Some PwC partners recommend putting the kibosh on further FASB-IASB ‘convergence’ efforts in favor of focusing on IFRS directly, as reported by Denise Lugo in her article, “PricewaterhouseCoopers Panelists Say SEC Should Nix Accounting Convergence,” in today’s BNA Daily Report for Executives.
BNA's Lugo noted that PwC’s National IFRS partner, David Schmid, said on a PwC IFRS webcast yesterday that PwC supported the original Memorandum of Understanding (MOU) between the FASB and IASB dating back to 2002 (last updated in 2006, with another update expected this fall) in which the two standard setters agreed to converge their standards by 2011.
However, Lugo notes: “Now that the SEC has discussed its proposed road map for U.S. adoption of international financial reporting standards, the Big Four accounting firm [PwC] no longer supports the concept of convergence.”
“’It's taking too long, it's too hard to do, and it didn't work,’ Schmid said about progress on the MOU,” according to Lugo. She notes that in light of the upcoming release of SEC’s proposed IFRS Roadmap, Schmid told the webcast, “it's no longer the time to focus on convergence… We want the FASB and the SEC to focus less on U.S. standards and focus on international accounting standards which we believe we will move to."
The idea of U.S. standard-setters focusing on IFRS in the short term and dropping the long-term detailed ‘convergence’ approach is not entirely foreign to those who have read FASB Chairman Robert Herz’ views on the path FASB is already headed down. As we noted in our post earlier this week (FASB Chairman on IFRS), FASB is already in favor of an ‘improve and adopt’ approach to IFRS, and is moving to adopt ‘identical’ standards to IFRS.
We believe an archived version of PwC’s Sept. 4 IFRS webcast will be posted (meantime you can see PwC’s Aug. 21 webcast on IFRS and Taxes), and here are more IFRS Reporting Resources from PwC.
EU Acceptance of U.S. Co’s Filings in IFRS vs. U.S. GAAP is a Consideration, Too
In addition to domestic impact questions on the use of IFRS here in the U.S., the approach to converging with IFRS - or directly adopting IFRS - is particularly relevant to U.S. companies that are listed, and therefore have to file financial statements with regulators or stock exchanges in, the EU.
On June 11, 2008 the European Commission released “Commission proposals regarding third country GAAPs in the EU as from 2009.” Highlights are below (numbers in parentheses refer to paragraph numbers in the proposal; references to “Commission” are to the European Commission, references to “Community” are the European Community):
“(6) In December 2007 the Commission consulted the Committee of European Securities Regulators (CESR) with regard to the technical assessment of the equivalence of the GAAP of the United States, China and Japan. In March 2008 the Commission extended the consultation with regard to the GAAP of South Korea, Canada and India.
(7) In its advice [delivered in March, May 2008 and in … respectively], CESR recommended finding US GAAP and Japanese GAAP equivalent to IFRS for use within the Community. Furthermore, CESR recommended the acceptance of financial statements using GAAPs of China, Canada and South Korea within the Community on a temporary basis, until no longer than 31 December 2011.
(8) In 2006 the United States' Financial Accounting Standards Board and the IASB concluded a Memorandum of Understanding which reaffirmed their objective of convergence between US GAAP and IFRS and outlined the work programme for this purpose. As a result of this work programme many major differences between US GAAP and IFRS have been resolved. In addition, following the dialogue between the Commission and the US Securities and Exchange Commission, reconciliation for Community issuers which prepare their financial statements according to IFRS is no longer required. Therefore, it is appropriate to consider US GAAP equivalent to adopted IFRS from 1 January 2009.”
If a full stop were to be placed on the FASB-IASB MOU as some are suggesting, would that impact the European Commission’s recent proposals to accept U.S. GAAP fillings in the EU noted above? Or would that question be moot if the SEC mandates IFRS in the U.S. at some date certain as suggested in its proposed IFRS Roadmap approved for release for public comment at SEC’s Aug. 27 meeting. We still await posting of SEC’s proposed IFRS Roadmap… the SEC just posted another item approved for release at its Aug. 27 meeting, a final rule on exemption from registration for foreign filers.
IFRS Challenges to College Faculty, Curriculum, Cited in KPMG-AAA Survey
According to survey results released yesterday, “Relatively few universities currently have a strategy in place to incorporate [IFRS] into accounting curricula in the 2008-2009 academic year.” Additionally, “the first class of graduating seniors likely to have a substantial amount of IFRS education will be the class of 2011, according to 30 percent of the professors [surveyed], followed by the class of 2012, at 24 percent. Only five percent of the respondents expect the Class of 2009 to have substantial knowledge of IFRS, and 17 percent say it will be the class of 2010. Those views are in line with the fact that 42 percent of the professors felt that textbooks would not be ready until the 2010-2011 academic year.”
