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  • 1.  
  • 2. An Overview of IAASA
    • Presentation to MBS in Corporate Leadership,
    • DCU Business School
    • 24 th November 2006
    • IAASA
    • Michael Kavanagh, Head of Financial Reporting Supervision
    • Eileen Townsend, Project Manager
  • 3. Presentation Overview
    • Role and Organisation of the Authority
      • Corporate Governance and IAASA
      • IAASA Board and Key Staff
      • IAASA Functions and Funding
    • Experience to Date
      • Supervision of the Prescribed Accountancy Bodies
      • Financial Reporting Supervision
    • Looking Forward
  • 4. Notes
    • Section 31 of 2003 Act on confidentiality
    • General confidentiality of MBS Sessions
    • Views are our own and do not necessarily reflect the Board’s
  • 5. Corporate Governance
    • Definition:
      • “ The system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs.”
      • OECD, April 1999
  • 6. Corporate Governance
    • Corporate Governance Regulatory Framework
      • Legislation
      • Common Law
      • Company’s M&A
      • Listing Rules
        • Combined Code
      • Accounting Standards
  • 7. Role of the Accounting Profession in Corporate Governance
    • Principles of Corporate Governance
      • Directors
      • Directors’ remuneration
      • Accountability and audit
      • Relations with shareholders
      • Institutional shareholders
    Combined Code, 2006
  • 8. Role of the Accounting Profession in Corporate Governance
      • Integrity of Corporate Reporting
      • Credibility of the External Audit
        • ‘ Auditors, traditional gatekeepers of the financial reporting regime, play a significant role in strengthening corporate governance’
  • 9. Role of the Accounting Profession in Corporate Governance
    • Self-regulation
      • Control by a governing body over its membership and the activities of its members
    • Self-regulation in the Accounting Profession
      • Entry qualifications
      • Quality assurance processes
      • Conformity with accounting regulations and
      • Rules development and enforcement
    Dellaportas et al. (2005, p. 63)
  • 10. Role of the Accounting Profession in Corporate Governance
    • Failures in corporate governance
      • Financial statements as the instrument of corporate scandals
      • Credibility gap in relation to accounting and auditing functions
      • Behaviour of accountants and auditors
  • 11. IAASA and CG - Context
    • Tribunal and PAC
    • Review Group on Auditing (2000) - Terms of reference included an examination of:
      • whether self regulation of the accountancy profession was working effectively and consistently;
      • auditor independence; and
      • role of the auditor in ensuring companies’ compliance with law and regulations.
  • 12. IAASA and CG - Context
    • RGA recommendations included
      • establishment of an oversight body;
      • financial reporting review function; and
      • requirement for directors’ compliance statements.
    • RGA’s recommendations given the force of law by the Companies (Auditing and Accounting) Act, 2003.
  • 13. CG and the 2003 Act
    • The 2003 Act deals principally with:
      • the establishment of IAASA; and
      • ‘ Other Measures to Strengthen the Regulation of Auditors ’, including:
        • statutory backing for accounting standards;
        • audit committees;
        • disclosure of accounting policies;
        • disclosure of auditors’ remuneration (analysed by audit, audit related and non-audit); and
        • Directors’ Compliance Statements.
    • CG impact of these ‘other measures’
  • 14. IAASA and the Corporate Governance Framework
    • Supervision of Accountancy Bodies’ Regulation of their Members
    • Supervision of Financial Reporting
  • 15. IAASA Board
    • Company Ltd. by guarantee - Board comprises 15 directors, nominated thus:
      • 2 (including the Chairperson) nominated by the Minister;
      • 3 nominated jointly by the prescribed accountancy bodies;
      • 9 nominated by the following bodies (1 each):
        • IBEC ICTU
        • IAIM ISE
        • Pensions Board IFSRA
        • Revenue DCE
        • Law Society
      • Chief Executive
    • A maximum of 5 of the 15 directors may be members of prescribed accountancy bodies.
  • 16. IAASA- key staff
    • Chief Executive – Ian Drennan
    • Head of Financial Reporting Supervision – Michael Kavanagh
    • Head of Regulatory & Monitoring Supervision – Helen Hall
    • Secretary & Head of Legal Services – Jane Meehan
    • Project manager – Eileen Townsend
    • Project manager – Bridget Ryan
    • Finance & Administration manager – Fergal O’Briain
  • 17.
