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CRMPG-III report on containing systemic risk

13 Aug 2008

The Counterparty Risk Management Policy Group III (a group of senior officials from a number of major financial institutions) has published a report titled Containing Systemic Risk: The Road to Reform.

The Report sets out an integrated framework of private initiatives that will complement official oversight to help contain systemic risk. The Policy Group focused on four key areas, which it deemed the most important and timely and were the areas in which the Policy Group believed it could make the greatest contribution. Those areas include:
  • Reconsideration of the standards for consolidation under US GAAP of entities currently off-balance sheet coming on-balance sheet.
  • Measures to better understand and manage high-risk financial instruments.
  • Significant enhancements to risk monitoring and management.
  • A series of sweeping measures to enhance the resiliency of financial markets generally and the credit markets in particular, with a special emphasis on OTC derivatives and credit default swaps.
The report also highlights important emerging issues that will require close attention in the period ahead. Accounting recommendations begin on page 18. Click to Download the Report (PDF 606k). We have added it to our Credit Crunch Page.

An excerpt from the accounting recommendations: II-1. The Policy Group endorses, in principle, the direction of the changes to the US GAAP consolidation rules provided that the changes are (1) principles-based, (2) convergent with International Financial Reporting Standards, and (3) accompanied by suitable disclosure and transition rules regarding regulatory capital which will provide flexibility in the implementation of these rules over a reasonable period of time.

II-2. The Policy Group recommends adoption of a single, principles-based global consolidation framework that is based on control and the ability to benefit from that control. The analysis of whether an entity (the investor) has a controlling interest in another entity (the investee) should be based on:

  • the investor's power over the investee, including the ability to make decisions that determine the success of the investee;
  • the degree of investor exposure to the risks and rewards of the investee, including through guarantees, commitments and all other explicit and implicit arrangements between the two entities; and
  • the design and sponsorship of the investee, including the degree to which the activities of the investee expose the investor to commercial, legal, regulatory and reputational risks.
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Updated IFAC education pronouncements

12 Aug 2008

IFAC's International Accounting Education Standards Board (IAESB) has released amended versions of its International Education Standards (IESs) and related education pronouncements.

The amendments result in more consistent use of terminology throughout the standards and more clearly describe the role of the IAESB and its standard-setting process. The amended documents (all of which were initially published 2003-2006) are:
  • Framework for International Education Pronouncements,
  • Introduction to International Education Standards, and
  • International Education Standards 1-8.
IESs express the benchmarks that IFAC member bodies are expected to meet in the preparation and continual development of professional accountants. Because the changes are editorial in nature, the IAESB did not undertake public consultation. In addition to these editorial amendments, the IAESB has commenced a project to substantively revise the Framework and the Introduction. As part of that project, the IAESB will seek public comments on changes to those documents. The amended versions of IESs 1-8, the Framework and the Introduction can be downloaded without charge from the IFAC Online Bookstore. Click for Press Release (PDF 35k).

 

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Deloitte letter to SEC on interactive data proposal

12 Aug 2008

On 14 May 2008, the US Securities and Exchange Commission proposed that all registrants be required to file their data with the SEC in XBRL (interactive data) format.

XBRL reporting would be required for registrants using either US GAAP or IFRSs. The transition would take three years starting in 2008. There's more information in our News Story of 16 May 2008. A few days later, the Commission proposed that more than 8,000 mutual funds trading in the US would also be required to file XBRL date (see our News Story of 26 May 2008). Deloitte & Touche LLP (United States) has submitted a comment letter on the SEC's first proposal. Overall, we support the Commission's interactive data initiative. Our letter makes a number of suggestions that, we believe, will ensure successful implementation of the proposed rule.

Among the points made in our letter:

  • Updated preparer guidance. The Commission should update the EDGAR Filer Manual to provide additional guidance on tagging information in the footnotes and financial statements, and this update should be exposed for public comment sufficiently in advance of the proposed adoption dates.
  • Maintenance, support, and updating of taxonomies. The Commission should expose for comment its plan for ensuring that the XBRL taxonomies remain current as well as its planned mechanism for communicating such updates to preparers and interactive data users.
  • Validation software considerations. The Commission plans 'to use validation software to check interactive data for compliance with many of the applicable technical requirements'. The Commission should release its validation criteria for public comment sufficiently in advance of the first phase-in dates under the rule to enable preparers and users to understand the extent of the procedures performed by the software and the expectations of the Commission.
  • Monitoring during the phase-in period. The Commission should specify (1) the criteria that it will use during the early phase-in periods to assess the success of the implementation and (2) how it will determine whether additional adjustments will be necessary for the later phase-in periods.
  • Assurance issues during the phase-in period. The PCAOB and the Commission should work with the auditing profession to revise the standard report of the independent registered public accountant to explicitly refer to the financial statements filed in Item 8 of the registrant's Form 10-K and perhaps to include a statement that assurance has not been provided on the interactive data. The Commission also should develop specific guidance on how the auditor should report if a registrant voluntarily elects to obtain assurance on its interactive data.
  • Clarifying the extent of auditor liability. Our letter offers a number of suggestions for clarifying auditor liability with respect to interactive data.
  • Early adoption of the proposal. The Commission should clarify how a registrant in one of the later phase-in groups could early-adopt the proposal.
  • Interactive data and financial statement requirements. The proposed rule currently would apply only to registration statements, annual reports on Forms 10-K or 20-F, quarterly reports on Form 10-Q, and transition reports. The Commission should clarify whether a registrant should file interactive data for Forms 8-K that update financial statements.
  • Need for assurance after the phase-in period. Throughout the phase-in period, the Commission should seek feedback from financial statement users regarding (1) whether their primary source of information for investing decisions is financial statements filed in the traditional format or as interactive data and (2) whether they believe assurance is needed for the interactive data.
  • Coordination with IFRS initiatives. The Commission has issued a concept release on allowing US issuers to prepare financial statements in accordance with International Financial Reporting Standards. The Commission should ensure that any rulemaking associated with that concept release remains aligned with its XBRL rulemaking efforts.

