® International Accounting Standards Board IASB UPDATE Tatsumi Yamada Board Member, IASB.

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International Accounting Standards

BoardIASBIASB 　　 UPDATEUPDATE

Tatsumi YamadaTatsumi Yamada

Board Member, Board Member, IASB IASB

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DisclaimerDisclaimer

Expressions of individual views by members of the IASB and its staff are encouraged. The views expressed in this presentation are those of the speaker.

Official positions of the IASB on accounting matters are determined only after extensive due process and deliberation.

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OutlineOutline

IASCF StructureIASCF Structure Convergence project with USAConvergence project with USA Convergence project with ChinaConvergence project with China Convergence effort in KoreaConvergence effort in Korea Convergence project with JapanConvergence project with Japan IASB agendaIASB agenda

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Working Groups

Standards Advisory Council

IASC Foundation (22 Trustees)

IASCF StructureIASCF Structure

International Accounting

Standards Board

Staff

IFRIC (Interpretations)

The standard setting operation

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IASC Foundation—OversightIASC Foundation—Oversight

22 trustees:22 trustees: 6 from North America6 from North America 6 from Europe6 from Europe 6 from Asia/Oceania6 from Asia/Oceania 4 Any area4 Any area

Appoint IASB members, SAC and IFRICAppoint IASB members, SAC and IFRIC Monitor IASB’s effectiveness, raise Monitor IASB’s effectiveness, raise

funds, approve budget, responsible for funds, approve budget, responsible for constitutionconstitution

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Standards Advisory Standards Advisory Council (SAC)Council (SAC)

40 members—worldwide40 members—worldwide Meets at least 3 times a yearMeets at least 3 times a year Consultative forum, includingConsultative forum, including

Input on IASB agenda and project Input on IASB agenda and project timetabletimetable

Advise IASB on projectsAdvise IASB on projects Support the promotion and adoption of Support the promotion and adoption of

IFRSsIFRSs

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Board MembersBoard Members

12 full-time and 2 part-time members12 full-time and 2 part-time members Sole responsibility for setting agenda Sole responsibility for setting agenda

and standardsand standards Presently from 9 countries and 5 Presently from 9 countries and 5

continentscontinents

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Convergence with USAConvergence with USAFASB – Norwalk AgreementFASB – Norwalk Agreement

A focus is convergence with US A focus is convergence with US FASBFASB

Norwalk Agreement aims to Norwalk Agreement aims to achieve convergence in short and achieve convergence in short and long term (October 2002) long term (October 2002)

MOU related to Roadmap is MOU related to Roadmap is second step of Norwalk Agreement second step of Norwalk Agreement (February 2006)(February 2006)

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Convergence with USA Convergence with USA FASB– ‘Roadmap’ FASB– ‘Roadmap’

AgreementAgreement SEC ‘road map’ – removal of SEC ‘road map’ – removal of

reconciliation to US GAAPreconciliation to US GAAP by 2009 at the by 2009 at the latestlatest

April 2005 – SEC/EC agreed on ‘roadmap’April 2005 – SEC/EC agreed on ‘roadmap’ Progress of convergence by 2008Progress of convergence by 2008

TargetTarget Not necessary to achieve full Not necessary to achieve full

convergence on all standardsconvergence on all standards Working jointly and making progress on Working jointly and making progress on

major projects by 2008 (MOU)major projects by 2008 (MOU)

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Convergence with USA Convergence with USA FASB– ‘MOU – Short term’ FASB– ‘MOU – Short term’

FASB examinationFASB examination IASB examinationIASB examination

Fair value optionFair value option Borrowing costsBorrowing costs

Impairment (with IASB)Impairment (with IASB) Impairment (with FASB)Impairment (with FASB)

Income tax (with IASB)Income tax (with IASB) Income tax (with FASB)Income tax (with FASB)

Investment propertiesInvestment properties Government grantsGovernment grants

Research and Research and developmentdevelopment

Joint venturesJoint ventures

Subsequent eventsSubsequent events Segment reportingSegment reporting

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Convergence with USA Convergence with USA FASB– ‘MOU – Other projects’ FASB– ‘MOU – Other projects’