    • Chief
    • Executive
    • Ian Drennan
    Board Head of Regulatory & Monitoring Supervision Helen Hall Head of Financial Reporting Supervision Michael Kavanagh Secretary & Head of Legal Services Jane Meehan Finance & Administration Manager Fergal O’Briain Project Managers Bridget Ryan Eileen Townsend
  • 18. Statutory Remit (S.8)
    • To supervise how the prescribed accountancy bodies regulate and monitor their members;
    • To promote adherence to high professional standards in the auditing & accountancy profession;
    • To monitor whether the accounts of certain classes of companies and other undertakings comply with the Companies Acts and, where applicable, Article 4 of the IAS Regulation [reference to IFRS inserted by S.I. No. 116 of 2005]; and
    • To act as a specialist source of advice to the Minister on auditing and accounting matters.
    • - All commenced at this stage except no.3
  • 19. Functions
    • The Authority’s principal functions include:
      • Promoting adherence to the highest standards in the profession;
      • Considering applications for recognition for audit purposes;
      • Supervising the manner in which the accountancy bodies monitor (including work quality) and regulate (including investigation and disciplinary functions) their members;
      • Where deemed appropriate, conducting investigations into bodies and/or members.
      • Co-operating in the development of auditing and ethical standards.
      • Reviewing the financial statements of certain companies and other undertakings;
      • Co-operating in the development of accounting standards and practice notes.
  • 20. Funding
    • Two aspects to funding –
    • Day to day operation of IAASA
    • - 40% Exchequer
    • - 60% Prescribed accountancy bodies
    • Reserve Fund
    • - 20% Exchequer
    • - 30% Prescribed accountancy bodies
    • - 50% Review constituency
  • 21. Exchequer & Prescribed Bodies Contribution - 2006
    • Total budget – 2006: €2.297m, provided thus:
      • Exchequer 919,000
      • ICAI 757,000
      • ACCA 233,000
      • ICPAI 170,000
      • CIMA 96,000
      • IIPA 54,000
      • ICAEW 21,000
      • AIA 18,000
      • CIPFA 15,000
      • ICAS 14,000
  • 22.
    • Supervision of the Prescribed Accountancy Bodies
  • 23. Supervision of the Prescribed Accountancy Bodies
    • Principal object:
      • 8(1)(a) - “ to supervise how the prescribed accountancy bodies regulate and monitor their members”
  • 24. Supervision of the Prescribed Accountancy Bodies
    • IAASA as ‘Supervisor’ rather than ‘Regulator’
  • 25. Supervision of the Prescribed Accountancy Bodies
    • 9 Prescribed Bodies
      • 6 Recognised Bodies
        • ACCA, ICAEW, ICAI, ICAS, ICPAI, IIPA
      • 3 Prescribed Bodies
        • AIA, CIMA, CIPFA
  • 26. Supervision of the Prescribed Accountancy Bodies
    • Approval Function
      • Grant recognition
      • Attach conditions to recognition
      • Approve the constitution & bye-laws, investigation & disciplinary procedures & standards, & also any amendments
  • 27. Supervision of the Prescribed Accountancy Bodies
    • Supervisory Function
      • supervise how each recognised body monitors its members
      • supervise the investigation & disciplinary procedures of each prescribed accountancy body
      • require explanations about the performance of regulatory and monitoring duties
      • conduct section 25 reviews of members of recognised accountancy bodies, if deemed appropriate
  • 28. Supervision of the Prescribed Accountancy Bodies
    • Investigation/Enforcement Function
      • conduct enquiries into compliance with approved I&D procedures (S. 23)
      • undertake investigations into possible breaches of accountancy body standards by a member (S. 24)
      • impose sanctions on a body/member
  • 29. Supervision of the Prescribed Accountancy Bodies
    • Prescribed Body Reviews
    • Undertaking detailed reviews of each prescribed body
    • Emphasis of reviews is on seeking to ensure adherence to a common high standard of regulatory activity from which the public can derive comfort
  • 30. Supervision of the Prescribed Accountancy Bodies
    • Prescribed Body Reviews (cont.)
