Proposed IFRS Roadmap

The Commission's staff, in particular the folks in the Office of the Chief Accountant and the Division of Corporation Finance, have been working to help me and my fellow Commissioners evaluate the comments we received on the proposed IFRS Roadmap. In terms of where we are in the process of moving forward, the comment period ended in April with over 200 thoughtful letters received. We are, as always, carefully reading all of these responses – most of them, more than once. The comment letters raise a number of complex issues, including issues related to the workability of various aspects of the proposed approach. We are very thankful to all who took the time to share their knowledge and experience with us.

Our next steps will, of course, be determined in part by the feedback we received. Commenters appear to generally agree on the benefits of a single set of high quality global accounting standards. Commenters differ, however, and differ strongly, on the best plan for getting there. Reading through many of the comments, I have been struck not only by the diversity, but also by the intensity of opinions on the issues.

As with any important policy question, we are proceeding deliberately and thoughtfully. We are working diligently to make sure we understand all of the advantages and disadvantages. Chairman Schapiro has said that we would soon turn to the proposed IFRS Roadmap, and we are doing just that. At this stage in our review process, I expect we will likely consider further action sometime in early 2010.

We call for a set of universally accepted standards for the disclosure to shareholders of climate change-related information1 connected to financial performance and to mainstream financial reporting.2 We propose that policy makers endorse collaboration between all relevant stakeholders to form an independent standard setter charged with achieving these goals.

We call on policy-makers to endorse the establishment of an independent, stakeholder-led standard setting body with appropriate accountability to public authorities, tasked with the development of a single set of universal standards for businesses to make climate change-related disclosures, linked to financial performance and mainstream financial reports. We believe that this will promote provision of more trusted, accurate and reliable information to investors and other stakeholders, thus enabling them to make better-informed decisions and drive the scale of behavioral change necessary to achieve a low-carbon economy.

To be eligible to voluntarily start using IFRSs in 2010, domestic Japanese companies must meet both of (1) and (2) below:

1. All of the following requirements shall be met:
   • Shares issued by the company are listed on a Securities Exchange in Japan.
   • The company discloses in its Annual Securities Reports information regarding specific efforts to ensure appropriateness of its consolidated financial statements.
   • The company allocates executives or employees with ample knowledge about Designated IFRSs and has in place a structure that enables it to properly prepare consolidated financial statements in accordance with Designated IFRSs.
2. The company, its parent, a related company, or the parent of the related company shall either:
   • disclose under laws and regulations of a foreign jurisdiction periodically as required thereby, documents on its business conditions prepared in accordance with IFRSs;
   • disclose under rules set by a foreign security exchange markets periodically as required thereby, documents on its business conditions prepared in accordance with IFRSs; or
   • own a foreign subsidiary whose capital is equal to or exceeds the equivalent of two billion Japanese yen.

This joint FEE-EFRAG paper firstly provides detail on the context of the recent IASB proposals and then goes on to give a general description of the expected loss model (including two worked computations). This high-level analysis is followed by a discussion about what information is generated by the model, including a description of how the results would be presented and disclosed in the financial statements and associated notes. Finally the Paper compares the expected loss model with other kinds of impairment models.... The aim of the paper is to provide general characteristics of the expected loss model, highlight the potential complexities and challenges, and stress the key differences from other models, rather than provide the assessment of its suitability, which would be provided in the comment letters to IASB by both FEE and EFRAG next year.