These are just a few highlights from the KPMG LLP – American Accounting Association (AAA) IFRS Faculty Survey results released yesterday; we provide more highlights and a link to the full survey results in this FEI summary. If you received this post from 'a friend' and would like to get the FEI blog by email, you can sign up here.
Friday, September 5, 2008
Thursday, September 4, 2008
FASB Says Proposals Amending Securitization, Consolidation Rules Will Be Out By Sept. 15
In a media advisory issued yesterday (Sept. 3), the Financial Accounting Standards Board stated “it expects to issue three separate but related Exposure Drafts [EDs] on or around September 15, 2008, for public comment,” proposing amendments to FAS 140 (Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities) and FIN 46R (Consolidation of Variable Interest Entities). [Note: we previously reported on the board’s July 30 decision to defer the proposed effective date of the new standards and to issue separate disclosure requirements to beef up disclosures on an interim basis, i.e. prior to the effective date of the new standards.]
“The proposed Statement to amend Statement 140,” said FASB in its Sept. 3 announcement, “would, among other things, remove the concept of a qualifying special-purpose entity (SPE) and would remove the exception from applying Interpretation 46(R) to qualifying special-purpose entities (SPEs).”
Additionally, “The proposed Statement to amend Interpretation 46(R) would amend the guidance for determining whether an enterprise must consolidate a SPE, including those previously considered qualifying SPEs [QSPEs].”
FASB said it will issue a third proposal, regarding certain disclosures to take place prior to the effective date of the above amendments. These disclosures will be included in a Proposed FASB Staff Position (FSP) to be entitled, “Disclosures about Transfers of Financial Assets and Interests in Variable Interest Entities.”
Hat tip to Steve Burkholder of BNA who reported on this development in his article, “FASB Plans to Issue Proposals On Securitizations, Consolidations,” in today’s BNA Daily Report for Executives.
Burkholder noted, "In its proposed changes to Statement No. 140, which has become one of FASB's most high-maintenance standards, the board plans that a main event would be to remove the accounting notion of a "qualifying special-purpose entity," or QSPE." He adds, "[O]ver the years, FASB continued to learn of business practices and activities with regard to special-purpose entities that call into question a reading of isolation from the transferor and therefore the use of sale accounting." He cites earlier remarks of FASB Chairman Rober Herz in which Herz said he believed there had been some 'abuse' or 'lack of faithful application' of FAS 140, as well as 'maybe lack of proper enforcement.'
The issue of isolation and moreover the issue of a QSPE being 'passive' (which to some precluded or made more difficult the ability to modify loans - including subprime loans - in spite of calls for certain modifications to be made to help borrowers avoid default and foreclosure - was brought to the forefront during the recent subprime crisis. A sample of our earlier reporting on this issue can be found here and here (see subhead: 'Was SEC Letter on FAS 140 'Unequivocal'?).
BNA's Burkholder also reports: "The board [FASB] hopes to hold a public roundtable on the proposals in early November.”
In related news, the IASB issued an announcement yesterday updating info on its website regarding upcoming roundtables on amendments to its consolidation standards, including as relate to SPEs. As previously announced, the first such roundtable will take place Sept. 17 in London.
According to IASB’s consolidation project page, a second roundtable will take place in North America in late September. As noted in this project report dated June, 2008, “The current project plan envisages the publication of an exposure draft in the fourth quarter of 2008 and the issue of a revised standard in the second half of 2009.” A copy of the IASB’s staff draft of the proposed amendments to the consolidation standard is included in Agenda Paper 1A for the upcoming World Standard Setters Meeting which will take place on Sept. 11-12 in London. If you are a new reader of our blog and would like to receive your own copy by email, enter your email address here.
“The proposed Statement to amend Statement 140,” said FASB in its Sept. 3 announcement, “would, among other things, remove the concept of a qualifying special-purpose entity (SPE) and would remove the exception from applying Interpretation 46(R) to qualifying special-purpose entities (SPEs).”
Additionally, “The proposed Statement to amend Interpretation 46(R) would amend the guidance for determining whether an enterprise must consolidate a SPE, including those previously considered qualifying SPEs [QSPEs].”
FASB said it will issue a third proposal, regarding certain disclosures to take place prior to the effective date of the above amendments. These disclosures will be included in a Proposed FASB Staff Position (FSP) to be entitled, “Disclosures about Transfers of Financial Assets and Interests in Variable Interest Entities.”
Hat tip to Steve Burkholder of BNA who reported on this development in his article, “FASB Plans to Issue Proposals On Securitizations, Consolidations,” in today’s BNA Daily Report for Executives.
