INSIGHT. IASB and Accounting Standards Board of Japan agree to next steps in launching joint project for convergence

Transcription

1 THE NEWSLETTER OF THE INTERNATIONAL ACCOUNTING STANDARDS BOARD INSIGHT January 2005 IASB and Accounting Standards Board of Japan agree to next steps in launching joint project for convergence On 21 January the IASB and the Accounting Standards Board of Japan (ASBJ) announced their agreement to launch a joint project to reduce differences between International Financial Reporting Standards (IFRSs) and Japanese accounting standards. Phase 1 of this project is the first step towards the final goal of convergence of their standards. The agreement follows the announcement of 12 October, when both boards agreed to examine differences between IFRSs and Japanese accounting standards. Both boards believe that this effort will promote further international convergence to high quality accounting standards and will contribute to the development of global capital markets. Specific elements of the agreement include: 1. The boards will identify and assess differences in their existing standards on the basis of their respective conceptual frameworks or basic philosophies with the aim of reducing those differences where economic substance or market environments such as legal systems are equivalent. 2. The boards will address the differences in their respective conceptual frameworks. This will take place later in the project, as a separate subproject, at a time agreed by the boards. 3. The boards will consider their respective due process requirements in arriving at agreement. IASB issues amendment to pension cost standard On 16 December the IASB issued an amendment to IAS 19 Employee Benefits. The IASB has decided to allow the option of recognising actuarial gains and losses in full in the period in which they occur, outside profit or loss, in a statement of recognised income and expense. This option is similar to the 4. The ASBJ will undertake a study to get an overall picture of major differences between Japanese accounting standards and IFRSs and will identify topics to be discussed. 5. The boards will adopt a phased approach to the comparative reviews of differences in individual standards. 6. The scope of the first phase is standards in place as of 31 March 2004, with the following exceptions: standards under review or intended to be reviewed in the joint projects between the IASB and the US Financial Accounting Standards Board (FASB) standards that are divergent owing to differences in the respective conceptual frameworks or basic philosophies standards recently developed standards whose requirements are subject to legal restrictions or those currently considered inapplicable in Japan. Topics excluded from the first phase will be addressed in subsequent phases. The ASBJ will identify topics for the first phase of the project by early Based on the above agreement, an initial meeting between representatives of the two boards will take place in Tokyo in the first quarter of requirements of the UK standard, FRS 17 Retirement Benefits. Before the amendment IAS 19 required actuarial gains and losses (ie unexpected changes in value of the benefit plan) to be recognised in profit or loss, either in the period in which they occur or spread over the service INSIDE THIS ISSUE News 1-6 Project updates 7-11 IFRIC Education Report: SAC Trustees News 15 Staff changes 15 IASB Publications 16 IASB INSIGHT / ISSN Editor: Michael Butcher The views expressed in IASB Insight are not necessarily shared by the IASC Foundation Trustees or the IASB. Articles are published without responsibility on the part of the publishers or the authors for loss occasioned by any person acting or refraining from acting as a result of any view expressed herein. Copyright 2005 International Accounting Standards Committee Foundation (IASCF). All rights reserved. No part of Insight may be translated, reprinted or reproduced or utilised in any form either in whole or in part or by any electronic, mechanical or other means, now known or hereafter invented, including photocopying and recording, or in any information storage and retrieval system, without prior permission in writing from the IASCF contact Gillian Bertol, Publications Director. IASB INSIGHT is published four times a year by the International Accounting Standards Committee Foundation, 30 Cannon Street, London EC4M 6XH, United Kingdom. Tel: +44 (0) Fax: +44 (0) iasb@iasb.org Web: To order IASB publications, visit our Website at

2 NEWS lives of the employees. Many entities have spread the gains and losses. Under the amendment, entities that at present spread the gains and losses are not required to change their approach, but are now free to choose to do so. In particular, the amendment allows companies that are already showing the surplus or deficit in full under FRS 17 to continue with their present policy. The amendment also (a) specifies how group entities should account for defined benefit group plans in their separate or individual financial statements and (b) requires entities to give additional disclosures. The IASB has previously signalled its intention to undertake a comprehensive project on post-employment benefits, looking at fundamental aspects of measurement and recognition. Exploration for and evaluation of mineral resources: new standard issued On 9 December the IASB issued IFRS 6 Exploration for and Evaluation of Mineral Resources. The publication of this IFRS provides, for the first time, guidance on accounting for exploration and evaluation expenditures, including the recognition of exploration and evaluation assets, and completes the first step in the IASB s project to achieve the convergence of widely varying accounting practices for extractive activities around the world. IFRS 6 is effective for annual periods beginning on or after 1 January However, earlier application is encouraged, and if an entity adopts IFRS 6 before 1 January 2006, transitional relief is available for some comparative disclosures. In developing IFRS 6, the IASB balanced the urgent need for global accounting standards for extractive activities (mining and oil and gas) generally with the recognition that developing a global consensus on a rigorous and comprehensive approach would require extensive consultation. That consultation could not be completed in time to meet the starting date of 2005 set by a number of jurisdictions for the application of international standards. In that light, IFRS 6 completes only the initial phase of the IASB s project on extractive activities. It seeks to increase transparency by requiring improved disclosures for exploration and evaluation assets. In addition, the IASB has made modest improvements to recognition and measurement practices, especially with respect to testing exploration and evaluation assets for impairment, without requiring extensive changes that themselves might need to be changed once the comprehensive review of accounting for extractive activities has been completed. In April 2004 the Board approved a research project to be undertaken by staff from the national standard-setters in Australia, Canada, Norway and South Africa that will address accounting for extractive activities generally. The project team has undertaken a detailed examination of the comments received on the Issues Paper Extractive Industries published by the IASB s predecessor organisation, IASC, in November 2000, and is developing its research priorities. The team is assisted by an advisory panel, which includes members from industry (oil and gas and mining sectors) and accounting firms, analysts and other users of financial statements; auditors; and securities regulators. IASB issues limited amendments to IAS 39 on transition and initial recognition On 17 December the IASB issued limited amendments to IAS 39 Financial Instruments: Recognition and Measurement on the initial recognition of financial assets and financial liabilities. The amendments provide transitional relief from retrospective application of the day 1 gain and loss recognition requirements. They allow, but do not require, entities to adopt an approach to transition that is easier to implement than that in the previous version of IAS 39, and will enable entities to eliminate differences between the IASB s standards and US requirements. When improving IAS 39 the IASB decided to include guidance on when an entity can recognise gains or losses on initial recognition of financial instruments. The revised version of IAS 39 issued in 2003 states that the best evidence of the fair value of a financial instrument at initial recognition is the transaction price, unless the fair value can be evidenced by comparison with other observable current market transactions, or is based on a valuation technique whose variables include only data from observable markets. It follows that a day 1 gain or loss can be recognised only if evidenced in this way. When developing this requirement, the IASB noted that it converged with US generally accepted accounting principles (GAAP). The transition provisions in the revised IAS 39 and in IFRS 1 First-time Adoption of International Financial Reporting Standards required retrospective application of this guidance. 2 IASB INSIGHT, January 2005