ProjectsProjects Progress to be achieved by 2008Progress to be achieved by 2008

Business Business CombinationsCombinations

To have issued converged To have issued converged standards (projected for 2007) standards (projected for 2007)

ConsolidationsConsolidations To implement work aimed at the To implement work aimed at the completed development of completed development of converged standards as a matter converged standards as a matter of high priority of high priority

Fair Value Fair Value MeasurementMeasurement

To have issued converged To have issued converged guidance guidance

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Liabilities/Liabilities/equity equity distinctionsdistinctions

To have issued one or more due To have issued one or more due process documentsprocess documents

PerformancePerformance

ReportingReporting

To have issued one or more due To have issued one or more due process documents on the full process documents on the full range of topicsrange of topics

Post-Post-retirement retirement benefits (inc. benefits (inc. pensions)pensions)


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Revenue Revenue RecognitionRecognition


DerecognitionDerecognition To have issued a due process To have issued a due process document relating to the results of document relating to the results of staff research efforts staff research efforts

FI FI (replacement (replacement of existing of existing standards)standards)

To have issued one or more due To have issued one or more due process documents relating to the process documents relating to the accounting for financial accounting for financial instruments instruments

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Intangible Intangible assetsassets

To have considered the results of To have considered the results of the IASB’s research project and the IASB’s research project and made a decision about the scope made a decision about the scope and timing of a potential agenda and timing of a potential agenda project project

LeasesLeases To have considered and made a To have considered and made a decision about the scope and decision about the scope and timing of a potential agenda timing of a potential agenda project project

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Convergence Project with Convergence Project with ChinaChina

June 2005 – China agrees to make up an June 2005 – China agrees to make up an action plan to achieve high-quality action plan to achieve high-quality accounting standards accounting standards

October 2005 – IASB staff was in China to October 2005 – IASB staff was in China to discuss Chinese EDs for convergencediscuss Chinese EDs for convergence

November 2005 – the 1November 2005 – the 1stst convergence convergence meeting including IASB Board membersmeeting including IASB Board members

February 2006 – issuance of new standards February 2006 – issuance of new standards substantially converged with IFRS in main substantially converged with IFRS in main principles (effective from January 2007 for principles (effective from January 2007 for listed companies)listed companies)

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Convergence Effort in Convergence Effort in KoreaKorea

February 2006 – establishment of ‘IFRS February 2006 – establishment of ‘IFRS convergence task force’ to discuss the three convergence task force’ to discuss the three step strategy – replacement of KAS by step strategy – replacement of KAS by Korean IFRSKorean IFRS

Phase I – Optional application of KIFRS or Phase I – Optional application of KIFRS or KAS for all entities (starts by 2009)KAS for all entities (starts by 2009)

Phase II – Application of KIFRS to listed Phase II – Application of KIFRS to listed global entities global entities

Phase III – Application of KIFRS to all listed Phase III – Application of KIFRS to all listed entitiesentities

Timing of Phase II and III is not decidedTiming of Phase II and III is not decided

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Convergence Project with Convergence Project with JapanJapan

October 2004 –inauguration of the Joint October 2004 –inauguration of the Joint Convergence projectConvergence project

March 2005 –items to be dealt with in the 1March 2005 –items to be dealt with in the 1stst phase were announced (1phase were announced (1stst meeting ) meeting )

September 2005 – progress has been September 2005 – progress has been reported (2reported (2ndnd meeting) meeting)

March 2006 – a new (whole picture) March 2006 – a new (whole picture) approach agreed and three new items added approach agreed and three new items added (Asset removal obligation etc) (3(Asset removal obligation etc) (3rdrd meeting) meeting)

44thth meeting will be held in London in meeting will be held in London in September 2006September 2006

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The IASB agendaThe IASB agenda

