AASB 2007-4, in effect, undoes most of the changes that the AASB had made to IFRSs when it initially adopted them as Australian Equivalents of IFRSs (A-IFRSs), bringing A-IFRSs much closer to their IFRS equivalents:

In all, 34 different Standards are affected by AASB 2007-4. New accounting policy options are introduced. A large number (but not all) of the Australian-specific disclosures and requirements have been eliminated. AASB 2007-4 applies to annual reporting periods beginning on or after 1 July 2007, but may be early adopted so long as all its requirements are adopted at the same time.

Deloitte (Australia) has published Accounting Alert 2007/09  (PDF 122k) to provide guidance on the applying AASB 2007-4. Appendices to Alert 2007/09 include:

• List of all AASB Standards affected by AASB 2007-4.
• A detailed summary of all the non-editorial changes and their impacts on the various Standards, providing a checklist for people to utilise in their consideration and implementation of AASB 2007-4.
• Examples of disclosures if applying AASB 2007-4 results in a change in accounting policy.

Adoption of a new accounting policy as a result of AASB 2007-4 is a voluntary change in accounting policy under AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors (equivalent of IAS 8). AASB 108 only permits a voluntary change in accounting policy if the entity can demonstrate that change results in the financial report providing reliable and more relevant information on the entity's financial position, performance and cash flows. AASB 2007-4 can be downloaded from The AASB's Website in Word and PDF formats.

The latest updates reflect new data on the number of non-US companies registered with the US Securities and Exchange Commission: 1,145 non-US companies from 53 jurisdictions were registered at 31 December 2006 (compares with 1,236 companies from 53 jurisdictions a year earlier):

• Alphabetical Listing of Companies (PDF 390k)
• Geographic Listing of Companies (PDF 394k)
• Listing by US Trading Market (PDF 44k)
• Geographic Summary by Jurisdiciton of Incorporation (46k)

Additionally, 684 foreign companies whose securities trade in the US claim exemption from SEC registration because they are registered in, and file comparable information in, their home jurisdiciton or another jurisdiction. Here is the List at 21 June 2005 (399k).

• Guido Fladt, Partner, PricewaterhouseCoopers, Germany; Member, Global PwC Corporate Reporting Task Force
• Bernd Hacker, Head of Standard Setter Liaison and Financial Instruments Accounting Policies, Siemens, Germany
• Darrel Scott, Head of Group Finance, FirstRand Banking Group, South Africa
• Andrew Vials, Partner in charge of the UK firm's Department of Professional Practice, Accounting and Reporting, KPMG.

The appointments are for three year terms ending on 30 June 2010, with eligibility for one renewal term. Click for Press Release (PDF 55k). The new appointees replace four retiring IFRIC members, and their appointments retain IFRIC's current size of 12 members. On 2 April 2007, the IASCF invited comments on a Proposal to Enlarge IFRIC (PDF 297k) to 14 members. Comment deadline is 31 July 2007. Click for Complete List of IFRIC Members.

Click to download the Endorsement Status Report as of 4 May 2007(PDF 37k). Currently, the following IASB pronouncements have not yet been endorsed for use in Europe:

• IFRS 8 Operating Segments
• IAS 23 Borrowing Costs (revised March 2007)
• IFRIC 10 Interim Financial Reporting and Impairment
• IFRIC 11 IFRS 2: Group and Treasury Share Transactions
• IFRIC 12 Service Concession Arrangements

The 4 May 2007 report indicates that: No decision has as yet been taken as to when the ARC will be asked to vote on IFRIC 12. The Commission will not vote to endorse IFRS 8 before September 2007, and probably a bit later. EFRAG's website says: "The European Parliament has in effect postponed its decision on the endorsement of IFRS 8 Operating Segments until at least September 2007. [See the IAS Plus News Story of 27 April 2007.] The implications for European companies are that IFRS 8 at present is not part of the IFRSs adopted in the European Union. Therefore IAS 14 is still the standard adopted in relation to reporting segment information in the EU."

The newsletter summarises the 17 April 2007, meeting of the AICPA's SEC Regulations Committee and the staff of the US Securities and Exchange Commission. There is an update of the ongoing projects in the Office of the Chief Accountant, Division of Enforcement, and Division of Corporation Finance. There is also a summary of SEC staff views on range of technical issues discussed with SEC Regulations Committee.

