News

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Buckle Up (On the Road to IFRS in the US)

16 Oct 2008

Deloitte (United States) has published Buckle Up (On the Road to IFRS).

International Financial Reporting Standards have quickly become a priority for US companies now that the Securities and Exchange Commission (SEC) has proposed an IFRS road map and rules changes. This book, the eleventh in our 'Straight Talk' series, helps executives understand the implications of IFRS and their role in addressing the associated changes. The publication also offers practical suggestions to help companies navigate through these important issues. "Today's decisions will determine the direction and speed of your transition. It can be a smooth ride, but could also become a roller coaster or a train wreck." Click to download Buckle Up (On the Road to IFRS) (PDF 3,661k).

 

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Deloitte Alert on fair value of perpetual preferred

16 Oct 2008

Deloitte (United States) has published a Financial Reporting Alert on SEC Issues Letter Clarifying Other-Than-Temporary Impairment Guidance for Perpetual Preferred Securities.

The SEC letter is mentioned in our 15 October news story. Click to download Deloitte Financial Reporting Alert 08-16 (PDF 28k). Note: This Alert was revised 18 October 2008.

 

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Notes from day 3 of the October 2008 IASB meeting

16 Oct 2008

The International Accounting Standards Board is holding its regular October 2008 meeting at the IASB's offices, 30 Cannon Street, London on Monday to Friday 13-17 October 2008. The meeting is open to public observation and is being webcast.

Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the meeting.

 

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Discussion Paper on financial statement presentation

16 Oct 2008

The IASB and the US FASB have jointly published for comment a Discussion Paper (DP) 'Preliminary Views on Financial Statement Presentation'.

The goal of the project is to create a standard that requires entities to organise financial statements in a manner that clearly communicates an integrated financial picture of the entity. The project is about how best to portray assets, liabilities, income, expense, cash flows and related information in financial statements. It is not about how those items are recognised or measured. The boards propose the following two objectives for financial statement presentation:

  • Cohesiveness. Formatting the information in financial statements so that a reader can follow the flow of information through the various statements
  • Disaggregation. Separating information that responds differently to economic events

To achieve these main objectives the boards have developed a principle-based format that is presented in the discussion paper and is visualised below:

 

Statement of Financial PositionStatement of Comprehensive IncomeStatement of Cash Flows
Business
  • Operating assets and liabilities
  • Investing assets and liabilities
Business
  • Operating income and expenses
  • Investing income and expenses
Business
  • Operating cash flows
  • Investing cash flows
Financing
  • Financing assets
  • Financing liabilities
Financing
  • Financing asset income
  • Financing liability expenses
Financing
  • Financing asset cash flows
  • Financing liability cash flows
Income taxes Income taxes on continuing operations (business and financing) Income taxes
Discontinued operations Discontinued operations net of tax Discontinued operations
Other comprehensive income, net of tax
Equity Equity

The Comment Deadline is 14 April 2009. Click for Press Release (PDF 43k). The IASB's goal is to issue an exposure draft of proposed revisions to IAS 1 by 2010.

 

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EC endorses IAS 39 reclassification amendment

16 Oct 2008

The European Commission has approved, for use in Europe, the IASB's recent Amendment to IAS 39 and IFRS 7 permitting reclassification of some financial instruments out of the fair-value-through-profit-or-loss category and out of the available-for-sale category.

The amendments introduce into IFRSs the same possibility of reclassifications that is already permitted under US GAAP. The Commission's endorsement has been published in the Official Journal of the European Union as Regulation (EC) No 1004/2008 (PDF 47k).
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EC Declaration on IAS 39 and IFRS 7

16 Oct 2008

In our news story immediately below, we noted that the European Commission has approved, for use in Europe, the IASB's recent Reclassification Amendment to IAS 39 and IFRS 7.

That approval was preceded by an extended discussion of a number of financial instruments accounting matters by the EC's Accounting Regulatory Committee (ARC, which met on 15 October 2008), by EU G8 Heads of State (who met on 4 October 2008), and by the ECOFIN (the Eurogroup and EU Economic and Finance Ministers Council, who met on 6-7 October 2008). It was also preceded by an EFRAG Recommendation and several related speeches by EC President Jose Manual Barroso (Speech #1, Speech #2, and Speech #3). Here are links to the various ARC documents: Concurrent with the Commission's decision to approve the IAS 39 reclassification amendment, the Commission also made the following public declaration:

COMMISSION DECLARATION

Given the turbulence in financial markets, the Commission will continue to closely monitor all accounting issues that could impact on the stability of financial institutions and financial markets and will keep under constant review the implementation of IAS 39 and IFRS 7.