Short-term Short-term convergenceconvergence

Next step / Next step / current statuscurrent status

Timing estimateTiming estimate

Income taxesIncome taxes EDED Q2 2006Q2 2006

SegmentsSegments EDED Q1 2006Q1 2006

Borrowing costsBorrowing costs EDED Q1 2006Q1 2006

Joint venturesJoint ventures Start Start deliberationsdeliberations

Early 2006Early 2006

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Other short Other short termterm



Puttable Puttable instrumentsinstruments

EDED Early 2006Early 2006

Emission rightsEmission rights EDED deferreddeferred

Government Government GrantsGrants

EDED deferreddeferred

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Joint Projects Joint Projects with FASBwith FASB

Next step / current Next step / current statusstatus

Timing Timing estimateestimate

Business Business combinations IIcombinations II

RedeliberationsRedeliberations IFRS early IFRS early 20072007

Fair value Fair value measurementmeasurement

ED, based on ED, based on FASB workFASB work

Mid 2006Mid 2006

Non-financial Non-financial liabilitiesliabilities

RedeliberationsRedeliberations IFRS end IFRS end 20062006

Non-controlling Non-controlling interestsinterests

RedeliberationsRedeliberations IFRS early IFRS early 20072007

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Fair Value MeasurementFair Value Measurement

HowHow to measure fair value if another to measure fair value if another standard requires a FV measurementstandard requires a FV measurement

NotNot whenwhen to measure fair value to measure fair value Definition of fair valueDefinition of fair value

The The priceprice that would be that would be received for an assetreceived for an asset or or paid to transfer a liabilitypaid to transfer a liability in a in a current transactioncurrent transaction between between marketplace participantsmarketplace participants in the in the reference reference marketmarket for the asset or liability for the asset or liability..

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FVM ApplicationFVM Application

Transaction price presumed to be FV Transaction price presumed to be FV on initial recognitionon initial recognition

Reference marketReference market Market entity would transact inMarket entity would transact in

Valuation premiseValuation premise ““In exchange” or “in use”In exchange” or “in use”

Market observable prices or inputs Market observable prices or inputs preferred to entity inputspreferred to entity inputs

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Non-financial LiabilitiesNon-financial Liabilities

Scope is all non-financial liabilities not Scope is all non-financial liabilities not covered by another standardcovered by another standard

Analyse whether obligation is Analyse whether obligation is conditional or unconditionalconditional or unconditional

Purely conditional obligations are not Purely conditional obligations are not liabilitiesliabilities No present obligation from past eventNo present obligation from past event

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Non-financial LiabilitiesNon-financial Liabilities

Unconditional ”stand ready” Unconditional ”stand ready” obligations are liabilitiesobligations are liabilities Result in outflow of resources in all casesResult in outflow of resources in all cases Service provided by assuming riskService provided by assuming risk

Uncertainties about amount and timing Uncertainties about amount and timing of future events affect measurementof future events affect measurement Not a recognition thresholdNot a recognition threshold

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Joint Projects Joint Projects with FASBwith FASB



Performance Performance reportingreporting

-- Segment A-- Segment A

-- Segment B-- Segment B

EDED

DPDP

Q1 2006Q1 2006

End 2006End 2006

Conceptual Conceptual FrameworkFramework

Series of DPsSeries of DPs From mid 2006From mid 2006

Revenue Revenue recognitionrecognition

DPDP End 2006?End 2006?

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Performance ReportingPerformance Reporting

Fresh look at presentation of financial Fresh look at presentation of financial statement packagestatement package

Segment A – segregate income and Segment A – segregate income and expenses from equity transactionsexpenses from equity transactions

Segment B – complete redesignSegment B – complete redesign

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Performance Performance ReportingReporting Segment A DecisionsSegment A Decisions

Required financial statements agreedRequired financial statements agreed Required comparative information Required comparative information

agreedagreed Will be exposed for comment as ED in Will be exposed for comment as ED in

Q1 2006Q1 2006 (IASB only)(IASB only) No changes to information already No changes to information already

required to be presentedrequired to be presented Statement of recognised income and Statement of recognised income and

expense can be presented as a single expense can be presented as a single statement or two statementsstatement or two statements

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Statement of Recognised Statement of Recognised Income and ExpenseIncome and Expense

