News

FASB (old) Image

FASB issues two convergence exposure drafts

10 Oct 2008

The US Financial Accounting Standards Board has issued two separate but related Exposure Drafts for public comment.

The two proposed FASB Statements, Going Concern and Subsequent Events, would:
  • incorporate accounting guidance that originated as auditing standards into the body of authoritative literature issued by the FASB, and
  • converge US GAAP generally accepted accounting principles and International Financial Reporting Standards.
Including this guidance in authoritative accounting literature as well as in auditing standards emphasizes that accounting and reporting are the primary responsibility of an entity and its management, not its auditor. Click for Press Release (PDF 20k).

 

European Union (old) Image

Commissioner McCreevy urges easing accounting rules for banks

10 Oct 2008

In remarks before a plenary session of the European Parliament in Brussels on 8 October 2008, Charlie McCreevy, the European Commissioner for Internal Market and Services, urged the IASB to ease accounting rules for banks under IFRSs.

He said that banks should be allowed to transfer assets out of fair value through profit or loss ('trading book') into an amortised-cost-with-impairment model ('banking book') on the same basis as US GAAP allows. Under the US GAAP model, such transfers are 'rare', and the fair value at date of transfer becomes the 'deemed cost' going forward. Several news reports have suggested that Mr McCreevy proposed that the transfers should result in a bank retrospectively restating the investments back to their original historical cost at acquisition, with a corresponding increase in the bank's capital. But this is not indicated in Mr McCreevy's Prepared Remarks (PDF 72k). Here is an excerpt:

In addition we are urgently putting changes to our accounting rules to ensure Banks in the EU can avail of the same flexibility that is offered to banks in the US. Namely this will provide the option for individual banks if they want to move assets from their trading books to their banking books. This is a comitology measure which I hope the Parliament will be able to give its agreement as a matter of urgency. In the meantime I would hope that national supervisors would apply these new provisions already so that banks, who wished to, could avail of this new possibility for their third quarter results. In addition there is the IASB's acceptance of the US SEC's clarification of the use of fair value accounting when there is no active market information. This is also highly relevant for banks and should be used for third quarter reporting.
Heads Up Image

Heads Up on meeting of FASB's Valuation Resource Group

09 Oct 2008

The latest edition of the Heads Up newsletter from Deloitte & Touche LLP (United States) summarises nine issues discussed at the 23 September 2008 meeting of FASB's Valuation Resource Group (VRG).

FASB established the VRG to provide the FASB staff with information about implementation issues regarding fair value measurements used in financial reporting and the alternative viewpoints associated with those implementation issues. Click to Download this Issue of Heads Up (PDF 135k). There is an archive of past issues of Heads Up Here.

The nine issues the VRG discussed are:

  • VRG Issue No. 2008-11: IASB's Expert Advisory Panel White Paper
  • VRG Issue No. 2008-12: Fair Value Disclosure
  • VRG Issue No. 2008-13: Observable Versus Unobservable Inputs
  • VRG Issue No. 2008-14: Fair Value Measurement of Liabilities Under Statement 157
  • VRG Issue No. 2008-15: Allocation of In-Use Valuation to Individual Unit of Account
  • VRG Issue No. 2008-16: Fair Value of Accounts Receivables, Accounts Payable, and Accrued Liabilities in a Business Combination
  • VRG Issue No. 2008-17: Identification and Allocation of Market Participant Synergies
  • VRG Issue No. 2008-18: Fair Value of a Noncontrolling Interest and a Previously Held Equity Interest
  • VRG Issue No. 2008-19: Impact of Valuing Contingent Liabilities Under FAS 141(R) — Gross Versus Net Analysis

 

Canada Image

CICA statement on fair value accounting for investments

09 Oct 2008

The Canadian Institute of Chartered Accountants has issued a Statement on Fair Value Accounting by Paul Cherry, Chair, Canadian Accounting Standards Board.

