Commission roundtable on consistent application of IFRS
On 20 September, the European Commission hosted its second roundtable on the consistent application of IFRS. The event was attended by representatives of national standard-setters (including the ASB), regulators, preparers, the IASB and EFRAG. The roundtable is designed to be an informal and temporary mechanism to share and discuss potential issues that might give rise to problems of consistent application and which might be submitted to the International Financial Reporting Interpretations Committee (IFRIC). The roundtable acts as a filter.
A number of issues were discussed at the meeting, and three of those issues were considered to give rise to common concern for referral to the IASB or IFRIC:
- De facto control - the IASB has confirmed that IAS 27 contemplates circumstances in which one entity can control another without owning more than half the voting power. This issue is already on the IASB's agenda as part of its consolidations project, but the roundtable raised concerns about the length of time this would take to come to a final view and agreed that the Commission should write to the IASB about the importance of this issue.
- IFRIC 9 'Reassessment of Embedded Derivatives' - the roundtable view is that the scope should be extended to cover all financial instruments in a business combination and the Commission will refer this issue to IFRIC.
- Common control transactions - accounting for business combinations under common control is excluded from the scope of IFRS 3 and has not been included in Phase II of the IASB's business combinations project. The roundtable view is that this is an outstanding important accounting issue and the Commission will write to the IASB.
Papers relating to the roundtable meetings and the issues discussed can be accessed on the Commission's website at: http://ec.europa.eu/internal_market/acco unting/ias_en.htm.
Amendment to Accounting Directives published
On 16 August, EU Directive 2006/46/EC was published in the Official Journal (OJ). The Directive amends the 4th and 7th Company Law Directives, the Bank Accounts Directive, and the Insurance Undertakings Directive (collectively, the Accounting Directives). The amendments have been introduced as part of the Commission's 'post-Enron' response to achieve greater transparency in, and collective responsibility for, financial statements, and to require an annual corporate governance statement.
In summary, the Directive will introduce changes to UK company law covering:
(a) an option to raise thresholds for defining Small and Medium-sized Entities (SMEs) (Articles 1.1 to 1.4);
(b) an option to permit the valuation of financial instruments and associated disclosures at fair value (Article 1.5);
(c) new disclosure requirements in respect of off-balance sheet arrangements and related party transactions (Article 1.6);
(d) a requirement for a corporate governance statement (Article 1.7); and
(e) a requirement covering the collective responsibility of Board members for drawing and publishing the annual accounts and the annual report (Article 1.8).
Member States are required to implement the provisions of the Directive into national law by 5 September 2008. The Government is considering the timetable for implementation and is planning to consult on this by the end of 2006. The main implications for the ASB concern the disclosure requirements referred to in (c) above.