 

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Deloitte UK study on interim management statements

12 Aug 2008

Deloitte & Touche (United Kingdom) has published First Impressions: The First Year's Interim Management Statements.

This publication considers how UK listed companies have implemented the new requirements for a twice-yearly interim management statement (IMS) in the first year of compliance with the UK Disclosure and Transparency Rules (DTR) (which is based on the European Transparency Obligations Directive). In particular, it surveys interim management statements of UK listed companies (including separate consideration of investment trusts), reviews compliance with the new rules, and contains illustrative and real life example IMSs as well as an IMS disclosure checklist. Click to download:

 

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Taiwan convergence project plan update

11 Aug 2008

In our news story of 9 January 2008, we posted the Project Plan Concerning the Convergence with IFRSs adopted by the Financial Accounting Standards Committee (FASC) of the Accounting Research and Development Foundation (ARDF) of Taiwan.

The ARDF has recently Updated its Project Plan (PDF 5k) to reflect progress on its convergence agenda. Click for our Taiwan Page.
Click to view the Project Plan Concerning the Convergence with IFRSs (PDF 31k).

 

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Minutes of ARC meeting 11 July 2008

09 Aug 2008

In our News Story of 20 July 2008, we presented a brief summary of the discussions and decisions at the 11 July 2008 meeting of the European Commission's Accounting Regulatory Committee (ARC).

The Commission has now released the Summary Record (Notes) of the ARC Meeting (PDF 43k).

 

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IASC Foundation publishes new IFRS taxonomy module manager

08 Aug 2008

The International Accounting Standards Committee (IASC) Foundation has released a new IFRS Taxonomy Module Manager (ITMM).

ITMM is an add-on for the IFRS Taxonomy 2008. It offers taxonomy users such features as:
  • The ability to combine taxonomy files with one another
  • An entry point that combines, for example:
    • Consolidated statement of financial position, by order of liquidity
    • Consolidated income statement, by function of expense
    • Consolidated statement of cash flows, using the direct method
  • An interactive graphical interface that guides the user through the selection of the necessary IFRS modules
  • An entry point (in the form of a schema or empty instance document) that is the starting point for entity-specific extension or direct filing
  • Ability to navigate across the IFRSs as well as the structure of financial statements
  • A normal mode for first-time users, and advanced settings (together with expert mode) for experienced users
Click here to Access ITMM on the IASCF website.

 

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IFRSs for US companies – planning for adoption

07 Aug 2008

As full acceptance of IFRS in the United States nears, developing a plan around IFRS implementation is becoming increasingly important for companies to effectively position themselves for the future.

To help companies better understand the impact a move to IFRS will have on organisations, Deloitte has released the publication International Financial Reporting Standards for US Companies: Planning for Adoption. This publication provides an overview of key IFRS considerations, includes practical steps for US executives, and addresses key questions for US companies, including:
  • How can company leaders – especially in finance – begin to plan properly for tomorrow's IFRS world?
  • What impact will a transition to IFRS have on technical accounting, tax, process and statutory reporting, technology infrastructure, and organisational issues?
  • What about timing considerations for IFRS conversion activities?
Download the Publication (PDF 1,843k) to learn more.

 

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Report on implementation of EU statutory audit directive

07 Aug 2008

The European Commission has published a report on where the 27 Member States stand with their implementation of the May 2006 Statutory Audit Directive, which had to be transposed into national law by 29 June 2008. Twelve Member States have completed the entire implementation of the Directive.

Most of the other Member States have transposed major parts of the Directive but are still missing some important provisions. Click for:
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EC defers registration of non-EU audit firms from 30 countries

07 Aug 2008

The European Commission has granted a transitional period for the registration requirements for audit firms from 30 non-EU countries.

Those firms may continue their audit activities regarding non-EU companies listed on European markets without registering until 1 July 2010. However, transition will only be granted if the non-EU audit firms comply with the minimum information requirements necessary for investors in Europe. Audit firms from non-EU countries that do not fall under the transitional regime will be subject to full registration and oversight by the competent EU Member State. Click for Press Release (PDF 94k).

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