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Japan and EC discuss accounting progress

30 Nov 2006

Officials from the Japanese Financial Services Agency and the European Commission met in Tokyo on 27 November 2006 to discuss the progress made by Japan towards converging with International Financial Reporting Standards.

Participants also discussed consistency in the interpretation and application of both standards. Japan is seeking recognition of Japanese GAAP as equivalent to IFRSs for the purpose of filings by Japanese companies listed in the European Union. The EC explained its intention to defer the equivalence assessment until 2009, and highlighted the importance of continued effort towards accelerating the convergence and ensuring the consistent application of the accounting standards. The JFSA detailed the time-framed convergence programme of the Accounting Standards Board of Japan. The two groups plan to meet twice yearly, with the next meeting planned for the first half of 2007. Click for Press Release (PDF 22k).
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EFRAG does not support IFRIC D20

30 Nov 2006

The European Financial Reporting Advisory Group (EFRAG) has written to the International Financial Reporting Interpretations Committee expressing reservations about the proposals in IFRIC Draft Interpretation D20 Customer Loyalty Programmes.

Here is an excerpt from EFRAG's Letter to IFRIC (PDF 35k):

We do not support the consensus proposed by the Draft Interpretation. In particular, we do not support the adoption of a deferred revenue approach. Instead, we favour adoption in D20 of the so-called cost/provision approach and believe that this approach will, in most instances, result in the most appropriate accounting treatment. We believe that the lack of a clear set of guidelines on segmentation of revenue transactions will lead to inconsistent accounting practices and, generally we doubt whether a consistent and comparable approach will be achieved if the measurement model being proposed is adopted. For those reasons, and until further research is undertaken, we believe that the cost/provision approach will provide the most suitable level of comparability of information in the financial statements.

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Deloitte partner assumes the Presidency of IFAC

30 Nov 2006

Fermin del Valle, a Partner in Deloitte Argentina since 1980, has become the President of the International Federation of Accountants for a two-year term ending in November 2008.

Mr del Valle was IFAC Deputy President from November 2004 to November 2006 and served as a member of the IFAC Board beginning in October 1997. He has been an Associate Professor at the School of Economic Sciences at the University of Buenos Aires and a Professor of Accounting and Auditing at the University of San Andres.
Mr. del Valle is also a member of the IFAC Regulatory Liaison Group and most recently served as chairman of IFAC's Planning and Finance Committee, where he led the organisation in the development of its operational and strategic plan for 2006-2008. He is also a former member of IFAC's Compliance Committee, Audit Committee, and Structure and Organisation Task Force.
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IPSASB proposal on disclosure of assistance

29 Nov 2006

The International Public Sector Accounting Standards Board IPSASB) has published Exposure Draft 32 on Financial Reporting Under the Cash Basis of Accounting – Disclosure Requirements for Recipients of External Assistance.

ED 32 proposes that the financial statements of governments that receive external assistance disclose the total amount of external assistance received, used, and available during the reporting period. ED 32 also encourages a range of additional disclosures that will further enhance the usefulness of the financial statements in the assessment of the financial position of recipients and of their use of external assistance. ED 32 was developed following consideration of responses that the IPSASB received to a previous exposure draft, ED 24, a document with the same title which was issued in February 2005. ED 32 proposes amendments to address constituents' concerns regarding the previous exposure draft. Comments due by 31 March 2007. Click for Press Release (PDF 83k). Click for Exposure Draft 32 (PDF 309k).
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European discussion paper on performance reporting

28 Nov 2006

The European Financial Reporting Advisory Group (EFRAG) and the Instituto de Contabilidad y Auditoría de Cuentas (or ICAC) have published a Discussion Paper on performance reporting entitled 'What (if anything) is wrong with the good old income statement?' It is the second paper issued under the auspices of the Pro-active Accounting Activities in Europe (PAAinE).

The paper identifies and analyses the arguments of those who believe that fundamental changes are needed to the existing performance reporting model, and also explains the reasoning of those who believe such changes are not needed.

The paper does not reach any conclusions on the issues, but it sets the scene for a subsequent paper that will explore the underlying issues involved in greater detail.

The comment period ends on 31 March 2007. Click to Download the Discussion Paper (PDF 896k).

 

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EC Commissioner comments on accounting issues

24 Nov 2006

In a presentation titled Rewarding Excellence in Legibility of Accounts: Meeting the IFRS Challenge, Charlie McCreevy, the European Commissioner for Internal Market and Services, commented on a number of IFRS-related issues:

  • Readbility. "IFRS aim to give increased transparency in accounts. But this must not be at the expense of legibility. Preparers have been grappling with the novelties of IFRS. Companies and investors will take some time to absorb and digest them. That is why I have repeatedly said we need a period of relative stability to let the new standards bed down."
  • Information overload. "The world's biggest accounting firms have recently joined forces to call for a radical overhaul of how companies report. They have called, in particular, for two changes. The first is that there should be a move to real-time, internet-based accounting, instead of quarterly statements. The second is that more non-financial information should be provided to give a fuller picture of companies' performance. The accounting firms are right to provoke a debate. But I wonder whether a flood of information is really the answer. Of course, we must make use of new technological tools. Yet often the real problem in the digital age is how best to sift the mass of information that is available. How to find the needle in the haystack. Too much information may mean many investors will have to rely more heavily on professional analysts. In fact, I have to tell you that I am very glad we didn't go for quarterly reporting in Europe."
  • IFRS for SMEs. "The Commission is working to identify areas of EU accounting and company law which can be simplified for SMEs. Important work on SME accounting is also going on at the International Accounting Standards Board (IASB). I have already made clear to that board that if this work is to be useful, it must be kept simple. This is the clear test that I will apply in determining whether it is worthwhile making use of the results of the IASB's work at EU level."

