As reported in this month’s roundup, the G20 leaders have put pressure on accounting standard setters with a wide range of measures and proposals. By Nick Topazio, financial reporting specialist, CIMA.
INTERNATIONAL
G20 calls for improved valuation and provisioning
At its London summit, the G20 called on the accounting standard setters to work urgently with supervisors and regulators to improve standards on valuation and provisioning. It also called on them to achieve a single set of high quality global accounting standards.
The G20 also expanded the Financial Stability Forum to become the Financial Stability Board. The board will have wide authority to review and advise financial regulators and standard setting bodies.
G20 recommendations for accounting standard setters for 2009 include:
- reducing the complexity of accounting standards for financial instruments
- strengthening accounting recognition of loan loss provisions by incorporating a broader range of credit information
- improving accounting standards for provisioning, off balance sheet exposures and valuation uncertainty
- achieving clarity and consistency in the application of valuation standards internationally, working with supervisors
- making significant progress towards a single set of high quality global accounting standards
- within the framework of the independent accounting standard setting process, improving involvement of stakeholders, including prudential regulators and emerging markets, through the IASB’s constitutional review.
The G20 leaders also agreed that accounting standard setters should improve standards for the valuation of financial instruments based on their liquidity and investors’ time holding horizon - while reaffirming the principle of fair value accounting.
Read the full text of the G20 leaders’ communiqué.
Australia proposes carbon emission trading scheme
The Australian federal government has proposed a carbon pollution reduction scheme. The scheme would come into effect on July 2010.
It is intended that entities in specified sectors (energy, transport, etc) that emit more than 25,000 tonnes of CO2 equivalent will need an emissions permit for each tonne of CO2 equivalent produced that year.
The government will set a cap for the volume of allowable emissions and the market will determine the price of the permits based on supply and demand.
Deloitte Australia has a paper examining the potential effects on current financial reporting requirements.
IASB and FASB commit to new financial instrument standard
The International Accounting Standards Board and the Financial Accounting Standards Board have agreed to an accelerated project to replace their financial instrument standards with a new joint standard. The new standard will comprehensively address issues raised by the current economic crisis.
The aim is to produce a proposal within six months.
Read the IASB press release.
IASB puts forward new income tax standard
The IASB has proposed a new income tax standard. The standard would maintain the temporary difference approach which aims to recognise future tax consequences of past events and transactions now - rather than wait until the tax needs to be paid.
The proposed standard removes most of the exceptions in IAS 12 and aims to simplify the accounting requirements. The second set of proposals on which the IASB has invited comment relates to derecognition.
Derecognition happens when an entity removes a financial instrument from its financial statements. This occurs if the entity no longer controls a financial asset, or no longer has an obligation to settle a financial liability. The IASB has proposed to enhance disclosure requirements to allow a better assessment of risks associated with assets derecognised under the proposals, but which the entity is still involved with.
You can comment on both exposure drafts until 31 July 2009. Comments can be provided to CIMA via the consultation database.
Find out more about the income tax project and the derecognition project.
IASB seeks views as part of off balance sheet activities review
The IASB will hold public roundtables in Toronto, Tokyo and London in June to discuss its proposals on consolidation and derecognition. The emphasis will be on securitisations and the use of structured vehicles for off balance sheet accounting.
See the IASB press release for more information.
IASB publishes 2009 annual improvements update
Every year, the IASB updates its suite of financial reporting standards for non urgent but necessary changes that would not be included in other projects.
The proposed amendments to 12 IFRSs were published in October 2007, August 2008 and January 2009. They have been published as one consolidated text to ease the burden of change.
The effective date for these changes is annual periods beginning on or after 1 January 2010.
Read the IASB press release.
IASB standards available online
The IASB has responded to calls for improved access to its standards by making them available online.
May 2009