3 NEWS After the revised IAS 39 was issued in December 2003, constituents raised the following concerns: retrospective application of the day 1 gain or loss recognition requirements will be difficult and expensive, and may require subjective assumptions about what was observable and what was not; and retrospective application diverges from the requirements of US GAAP. Similar requirements in US GAAP are applicable only to transactions entered into after 25 October Given these concerns the IASB decided, as a special case, to amend the transition requirements in the revised IAS 39. The amendments allow, but do not require, entities to adopt an approach to transition that is easier to implement than that in the revised IAS 39 and also enable entities to eliminate any reconciling differences with US GAAP. The amendments give entities a choice of applying the day 1 gain or loss recognition requirements in IAS 39: retrospectively (as previously required by IAS 39); prospectively to transactions entered into after 25 October 2002 (the effective date of similar requirements in US GAAP); or prospectively to transactions entered into after 1 January 2004 (the date of transition to IFRSs for many entities). IFRIC closes year with seven publications In the last few weeks of 2004, the International Financial Reporting Interpretations Committee (IFRIC) released seven documents: Four Interpretations IFRICs 2-5 An Amendment to SIC-12 Two Draft Interpretations D10 and D11 THE NEW INTERPRETATIONS The classification of members shares in co-operative entities IFRIC 2 Members Shares in Co-operative Entities and Similar Instruments, issued on 25 November, gives guidance on the classification of members shares in co-operative entities either as financial liabilities or as equity. The Interpretation was a direct response to concerns expressed by constituents that the classification of members shares in co-operative entities under IAS 32 Financial Instruments: Disclosure and Presentation is unclear. Members shares in co-operative entities have some characteristics of equity. They also give the holder the right to request redemption for cash or another financial instrument, although that right may be subject to limits on whether the instruments will be redeemed. The Interpretation gives guidance on how those redemption terms should be evaluated in determining whether the financial instrument should be classified as financial liabilities or as equity. The guidance was developed after extensive discussions with representatives of the European Association of Co-operative Banks. Accounting for greenhouse gas emissions On 2 December the IFRIC released IFRIC 3 Emission Rights. In the light of the Kyoto agreement, several governments have, or are in the process of developing, schemes to encourage reductions in greenhouse gas emissions. IFRIC 3 specifies the accounting for companies participating in such schemes. The guidance is timely because one such scheme the European Union s Emissions Trading Scheme starts this year. IFRIC 3 requires companies to account for the emission allowances they receive from governments as intangible assets, recorded initially at fair value. It also requires companies, as they produce emissions, to recognise a liability for the obligation to deliver allowances to cover those emissions. The IFRIC intends to continue to work with the IASB to identify whether it would be possible to amend the accounting treatment in IAS 38 Intangible Assets for some readily tradeable intangible assets (such as some emission allowances). The requirements of that standard constrained the IFRIC in developing its Interpretation but it would not have been possible to amend the standard in time for Scope of leasing standard Also on 2 December, IFRIC 4 Determining whether an Arrangement contains a Lease was released. The Interpretation gives guidance on determining whether arrangements that do not take the legal form of a lease (eg some take-or-pay contracts) should, nonetheless, be accounted for in accordance with IAS 17 Leases. It specifies that an arrangement contains a lease if it depends on the use of a specific asset and conveys a right to control the use of that asset. This Interpretation explains that the requirements of the IASB s leasing standard have wider applicability than just those agreements described as leases. Elements of some supply and outsourcing agreements may now need to be treated as leases. In finalising this Interpretation the IFRIC has responded to those constituents who were concerned about the differences between the draft Interpretation and similar requirements of the IFRIC s US counterpart, the Emerging Issues Task Force. As a result, the main requirements of the Interpretation are the same as the US requirements. IASB INSIGHT, January

4 NEWS Accounting for interests in decommissioning funds On 16 December the IFRIC issued IFRIC 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds. Decommissioning fund arrangements are becoming increasingly common. IFRIC 5 explains how to treat expected reimbursements from funds set up to meet the costs of decommissioning plant (such as nuclear plant) or equipment (such as cars) or in undertaking environmental restoration or rehabilitation (such as rectifying pollution of water or restoring mined land). It is expected that the Interpretation will assist users to make a reasoned assessment of future benefits that contributors might receive from those funds. IFRIC 5 includes an amendment to IAS 39 Financial Instruments: Recognition and Measurement so as to exclude from the scope of IAS 39 rights to reimbursement for expenditure required to settle a liability recognised as a provision. Such rights are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and IFRIC 5. AMENDMENT TO THE SCOPE OF SIC-12 As foreshadowed in the last edition of Insight, on 11 November the IFRIC released an Amendment to the scope of Interpretation SIC-12 Consolidation Special Purpose Entities. SIC-12 excluded from its scope post-employment benefit plans and equity compensation plans. Such plans were within the scope of the accounting standard IAS 19 Employee Benefits (as amended in 2002). However, as the accounting standard IFRS 2 Share-based Payment becomes effective (for annual periods beginning on or after 1 January 2005), IAS 19 will no longer apply to equity compensation plans. The Amendment removes the scope exclusion in SIC-12 for equity compensation plans. Hence, an entity that controls an employee benefit trust (or similar entity) set up for the purposes of a share-based payment arrangement will be required to consolidate that trust. The Amendment also amends the scope exclusion in SIC-12 for post-employment benefit plans to include other long-term employee benefit plans, to ensure consistency with the requirements of IAS 19. Previously, SIC-12 did not exclude other long-term employee benefit plans from its scope. However, IAS 19 requires those plans to be accounted for in a manner similar to the accounting for post-employment benefit plans. PROPOSALS FOR TWO FURTHER INTERPRETATIONS Waste management liabilities On 25 November the IFRIC released draft Interpretation D10 Liabilities arising from Participating in a Specific Market Waste Electrical and Electronic Equipment, which proposes guidance on the accounting for liabilities for waste management costs. D10 clarifies when certain producers of electrical goods will need to recognise a liability for the cost of waste management relating to the decommissioning of waste electrical and electronic equipment (historical waste) supplied to private households. This is a situation that will affect many European manufacturers and is the result of the European Union s Directive on Waste Electrical and Electronic Equipment. However, the European model for handling the costs of such waste is thought likely be replicated elsewhere. The Directive prescribes that the cost of waste management for equipment that has been sold to private households before 13 August 2005 ( historical household equipment ) will fall to producers of that type of equipment who are in the market in the period specified in the applicable legislation (the measurement period). They have to contribute to costs proportionately e.g. in proportion to their respective share of the market by type of equipment. The issue that the IFRIC addressed was: if an entity has an obligation to contribute to waste management costs based on its share of the market in a measurement period, when does a liability arise in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets? Did it arise with the manufacture or sale of the historical household equipment? Does it arise when the waste management costs are incurred? Does it arise as a result of participation in the market in the measurement period? The IFRIC concluded that the event giving rise to the liability for costs of such historical waste, and so its recognition, is participation in the market in a measurement period, ie a period in which market shares are determined for the purposes of allocating waste management costs. The IFRIC did not agree that production of the equipment was the triggering event for liability recognition. The proposals are open for public comment until 11 February Changes in contributions to employee share purchase plans On 16 December the IFRIC released draft Interpretation D11 Changes in Contributions to Employee Share Purchase Plans. D11 clarifies how an entity should apply IFRS 2 Share-based Payment if an employee ceases to contribute to an employee share purchase plan (ESPP) and, as a consequence, is no longer able to buy shares in the plan. The IFRIC concluded that the entity should account for this event as a cancellation. Therefore, in accordance with paragraph 28(a) of IFRS 2, the entity should recognise immediately the amount that otherwise would have been recognised for services received over the remainder of the vesting period. 4 IASB INSIGHT, January 2005

