• Agreement in the United States on a 'blueprint' for allowing US domestic companies to use IFRSs, and
• Commitment by key international parties to undertake the steps necessary to strengthen and sustain the IASB as the independent body responsible for establishing high-quality international standards.

They also expressed support for:

• Requiring all US public companies to use 'an improved version of International Financial Reporting Standards' rather than allowing a choice of US GAAP and IFRSs.
• Removing the reconciliation requirement only for companies applying IFRS as adopted by the IASB, rather than jurisdictional variations.

An excerpt:

The views contained in our letter can be summarized in the following four main points: Investors would be better served if all US public companies used accounting standards promulgated by a single global standard setter as the basis for preparing their financial reports. This would be best accomplished by moving US public companies to an improved version of International Financial Reporting Standards (IFRS). We believe permitting extended periods of choice between US Generally Accepted Accounting Principles (GAAP) and IFRS results in a two-GAAP system that creates unnecessary complexity for investors and other users of financial information. Permitting choice would add to the overall complexity of our reporting system. We, the SEC, and other affected parties should work together to develop a transition plan or 'blueprint' for moving US public companies to IFRS. As noted in the Concept Release, a move to IFRS by all US public companies would be a complex, multi-year endeavor. The US needs a blueprint that provides an orderly move to IFRS that minimizes the disruptions and costs to capital market participants and to other US entities that use FASB standards. The blueprint should identify a target date or dates for completing the transition to IFRS along with interim milestones. The target date should allow adequate time to make the many necessary changes to the various elements of the US financial reporting infrastructure (auditing standards, GAAP-based regulations, education systems, licensing requirements, etc). The blueprint should identify the areas of IFRS that should be improved during the period of transition to IFRS by US public companies. We believe the best way to make those improvements would be through the continued joint development of common standards by the International Accounting Standards Board (IASB) and the FASB. To complete the move to IFRS, the blueprint should outline the process by which we would adopt IASB standards in other areas 'as is'. The SEC should seek international cooperation to identify and implement changes we believe are necessary to sustain the IASB and to secure it as the independent global body that establishes high-quality international accounting standards. In particular: Mechanisms should be established to provide the IASB with sufficient and stable funding and staffing levels, thereby ensuring its sustainability as an independent setter of high-quality accounting standards. Agreements are needed to eliminate the separate review and endorsement processes that various jurisdictions apply to each IFRS after it is issued by the IASB. These after-the-fact jurisdictional processes are inconsistent with the objective of a single set of high-quality international accounting standards, as evidenced by the local variants of IFRS that have developed in some jurisdictions. Jurisdictions, including the US, need to make their views known as part of the IASB's due process rather than after the standards are issued. International cooperation in these two areas is needed to foster the sustainability of the IASB as a global standard setter and to ensure that IFRS, as promulgated by the IASB, becomes and continues to be a single set of high-quality international accounting standards. If the recommended changes in these two areas are not made, we believe the benefits from transitioning US public companies from our well-established financial reporting system to IFRS could decrease dramatically. The removal of the requirement that foreign private issuers reconcile their reported results to US GAAP is a difficult and sensitive issue that could have important implications for the continued development of a truly international financial reporting system. We suggest the timing of any removal of this requirement should coincide with the following: Development of and commitment to the blueprint by key parties in the US; and Commitment by key international parties to undertake the steps necessary to strengthen and sustain the IASB as the independent body responsible for establishing high-quality international standards. We strongly agree with the SEC that the reconciliation requirement would be removed only for companies applying IFRS as adopted by the IASB.

Click to view Letter to the US Securities and Exchange Commission (PDF 146k).

 

The Commission had made this Proposal in July 2007. Here is an excerpt from the Commission's Meeting Notice:

The Commission will consider whether to adopt amendments to Form 20-F, Rules 1-02, 3-10 and 4-01 of Regulation S-X, Forms F-4 and S-4, and Rule 701 under the Securities Act to accept financial statements prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board without reconciliation to generally accepted accounting principles as used in the United States when contained in the filings of foreign private issuers with the Commission.

 

• ISA 200 (Revised and Redrafted) Overall Objective of the Independent Auditor, and the Conduct of an Audit in Accordance with International Standards on Auditing (PDF 31k)
• ISA 500 (Redrafted) Considering the Relevance and Reliability of Audit Evidence (PDF 40k)

In both cases, we are supportive of the proposed guidance and believe that the overall drafting was completed in accordance with the clarity conventions and criteria adopted by IAASB. You will find our past comments to the IAASB Here.

 

The Trustees will publish the revised Constitutional language and an advertisement for new members shortly.

 

The article presents issues and perspectives relating to whether the US Securities and Exchange Commission should allow foreign registrants to use IFRSs without a reconciliation to US GAAP and, possibly, allow domestic registrants to use IFRSs instead of US GAAP. Click to Download the Article (PDF 335k), which is copyright by Financial Executives International and posted here with their kind permission.

 

The Trustees will begin a series of consultations with key stakeholders on these proposals in the build up to the Constitution Review, which is scheduled to start in 2008. Click for IASCF News Release (PDF 55k).