    • Findings are confidential
    • Findings of reviews and complaints received will impact on:
      • The Authority’s risk assessment & selection methodologies
      • the scope and frequency of future reviews
  • 31. Supervision of the Prescribed Accountancy Bodies
    • Prescribed Body Reviews (cont.)
    • Initial reviews have 4 main areas of focus:
      • governance and its impact on the regulation of members;
      • systems for monitoring members;
      • complaints handling, investigative, disciplinary and appeals procedures; and
      • licensing & registration of members.
  • 32. 1. Governance and its Impact on the Regulation of Members
    • Gain an understanding of the Corporate Governance of the body, including its:
      • organisational structure
      • link between the governing body & Committees;
      • Committees’ working methods & procedures;
      • link between the Committees and the Quality Assurance and Secretariat functions.
    • Reviews of Committees’ minutes and attendance at meetings as observers.
  • 33. 2. System for Monitoring Members
    • Examination of bodies’ procedures for monitoring members providing audit services:
      • monitoring cycles and annual plans;
      • firm/practitioner risk assessment and visit selection methodologies;
      • monitoring approach, scope, emphasis, review programmes and file selection procedures;
      • internal quality control procedures;
      • grading criteria;
      • response and follow-up to unsatisfactory monitoring visits;
  • 34. 2. System for Monitoring Members
      • assessment of the resourcing of the monitoring function, both human and financial;
      • ‘ shadowing’ of bodies’ inspection staff on selected visits; and
      • members’ compliance with other obligations e.g. PII, CPD.
  • 35. 3. Complaints Handling & Disciplinary Procedures
    • Examination of:
      • complaints handling processes and procedures;
      • disciplinary and appeals processes; and
      • policies regarding the publication of disciplinary or regulatory outcomes/sanctions.
    • Detailed review of selected files.
    • Assessment of resourcing of the function.
  • 36. 4. Licensing and Registration
    • Gain an understanding of the procedures for:
      • issuance, renewal, suspension and revocation of licenses/authorisations
    • to allow members/member firms to engage in public practice and to provide an audit service.
  • 37. Further Developments
    • The revised EU 8 th Company Law Directive
      • Transposition into domestic legislation by mid 2008
      • All member states should establish public oversight systems
  • 38. Other Work Ongoing
    • APB
    • EGAOB
    • IFIAR
  • 39. Other Work Ongoing
    • Approvals for amendments to Constitution/Bye-laws etc.
    • Complaints
    • Annual Reports to the Authority
  • 40. Financial Reporting Supervision Function
  • 41. Principal Functions of Financial Reporting Supervision Unit
    • To monitor whether the accounts of certain classes of companies and other undertakings comply with the Companies Acts and IAS Regulation
    • Co-operating in the development of accounting standards and practice notes
    • Assisting the Board to discharge its functions as an advisor to the Minister on accounting related matters
    • Liaising with other countries’ financial reporting monitoring bodies
    • Developing policy regarding the imposition of levies on the Authority’s financial statement supervision constituency (S15)
    • Identifying, and maintaining under review, the composition of the Authority’s financial statement review constituency
  • 42. Monitoring whether the financial statements of certain companies comply with the Companies Acts
    • Section 26 of the 2003 Act
    • The IAS Regulation
    • The Transparency Directive
  • 43. Section 26 of the 2003 Act
    • The financial reporting supervision constituency comprises:
      • all plcs (whether listed or not);
      • all subsidiary undertakings of plcs;
      • all private companies limited by shares that, in both in the relevant financial year and the immediately preceding financial year, satisfy the following criteria:
        • balance sheet total exceeds €25m; and
        • turnover exceeds €50m.
      • all private companies limited by shares which, when aggregated with their subsidiary undertakings, exceed the aforementioned thresholds;
      • all subsidiary undertakings of the preceding class of private companies; and
      • certain other undertakings, and where applicable their subsidiary undertakings, that satisfy the aforementioned criteria, including unlimited companies and partnerships whose members having unlimited liability are themselves limited companies.
