Reporting review
The Ernst & Young bulletin on auditing, accounting and corporate governance. July 2011
France's Lagarde named IMF chief
The International Monetary Fund has named French Finance Minister Christine Lagarde as its next managing director, catapulting her into the middle of a deepening European debt crisis. Lagarde, the first woman and 11th consecutive European to hold this position, will have to lead an international institution while showing independence from her previous positions as part of the French government. Lagarde has said that, "I will make it my overriding goal that our institution continues to serve its entire membership with the same focus and the same spirit. The IMF must be relevant, responsive, effective, and legitimate, to achieve stronger and sustainable growth, macroeconomic stability, and a better future for all."
SEC urged to go slow on global accounting move
Business representatives and accountants have told the Securities and Exchange Commission that the US should move towards use of international accounting standards but must not rush the process. The SEC has said that it will decide this year whether to switch to international financial reporting standards set by the International Accounting Standards Board. SEC Chairman Mary Schapiro has said that the issue "is a major decision for this agency and one not to be taken lightly." "Our primary focus will be to ensure that investors have the information they need in a form that's helpful to them," but the agency will also consider the costs of making the move, she said. However, panelists have said that the absence of detailed rules in IFRS, which is based more on broad principles, could also cause confusion.
CFTC expands its power to pursue fraud, manipulation
Commodity regulators have voted 5-0 to approve a rule that expands their ability to pursue fraud and manipulation in the derivatives markets they regulate, finishing the first major rule required by the Dodd-Frank law. With the vote, the regulators will now only have to prove that a trader acted recklessly, instead of proving that the trader intended to manipulate a market. Regulators also no longer have to show that a trader's actions actually had an effect on price, which was part of the previous standard for manipulation. The vote marks the beginning of the final phase of rules writing required by the Dodd-Frank law. The law gave the CFTC new responsibility to regulate the over-the-counter derivatives market as well as expanded anti-manipulation authority.
Accounting regulators delay new rule on leases
The Financial Accounting Standards Board and the International Accounting Standards Board have said that more work is needed on a proposed rule that would change how companies account for their leases, possibly pushing back issuance of the new rule by months. They have said that they will reintroduce a revised lease-accounting proposal for public comment later this year, with changes from their original proposal last year. The move follows a similar delay the boards announced last month for their proposal to overhaul the rules on revenue recognition, which is also being revised and reissued. The leasing and revenue-recognition proposals are both among the key elements of the two accounting boards’ “convergence” attempt to bring US and global accounting rules closer together.
Latest publications from Ernst & Young
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IFRS Outlook – May/June 2011
The May/June issue of IFRS Outlook, provides clients with timely information and insights related to IFRS and emerging issues.
What you need to know about the new consolidation, joint arrangements and disclosure standards
The International Accounting Standards Board (IASB) issued in May the long awaited package of standards, IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities. Read about the impact of the new requirements and key issues that you should be considering now.
Fair value measurement: What you need to know about the new standard
IFRS 13 Fair Value Measurement was issued on completion of this joint project between the IASB and US Financial Accounting Standards Board (FASB) in May. This new standard does not change when an entity is required to use fair value, but rather, describes how to measure fair value under IFRS, when fair value is required or permitted to be used. Learn about the principles and key elements of the new standard from this article.
IFRS update
Find out which projects the IASB and the IFRS Interpretations Committee are currently discussing.
Resources
Look here for an up to date list of our recent publications, including Good First Time Adopter Limited 31 December 2011, an illustrated set of consolidated financial statements of a fictitious company presenting IFRS financial statements for the first time, and Joint Project Watch,which provides a snapshot of the key developments on the various joint projects of the IASB and the US FASB.IFRS Outlook – May/June 2011
IFRS Developments – Issue 8: Proposed improvements to IFRS
The International Accounting Standards Board (IASB) has proposed seven necessary, but non-urgent, improvements to International Financial Reporting Standards (IFRS) as part of its annual improvements project. The amendments are intended to clarify existing IFRS, typically where ambiguity exists. The comment period for the exposure draft closes on 21 October 2011. IFRS Developments – Issue 8: Proposed improvements to IFRS
IFRS Developments – Issue 9: A new approach to credit impairment is in the works
The IASB and the FASB received mixed feedback on their previous proposals for credit impairment and have now decided to develop a new approach. This new approach considers splitting loans into three buckets based on their underlying credit risk characteristics and the information available.
The model would represent a significant change from current practice under both US GAAP and IFRS. In addition, this will raise some new practical challenges for preparers of financial statements. IFRS Developments – Issue 9: A new approach to credit impairment is in the works
Joint Project Watch – June 2011
The standard-setting activities of the IASB and the FASB continue to move forward. The Boards recently decided to re-expose their revenue recognition model, providing constituents another opportunity to provide feedback. They have issued final standards on some projects and continue to redeliberate others. Our June 2011 edition of Joint Project Watch is designed to give you a snapshot of key developments from an IFRS perspective, together with our observations on the potential implications for companies. Joint Project Watch – June 2011
Implementing Phase 1 of IFRS 9 (Second Edition)
This is an update of the first edition that we issued in June 2010. In this edition, we have addressed additional questions that are being asked about implementing IFRS 9 Financial Instruments, recognising that some aspects of the standard are still unclear.