5 NEWS D11 also clarifies how an entity should apply IFRS 2 if an employee changes from one ESPP to another. The IFRIC concluded that the entity should account for this event in accordance with paragraph 28(c) of IFRS 2. For example, if the entity identifies the equity instruments granted to the employee under the new ESPP as replacements for the equity instruments granted to that employee under the original ESPP, the entity should account for this event as a modification of the original grant of equity instruments. The proposals are open for public comment until 1 March IASB and FASB international working group on performance reporting starts work On 22 November the IASB announced the membership of a new international working group that it has established jointly with the US Financial Accounting Standards Board (FASB). The objective in setting up the working group is to help the boards in their joint project to establish standards for the presentation of information in the financial statements that would improve the usefulness of that information in assessing the financial performance of a business enterprise. The working group consists of senior professionals with extensive experience in and responsibility for the preparation, analysis, audit and regulation of financial statements. The members and official observers are listed on the next page. Although all types of entities are within the scope of the joint project, the boards have not appointed to the working group representatives from financial institutions. They received many nominations for this category, but decided that the reporting needs of financial institutions should be considered separately from those of other sectors. Financial institutions will remain within the scope of the project, but the boards intend to set up a specialist subgroup to examine the reporting needs of financial institutions. The timetable for selecting members of this group is under consideration. The boards will also ask each of the IASB working groups to provide a representative as an official observer at meetings of the new working group. Project overview To meet its objective the project will focus on form and content, classification and aggregation, and display of specified items and summarised amounts on the face of the required financial statements (for both interim and annual periods). That includes determining whether to require the display of certain items regarded as key measures or necessary for the calculation of key measures. The project is not addressing performance reporting outside financial statements, such as in management discussion and analysis (MD&A) statements, in regulatory filings or the reporting of so-called pro forma earnings in press releases or other communications. It also does not currently address disclosures about an entity s segments or matters of recognition or measurement of items in financial statements. Project background Until recently, the IASB and FASB have conducted separate projects on this topic. Those projects differed in important respects and the boards suspended them in late 2003 while they decided on the most effective way forward. In April 2004 the boards agreed that a project on this topic should be conducted jointly and that the work should be performed in segments. The first segment of the project aims to deal with short-term convergence on matters such as the set of required financial statements and the number of years of comparatives to be presented. The second segment of the project will address issues related to recycling, disaggregation and the use of totals/subtotals in the required financial statements. The boards also directed the staff to form a joint international working group to assist the boards and staff in identifying issues to be considered for this project and developing proposed solutions. The boards expect that a document on the first segment will be published in late 2005 for public comment. Getting the work started On 13 and 14 January 2005, the joint international working group met in public in London to exchange views on the project. The first day was devoted to topics relating to the first segment of the project. These included the set of required financial statements, the number of comparative periods to be presented, and the use of the direct and indirect method in the statement of cash flows. On the second day, the group discussed topics relating to the second segment. These included the definition of performance measures, the merits of recycling and the importance of disaggregation. The meeting was educational and no decisions were reached. The staff will use the valuable input from this meeting to update the project plan, to review the order of priorities and to sequence the issues that will be discussed at future board meetings. The boards greatly appreciate everyone s enthusiasm to help in the improvement of international accounting standards and they hope that constituents will share their thoughts and concerns during the consultative stages of this project. Constituents are also encouraged to register as observers at any of the working group s meetings, which will be open to the public. Observer registration details will be available on the IASB/FASB Websites when meeting dates have been agreed. IASB INSIGHT, January

6 NEWS Membership of the international working group on performance reporting Name Title Organisation Country Peter R Bible Chief Accounting Officer General Motors Corporation United States Kathryn Cearns Consultant Accountant Herbert Smith United Kingdom Malcolm Cheetham Chief Accounting Officer Novartis Switzerland Stephen Cooper Managing Director, Valuation & Accounting Research UBS Investment Bank United Kingdom W Peter Day Executive General Manager Finance Amcor Limited Australia Jacques De Greling Equity Analyst IXIS Securities (Caisse d Epargne Group) France Bo Eriksson Senior Vice President/ Corporate Controller Stora Enso Oyj Finland Bridget Gandy Managing Director, International Accounting and Research Fitch Ratings Ltd United Kingdom Gregory Jonas Managing Director Moody s Investors Service United States Ken Kelly Vice President & Controller McCormick & Co United States Sara York Kenny Principal Accounting Policy Advisor International Finance Corporation (World Bank Group) United States / Global Guido Kerkhoff Senior Executive Vice President Group Accounting and Reporting Deutsche Telekom AG Germany Michael P Krzus Director Grant Thornton LLP United States Chris Legge Managing Director, Industrial Ratings Standard & Poor s United Kingdom Patricia McConnell Senior Managing Director Bear Stearns United States Stuart MacDonald Head of Group Financial Reporting Scottish Power plc United Kingdom Elizabeth Mooney Analyst Capital Strategy Research United States Dipl.-Kfm. Hans-Joachim Pilz Managing Director SBFA Investment Research Germany Wolfgang H Reichenberger Executive Vice President & Chief Financial Officer Nestlé SA Switzerland Walter Schuster Professor Stockholm School of Economics Sweden Stephen Taylor Partner Deloitte Touche Tohmatsu Hong Kong Takashi Yaekura Professor Hosei University, Faculty of Business Administration Japan Hiroshi Yamada Councillor Corporate Accounting Group Gilles Zancannaro Corporate Director Information Systems and Finance Matsushita Electric Industrial Co., Ltd. Bouygues Japan France Official Observers European Financial Reporting Advisory Group International Organization of Securities Commissions Basel Committee on Banking Supervision IASB Financial Instruments and Insurance Working Group representatives 6 IASB INSIGHT, January 2005