IASCF Governance Proposals

Establish a formal reporting link to official organisations: The Trustees should establish a link to a representative group of official organisations, including securities regulators. This body would approve Trustee appointments and review Trustee oversight activities, including the adequacy of the annual funding arrangements as well as the overall budget. Develop a multi-layered, multi-faceted approach to accountability beyond the formal link to official organisations: The Trustees should intensify and deepen their engagement with key stakeholder groups and develop mechanisms for the Trustees to receive input outside formalised procedures. This would necessarily include mechanisms for meeting with official organisations and policymakers and private sector institutions. Furthermore, such accountability would require consideration of the role and structure of the Standards Advisory Council in the organisation's accountability. Create a mechanism for public input to the Trustees outside regularly scheduled meetings with specific stakeholder groups: The Trustees should establish enhanced mechanisms for input from interested parties who wish to comment on the IASC Foundation's and the IASB's policies, processes, and procedures. Continue efforts towards a sustained, broad-based funding regime: Having already significantly broadened the funding base through the new approach adopted in 2006, the Trustees should continue their work to broaden the funding base further.

 

• Philip Laskawy, the current Chairman of the Trustees of the IASC Foundation, will become Vice Chairman of the Trustees when Gerrit Zalm assumes the chairmanship in January 2008. As previously agreed, Bertrand Collomb will stand down as Vice Chairman at year end and will remain as a Trustee.
• Jeffrey Lucy, former Chairman of the Australian Securities and Investments Commission and incoming Chairman of the Australian Financial Reporting Council, will join the Trustees for a three-year term, beginning January 2008.
• Kees Storm, former Chairman of AEGON, will resign from the Trustees at the end of the year due to other commitments. The Trustees will initiate a public search for his successor shortly.
• The Trustees will consult the Trustees Appointments Advisory Group as part of the Trustees' efforts to fill the two other Trustee vacancies, created by the retirements of Roberto Teixeira da Costa and William McDonough.

Click here for a complete List of IASCF Trustees. Regarding the current vacancy in membership of the IASB, the Trustees' Nominating Committee announced that they will begin a new search to fill the vacancy.

This body would meet regularly with the IASCF Trustees to:

• Review and comment on the IASB's work programme.
• Participate in – and have final approval in the selection of – IASCF Trustees.
• Review the Trustees' oversight activities.

Click to download the Joint Statement (PDF 72k). An excerpt:

 

Excerpt from the Joint IOSCO, EC, SEC, and FSAJ Statement

The IASB, which is overseen by the IASC Foundation Trustees, is an independent standard setter committed to developing, in the public interest, a single set of high quality, understandable, and enforceable global accounting standards. The IASC Foundation Trustees have scheduled a review of the Foundation's Constitution to begin in 2008. The authorities responsible for capital market regulation propose to utilize the opportunity of the Constitution Review to put forward, in collaboration with the IASC Foundation, certain changes to strengthen the Foundation's governance framework, while emphasizing the continued importance of an independent standard-setting process. Central to this effort is the establishment of a new monitoring body within the governance structure of the IASC Foundation to reinforce the existing public interest oversight function of the IASC Foundation Trustees. The creation of such a monitoring body would serve to complement the Trustees in its representation of the interest of the global investor community, thereby enhancing public confidence in IFRS. One key objective is to have the monitoring body meet regularly with IASC Foundation Trustees to discuss, review and comment on the IASB's work program. We expect the IASC Foundation and IASB Chairmen will also engage with relevant public authorities. The monitoring body would, together with the IASC Foundation Trustees and in consultation with the trustee appointments advisory group, participate in the selection of Trustees. The monitoring body would also be responsible for the final approval of Trustee nominees and would have the opportunity to review the Trustees' procedures for overseeing the standard-setting process and ensuring the IASB's proper funding.

• Public companies, as defined in the Companies Act*;
• Government majority owned companies;
• Banking and financial institutions;
• Superannuation, insurance, and insurance broking entities;
• Government entities established under their own statute;
• Entities with annual group turnover of at least F$20m (US$13m) or with assets exceeding F$20m (US$13m);
• Entities that are publicly accountable (which have debt or equity instruments on public issue or have coercive power to tax, rate, or levy to obtain public funds); and
• Entities where any of the above listed entities have significant influence (through more than 20 per cent ownership), as equity accounting would be applicable for the parent company reporting.

*Public companies, as defined in the Companies Act, are companies that do not restrict transfer of shares, and have minimum 7 shareholders. There is no limit on the maximum number of shares. All listed companies on the South Pacific Stock Exchange (in Fiji) are public companies, as are all unlisted companies that are incorporated or converted as public companies in accordance with the Companies Act.

Moreover, the Institute has ruled that the members must follow IASBs IFRSs extant as at January each year with an option to adopt earlier any subsequent new standards or updates.

The chairman of the FIA Standards Committee summarised the new requirements, and also provided an update on standards to be followed by non-IFRS entities and on auditing standards, in the Institute's Journal August 2007 (PDF 23k). We have created a new Fiji Page.

This issue of Heads Up summarises the discussions at a meeting on 11 October 2007 between the AICPA SEC Regulations Committee and the SEC staff. Those discussions covered, among other things:

• Eligibility criteria to determine the age of the financial statements of an acquired business that must be provided in a registration statement
• Disclosure requirements in registration statements for proposed FSP APB 14-a regarding convertible debt securities
• Financial statements a registrant should use in determining the significance of an acquired business that is a successor to a predecessor company
• What guarantor financial statements a registrant must provide in an automatic shelf registration statement at the time of filing
• How a registrant should determine whether separate financial statements or summarised financial information is required when an investment is accounted for under the FASB Statement 159 fair value option rather than under the equity method
• Financial statements that an issuer of asset-backed securities must provide for entities providing credit enhancements in certain periodic reports
• Registrant's requirement to update its financial statements in a Form S-8 when subsequent events (such as discontinued operations or changes in segments) have occurred