As reported in this month's news roundup, the majority of big issues facing financial executives in 2009 relate to financial reporting. By Nick Topazio, financial reporting specialist, CIMA.
International
FEI identifies top challenges for financial executives
Financial Executives International has compiled a list of top challenges facing financial executives in 2009. At least half of them relate to financial reporting issues. The challenges are:
1) implications of the economic crisis
2) fair value measurements
3) business taxation
4) XBRL (see below)
5) convergence of US Generally Agreed Accounting Principles (GAAP) and IFRS
6) new joint IASB / FASB standard on business combinations
7) financial statement presentation
8) complexity in financial reporting
9) controls and risk management
10) employee benefits issues
11) climate change legislation and regulation.
See the FEI article for more (19 December).
US sets June deadline for XBRL filing
The Securities and Exchange Commission (SEC) will require public companies to provide an XBRL version of their SEC filings. Under the new rules, the 500 largest US public companies and foreign private issuers listed with the SEC will need to provide financial information using XBRL beginning 15 June 2009. Smaller companies, depending on their size and filing status, would begin reporting in XBRL in 2010 or 2011, with all public companies filing in XBRL within three years.
Watch a webcast of the SEC announcement, or read the SEC press release.
IASB addresses G20's concerns about off balance sheet vehicles
G20 world leaders raised concerns at their recent meeting about the use of off balance sheet vehicles - particularly by banks. New IASB proposals address those concerns by presenting a new, principles-based definition of control of an entity that would apply to a wide range of situations and be more difficult to evade by special structuring.
The consultation is open for comment until 20 March 2009.
Read the IASB press release.
Europe recognises IFRS equivalence of six countries
The European Commission has designated the GAAPs of the United States, Japan, China, Canada, South Korea and India as equivalent to IFRS as adopted by the EU.
This decision was based on the expectation of certain actions by some of these countries. As a consequence the commission will review the situation in China, Canada, South Korea, and India by 2011. Companies from any of these countries listed on EU markets will continue to be able to file their financial statements prepared in accordance with their national GAAP.
Read the EC press release.
EFRAG looks for greater influence
The European Financial Reporting Advisory Group (EFRAG) is proposing changes to its organisational structure with a view to exercising greater influence over the future direction of financial reporting - and International Financial Reporting Standards (IFRS) in particular. These changes would lead to greater coordination with the case bodies and more independence in EFRAG’s supervisory body.
See the EFRAG website.
Interpretation on non-cash distributions to owners
Existing IFRS do not address how an entity should account for non cash distributions to its owners.
The interpretation IFRIC 17 makes clear that:
- a dividend payable should be recognised when the dividend is appropriately authorised
- an entity should measure the dividend payable at the fair value of the net assets to be distributed
- an entity should recognise the difference between the dividend paid and the carrying amount of the net assets distributed in profit and loss.
Read the IASB press release.
Comments on Australian board's intangible assets paper
The Australian Accounting Standards Board (AASB) discussion paper 'Initial accounting for internally generated intangible assets' discusses whether increased recognition of such assets is possible.
This is an important debate - especially in light of the differences that exist between the accounting for internally generated intangible assets in a business combination context and at other times.
See the AASB discussion paper and comment on the proposals. The closing date for comments is 15 May 2009.
Eliminating unnecessary disclosures for state controlled entities
Following adverse comments on its original proposals, the International Accounting Standards Board (IASB) has revised its disclosure requirements in relation to IAS 24.
Unlike the original proposal, the revised proposal will not require state controlled entities to assess the extent of state influence. Instead, it would require general disclosures about the types and extent of significant transactions.
Read the full press release and comment on the proposals.
Four standards approved for Europe use
The European Commission has endorsed four standards for use in Europe:
- revised IAS 23 Borrowing Costs
- amendments for Vesting Conditions and Cancellations to IFRS 2 Share-based Payment
- IFRIC 13 Customer Loyalty Programmes
- IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction.
Download the latest EFRAG endorsement status report.
Joint IASB and FASB proposals on revenue recognition
US GAAP and IFRS have potentially conflicting revenue recognition standards. These conflicts can lead to differing results for similar transactions. The boards have published a discussion paper which proposes a single revenue model.
The underlying principle is that a company would recognise revenue when it satisfies a performance obligation by transferring goods and services to a customer as contractually agreed.
The discussion paper is open for comment until 19 June 2009. You can comment directly here.
Proposed changes to accounting for embedded derivatives
One of the IASB’s recent responses to current economic conditions was to permit reclassification of financial statements.
However - one of the risks of bypassing normal IASB due process requirements was unintended consequences and the IASB has been made aware of potential diversity in practice in relation to the accounting for embedded derivatives.
These proposals would require all embedded derivatives to be assessed and, if necessary, separately accounted for. Make your views known by 21 January 2009.
Read the full IASB press release.
United Kingdom
FRC advice on corporate reporting challenges during the downturn
The Financial Reporting Council has published advice to help directors meet their responsibilities in annual reports and accounts. This includes:
- an analysis of the challenges for audit committees arising from the global liquidity squeeze and some suggested questions that may need addressing.
- an update for directors of listed companies on reporting on going concern and liquidity risk.
Read the press release and see the documents.
Proposed amendments to FRS 29 Financial Instruments: Disclosure
You can read more about the ASB’s proposals and comment on the changes. The consultation ends on 30 January 2009.
FRC consults on funding
The FRC proposes to increase core operating costs by 7%. Taking into account withdrawal of the government’s funding of FRC activities, those companies that paid the FRC levy this year will on average face a 9% increase next year.
If you wish to comment, you will need to do so by 13 March 09.
Read the full press release.
Report on UK listed company audited financial statements
Deloitte has published the results of a survey of 130 listed companies, which show:
- 51% of the published financial statements include non GAAP numbers on the face of the income statement.
- 86% of companies identified key sources of estimation uncertainty or areas of critical judgements. However, these disclosures tended to be generic in nature and not particularly informative.
- Of the companies surveyed, 49% still use UK GAAP as the basis for accounting in their parent company standalone accounts.
Read the full results and download the survey.
January 2009