7 IASB project timetable 2005 The chart below shows the IASB s present expectations about the timing of projects on its active agenda, and lists the topics on its research agenda. Like all such projections, the timing of individual projects is subject to change as the IASB s deliberations proceed. For projects on the IFRIC s agenda, see pages THE ACTIVE AGENDA (see Note 1) Financial instruments: IAS 39 Fair value option IAS 39 Cash flow hedge accounting of forecast intragroup transactions IAS 39 and IFRS 4 Financial guarantee contracts and credit insurance 7 Disclosures IAS 32 Shares puttable at fair value Joint projects with the FASB A Business combinations and related issues: B C Phase II Application of the purchase method Minority interests amendment to IAS 27 Intangibles amendment to IAS 38 Short-term convergence of IFRSs and US standards: IAS 12 Income Taxes Amendment of IAS 20 (Government grants etc) Disclosures about segments (replacement of IAS 14) IAS 37 Provisions, Contingent Liabilities and Contingent Assets Other joint projects: Reporting comprehensive income Revenue and related liabilities Conceptual framework Other IASB projects: 2005 Qtr 1 Qtr 2 Qtrs 3 & 4 later IFRS IFRS IFRS IFRS Accounting standards for small and medium-sized entities Consolidation possible joint project: Control Special purpose entities Insurance contracts phase II DP Liabilities and equity DP THE RESEARCH AGENDA (see Note 2) Extractive activities Financial instruments, improvements to existing standards Hyperinflationary economies IAS 39 Interest margin hedging Intangible assets Investment entities Joint ventures Leases Management commentary Measurement objectives RP PROJECT UPDATE NOTES 1 Topics are placed on the active agenda after consultation with the Standards Advisory Council and a formal vote of the IASB in open meeting. 2 Topics that are candidates for the active agenda, but not yet under active deliberation by the IASB. They include topics being studied by other standard-setters or IASB working groups at the IASB's request. DP DP DP DP Legend: RP Research Paper DP Discussion Paper Exposure Draft IFRS International Financial Reporting Standard (IFRSs include International Accounting Standards and Interpretations) IASB INSIGHT, January

8 PROJECT UPDATE Financial instruments Andrea Pryde, assistant project manager, surveys progress on this topic The October/November edition of Insight reported that the IASB had published three short exposure drafts of amendments to IAS 39 Financial Instruments: Recognition and Measurement that were intended to ease the implementation of the standard. The comment periods for those exposure drafts ended in October. The first amendment arising from the exposure drafts, on Transition and Initial Recognition of Financial Assets and Financial Liabilities, was issued on 17 December (see page 2). The IASB has not yet considered detailed analyses of comments on the exposure drafts of the other two amendments, on Cash Flow Hedge Accounting of Forecast Intragroup Transactions and Financial Guarantee Contracts and Credit Insurance. At its meetings in December and January the IASB held public education sessions on these topics, which included presentations from constituents. The IASB intends to complete these remaining amendments as soon as possible, for application for annual periods beginning on or after 1 January The comment period on another exposure draft, 7 Financial Instruments: Disclosures, also ended in October. A total of 105 comment letters were received. The IASB has started to debate the issues raised by respondents and plans to complete an IFRS based on 7 by the end of June The IASB continues to explore whether there is an alternative solution to the proposals in the exposure draft of proposed amendments to IAS 39 on The Fair Value Option. The IASB had noted that the large majority of the 116 comment letters received did not agree with the proposals, and included a majority from respondents in all categories except regulators. However, the IASB noted that reverting to the unrestricted fair value option in IAS 39 (as amended in March 2004) would not address the concerns of regulators, which were the reason for publishing the exposure draft. Since September, the Board has considered and rejected a possible approach that has been developed by some in the banking industry. This approach would permit use of the fair value option only for a financial asset or financial liability that is part of a group of financial assets and financial liabilities that are managed together on a fair value basis in accordance with a documented risk management strategy, and only part of this group is required or permitted to be measured at fair value. The IASB was concerned about whether this approach could be made operational and whether it could be applied outside of the banking sector, eg to insurers, commercial entities, investment trusts and venture capital entities. The IASB is considering an alternative approach that was developed by IASB staff with the help of a few Board members. This approach seeks to identify, as principles rather than detailed rules, situations in which using the fair value option would be a preferable accounting policy. The IASB supported further exploration of this approach, including consideration of whether it could be made operational, at a future meeting. In addition, the IASB has confirmed its intention to hold one or more public meetings in the first quarter of 2005, to which it would invite constituents with differing views. The aim would be to understand fully the concerns of all constituents and establish whether the proposed new approach or a variant of it would be broadly supported among all classes of constituents. The IASB s work on IAS 32 and IAS 39 is supplemented by that of the IFRIC, which has received requests for interpretations of both standards. So far, the IFRIC has finalised its interpretation of IAS 32, IFRIC 2 Members Shares in Co-operative Entities and Similar Instruments (issued on 25 November see page 3), and has added to its agenda a project on the reassessment of embedded derivatives. For the longer term, the first meeting of the Financial Instruments Working Group took place in September The group is tasked with assisting the IASB in improving, simplifying and ultimately replacing IAS 39 and with examining broader questions on the application and extent of fair value accounting. At its first meeting, the group had a preliminary discussion of which issues it should address and their relative priority. The group will meet again in March when it is expected to discuss hedge accounting on a portfolio basis and how to determine fair value. The IASB is also beginning to consider whether it might add one or more projects to its agenda to eliminate differences in the accounting for financial instruments between IFRSs and US GAAP. This work is at a preliminary research stage and no Board discussions have yet taken place. 8 IASB INSIGHT, January 2005