Mr Cherry's message is, in a nutshell, fair value measurement of financial instruments reflects the reality in the marketplace today. Historical cost does not. Don't blame accounting for telling it like it is. Click to Download the Statement (PDF 38k). Here is an excerpt:

Generally Accepted Accounting Principles require many investments in stocks and bonds to be measured at fair value. Investments carried at cost must be assessed for impairment at the time of reporting and, if determined to be impaired, must be written down to their estimated fair value as at the balance sheet date. Basically, Canadian companies are being asked to make a realistic estimate of the holding's fair value as at the balance sheet date and then clearly explain to investors how that figure was determined. In determining a holding's fair value, companies must estimate the price that market participants would sell for, or buy at, in an active liquid market, if there were one.

In times of financial crisis, it is natural to ask: 'What went wrong?' Some people blame the current crisis on the increased use of fair value accounting for financial instruments. Yes, measuring fair value in turbulent times can be very difficult, but the huge swings in market prices reflect the reality of the marketplace. Do we really want financial statements based on management's guess as to what market prices might be in 'normal' conditions at some point in the future? There is a growing realization that the accounting requirements are not to blame. Fair value accounting tells investors and the public 'the way it is'.

 

IASC Foundation (blue) Image

Trustees support IASB's accelerated steps on the credit crisis

09 Oct 2008

At their meeting in Beijing today, the Trustees of the IASC Foundation announced their unanimous support for the approach that the International Accounting Standards Board Announced on 3 October 2008 to accelerate its response to the credit crisis.

Under this approach, the IASB will seek appropriate language to eliminate any differences in how International Financial Reporting Standards and US GAAP address the issue of reclassification of financial instruments. The Trustees support the IASB's intention to complete this work by the end of next week. Click for IASC Foundation Press Release (PDF 179k). An excerpt:

In reaching this common view, the Trustees emphasised that they do not and would not take positions on the specific technical content of IFRSs; the Trustees therefore reaffirmed their commitment to preserving the independence of the IASB's standard-setting process. With more than 100 countries now using IFRSs, the Trustees highlighted the fact that any weakening of the IASB's independence would be likely to reduce transparency, potentially lead to a weakening of standards worldwide, and would ultimately undermine investor confidence at a fragile time for the world's markets.

 

SEC (US Securities and Exchange Commission) (dark gray) Image

SEC begins study of 'mark-to-market' accounting

09 Oct 2008

The US Securities and Exchange Commission has announced details of its study on 'mark-to-market' (fair value) accounting by financial institutions, as required by Section 133 of the Emergency Economic Stabilization Act of 2008. The study is to be completed by 2 January 2009, in consultation with the Secretary of the Treasury and the Board of Governors of the Federal Reserve System.

The study will focus on:
  1. The effects of such accounting standards on a financial institution's balance sheet
  2. The impacts of such accounting on bank failures in 2008
  3. The impact of such standards on the quality of financial information available to investors
  4. The process used by the Financial Accounting Standards Board in developing accounting standards
  5. The advisability and feasibility of modifications to such standards
  6. Alternative accounting standards to those provided in [Financial Accounting Standards Board] Statement Number 157
James Kroeker, Deputy Chief Accountant at the SEC, will be staff director for the study. Before joining the SEC, Mr Kroeker was a partner at Deloitte and Touche, LLP. The SEC intends to schedule public roundtables to obtain input into the study from investors, accountants, standard setters, business leaders, and other interested parties. Click for SEC Press Release (PDF 26k).

 

AICPA (American Institute of CPAs) (lt green) Image

AICPA launches new IFRS newsletter

08 Oct 2008

The American Institute of Certified Public Accountants has launched a new monthly newsletter on IFRSs called IFRS Report.

IFRS Report includes brief summaries of articles from a wide range of publications and other resources and provides links back to the original sources. You can Subscribe Here free of charge by providing a valid email address.