The Commission will continue to work intensively with all stakeholders and will organise a meeting within the next few days* to consider other possible issues under IAS 39 and IFRS 7. The Commission will, in particular, review the issue of the fair value option, embedded derivatives, insurance questions, and any other issues in IAS 39 and IFRS 7 of concern, and requests the IASB and CESR to begin work immediately in order to find appropriate solutions in the public interest taking into account an appropriate level of transparency. The Commission will propose further amendments to IAS 39 and IFRS 7, by all legal means if necessary, by the end of October.

The Commission also considers that an in depth reflection is needed on fair value accounting, including possible procyclicality effects. The newly formed EFC group on procyclicality could be one avenue for taking forward this question expeditiously.

The Commission takes note that Member States want to have an in depth reflection on the standard-setting process.

*IAS Plus comment: This meeting is set for Tuesday 21 October 2008.
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Notes from day 2 of the October 2008 IASB meeting

15 Oct 2008

The International Accounting Standards Board is holding its regular October 2008 meeting at the IASB's offices, 30 Cannon Street, London on Monday to Friday 13-17 October 2008. The meeting is open to public observation and is being webcast.

Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers at the meeting.

 

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SEC guidance on fair value of perpetual preferred

15 Oct 2008

The Office of the Chief Accountant (OCA) of the US SEC has written to FASB Chairman Robert H Herz about how to assess declines in fair value for perpetual preferred securities (PPS).

US GAAP measures impairment differently for debt and equity instruments – some would say more rigorously for equity than for debt. The OCA notes that although PPS have 'debt-like characteristics', they are classified as equity because they are not redeemable. The letter states that:

OCA, after consultation with and concurrence of the FASB staff', has concluded that it would not object to an issuer, in assessing impairment of PPS, applying an impairment model (including an anticipated recovery period) similar to a debt security provided there has been no evidence of a deterioration in credit of the issuer (for example, a decline in the cash flows from holding the investment or a downgrade of the rating of the security below investment grade) until this matter can be addressed further by the FASB.
Concurrent with sending the letter, the SEC has asked the FASB to address this and related issues. Click to Download the SEC Letter (PDF 99k).

 

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Implications of US Economic Stabilization Act

15 Oct 2008

Deloitte & Touche LLP (United States) has published an edition of the Heads Up newsletter that summarises the key provisions of the US Emergency Economic Stabilization Act of 2008 and discusses the accounting, tax, and business issues raised by the Act that may require consideration in the upcoming weeks.

Click to Download this Issue of Heads Up (PDF 210k).

Among the accounting considerations discussed in the newsletter are:

  • Assessment of 'other-than-temporary impairment (OTTI)'
  • Classification of financial assets and liabilities as HTM or OTTI
  • Recognition of interest income and impairment of beneficial interests
  • Accounting by creditors for impairment of loans
  • Accounting by mortgage banking institutions
  • Measurement of fair value
  • Warrants and liability/equity classification
  • Guarantee accounting
  • Modifications of loans held in QSPEs
  • Compensation 'clawback' considerations
  • Income tax accounting
  • Disclosure adequacy

 

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EU is developing an 'accounting proposal'

15 Oct 2008

On 14 October 2008, José Manuel Durão Barroso, President of the European Commission, spoke at a press conference in advance of the two-day meeting of the European Council (heads of state of the 27 EU member states) that will be held on 15-16 October 2008. His remarks focused on the EU's response to the global financial crisis.

He noted, among other things, that today the Accounting Regulatory Committee will be considering a procedure for 'modifying accounting rules'. Click to Download Mr Barroso's Remarks (PDF 74k). The nature of the procedure or modifications is not indicated, but several press reports refer to possible relaxation of the fair value measurement rules for financial instruments. An excerpt:

We have now reached a comprehensive agreement and a detailed programme for the Euro area and the EU as a whole. A programme to restore liquidity. A programme to recapitalise banks and to protect savers and taxpayers. A programme to lay the foundations of recovery and future sustainability....

We have accelerated the procedure for modifying accounting rules. This will prevent healthy assets being undervalued. It will ensure EU companies are not at a competitive disadvantage with companies based in other jurisdictions. The Accounting Regulatory Committee will approve our proposal tomorrow, on Wednesday.
Also on 14 October 2008 (yesterday), the European Commission published FAQs on Europe's Response to the Financial Crisis (PDF 98k). The FAQ states:

The Commission has already launched fast-track procedures to adjust accounting rules in order to be sure that assets are not undervalued, confidence is not unnecessarily undermined and EU financial institutions not disadvantaged vis-à-vis their international competitors. Provided Member States and the European Parliament approve these changes quickly, this will allow the rules to be applied for the third quarter, from 1 July 2008.

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