9 Joint short-term convergence with the FASB PROJECT UPDATE Project manager Anne McGeachin reports. The US Financial Accounting Standards Board (FASB) has issued standards on two of the four short-term convergence subjects on which it consulted in 2004 asset exchanges, and the treatment of idle capacity and spoilage costs in the cost of inventory. On asset exchanges, the FASB has converged with the requirements of IAS 16 Property, Plant and Equipment that exchanges of assets with commercial substance should be measured at fair value. On the cost of inventory, the FASB has converged with the requirements of IAS 2 Inventories that the cost of idle capacity or spoilage should not be included in the cost of inventories. Standards on the other two subjects voluntary changes in accounting policies, and earnings per share are expected soon. The FASB is expected to converge with the requirements of IAS 8 by requiring retrospective application of voluntary changes in accounting policy and changes required by new standards unless the standard specifies a different treatment. The FASB is also expected to converge with the requirements of IAS 33 Earnings per Share on contingently issuable shares. The FASB has also been considering the tentative decisions made by the IASB on income taxes. Agreement has been reached on some matters, and discussions on others are continuing. A joint exposure draft of proposed amendments to IAS 12 Income Taxes and SFAS 109 Accounting for Income Taxes is expected later this year. The IASB also expects to publish this year proposals to amend IAS 37 Provisions, Contingent Liabilities and Contingent Assets to converge with the US standard SFAS 146 Accounting for Costs Associated with Exit or Disposal Activities and in January 2005 agreed to change its approach to segment reporting to converge with SFAS 131 Disclosures about Segments of an Enterprise and Related Information. In the next phase of the short-term project with the FASB, the boards plan to work together on the following: research and development, interim reporting, impairment (after the measurement research project), borrowing costs (after the measurement research project), joint ventures, investment properties, and property, plant and equipment. Insurance contracts Senior project manager Peter Clark reports. Background The IASB completed phase I of its project on insurance contracts in March 2004 by issuing IFRS 4 Insurance Contracts. However, the IASB is acutely aware that there is an urgent need for a comprehensive standard on insurance contracts and has now restarted the second phase of this project. In restarting the project, the IASB is taking a fresh look at financial reporting by insurers. Past work by the IASB and by its predecessor is a useful resource, but the IASB does not feel bound by it. The only restrictions on a fresh look are the IASB s Framework and the general principles established in the IASB s existing standards. Similarly, the IASB can learn from national or industry practice, but will not be constrained by it. Insurance Working Group In restarting phase II, the IASB s first step was to set up a working group to help it to analyse accounting issues relating to insurance contracts. As reported in the last edition of Insight, the group includes senior financial executives who are involved in financial reporting for insurers, as well as analysts, actuaries, auditors and regulators. The Insurance Working Group has met three times so far and is providing useful input. The group s discussions have concentrated on non-life insurance, but the group is beginning to turn to life insurance. Towards a discussion paper The objectives of the IASB s discussions so far have been mainly educational. However, in January 2005, the IASB reviewed a project plan. The initial output for phase II will be a discussion paper, incorporating the IASB s preliminary views on the issues that determine the direction of the project. It will not be a comprehensive discussion of all matters that might be included in a standard. The discussion paper cannot be expected before the end of 2005, and quite possibly might not be ready until later than that. Developing an exposure draft would take at least 18 months from when the discussion paper is published and a final standard would take at least another 12 months. Although some parties may be disappointed that progress cannot be faster, developing a high quality, converged solution will take time. Convergence Seeking convergence with national standards is an important priority for the IASB. In this respect, convergence of IFRSs and US standards is particularly significant. The agenda of the US Financial Accounting Standards Board (FASB) does not currently include a project on insurance contracts, but the FASB has expressed an interest in participating in a modified joint project. In other words, the discussion paper would be developed primarily through the deliberations of the IASB, with input from the Insurance Working Group. Following analysis of comments received, the boards would undertake a joint project with the objective of issuing identical or substantially similar standards. IASB INSIGHT, January

10 PROJECT UPDATE Next steps The IASB expects: to hold a further educational session on non-life insurance liabilities in February, focusing on discounting and on risk and uncertainty. No decisions are expected. to discuss non-life insurance contracts in March. The Insurance Working Group meets next on 13 and 14 April in London. Meetings of the IASB and of the group are open to the public. The IASB s Website contains registration details and agendas for forthcoming meetings, as well as updates on this and other projects. Business Combinations: Progress with common IASB/FASB exposure draft Project manager Galina Ryltsova reports The July 2004 edition of Insight reported that the US Financial Accounting Standards Board (FASB) and the IASB had agreed to develop jointly a common, cohesive exposure draft on accounting for business combinations that will incorporate the decisions reached in their joint project and the guidance in their existing standards that will not be changed by the joint project. (That guidance was developed in the boards separate phase I projects that led to US SFAS 141 Business Combinations and IFRS 3 Business Combinations.) The boards expected that the guidance in the exposure drafts published by the IASB and the FASB would differ only to the extent of differing decisions reached in phase I and the joint project and inherited differences that originate from other standards. Nevertheless, in November and December 2004 the boards continued their efforts to eliminate issues of divergence that were identified in developing the joint exposure draft. Most of those issues relate to differences between IFRS 3 and SFAS 141 that were not part of the boards deliberations in this joint project. The main points covered in the boards discussions were as follows. Definition of a business combination The IASB, in IFRS 3, and the FASB, in phase II of the project, developed different definitions of a business combination. Originally, the boards did not plan to reconsider jointly the definition of a business combination. However, now that they have decided to develop a joint exposure draft, they agreed that reaching a single definition is of primary importance. At its meeting in November 2004, the IASB indicated a preference to develop with the FASB a new converged definition of a business combination if it could be done quickly and not delay publication of the joint exposure draft. However, as a new definition of a business combination could not be developed quickly, the IASB agreed to converge with the FASB s definition of a business combination for the purposes of the exposure draft. That definition is a transaction or other event in which an acquirer obtains control of one or more businesses. Identifying the acquirer The guidance in IFRS 3 for identifying the acquirer differs from that in SFAS 141. The IASB s guidance is based on the definition and guidance on control that is included in IAS 27 Consolidated and Separate Financial Statements. The FASB s guidance does not rely on control because in US GAAP there is no guidance similar to the IASB s on control. The boards agreed to converge on the guidance for identifying the acquirer in IFRS 3 and SFAS 141 as follows: The first step would be to identify the party who obtained control Neither board would provide any control guidance in the joint exposure draft. The IASB s exposure draft would refer to IAS 27 s guidance on control and the FASB s exposure draft would refer to its literature. If it is not obvious which party obtained control, the second step would be to consider other factors These factors would be similar to those provided in both IFRS 3 and SFAS 141. Definition of goodwill The FASB agreed that it prefers the IASB s approach for defining goodwill by its nature rather than by its measurement, and decided to adopt it. However, the FASB suggested a modification to the IASB s definition of goodwill by deleting three words as follows: Future economic benefits arising from assets that are not capable of being individually identified and separately recognised. The FASB believes that capable is not the right word to describe whether an intangible asset should be recognised separately from goodwill. For example, in many instances intangible assets that are subsumed in goodwill (such as workforce) are capable of being individually identified, but are not recognised separately from goodwill because they do not meet the recognition criteria. The IASB agreed with this modification. Reliable measurement IFRS 3 requires that all assets acquired and liabilities assumed in a business combination must be reliably measurable in order to be recognised. SFAS 141 does not have a similar requirement. The IASB considered whether the reliability of measurement criteria should be retained in the revised IFRS 3. The IASB agreed not to include such a requirement for assets acquired (apart from intangible assets) and liabilities 10 IASB INSIGHT, January 2005

