Board's deliberations at the January meeting where you indicated that:

  • (a) the direction in which the project is presently heading under Board members' guidance is leading to a standard which appears far too lengthy and complex; and
  • (b) more simplifications are needed than decided up to date in order to meet constituents' expectations.

We agree with this view. We think it is important that the IFRS for SMEs is easy to understand and comprehensive on a stand-alone basis.

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EU regulators will study reporting requirements

12 Feb 2006

The three main committees of European Union financial regulators – the Committee of European Securities Regulators (CESR), the Committee of European Banking Supervisors (CEBS), and the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) – have published a common cross-sector work programme for 2006. The main goal of this supervisory cooperation is to enhance consistency in implementing EU legislation across financial sectors.

The work programme includes an examination of reporting requirements, including IFRSs:

The Committees will request input from relevant market participants to take stock of potential inconsistencies in reporting requirements stemming from sectoral EU directives applying to European supervised entities and market participants, taking into account IFRS. The Committees aim at presenting a first result of this inventory within the second half of 2006. Based on this inventory, future work may be proposed.

Click for (PDF 33k) and related (PDF 108k). CESR, CEBS, and CEIOPS are sometimes referred to as the '3 Level 3' regulators or '3L3'.
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IFAC paper on auditing sustainability reports

11 Feb 2006

The International Federation of Accountants (IFAC) has issued a consultation paper that explores the assurance aspects of the Global Reporting Initiative's (GRI's) proposed new Sustainability Reporting Guidelines (G3).

The GRI, which develops global reporting guidelines on the economic, environmental, and social performance of organisations, has released draft guidelines designed to enhance the comparability, clarity, ease of use, and assurability of sustainability reports. IFAC's consultation paper, Assurance Aspects of G3 - The Global Reporting Initiative's 2006 Draft Sustainability Reporting Guidelines, explores issues in the proposed G3 Guidelines that specifically relate to assurance reporting. The paper is aimed primarily at professional accountants with some familiarity with sustainability assurance. IFAC requests comments by 31 March 2006. Click to download:
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EFRAG concerns on IASB measurement paper

11 Feb 2006

The European Financial Reporting Advisory Group (EFRAG) has invited comments on its draft response to the IASB Discussion Paper Measurement Bases for Financial Accounting - Measurement on Initial Recognition.

In its draft response, EFRAG expresses "a number of fundamental concerns regarding the reasoning and conclusions reached in the paper", including the following:
  • The paper's exclusive focus on initial measurement in isolation from subsequent measurement.
  • The "basic assumption... that perfect markets (or at the very least active and liquid markets that involve low transaction costs) exist for every asset and liability". In EFRAG's view this is the exception rather than the norm.
  • The necessity to decide on financial statement concepts of financial performance and financial position before addressing measurement issues.
  • Lack of evidence for the superiority of market value measurement objectives over entity-specific measurement objectives. "If the arguments in the paper are the only arguments in favour that exist and have been expressed in the paper in the best way possible, we do not understand how the paper could have reached the conclusions it has."
Click to download EFRAG's Draft Letter (PDF 100k). EFRAG requests comments by 1 May 2006.
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Interview on a range of IFRS and SME issues

10 Feb 2006

We have posted an Interview with Paul Pacter (PDF 399k), Deloitte director and IAS Plus Webmaster, published in The Accountant (Malta) Winter 2005 issue.

The interview covered IASB standards for small and medium-sized entities and other IFRS-related issues including 'balance-sheet orientation', user needs, relevance vs. reliability, the 'stable platform' of IFRSs, and prospects for change over the next ten years. Paul has also written about Accounting Standards in 2015 (PDF 267k) in A Plus, the magazine of the Hong Kong Institute of CPAs.
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Eliminating the IFRS reconciliation in the USA

10 Feb 2006

European Union Internal Markets Commissioner Charlie McCreevy and US Securities and Exchange Commission Chairman Christopher Cox met in Washington on 8 February 2006. They discussed, among other things, progress toward eliminating the need for reconciliation between International Financial Reporting Standards and US Generally Accepted Accounting Principles (GAAP) in SEC filings by non-US IFRS issuers.

Both the EC and the SEC agreed that, for the reconciliation to be eliminated, regulatory procedures need to be in place in a non-US SEC registrant's home country to ensure that IFRSs are applied and interpreted faithfully and consistently. Work on those procedures in the EU is underway. Click for:
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New Global Offerings Services newsletter

10 Feb 2006

We have posted the (PDF 228k).

Global Offerings Services is a global team of Deloitte practitioners assisting non-US companies and non-US practice office engagement teams in applying US and International accounting standards (that is, US GAAP and IFRSs) and in complying with the SEC's financial reporting rules. Past GOs Newsletters are Here.
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Special IAS Plus newsletter on operating segments

10 Feb 2006

On 19 January 2006, the IASB published Exposure Draft 8 Operating Segments.

ED 8 would replace IAS 14 and align segment reporting with the requirements of FASB's SFAS 131 Disclosures about Segments of an Enterprise and Related Information. Deloitte has published a (PDF 69k) explaining ED 8. You will find links to all past IAS Plus newsletters Here.

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