  • 44. Relevant Exemptions
    • Act provides potential exemptions for:
      • certain entities already subject to, what in the Minister’s opinion, is an appropriate level of supervision/regulation
      • - might, for example, include Part XIII companies and UCITS
      • S110 TCA ’97 entities (securitisation vehicles).
  • 45. IAS Regulation
    • Given effect to in Ireland by SI 116 of 2005;
    • Requires EU Member States to take appropriate measures to ensure compliance with IFRS (applies to listed entities – consolidated a/c’s only);
    • Recital no.16 of the Regulation -
    • “ A proper and rigorous enforcement regime is key to underpinning investors' confidence in financial markets. Member States, by virtue of Article 10 of the Treaty, are required to take appropriate measures to ensure compliance with international accounting standards. The Commission intends to liase with Member States, notably through the Committee of European Securities Regulators (CESR), to develop a common approach to enforcement .”
  • 46. Transparency Directive
    • Article 24(4)(h) of the Transparency Directive (“TD”):
    • - “..to examine that information referred to in this Directive is drawn up in accordance with the relevant reporting framework and take appropriate measures in case of discovered infringements.”
    • Directive deals with Interim Financial Statements (which are not within the scope of Section 26).
  • 47. Proposed Approach to Financial Statement Supervision
    • S26/ IAS Regulation/ Transparency Directive suggests a proactive rather than reactive approach to monitoring
    • Methodology for risk assessment and selection of entities / financial statements for review has been developed
    • Written in context of S26 but also with a view to adherence to CESR Std No 1 “ Enforcement of Standards on Financial Information in Europe ”.
  • 48. Methodology for selection of entity for review
    • CESR Standard No.1 – Principle 13
    • “ The preferred models for selecting financial information for enforcement purposes are mixed models whereby a risk based approach is combined with a rotation and/or a sampling approach. However, an approach based solely on risk may be an acceptable selection method. A pure rotation approach as well as a pure reactive approach is not acceptable….”
  • 49. Methodology for selection of entity for review
    • Mixed model approach proposed and developed for IAASA
    • Criteria for selection will include
      • Risk of material misstatement in the financial statements
      • Potential impact on users of financial statements in the event of material misstatement
      • Supplemented with random selection of F/S for review
      • Complaint from public may also trigger a review
  • 50. Methodology for selection of entity for review
    • Risk of material misstatement in the financial statements – factors include:
    • - financial structure and business trends,
    • - financial position and ratios,
    • - industry specific issues,
    • - corporate governance issues and internal control environment,
    • - related party transactions,
    • - incidence of business combinations and disposals,
    • - audit qualifications and related issues,
    • - administrative, court and regulatory actions,
    • - third party signals (e.g. complaints received by the Authority, press
    • reportage etc.)
  • 51. Methodology for selection of entity for review
    • Potential impact on users …… users include:
    • - present and potential investors;
    • - shareholders;
    • - employees;
    • - lenders;
    • - suppliers and other trade creditors;
    • - customers;
    • - the Revenue Commissioners;
    • - regulatory authorities;
    • - the general public
  • 52. Methodology for selection of entity for review
    • Potential impact on users – factors include:
    • - Number, and nature of, retail investors
    • - Size of undertaking (including number of employees)
    • - Public profile
    • - Industry profile
    • - Whether the shares or other securities of the undertaking are traded on a public stock exchange. For those undertakings that have securities traded on a public stock exchange the following will be considered -
      • Share trading activity and volatility in stock price
      • Market capitalisation
      • Number of investors
      • Nature of security traded
  • 53. S26 enforcement regime
    • In circumstances where there is, or may be, an issue regarding a set of financial statements’ compliance with the Companies Acts or the IAS Regulation, and those financial statements have been:
      • disseminated to members in advance of the AGM; or
      • laid before the AGM; or
      • delivered to the Registrar
      • the Authority may give notice to the directors of the entity concerned.
  • 54. S26 enforcement regime
    • The aforementioned notice must specify:
      • the matters in respect of which it appears to the Authority that a question of non-compliance arises; and
      • a period of not less than 30 days in which the directors are required to furnish the Authority with an explanation of the financial statements or prepare revised financial statements.