11 PROJECT UPDATE assumed in a business combination as it is already an overriding criterion for recognition in the Framework. Accounting for adjustments to provisional values as a result of completing the initial accounting for a business combination IFRS 3 requires the acquirer to recognise any adjustments to provisional values as a result of completing the initial accounting as if the initial accounting had been completed at the acquisition date. However, practice in the US is that such adjustments are generally accounted for prospectively. The IASB decided to retain the requirement in IFRS 3 for completing the initial accounting. The FASB agreed to adopt the IASB s approach in IFRS 3 and require any adjustments made to the provisional amounts recorded in a business combination to be accounted for retroactively (that is, by restating previously reported amounts) rather than prospectively. Terminology The IASB decided to adopt the term non-controlling interest to replace minority interest because it believes non-controlling interest is more accurate. An entity may hold a minority ownership interest but have control through other means. Therefore, non-controlling interest is more consistent with the concept of control in IAS 27. Accounting Standards for Small and Medium-sized Entities (SMEs) Paul Pacter, Director, Standards for SMEs, reports. In December 2004, after considering the views expressed in the responses to the Discussion Paper on SMEs, the IASB approved the following way forward on the project: IASB Standards for SMEs should focus on financial reporting by those non-publicly accountable entities that have external users of their financial statements (ie users other than primarily owner-managers). Jurisdictions could, of course, choose to permit or require them for all SMEs, including very small ones. The IASB should not develop detailed guidelines on which entities should or should not be eligible to use the IASB Standards for SMEs. That is a matter to be decided by national jurisdictions. The IASB agreed that the Framework for the Preparation and Presentation of Financial Statements should apply to all entities. However, the IASB should consider recognition and measurement simplifications for SMEs, as well as disclosure and presentation simplifications based only on user needs and cost-benefit considerations as provided for in the Framework. There should be no preconceived objections to such changes. If a recognition or measurement issue is addressed in an IFRS, but not in SME Standards, the entity should be required to apply that IFRS to the issue. This mandatory fallback should be implemented by including IFRSs at the top of the accounting policy hierarchy in the SME equivalent of paragraph 11 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. An entity following IASB Standards for SMEs should follow those standards in their entirety and should not have a choice of reverting to IFRSs on a standard-by-standard or principle-by-principle basis. If an entity follows IASB Standards for SMEs, the basis of presentation note and the auditor s report should make that clear so that the user understands that full IFRSs are not being followed. When published in printed form, IASB SME standards should be organised topically. The composition of the Advisory Group should be broadened to include more preparers and users of SME financial statements. Staff should develop a project plan that includes round-table meetings with preparers and users of SME financial statements. The staff have developed a project plan that includes public round-table discussions on recognition and measurement issues in September The IASB will discuss the plan at its February meeting. Interpretations IASB technical associate Adrian Murray reviews projects on the IFRIC s current agenda. As reported on page 3, the IFRIC s work was crowned in 2004 by the release of seven documents: four interpretations (IFRICs 2-5), an amendment to SIC-12 and two draft Interpretations (D10 and D11). Additionally, the IFRIC agreed the content of three further draft Interpretations, all on the topic of service concessions (see below). At the same time, work has been progressing on other IFRIC projects. These are the starting point for the IFRIC s agenda in 2005, but they will be supplemented by the selection of new agenda items early in the year. For more information, please refer to the decision summaries and observer notes from IFRIC meetings, which are published on the IASB Website: IASB INSIGHT, January

12 IFRIC Service concessions A service concession arrangement is a contractual arrangement for the provision of public services. The contract is between the grantor and the operator. The grantor (typically a public sector entity) conveys to the operator the right and obligation to provide specified services for the period of the concession. The operator s responsibilities may include constructing, financing and operating the infrastructure eg roads, prisons, hospitals, and energy supply networks used to provide the public services. In December, the IFRIC approved three draft Interpretations specifying the accounting treatment to be adopted by the operator. However, publication has been held back to allow for the preparation of illustrative examples and for minor editorial review. The examples and any changes arising from the review will be considered by the IFRIC at its meeting in February, and the three draft Interpretations are expected to be published for comment shortly after. The first of the three draft Interpretations proposes that the operator should not recognise the infrastructure as its property, plant and equipment. Rather, it should recognise the rights it receives in exchange for providing construction and other services (or other consideration) to the grantor as: (a) a financial asset if the grantor has primary responsibility for paying the operator; or (b) an intangible asset in all other circumstances, ie if the users of the concession services pay the operator for them. The second draft Interpretation sets out proposals on how the financial asset model should be applied, and the third sets out proposals on how the intangible asset model should be applied. Scope of IFRS 2 This project considers whether there are any circumstances in which IFRS 2 Share-based Payment applies to transactions in which an entity has issued equity instruments and the fair value of the identifiable assets received (including cash) appears to be significantly less than the fair value of the equity instruments issued. A draft Interpretation on the question will be discussed at the meeting in February see February IFRIC Update for more information. IFRS 2: Treasury share transactions and group transactions This project addresses the accounting for share-based payment arrangements in which: the entity grants options to its employees and chooses or is required to purchase its own shares upon exercise of the options by its employees, and a subsidiary s employees are granted rights to shares of the parent (relating to applying paragraph 3 of IFRS 2 in the separate financial statements of the subsidiary and parent). For example, in what circumstances should such transactions be accounted for as equity, as opposed to cash-settled transactions? A draft Interpretation will be considered at the meeting in February (see February IFRIC Update). IAS 39: Reassessment of embedded derivatives This project addresses the requirements to separate embedded derivatives from non-derivative host contracts under paragraph 11 of IAS 39 Financial Instruments: Recognition and Measurement. The IFRIC first discussed this topic in December, when it was agreed that: the assessment at initial recognition (whether any embedded derivatives exist and are required to be separated) should not be reconsidered throughout the life of the contract; and a first-time adopter should undertake the assessment of closely related using the conditions that existed when the contract was first entered into and not those when the entity adopts IFRSs for the first time. A draft Interpretation on the issue will be discussed at the meeting in February see February IFRIC Update for more information. Emission rights measurement mismatch IFRIC 3 Emission Rights (issued in December 2004) has given rise to a lively debate about the mixed measurement model in IFRSs: IFRIC 3 requires emission allowances to be recognised as an intangible asset within the scope of IAS 38 Intangible Assets. Under the cost model this asset is measured at cost. If an entity elects to use the revaluation model for subsequent measurement the allowance is measured at fair value, but changes in value above cost are recognised in equity. IFRIC 3 also specifies that as an entity produces emissions, it recognises a liability for its obligation to deliver allowances to cover those emissions. This is measured under IAS 37 by reference to the market value of the allowances required to settle the obligation, and changes in the value of the liability are recognised in profit and loss. The new project will consider ways to resolve this mismatch between (1) cost and value, or (2) profit or loss and equity. For example, one approach would be to amend the revaluation model in IAS 38 so that gains or losses on an intangible asset under the revaluation model could be recognised in profit or loss. See February IFRIC Update for later information. Combining and segmenting contracts Some time ago the IASB asked the IFRIC to consider the US guidance, for combining and segmenting contracts, in AICPA SoP 81-1 Accounting for Performance of Construction-Type and Certain Production-Type Contracts, with the aim of convergence on the requirements. Building on its discussions last year the IFRIC will review the question in February. At that meeting, it will decide whether 12 IASB INSIGHT, January 2005