Burkholder noted, "In its proposed changes to Statement No. 140, which has become one of FASB's most high-maintenance standards, the board plans that a main event would be to remove the accounting notion of a "qualifying special-purpose entity," or QSPE." He adds, "[O]ver the years, FASB continued to learn of business practices and activities with regard to special-purpose entities that call into question a reading of isolation from the transferor and therefore the use of sale accounting." He cites earlier remarks of FASB Chairman Rober Herz in which Herz said he believed there had been some 'abuse' or 'lack of faithful application' of FAS 140, as well as 'maybe lack of proper enforcement.'
The issue of isolation and moreover the issue of a QSPE being 'passive' (which to some precluded or made more difficult the ability to modify loans - including subprime loans - in spite of calls for certain modifications to be made to help borrowers avoid default and foreclosure - was brought to the forefront during the recent subprime crisis. A sample of our earlier reporting on this issue can be found here and here (see subhead: 'Was SEC Letter on FAS 140 'Unequivocal'?).
BNA's Burkholder also reports: "The board [FASB] hopes to hold a public roundtable on the proposals in early November.”
In related news, the IASB issued an announcement yesterday updating info on its website regarding upcoming roundtables on amendments to its consolidation standards, including as relate to SPEs. As previously announced, the first such roundtable will take place Sept. 17 in London.
According to IASB’s consolidation project page, a second roundtable will take place in North America in late September. As noted in this project report dated June, 2008, “The current project plan envisages the publication of an exposure draft in the fourth quarter of 2008 and the issue of a revised standard in the second half of 2009.” A copy of the IASB’s staff draft of the proposed amendments to the consolidation standard is included in Agenda Paper 1A for the upcoming World Standard Setters Meeting which will take place on Sept. 11-12 in London. If you are a new reader of our blog and would like to receive your own copy by email, enter your email address here.
Wednesday, September 3, 2008
FASB Chairman on IFRS
In an interview published in the September issue of Financial Executive Magazine, published by FEI, FASB Chairman Robert H. Herz advocated for FASB’s ‘improve and adopt’ approach to IFRS, said ‘going forward it is our intent to have identical standards’ to IFRS, and called for the formation of a national steering group to address issues relating to the move to IFRS. Read the full interview, conducted by Ellen M. Heffes, Editor-in-chief of the magazine. (NOTE: You will be prompted to create a free, online login account to read articles in our magazine if you are not an FEI member; see info on FEI membership, or for more info on membership, contact Nancy Ehlers, Manager, Membership and Chapter Relations, at nehlers@financialexecutives.org 973-765-1099).
In related news - also in the September issue of Financial Executive Magazine - see FEI President and CEO James J. Abel’s President’s Page on: “Ramping Up Awareness of Convergence Process,” and see this month’s Washington Insights column, by Christine DiFabio, Vice President, Technical Activities.
Private Cos Will Be Impacted Too
Public companies aren’t the only ones that will be impacted by the move to IFRS which will be set forth in SEC’s proposed FRS Roadmap approved for release for a 60 day comment period last week. (The comment period will begin 60 days after publication in the Federal Register; see our earlier coverage of SEC's Aug. 27 meeting.)
Herz noted in his FEI interview that the move to one set of global standards – with “a single global standard-setter… that will likely be IASB” – raises issues for private companies as well as public companies. He noted the Private Company Financial Reporting Committee (PCFRC) - jointly sponsored by FASB and the AICPA has been discussing this topic. (See also PCFRC Sept. 18-19 meeting agenda and related materials).
Separately, the IASB recently announced that it will hold a live webcast (taking questions from participants) on its IFRS for Private Entities project on Sept. 10.
In related news - also in the September issue of Financial Executive Magazine - see FEI President and CEO James J. Abel’s President’s Page on: “Ramping Up Awareness of Convergence Process,” and see this month’s Washington Insights column, by Christine DiFabio, Vice President, Technical Activities.
Private Cos Will Be Impacted Too
Public companies aren’t the only ones that will be impacted by the move to IFRS which will be set forth in SEC’s proposed FRS Roadmap approved for release for a 60 day comment period last week. (The comment period will begin 60 days after publication in the Federal Register; see our earlier coverage of SEC's Aug. 27 meeting.)
Herz noted in his FEI interview that the move to one set of global standards – with “a single global standard-setter… that will likely be IASB” – raises issues for private companies as well as public companies. He noted the Private Company Financial Reporting Committee (PCFRC) - jointly sponsored by FASB and the AICPA has been discussing this topic. (See also PCFRC Sept. 18-19 meeting agenda and related materials).
Separately, the IASB recently announced that it will hold a live webcast (taking questions from participants) on its IFRS for Private Entities project on Sept. 10.
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