This publication  contains recommendations as to how companies might address the challenges of tax reporting in financial statements brought about by recent changes including IFRSs and auditor independence. The report draws on market research that investigates how large businesses in the UK are managing the challenges of tax reporting. Some of the facts uncovered may be surprising:

Company tax directors and managers lack confidence in their company figures. Alarmingly, 43% of companies are concerned that errors in brought forward balances may eventually lead to material errors. There is a high level of discomfort with the technical requirements of the accounting standards. Nearly half (49%) of the companies claim to have had differences of opinion with their auditors on the interpretation of IAS 12. Only 50% of in-house tax professionals believe that their personal knowledge of IAS 12 is adequate, and only 12% believe that their staff is fully trained in this area. Accounting systems appear not to support the requirements of the tax function – making it difficult to get the numbers right.

The publication presents Deloitte's recommendations as to how companies can get to a 'fit for purpose' year end. Key recommendations for companies include the adoption of tax basis balance sheets, full quarterly tax reporting, and real time audits which conclude on the tax reporting impact of significant transactions, as they happen, to enable early identification of material issues.

Selective mutual recognition would involve the SEC permitting certain types of foreign financial intermediaries to provide services to US investors under an abbreviated registration system, provided those entities are supervised in a foreign jurisdiction under a securities regulatory regime substantially comparable (but not necessarily identical) to that in the United States. The roundtable will explore whether selective mutual recognition would benefit US investors by providing greater cross-border access to foreign investment opportunities while preserving investor protection. Click for SEC Press Release (PDF 46k).

The agenda for the meeting is:

Background about the IASB's post-employment benefits project Working procedures The Phase 2 project Recognition and presentation Overview of the Board's tentative decisions Elimination of deferred recognition Presentation alternatives Cash balance plans Background and scope Definitions of benefit promises Promises with guaranteed fixed returns

Click for Project Information.

Global Offerings Services is a global team of Deloitte practitioners assisting non-US companies and non-US practice office engagement teams in applying US and International accounting standards (that is, US GAAP and IFRSs) and in complying with the SEC's financial reporting rules. The GOs Newsletter is an update on relevant GAAP, regulatory, and other matters, webcasts, and publications.

Click for April 2007 Newsletter (PDF 135k).

The new guidance will enhance compliance under Section 404 of the Sarbanes-Oxley Act of 2002 by focusing company management on the internal controls that best protect against the risk of a material financial misstatement. The guidance is based on two broad principles:

• Management should evaluate whether it has implemented controls that adequately address the risk that a material misstatement in the financial statements would not be prevented or detected in a timely manner.
• Management's evaluation of evidence about the operation of its controls should be based on its assessment of risk.

Under the guidance, management can align the nature and extent of its evaluation procedures with those areas of financial reporting that pose the highest risks to reliable financial reporting (that is, whether the financial statements are materially accurate). As a result, management may be able to use more efficient approaches to gathering evidence, such as self-assessments, in low-risk areas and perform more extensive testing in high-risk areas. The SEC believes that by following these two principles, companies of all sizes and complexities will be able to implement our rules effectively and efficiently. Click for Press Release (PDF 36k).

An accounting standards board was formed in Brazil in August 2006, called Comite de Pronunciamentos Contabeis (CPC) – the Committee for Accounting Pronouncements. Its mandate clearly states that its mission is to converge Brazilian accounting requirements towards IFRSs. CPC was formed by agreement of six founding members:

• ABRASCA (the association of the Brazilian listed companies),
• APIMEC (the association for the analysts),
• BOVESPA (the Stock Exchange),
• CFC (the Federal Council of Accounting),
• IBRACON (the Institute of Independent Auditors), and
• FIPECAFI (the accounting research foundation, representing the academics.

In 2006, the Central Bank of Brazil formally decided that any bank required by law or regulation to publish financial statements in Brazil (be they domestic owned or foreign owned) will have to prepare and publish consolidated financial statements in full compliance with IFRSs starting with years ending 31 December 2010. For that purpose, the Central Bank disclosed in March 2006 that its technical departments had until 31 December 2006 to fully list all banking regulations still in force relating to financial reporting, consolidate them in a single document, and come up with recommendations of changes to converge to IFRSs and the legal procedures necessary. Such legal procedures might involve revoking the ruling by the Central Bank, revising it at the level of the National Monetary Council (that sits above Central Bank in certain issues), or eventual changes in law that would then be proposed by the President of the Republic to Congress.

Here is an excerpt:

Click for Full Speech.

• Annual Improvements 2006-2007
• Financial Instruments Puttable at Fair Value and Obligations Arising on Liquidation
• Financial Statement Presentation
• Conceptual Framework
• IFRS 2 Vesting Conditions and Cancellations
• Leases
• Liabilities – Amendments to IAS 37
• Post-employment Benefits

FEI attributed the reduction to "companies' increased efficiencies in complying with Section 404". Click for Press Release  (PDF 51k). Respondents to the survey made a number of positive comments about SOX 404:

• 60% agreed that compliance with Section 404 has resulted in more investor confidence in their financial reports.
• 46% agreed that financial reports are more accurate.
• 48% agreed that financial reports are more reliable.
• 34% agreed that compliance with Section 404 has helped prevent or detect fraud.

The initiatives are part of an ongoing effort to address the issues affecting US capital markets competitiveness. Initiatives announced by Mr Paulson are set out below and include elimination of the IFRS-US GAAP reconciliation:

Provide Investors with A Transparent and Sustainable Auditing System. The Treasury Department intends to charter a non-partisan committee to develop recommendations to consider options available to strengthen the industry's financial soundness and its ability to attract and retain qualified personnel. Treasury has asked former SEC Chairman Arthur Levitt, Jr. and former SEC Chief Accountant Donald T. Nicolaisen to serve as co-chairs for this public forum. Gain Better Understanding of Reasons for Increasing Financial Restatements. Restatements have soared during the past decade from 116 in 1997 to 1,876 in 2006. Treasury intends to commission a rigorous analysis of the factors driving financial restatements and their impact on investors and the capital markets. Results of the analysis will be made public upon completion. Enhance Financial Reporting US Generally Accepted Accounting Principles are comprised of more than 2000 individual pronouncements issued by various regulatory bodies. Investors often seek information not provided under financial reporting requirements. The Treasury Department is supportive of the SEC and the Financial Accounting Standards Board's efforts to enhance financial reporting transparency and accessibility for investors. Streamline Accounting Requirements to Encourage International Companies to List on U.S. Exchanges and Increase Investor Opportunities US public markets should not be closed off to companies that adhere to high quality internationally accepted accounting standards. The Treasury Department is supportive of the SEC's action to eliminate the US GAAP reconciliation requirement by 2009 of International Financial Reporting Standards reporting companies and the continued convergence of US GAAP and IFRS.

• Outline of Mr Paulson's Proposals  (PDF 25k) in an editorial titled The Key Test of Accurate Financial Reporting is Trust
• Press Release  (PDF 23k)
• Related March 2007 Speech by Mr Paulson  (PDF 31k)