  • 55. S26 enforcement regime
    • In the event that, at the end of the specified period, the directors have neither, in the Authority’s opinion:
      • given a satisfactory explanation
      • nor revised the financial statements,
    • the Authority may apply to the High Court for a declaration of non-compliance and associated orders.
  • 56. S26 enforcement regime
    • If, having considered the matter, the High Court is satisfied that an instance of non-compliance exists, the Court may make a declaration to that effect and may order the following:
      • the revision of the financial statements and/or directors’ report;
      • the re-audit of the financial statements;
      • that the directors take specified steps to bring the Court order to the notice of persons likely to rely on the financial statements;
      • that the Authority’s, and reporting entity’s, costs be awarded against the directors (in that context, every person who was a director at the time the financial statements were approved is considered to have been a party to that approval unless s/he can show that they took all reasonable steps to prevent approval (section 26(9)).
  • 57. S26 enforcement regime
    • In the event of an application being made to the High Court, the Authority is required to furnish the CRO with:
      • notice of the application; and
      • a general statement of the matters at issue.
    • On the conclusion of proceedings, the Authority is required to furnish the CRO with:
      • a copy of the Court Order; or
      • notice that the application has failed or has been withdrawn.
  • 58. Liaising with other countries’ financial reporting monitoring bodies
    • IAASA an active participant in EECS (European Enforcement Co-ordination Sessions) – sub committee of CESR – monthly meetings
    • EECS – Forum for discussing and co-ordinating “enforcement” decisions in EU/EEA
    • A database of IFRS enforcement decisions in the EU/EEA has been established – not precedents but likely to be persuasive reference point
    • Has been Irish EECS case which was brought to EU Roundtable on Consistent Application of IFRS
    • CESR/EECS liasing with IASB and SEC on various matters of mutual interest
    • EECS - very important part of SEC and EU “road map”
  • 59. Other financial reporting functions
    • Assisting the Board to discharge its functions as an advisor to the Minister on accounting related matters
    • - Advice on various matters as have arisen
    • - Member of CLRG and advice on part A6 of forthcoming Consolidation Bill dealing with accounting and auditing
    • Co-operating in the development of accounting standards and practice notes
    • - Irish Observer at ASB Board – twice monthly meetings
    • - Liaison with IASB
  • 60.
    • The Future of Financial Reporting in Ireland
  • 61. Re-cap on current accounting regimes operating in Ireland
    • Irish GAAP
    • International Financial Reporting Standards
    • Alternative Bodies of Accounting Standards
  • 62. European Communities (International Financial Reporting Standards and Miscellaneous Amendments) Regulations, 2005
    • Mandatory IFRS financial statements for
    • All consolidated group accounts for entities with securities listed
    • on an EU regulated market for years beginning 1/1/05
    • Group accounts of debt listed entities deferred until years
    • beginning 1/1/07
  • 63. European Communities (International Financial Reporting Standards and Miscellaneous Amendments) Regulations, 2005
    • Choice for all other companies to prepare individual or group accounts as
      • ‘ Companies Act’ accounts
      • or
      • IFRS accounts
    • One way choice, unless relevant change of circumstances
  • 64. Investment Funds, Companies and Miscellaneous Provisions Act, 2005.
    • Investment companies, as defined by Part XIII of the Companies Act, 1990 allowed to use Alternative Bodies of Accounting Standards (ABAS)
    • ABAS = US, Japanese and Canadian GAAP
  • 65. Main players involved in determining the future of financial reporting in Ireland
  • 66. Main players involved in financial reporting in Ireland Financial reporting ASB IASB CESR IAASA EU DETE SEC ICAI
  • 67. International Accounting Standards Board (IASB)
    • The accounting standards produced by the IASB (previously the IASC) are:
      • International Financial Reporting Standards (IFRS) (7)
      • International Accounting Standards (30)
      • Interpretations of these - IFRIC (10) and SIC (11)
  • 68. Accounting Standards Board
    • The accounting standards produced by the UK ASB (previously the ASC) include :
      • Financial Reporting Standards (FRS) (29)
      • SSAP (of ASC) (7 active)
      • Interpretations of these - UITF Abstracts (23)
  • 69. Financial Reporting Review Unit of IAASA
    • Principal functions include –
    • - Monitoring whether the accounts of certain classes of companies and other undertakings comply with the Companies Acts;
    • Co-operating in the development of accounting standards and practice notes;
    • Assisting the Board of IAASA to discharge its functions as advisor to the Minister on accounting and related matters ;
    • Liaising with other countries’ financial reporting monitoring bodies and developing contacts with those bodies.