SalesSales xxxxx xxxxxCost of salesCost of sales (xxxxx)(xxxxx)Gross profitGross profit xxxxx xxxxxExpensesExpenses

(xxxxx)(xxxxx)Profit or loss before taxesProfit or loss before taxes xxxx xxxxIncomes taxesIncomes taxes (xxxx)(xxxx)Profit or lossProfit or loss xxxxxxxxChanges in AFS securitiesChanges in AFS securities (xxxx) (xxxx)Change in FX translationChange in FX translation xxxx xxxxChange in cash flow hedgesChange in cash flow hedges

(xxxx)(xxxx)Recognised income and expenseRecognised income and expense xxxxxxxx

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Performance Performance ReportingReporting Full Set of Financial Statements -- 1 YearFull Set of Financial Statements -- 1 Year

Beginning and end of period Beginning and end of period statements of financial positionstatements of financial position

Statement of recognised income and Statement of recognised income and expenseexpense

Statement of changes in equityStatement of changes in equity Statement of cash flowsStatement of cash flows

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Performance Performance ReportingReporting Segment B ActivitiesSegment B Activities

Consider whether there is value in the Consider whether there is value in the notion of recycling between subtotals of notion of recycling between subtotals of net income and other comprehensive net income and other comprehensive incomeincome

If so, determine the basis for the types of If so, determine the basis for the types of transactions and events that should be transactions and events that should be recycled and when should recycling occurrecycled and when should recycling occur

Develop consistent disaggregation Develop consistent disaggregation principlesprinciples

Develop consistent definitions of totals Develop consistent definitions of totals and subtotals including financing categoryand subtotals including financing category

Develop a reporting model applicable to all Develop a reporting model applicable to all for-profit entities other than financial for-profit entities other than financial institutionsinstitutions

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Conceptual FrameworkConceptual Framework

Long-term projectLong-term project Conceptual base for all standardsConceptual base for all standards Approved 1989 - Needs an overhaulApproved 1989 - Needs an overhaul

Refine, update, complete, convergeRefine, update, complete, converge Will not stop Will not stop ““normal” developmentnormal” development

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Revenue and Related LiabilitiesRevenue and Related Liabilities

Biggest source of restatements in USBiggest source of restatements in US Need a clearer definition of revenueNeed a clearer definition of revenue When do we recognise revenue?When do we recognise revenue?

At contract signing or only at delivery?At contract signing or only at delivery? Triggering events?Triggering events? Bundled offerings?Bundled offerings?

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Standards for Standards for SMEs SMEs

EDED 20062006

Consolidation - Consolidation - controlcontrol

ED? / DP?ED? / DP? 20062006

Insurance Insurance contractscontracts

DPDP 20062006

Liabilities & Liabilities & EquityEquity

Monitoring Monitoring FASBFASB

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Insurance Insurance ContractsContracts

IFRS 4 is an interim standardIFRS 4 is an interim standard Insurance Working Group advising on Insurance Working Group advising on

Phase II – a clean slatePhase II – a clean slate Modified joint project with FASB (ie Modified joint project with FASB (ie

from Discussion Paper stage)from Discussion Paper stage)

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Research project Research project DPs issuedDPs issued

These are not yet active agenda itemsThese are not yet active agenda items

Leader Leader

Management commentaryManagement commentary New ZealandNew Zealand

Measurement objectiveMeasurement objective

– – at initial recognitionat initial recognition

CanadaCanada

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Other topics becoming ‘hot’Other topics becoming ‘hot’

These are not yet active agenda itemsThese are not yet active agenda items


PensionsPensions May become part of May become part of convergence effort convergence effort

UK ASB considering a UK ASB considering a projectproject

Asset impairmentAsset impairment Canada working on this as Canada working on this as part of ‘measurement’part of ‘measurement’

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International Accounting Standards

Board

IASB UpdateIASB Update

® International Accounting Standards Board IASB UPDATE Tatsumi Yamada Board Member, IASB.

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Transcript of ® International Accounting Standards Board IASB UPDATE Tatsumi Yamada Board Member, IASB.