13 UCATION to continue its work on the project, and if so what the focus should be. Published draft Interpretations The following draft Interpretations will be reviewed in the light of the comments received: D10 Liabilities arising from Participating in a Specific Market Waste Electrical and Electronic Equipment (published November 2004, comments due 11 February 2005) D11 Changes in Contributions to Employee Share Purchase Plans (published December 2004, comments due 1 March 2005). The IFRIC will also be considering changes to D5 Applying IAS 29 Financial Reporting in Hyperinflationary Economies for the First Time, in the light of the decisions made at the meeting in July See the February 2005 IFRIC Update for further information. IASCF Education Update Patrina Buchanan, Manager Educational Projects, reports on progress The April/May 2004 edition of Insight discussed why the IASC Foundation (IASCF) is undertaking an education initiative and the sort of education materials that will be published. The context of the initiative is the IASB s commitment to developing principles-based standards that necessarily involve professional judgement in their implementation. Consistent and rigorous implementation of IFRSs is important. The IASCF believes that publication of educational and explanatory material, either alone or in co-operation with others, will assist the implementation of IFRSs. The material that is being developed will not replace professional judgement in the application of IFRSs to transactions and events. But it will help to ensure that professional judgement is exercised within the principles established in the standards and the conceptual framework that underpins IFRSs. Educational materials The educational materials that will become available for purchase in the near future are: Conceptual Frameworks video and accompanying materials A Guide to IFRS 1 First-time Adoption of International Financial Reporting Standards A Guide to the Acquisition of a Business or an Interest in another Entity. The IASC Foundation will also distribute the following products developed by others: Electronic IFRS Disclosure Checklist IFRS E-learning training tool Conceptual frameworks At the joint meeting of the IASB and the US Financial Accounting Standards Board (FASB) in October 2004 the boards agreed to add to their respective agendas a joint project to develop a common conceptual framework that would improve on their existing frameworks and achieve their convergence by bringing them together into a single framework. The Conceptual Frameworks education product provides an excellent starting point in gaining an understanding of the current IASB and FASB frameworks, their similarities and their differences. The Conceptual Frameworks product includes the following: A CD-Rom of a presentation made by Jim Leisenring, a member of the IASB, in September 2004 at a meeting in London of standard-setters from around the world. The IASB Framework for the Preparation and Presentation of Financial Statements. Supporting materials detailing background information, notes for instructors and suggestions for using the product. The presentation focuses on the elements of financial statements (assets, liabilities, revenue/income and expenses), their definition and the criteria for their recognition in the financial statements. Mr Leisenring compares the IASB s Framework and the FASB s conceptual framework for financial accounting and reporting. Guides to IFRS 1 First-time Adoption of International Financial Reporting Standards and the Acquisition of a Business or an Interest in another Entity These guides are the first two in a series. They will include: a summary of the requirements of the relevant standards the conceptual context explanatory text describing the accounting treatment how to examples illustrating the accounting treatment a practical implementation guide. The practical implementation guides use a series of questions to help preparers, accountants and auditors to identify the parts of the standards and the other education materials needed to deal with a particular issue or problem. The guide to the Acquisition of a Business or an Interest in another Entity covers IFRS 3 Business Combinations, IAS 27 Consolidated and Separate Financial Statements, IAS 28 Investments in Associates and IAS 31 Interests in Joint Ventures. IASB INSIGHT, January

14 REPORT The guides will become available initially in electronic Web-based format, and will be linked to the standards and implementation guidance developed by the IASB. The material may be produced in print at a later date. Further guides to standards and accounting topics are planned for development. Where can you find out more about IASCF education materials? The IASCF Education materials will be available through the IASCF Shop on our Website shop.asp. The materials will be available for purchase as a whole or in parts. There is also an Education page on the Website, which will feature news and updates on IFRS education: resources/education.asp. Standards Advisory Council meets IASB The IASB met the Standards Advisory Council in London, on 18 and 19 November Technical associate Adrian Murray reports. Proposals to improve reporting for financial instruments The focus of this meeting of the IASB and the SAC was the IASB s future programme, now that the stable platform had been completed. Introducing the discussion Sir David Tweedie described work on the IASB s current projects to improve the accounting for financial instruments, which were addressing the fair value option, core deposits, cash flow hedging, financial guarantees and disclosures. The financial instruments working group would play a critical role in helping the IASB on these projects. Similar working groups had also been established for the insurance project, reporting comprehensive income and extractive activities. Robert Garnett, IASB member, summarised the European Commission s carve-out of sections of IAS 39 Financial Instruments: Recognition and Measurement dealing with the full fair value option and portfolio hedging of core deposits. An EU observer acknowledged that a partly endorsed IAS 39 was not ideal, but that it was still a major step forward for Europe. An IASB delegation was meeting European banks and regulators to search for a solution, which it was hoped would be in place by mid Council members urged the IASB to push forward with these amendments, which were eagerly awaited by the financial reporting community. Role of national standard-setters Sir David said that the IASB was strengthening the involvement of national standard-setters in its work. The IASB and the FASB had aligned their agendas, and were engaged in many joint projects, including revenue recognition, business combinations (phase II), performance reporting (in which the Japanese standard-setter was also involved) and the conceptual framework, in addition to several short-term convergence projects. Others who were contributing to the IASB s long-term research agenda included representatives from standard-setters in Argentina, Australia, Canada, France, Germany, Hong Kong, Malaysia, Mexico, New Zealand, Norway and South Africa. The IFRIC Chairman, Kevin Stevenson, said that he envisaged further liaison between the IFRIC and national interpretative bodies in the future. Some Council members expressed concern that the joint work of the IASB and the FASB seemed to exclude the involvement of other standard-setters. Sir David said that a close partnership between the IASB and the standard-setter from the world s largest capital market was essential for achieving globally accepted standards, but this relationship did not preclude the involvement of others. As he had already explained, representatives of other national standard-setters were leading almost all of the IASB s research agenda, which gave regional bodies an opportunity to influence the outcomes at an early stage. One Council member suggested that an explicit agreement between the IASB and national standard-setters should formalise their respective roles, a suggestion that received wide support. A memorandum of understanding, based on an agenda paper prepared by staff of the Australian Accounting Standards Board, would be developed. A Council member raised the question whether national standard-setters should vary or supplement IFRSs to suit local conditions. One Council member described experience in Sri Lanka, where the addition of paragraphs and supplementary material to address local conditions was perceived to enhance, not change, IFRSs. However, several members expressed concern that this could undermine the IFRS brand, and create confusion over what was genuinely IFRS equivalent. Constitutional review Sir Sydney Lipworth introduced a paper setting out the proposed changes to the IASC Foundation Constitution ( On the role and appointment of Trustees, Council members expressed mixed support for the proposal to increase Trustees appointed from the Asia/Oceania region from four to six. Some Council members supported the proposal, while others argued that professional experience should be the paramount criterion. As regards the proposals to clarify and emphasise the Trustees oversight role, some Council members supported a more proactive role in the agenda and decisions of the IASB, where the public interest was at stake. Council members also commented on the proposed changes to the IASB s voting and consultative procedures. Several Council members expressed support for the proposal to 14 IASB INSIGHT, January 2005