  • 70. Department of Enterprise Trade and Employment (DETE) and the European Union (EU)
    • Various laws relating to accounting standards including prescribing which accounting standards should be used by the different categories of companies, the format of those accounts, and other accounting related EU regulations that are transposed into Irish law by the DETE.
  • 71. The regulators – CESR and SEC
    • Primarily regulators of capital markets and therefore impact on financial reporting.
    • CESR-Fin active in a number of areas
  • 72. Influence of IFRS on the Irish financial reporting environment
  • 73. Other financial reporting functions
    • Assisting the Board to discharge its functions as an advisor to the Minister on accounting related matters
    • - Advice on various matters as have arisen
    • - Member of CLRG and advice on part A6 of forthcoming Consolidation Bill dealing with accounting and auditing
    • Co-operating in the development of accounting standards and practice notes
    • - Irish Observer at ASB Board – twice monthly meetings
    • - Liaison with IASB
  • 74. Experiences of first time implementation of IFRS
    • 8,000 listed groups required to report under IFRS in Europe including c50 in Ireland. Many others have done so voluntarily
    • The most common adjustments seen in Ireland
      • Financial instruments generally
      • Share-based payments
      • Pension obligations
      • Foreign currency
      • Business combinations
      • Leasing
      • Deferred tax
      • Dividend distributions
      • Others
  • 75. What future for UK/Irish GAAP?
    • As the world moves towards global accounting standards - What is the future role for ASB in setting accounting standards?
  • 76. The Accounting Standards Board (ASB)
    • ASB is an operating body of the UK Financial Reporting Council (FRC).
    • In Ireland, ASB standards are “promulgated” by the ICAI.
    • Section 41 of the 2003 Companies Act – “accounting standards ……. issued by any body or bodies prescribed by regulation”. Not yet commenced.
    • Accounting standards responsibilities impacted by move to International Financial Reporting Standards (IFRS).
    • ASB has consulted on its future role in 2004,2005 and 2006.
  • 77. Future role for ASB- UITFs
    • ASB acknowledges that national interpretations of accounting standards should be rare.
    • ASB has stated that the International Financial Reporting Interpretations Committee (IFRIC) is the appropriate body to interpret IFRS.
    • Role of Urgent Issues Task Force (UITF) under review .
  • 78. Future role for ASB – FRSs/SSAPs
    • ASB sees its role as primarily trying to
      • influencing future direction of IASB standards
      • = influencing EU policy on accounting standards, including the endorsement of IFRS
    • Future role in national standard setting might include issuing standards in relation to
      • Entity specific issues: for example, smaller entities
      • Sector specific issues: for example, use of Statements of Recommended Practice (SORPs) and
      • Improving communication between companies and investors: narrative reporting and the Operating and Financial Review (OFR).
  • 79. ASB convergence policy with IFRS
    • ASB policy: no case for maintaining differences between the principles underlying Irish/UK GAAP and IFRS.
    • Consulted on convergence strategy in 2004: responses indicated support for phased approach.
    • Responses to consultation on role in 2005 highlighted change of view:
      • Phased approach complicated/difficult to implement
      • Complicated IFRS may not be suitable for many companies
      • Await the outcome of the IASB SME project.
    • ASB now proposing to move to ‘big bang’ convergence from 2009
  • 80. ASB convergence – current proposals
    • ASB issued tentative proposals in May 2006 for public comment –
    • All publicly quoted and other publicly accountable companies would be required to apply full IFRS.
    • Use of the Financial Reporting Standard for Smaller Entities (FRSSE) extended to include medium-sized entities.
  • 81. ASB convergence – current proposals
    • Subsidiaries of group companies that apply full IFRS would also be required to apply full IFRS for measurement and recognition, but with reduced disclosure requirements (yet to be determined).