We have updated the following IFRIC agenda project pages to reflect discussions and decisions at IFRIC's meeting in May 2007:

• IAS 18 – Customer Loyalty Programmes (IFRIC D20)
• IAS 18 – Real Estate Sales
• IAS 18 – Guidance on Identifying Agency Relationships
• IAS 19 – The Effect of Minimum Funding Requirements on the Asset Ceiling (IFRIC D19)
• IAS 21 – Hedging a Net Investment in a Foreign Operation

Our summary now includes over 120 issues:

• IFRS 3 – Reassessments of acquiree's accounting as a result of a business combination
• IAS 1 and IAS 39 – Current or non-current presentation of derivatives classified as 'held for trading' under IAS 39
• IAS 16 – 'Gross' or 'net' presentation of sale of assets held for rental
• IAS 19 – Distinguishing between curtailments and negative past service costs

 

Topics covered in this issue include:

FASB Developments Statement on Accounting for Financial Guarantee Insurance Contracts Proposed Statement 133 Implementation Issue C21 Proposed Amendment of Interpretation 39 Issued AICPA Developments ASB Interpretation on the Confirmation Process Audit Risk Alerts Issued SEC Developments Compliance and Disclosure Interpretations Issued Section 18 of the Securities Act Amended Concerns About Strategies Associated With the Adoption of Statement 159 Commissioners Endorse Improvements to Sarbanes-Oxley Act Next Steps to IFRSs Announced Staff Provides Views on Interpretation 48 Clarifying Guidance Issued on Certain SEC Financial Statement Presentation Issues Anti-Money-Laundering Compliance Tool Introduced PCAOB Developments New Auditing Standard Proposed Concept Release on Tax Services Issued Guidance on Tax Transactions and Tax Services Issued Report on Auditors' Implementation of Internal Control Standard Issued GASB Developments Project Added to Help Governments Report Performance Information

You will find past issues of Accounting Roundup Here.

Customer Contributions
The IFRIC considered whether it should develop guidance as to how a utility company should account for customer contributions received. Such contributions arise when a utility enters into an arrangement with a customer as part of which the customer has to provide either an infrastructure asset or cash to fund the acquisition and/or construction of such an asset in order to obtain connection to the utility's network. The contributed infrastructure asset is necessary for the utility entity to provide an ongoing utility service to the customer. The IFRIC agreed that the issue met the IFRIC's Agenda Criteria. Members were concerned about how to limit the scope effectively, such that the IFRIC could reasonably expect to reach an answer. They requested the staff to consider the issue in a number of stages, which would assist it in reaching a consensus. These steps included identifying whether the transaction represented an exchange transaction (that is, a transaction at value); if so, does IFRIC 4 Determining whether an Arrangement contains a Lease apply to that transaction; determining whether the cost or fair value is the appropriate measurement base.

The IFRIC deferred a formal decision about whether to add the issue to its agenda. The staff will make an analysis of the issues involved together with possible alternative approaches at a subsequent meeting.

Review of Tentative Agenda Decisions Published in MArch 2007 IFRIC Update

The IFRIC confirmed its decisions not to take the following items to the Agenda:

• IFRS 3 Business Combinations – Reassessments on a business combination
• IAS 1 Presentation of Financial Statements and IAS 39 Financial Instruments: Recognition and Measurement – Current or non-current presentation of derivatives classified as 'held for trading' under IAS 39
• IAS 16 Property, Plant and Equipment – Sale of assets held for rental
• IAS 19 Employee Benefits – Curtailments and negative past service costs

In doing so, the IFRIC had suggestions on the wording of the Agenda Decision notices. In particular, when the IFRIC was referring something to the IASB, the staff was asked, wherever possible, to indicate the action that the IFRIC was suggesting (for example, Annual Improvements Project item, incorporation into a current project, other). The Agenda Decisions will be published in the May 2007 issue of IFRIC Update.

Staff Recommendations for IFRIC Agenda Decisions

Gaming transactions

The IFRIC discussed whether it should develop guidance as to how a gaming institution should account for bets or wagers received. The question focussed on whether such transactions give rise to revenue or whether unsettled wagers are financial instruments which should be accounted for using IAS 39.

The IFRIC agreed that there was a trend among gaming institutions to treat unsettled wagers as derivative instruments and that as such, diversity was unlikely in future. The IFRIC reached a tentative decision not to add this item to its Agenda.

IAS 39 Financial Instruments: Recognition and Measurement – Hedging future cash flows with purchased options

The IFRIC discussed whether it should develop guidance for the situation in which a purchased option in its entirety is designated as a hedging instrument to hedge variability in future cash flows in a cash flow hedge. In particular, they discussed a staff analysis of the guidance on the topic already in IAS 39, in particular material in the Implementation Guidance, Topic F.

The IFRIC agreed with the staff analysis that there was sufficient guidance in the Standard and related Implementation Guidance to answer the issue. It was also philosophically opposed to issuing an Interpretation (i.e authoritative guidance) on something contained in Implementation Guidance (i.e. non-authoritative). The IFRIC reached a tentative decision not to add this item to its Agenda. The staff was asked to adapt its analysis for inclusion in the tentative agenda decision.

IAS 39 Financial Instruments: Recognition and Measurement – Hedging multiple risks with a single derivative hedging instrument

The IFRIC discussed whether it should develop guidance for the situation in which a single derivative hedging instrument is used to hedge more than one different type of risk. The entire derivative is designated as a hedging instrument to hedge those exposures.

The IFRIC agreed with the staff analysis that there was sufficient guidance in the Standard to answer the issue. The IFRIC reached a tentative decision not to add this item to its Agenda. The staff was asked to adapt its analysis for inclusion in the tentative agenda decision.