15 TRUSTEES NEWS change the IASB s voting requirements from eight votes to nine. Council members also supported the continued publication of near-final drafts, and urged the IASB to consider in more depth the impact of its pronouncements. Lastly, Council members reviewed the changes to the terms of reference and operating procedures of the SAC, which were proposed at the SAC meeting in July The main change was the appointment of an independent Chair. IASCF Education initiative Elizabeth Hickey, IASCF Education Director, reported on the work of the Education team, including the publication of an executive briefing for high level management and audit committees, which would be updated periodically. A Council member asked whether the Education team would be offering computer-based competency training in applying IFRSs. Ms Hickey replied that the current focus was on producing materials to assist (rather than accredit) professionals, but she expected the market to dictate the development of such programmes. Other matters The SAC also discussed matters related to the IASB s projects on consolidations (including special purpose entities), revenue recognition and the conceptual framework. The Chairman of the IFRIC, Kevin Stevenson, gave an update on the IFRIC s recent activity and proposed changes to its operation. In addition, the SAC received reports on IASB project planning and the recently established working groups. Trustees publish proposed changes in the IASC Foundation Constitution On 23 November the Trustees of the International Accounting Standards Committee (IASC) Foundation published for public comment a consultation document containing their proposals to amend the IASC Foundation Constitution. The Constitution sets out the organisational framework of the IASC Foundation and the IASB. Comments are requested by 23 February The Trustees have concluded that the basic elements of the existing Constitution, first recommended by the former IASC s Strategy Working Party and then approved by IASC in 2000, have proved sound. The proposals in the consultation document would not alter the basic framework of the organisation, which leaves the setting of accounting standards to the IASB, an independent expert group with diverse practical and professional backgrounds. The Trustees, however, have taken into account concerns raised by those affected by the IASB s work, most notably on the Trustees oversight role, the composition of the Trustees and the IASB, and the IASB s operating procedures. The proposals are the outcome of an intensive review begun in November The review included a preliminary consultation paper seeking issues for consideration; a series of public hearings held in London, Mexico City, New York and Tokyo; consultations with the IASB s Standards Advisory Council; and contributions from more than a hundred organisations. After considering comments on the consultation document, the Trustees expect to finalise changes to the Constitution at their public meeting in March Staff changes Arrivals Two new members of the technical staff arrived in January to serve as project managers. Gavin Francis spent 14 years as an investment banker in London and New York at Schroder Salomon Smith Barney/ Citibank and for the last two years has been a consultant to a number of global investment and commercial banks and their corporate clients on IAS 32, IAS 39 and SFAS 133. He qualified as a chartered accountant with Arthur Andersen in London in its financial institutions group. Jenny Lee previously worked as an actuarial consultant with Hewitt (formerly Bacon and Woodrow), PricewaterhouseCoopers and Mercer HR, where she was concerned with the IASB, UK and US accounting requirements for employee benefits, as well as the IASB and US requirements for share-based payments. She also provided training designed to bridge the gap between actuarial and accounting requirements. On 1 December Olafur Eliasson, a native of Iceland, joined the staff as Assistant IT Manager. Departure At the end of December Colin Fleming, project manager, left to take up an appointment in London with one of the large accounting firms. A native of Bermuda, he joined the IASC staff in 1999 from Canada and, in addition to work on technical projects (most recently IFRS 6), he served IASC and subsequently the IASB in a wide range of capacities at various times, including as secretary of the IASB and the IFRIC, editor of Insight and Update and the Bound Volume, and Webmaster. IASB INSIGHT, January

16 CONCEPTUAL FRAMEWORKS CD-ROM A Presentation by Jim Leisenring At their joint meeting in October 2004 the IASB and the US Financial Accounting Standards Board (FASB) agreed to launch a joint project to develop a common conceptual framework that would improve on their existing frameworks and achieve their convergence in a single framework. Introducing Conceptual Frameworks CD-ROM - a new educational tool that will help you understand the similarities and differences between the IASB and FASB frameworks. This new educational CD-ROM features: A video presentation by Jim Leisenring, IASB member, from a September 2004 meeting in London of standardsetters from around the world. The IASB Framework for the Preparation and Presentation of Financial Statements. Supporting materials including background information, notes for instructors and suggestions for using the product. This video presentation focuses on the elements of financial statements (assets, liabilities, revenue/income and expenses), their definitions and the criteria for their recognition in financial statements. Mr Leisenring compares the IASB s Framework with the FASB s conceptual framework for financial accounting and reporting. This CD provides an excellent introduction to this important subject and benefit to a number of different audiences: accounting students and general business students; experienced accountants and business executives. If you want insight into the concepts underpinning accounting standard-setting or want to follow progress on the joint IASB/FASB conceptual framework then get Conceptual Frameworks CD-ROM. Copies of The Conceptual Framework CD cost just A discount of 35% is available for full time academics and academic institutions. To order your copy Simply visit the IASB bookshop at International Accounting Standards Committee Foundation Further guides to other international accounting topics are planned for development, so if you would like to find out more about IASCF education materials visit the Education page on TO BUY A COPY VISIT THE BOOKSHOP AT