    • No decision yet on companies that do not fall in 1, 2 or 3. Alternatives seem to be:
        • extend FRSSE application further,
        • apply IFRS to more companies,
        • maintain Irish/UK GAAP for them, or
        • some combination of (i), (ii) and (iii).
  • 82. Issues: what is public accountability?
    • IASB definition:
    • “ An entity has public accountability if:
    • (a) there is a high degree of outside interest in the entity from non- management investors or other stakeholders, and those stakeholders depend primarily on external financial reporting as their means of obtaining financial information about the entity; or
    • (b) the entity has an essential public service responsibility because of the nature of its operations.”
    • How to put this definition into operation still to be determined.
  • 83. Issues: FRSSE or IASB SME standard?
    • Is it appropriate to apply the FRSSE to medium-sized and possibly even larger companies?
    • Final decisions will be made when the outcome of the IASB SME project is clearer.
    • Possibility the EU will also get involved in an SME project?
  • 84. Current hot topics for future changes in financial reporting
  • 85. What direction are accounting standards going in?
    • ASB convergence with IASB standards
    • IASB formal agreements with US FASB and Japan.
    • Convergence roadmap between IFRS and US GAAP – 2008.
    • The potential impact of China… and other emerging economies.
  • 86. Current hot topics for future changes in financial reporting
    • Financial Statement presentation
    • Fair value measurement
    • Business combinations
    • Revenue recognition
    • Conceptual framework
    • … ..…………. and many more
  • 87. Financial Statement presentation
    • Current proposals are for 3 primary “financial statements” -
    Financing Cash Flows    Equity    Non-equity Financing Expenses Financing    Equity    Financing Liabilities Business    Operating Cash Flows    Treasury Cash Flows Business    Operating Income    Treasury Income Business    Operating Assets and Liabilities    Treasury Assets Statement of Cash Flows Statement of Earnings and Comprehensive Income Statement of Financial Position
  • 88. Financial Statement presentation
    • Each set of accounts will consist of
    • - 3 statements of financial position,
    • - 2 statements of earnings and comprehensive income/recognised income and expense,
    • - 2 statements of changes in equity, and
    • - 2 statements of cash flows.
  • 89. Fair value measurement
    • The objective of IASB/FASB joint project is to:
      • Define fair value,
      • Establish a framework for measuring fair value
      • Enhance disclosures about fair value, and
      • Codify existing fair value measurement guidance
    • Canadian DP – “Measurement on initial recognition”
    • FASB is nearing completion of its project on fair value measurements
  • 90. Business combinations
    • Joint IASB/FASB ED issued 30 June 2005 proposing major changes to acquisition accounting. For example e.g.
    • If acquirer purchases less than 100 % recognise assets and liabilities at the full amount of their fair values and goodwill as the difference between the fair value of the acquiree, as a whole, and the fair value of assets acquired and liabilities assumed.
    • the acquirer to account for acquisition-related costs incurred in connection with the business combination separately from the business combination (generally as expenses).
  • 91. Revenue recognition
    • Objectives are to –
    • Eliminate weaknesses in existing concepts and standards.
    • - Focus on changes in assets and liabilities
    • - Insufficient guidance on multiple-element revenue arrangements
    • - Deal more comprehensively with recognition criteria for various other types of transactions
    • Converge IFRSs and US requirements – approx 200 sources of standards and guidance on revenue recognition in US GAAP.
  • 92. Conceptual framework
    • IASB and FASB joint agenda project to develop a common conceptual framework.
    • Multi-phase project over a number of years: converged framework – 2010?
    • More than an academic exercise. Will have major impact on way in which the IASB/FASB will develop and revise standards.
    • First discussion paper issued July 2006
  • 93.
    • Questions?
  • 94. Contacts & Further Information
    • IAASA,
    • 2 nd Floor, Willow House,
    • Millennium Park,
    • Naas,
    • Co. Kildare.
    • Tel: +353 (0)45 983600 Fax: +353 (0)45 983601
    • Email: info@iaasa.ie
    • Web: www.iaasa.ie / www.iaasa.eu