In November 2009, the IASB published the first part of Phase 1 of IFRS 9. This dealt with the classification and measurement of all financial assets within the scope of IAS 39. In October 2010, the Board completed Phase 1 of IFRS 9, classification and measurement of financial instruments, by issuing amendments to IFRS 9. These amendments addressed financial liabilities and incorporated the current derecognition principles of IAS 39 into IFRS 9. We highlighted the main changes to the accounting requirements for financial instruments, and provided a brief commentary on the possible business impact, in our Supplements to IFRS Outlook, issues 60 and 89.
The new standard is principles-based, with less extensive rules and application guidance than IAS 39. Therefore, its application will require the careful use of judgment. This publication should be distributed to those entities that are currently preparing for or contemplating an early adoption of IFRS 9, so as to enable them to analyse the impact of the new standard Implementing Phase 1 of IFRS 9 (Second Edition).
IASB Projects: A pocketbook guide
The IASB continues to move forward with its standard-setting activities and the ability to stay one step ahead in a sea of change is critical. This June 2011 edition of the IASB Projects: A pocketbook guide summarises the key features of the various IASB projects, many of which are joint projects with the US FASB as part of ongoing efforts to converge IFRS and US GAAP. This guide also includes some of the potential financial and business implications of the proposed accounting changes, together with Ernst & Young's views on the projects.
This edition provides updates to 30 June 2011 for the following:
- New standards issued in May 2011: IFRS 10 Consolidated Financial Statements; IFRS 11 Joint Arrangements; IFRS 12 Disclosures of Interests in Other Entities; and IFRS 13 Fair Value Measurement
- Amendments issued in June 2011 to IAS 19 Employee Benefits and IAS 1 Financial Statement Presentation
- Tentative decisions taken by the IASB, including the June 2011 decision of the IASB and US FASB to re-expose the revenue recognition proposals
- Revised timelines for finalising the projects IASB Projects: A pocketbook guide
Applying IFRS: Lessee model comes together as leases project progresses
The IASB and the FASB (collectively, the Boards) have made significant changes to their proposed leases model to address conceptual and operational concerns constituents raised about their original proposal. Like the exposure draft, the revised proposal (i.e., exposure draft adjusted for subsequent deliberations) would require most leases to be recognised on the balance sheet. This would also require a number of judgements, as well as periodic reassessment.
The attached publication from our Applying IFRS series, Lessee model comes together as leases project progresses, summarises the revised leases proposal for topics the Boards have redeliberated through June 2011. These decisions are primarily lessee-related, and this publication compares the revised proposal with current accounting. All of the decisions made by the Boards to date are tentative and will not be finalised until they approve a final standard. The Boards still need to address lessor accounting and certain remaining issues. In addition, they have indicated that before finalising the standard, either a review draft will be made available or a second exposure draft will be issued for comment. Applying IFRS: Lessee model comes together as leases project progresses
Global Mining Centre publication – IFRS developments: Accounting for waste removal costs
The IFRS Interpretations Committee considered on the near final Interpretation on accounting for waste removal costs during the production phase of a surface mine at its July 2011 meeting. Certain additional changes were considered, such as accounting under a revaluation model. An effective date of 1 January 2013 was recommended.Global Mining Centre publication – IFRS developments: Accounting for waste removal costs
Date for your diary – Financial Reporting Outlook 2011
Emerging issues and leading thinking
Monday 21 November 2011, Park Plaza, Westminster Bridge, London SE1 7UT
The Ernst & Young Financial Reporting Outlook annual conference is a unique opportunity to prepare for the challenges ahead. Last year’s event attracted over 500 delegates from more than 20 countries.
With the changes to the leadership at the IASB and the likely upcoming decision by the SEC on the adoption of IFRS in the US, the second half of 2011 promises to be an important period in global financial reporting.
Leading standard setters and regulators at the IASB and FRC, investors, regulators and senior partners at Ernst & Young will focus on these emerging issues.
In addition this year sees a number of important changes for our clients including:
- The implementation of the UK Bribery Act 2010
- The introduction of XBRL reporting
- A number of final rules around the Dodd-Frank Act 2010
To address these challenges we have introduced a number of tailored break-outs.
You will also have the opportunity to:
- Put questions directly to our panel of senior influencers on governance, changes to IFRS and the wider challenges of international convergence.
- Join two of the eleven interactive breakout sessions to debate the year-end issues you face.
- Hear views and insight from peers and colleagues during lunch and post-event drinks, and through our interactive voting platforms.
To view full conference details and to register for this event, please visit:
www.financialreportingoutlook.com
Tel: +44 (0)20 7951 8798
Email: financialreportingoutlook@uk.ey.com