The first issue, published on 2 October 2008, covers the following topics:

IFRS Update

  • Foundation publishes guide to XBRL version of IFRS
  • US accountants intrigued by, wary of IFRS
  • IFRS shift will be challenging, rewarding
International Watch
  • European politicians urge changes to fair-value accounting rules
  • US move makes Japan reconsider adopting IFRS
Market Highlights
  • Senate approves rescue plan; House expected to vote again
Regulatory Developments
  • SEC issues clarifications of fair-value rules
  • IASB to discuss fair-value, off-balance-sheet accounting
IFRS at work
  • BYU accounting program prepares for shift to IFRS
AICPA News
  • Discuss IFRS with your peers through IFRS blog
  • Call for volunteers to work on convergence of international accounting standards

 

Accounting Roundup Image

Accounting Roundup – third quarter 2008 review

08 Oct 2008

We have posted Accounting Roundup: Third Quarter in Review–2008, prepared by the Accounting Standards and Communications Group of Deloitte LLP (USA).

This newsletter provides brief descriptions of pronouncements affecting accounting, financial reporting, and corporate governance issued during 3Q-2008 by standard setters and regulators including FASB, EITF, AICPA, SEC, FASAB, PCAOB, GASB, IASB, and IFRIC. This quarterly review consists of articles, adapted as necessary, from issues of Accounting Roundup published in July and August 2008, as well as new articles for the month of September. There's also information about upcoming Dbriefs Webcasts. You will find past issues Here. International and IFRS-related developments covered in this edition of Accounting Roundup are:
  • IASB Issues Additional Guidance on Hedge Accounting
  • IFRIC Issues Interpretation on Construction of Real Estate
  • IFRIC Issues Interpretation on Hedges of a Net Investment in a Foreign Operation
  • IASB Issues Proposed Amendments to IAS 33 on Earnings per Share
  • IASB Issues Proposed Amendments to Eight IFRSs
  • IASB Issues Exposure Draft on Discontinued Operations
  • IASB Issues Exposure Draft on IFRS 1 Exemptions
  • IFAC Reissues Auditing Standard on Related Parties
  • IFAC Issues Exposure Draft of IPSAS 5 on Borrowing Costs
  • IFAC Issues Proposal on Code of Ethics for Accountants
  • IASC Foundation Issues Discussion Document on Constitution Review
  • IASB Issues Draft Document From Expert Advisory Panel
Click to view Accounting Roundup: Third Quarter in Review–2008 (PDF 1,221k, 56 pages).

 

European Union (old) Image

ECOFIN conclusions on accounting valuations

08 Oct 2008

Our News Story of 7 October noted that the Eurogroup and EU Economic and Finance Ministers Council (ECOFIN) would be discussing accounting valuation issues at its meeting in Luxembourg on 6 and 7 October 2008. ECOFIN has adopted a broad range of Conclusions on a Coordinated EU Response to the Economic Slowdown.

Here is the conclusion on asset valuation:

On asset valuation, revised standards are urgently awaited from the International Accounting Standards Board; otherwise, persistent concern about the accounting treatment of assets will continue to undermine investor confidence.

Click to view Conclusions on a Coordinated EU Response to the Economic Slowdown (PDF 143k).

European Union (old) Image

Additional ECOFIN conclusions on accounting

08 Oct 2008

Our story immediately below reports on a conclusion that the Eurogroup and EU Economic and Finance Ministers Council (ECOFIN) reached on accounting valuation issues at its meeting in Luxembourg on 6 and 7 October 2008. ECOFIN has also published another set of conclusions titled Immediate Responses to Financial Turmoil that addresses, among many other things, several financial instruments accounting issues.

Specifically, ECOFIN makes recommendations on mark-to-market valuation rules and reclassification rules for financial instruments:

We underline the necessity of avoiding any distortion of treatment between US and European banks due to differences in accounting rules. We take note of the flexibility in the application of mark to market valuation under IFRS as outlined in recent guidance from the IASB. Ecofin strongly recommends that supervisors and auditors in the EU apply this new guidance immediately. We also consider that the issue of asset reclassification must be resolved quickly. To this end, we urge the IASB and the FASB to work together on this issue and welcome the readiness of the Commission to bring forward appropriate measures as soon as possible. We expect this issue to be solved by the end of the month, with the objective to implement as of the third quarter, in accordance with the relevant procedures.

Click to view Immediate Responses to Financial Turmoil (PDF 116k).

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