IAS 39 Financial Instruments: Recognition and Measurement – Scope of IAS 39.11A

The IFRIC discussed whether it should develop guidance about whether IAS 39 paragraph 11A could be applied to all contractual arrangements that contain one or more embedded derivatives, in particular whether IAS 39 paragraph 11A can be applied to hybrid contracts that contain financial or non-financial hosts that are outside the scope of IAS 39. An alternative view is that IAS 39 paragraph 11A can only be applied to hybrid contracts with hosts that are within the scope of IAS 39.

The IFRIC agreed with the staff analysis that IAS 39 paragraphs 11 and 11A should be read in light of the scope of IAS 39 and that was sufficient guidance in the Standard to answer the issue. The IFRIC reached a tentative decision not to add this item to its Agenda. The staff was asked to adapt its analysis for inclusion in the tentative agenda decision.

IAS 39 Financial Instruments: Recognition and Measurement – AG33(d)(iii)

The IFRIC discussed whether it should provide guidance on the operation of IAS 39 AG33(d)(iii), which specifies whether foreign currency derivatives embedded in certain contracts (for example, contracts to buy or sell non-financial items) are closely related to the host contracts.

The IFRIC reached a tentative decision not to add this item to its Agenda. IFRIC members thought that the issues relate to how to apply IAS 39 and that circumstances vary case-by-case. Judgment is necessary when determining whether the requirements in AG33(d)(iii) are satisfied based on the facts of each case. Any guidance that the IFRIC might be able to develop would be to add to the existing Application Guidance rather than an Interpretation of IAS 39. The staff was asked to adapt its analysis for inclusion in the tentative agenda decision.

Plan to sell the controlling interest in a subsidiary

The IFRIC discussed whether it should provide guidance on applying IFRS 5 Non-current Assets Held for Sale and Discontinued Operations when an entity is committed to a plan to sell the controlling interest in a subsidiary. The request considered situations in which the entity retained a non-controlling interest in its former subsidiary, taking the form of either an investment in an associate, an investment in a joint venture or a financial asset.

The IFRIC agreed with the staff analysis that the fundamental trigger for IFRS 5 accounting was the loss of control of the subsidiary through sale. The IFRIC reached a tentative decision that this matter should be addressed by the IASB and should not to added to the IFRIC agenda.

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations – Disclosures

The IFRIC discussed whether it should provide guidance to clarify whether the disclosure requirements of IFRS 7 Financial Instruments: Disclosures and IAS 19 Employee Benefits apply to non-current assets (or disposal groups) classified as held for sale or discontinued operations under IFRS 5.

After discussion, the IFRIC noted that more analysis was required before it would be in a position to determine whether an Interpretation was required. In particular, IFRS 5 and its FASB equivalent, FAS 144 are 'converged' standards. The staff was requested to confer with the FASB/ EITF staff to determine the US experience on the application of FAS 144.

The IFRIC will discuss this issue again at a subsequent meeting.

IAS 12 Income Taxes-Deferred taxes arising from unremitted foreign earnings

The IFRIC discussed whether it should provide guidance about how an entity should account for potential deferred tax liabilities arising from temporary differences created by income that is earned in a foreign jurisdiction but is not taxable until it is remitted to the entity's home jurisdiction.

The IFRIC noted that the issue is being considered as part of the IASB's project on Income taxes, for which an Exposure Draft is expected soon. Consequently, The IFRIC reached a tentative decision not to add this item to its Agenda.

Presentations to Retiring IFRIC Members

The IFRIC Chairman made formal presentations to those IFRIC members whose terms expire on 30 June: Jeannot Blanchet, Domingo Marchese, Mary Tokar and Ian Wright. Their replacements have not yet been announced, but the IFRIC Chairman hoped that they would be present at the next meeting.

This summary is based on notes taken by observers at the IFRIC meeting and should not be regarded as an official or final summary.

BOARD MEETING AGENDA 15-18 May 2007, London Tuesday 15 May 2007 Leases Business Combinations II Wednesday 16 May 2007 Conceptual Framework – Reporting Entity IFRS 2 Vesting Conditions and Cancellations Update on the IFRIC meeting held on 3 and 4 May 2007 Annual Improvements 2006-2007: 1. At what point should costs associated with advertising and promotional activities be recognised as an expense in the income statement and when should an entity may recognise a prepayment? 2. Should the IAS 28 and IAS 31 disclosures be required when the investment in the associate or jointly controlled entity is accounted for at fair value, for example by a venture capital organisation? 3. Can impairments recognised against associates be reversed? 4. Clarification of whether subsidiaries held for sale in separate financial statements are within the measurement scope of IFRS 5. 5. Proposed wording revisions to IAS 20 and IAS 29 to confirm to defined or more consistently used terms. Thursday 17 May 2007 Financial Statement Presentation Liabilities – Amendments to IAS 37 Friday 18 May 2007 Financial Instruments Puttable at Fair Value and Obligations Arising on Liquidation Post-employment Benefits Annual Improvements 2006-2007 – IAS 19: difference between negative past service costs and curtailments