Click for Full Presentation (PDF 72k).

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Standard setting activity in Asia-Pacific region

23 Nov 2006

We have updated a number of pages on this website to reflect recent standard setting activity in the Asia-Pacific region.

Click for access to our jurisdiction pages:

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Updated summary of issues not added to IFRIC agenda

22 Nov 2006

We have updated our Summary of Issues Not Added to IFRIC's Agenda to include IFRIC's final decisions in November 2006 not to add the following topics to its agenda:

  • IAS 1 - Whether the liability component of a convertible instrument should be classified as current or non-current
  • IAS 11 - Allocation of profit in a single contract
  • IAS 16 - Revaluation of investment properties under construction
  • IAS 32 - Changes in the contractual terms of an existing equity instrument resulting in it being reclassified
  • to financial liability
  • IAS 32 - Classification of a financial instrument as liability or equity
  • IAS 32 - Foreign currency instruments exchangeable into equity instruments of the parent entity of the issuer
  • IAS 32 - Puts and forwards held by minority interests
  • IAS 38 - Classification and accounting for SIM cards
  • IAS 38 - Adoption of IAS 38 (revised 2004)
  • IAS 39 - Valuation of electricity
  • IAS 39 - Testing of hedge effectiveness on a cumulative basis
  • IFRS 2 - Fair value measurement of post-vesting transfer restrictions
  • IFRS 2 - Incremental fair value to employees as a result of unexpected capital restructurings
  • IFRS 2 - Employee benefit trusts in the separate financial statements of the sponsor
  • IFRS 3 - Are puts or forwards received by minority interests in a business combination contingent consideration?
  • IFRS 7 - Presentation of 'net finance costs' on the face of the income statement
  • SIC-12 - Relinquishment of Control
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Treasury Secretary comments on accounting and auditing

22 Nov 2006

United States Secretary of the Treasury Henry M Paulson spoke recently to the Economic Club of New York on the Competitiveness of Capital Markets.

He gave particular emphasis to accounting and auditing matters. Click to Download Mr Paulson's Remarks (PDF 68k). Here is an excerpt from the comments on accounting:

The corporate scandals were, for the most part, accounting scandals, so it is not surprising that so much of the recent reform has focused on the accounting industry. Our accounting system is the lifeblood of our capital markets. And it has historically represented a very high standard. But it was abused in the corporate scandals by manipulation and smoothing of earnings.

Capital markets rely on trust, which is based on financial information presumed to be accurate and to reflect economic reality. The ultimate responsibility for accurate and transparent financial statements must rest with management. The role of the external auditor is to examine a company's financial statements in order to express an opinion that conveys reasonable, but not absolute, assurance as to the truth and fairness of the statements. Auditors do this by evaluating management's adherence to Generally Accepted Accounting Principles....

A common theme in my remarks today is the desirability, where practical, of moving toward a principles-based system. Nowhere is this issue more relevant than in the accounting system. Added complexity and more rules are not the answer for a system that needs to provide accurate and timely information to investors in a world where best of class companies are continually readjusting their business models to remain competitive.

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Guidance on implementing IFRS-based standards in China

21 Nov 2006

The Ministry of Finance of China has issued limited implementation guidance on 32 of the 38 Accounting Standards for Business Enterprises (ASBEs) that it adopted in February 2006, effective for 2007 financial reports of Chinese listed companies.

The table below has the complete list of the new ASBEs. The guidance covers ASBEs 1-14, 16-24, 27, 28, 30, 31, 33, 34, 35, 37, and 38. The MOF guidance is currently available only in Chinese to Download Zip File (4,009k ZIP). Alternatively, all of the ASBEs and guidance can be downloaded in Chinese from the official website of China Accounting Standards Committee www.casc.gov.cn/htm.

China's Accounting Standards for Business Enterprises

Basic Standard

1

Inventories

2

Long-term equity investments

3

Investment properties

4

Fixed assets

5

Biological assets

6

Intangible assets

7

Exchange of non-monetary assets

8

Impairment of assets

9

Employee compensation

10

Enterprise annuity fund

11

Share-based payment

12

Debt restructurings

13

Contingencies

14

Revenue

15

Construction contracts

16

Government grants

17

Borrowing costs

18

Income taxes

19

Foreign currency translation

20

Business combinations

21

Leases

22

Recognition and measurement of financial instruments

23

Transfer of financial assets

24

Hedging

25

Direct insurance contracts

26

Re-insurance contracts

27

Extraction of petroleum and natural gas

28

Changes in accounting policies and estimates and correction of errors

29

Events occurring after the balance sheet date

30

Presentation of financial statements

31

Cash flow statements

32

Interim financial reporting

33

Consolidated financial statements

34

Earnings per share

35

Segment reporting

36

Related party disclosure

37

Presentation of financial instruments

38

First time adoption of Accounting Standards for Business Enterprises

Correction list for hyphenation

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