• Introduction

  International Financial Reporting Standard (“IFRS”)* and International Financial Reporting Interpretations Committee (“IFRIC”) update

  As companies come to grips with the changes that came into effect for accounting periods starting on or after 1 January 2009 (see Winter 2008-2009), so the next phase of amendments have been issued which in the main are either effective later in this current calendar year or for accounting periods commencing on or after 1 January 2010.

  In addition any company seeking an admission of securities to trading must look at the changes to ensure that where IFRS is to be adopted for the first time in support of admission, that the correct version of the standard is being applied, which may, in some cases require earlier application than for some companies whose securities are already admitted.

  Changes to “equivalence” to IFRS as adopted in the EU for third country (i.e. non-EEA issuers)

  The Prospectus Rules and AIM Rules for Companies have always allowed a GAAP which is deemed equivalent to IFRS as adopted in the EU.  Originally, the Committee of European Securities Regulators (CESR) issued advice on equivalence in 2005 and concluded that certain GAAPs could be used as long as remedies were included (ranging from additional disclosures to reconciliations of differences).

  This was updated by a decision by the European Commission in 2006, and that decision was repealed with effect from 1 January 2009 by decision 2008/961/EC.

  In that decision, the following GAAPs are to be treated as equivalent to IFRS adopted pursuant to Regulation (EC) No 1606/2002 from 1 January 2009:

  1. IFRS as issued by the IASB (providing the notes to the financial statements contain an explicit and unreserved statement of compliance in accordance with IAS1: Presentation of Financial Statements)
  2. Japanese GAAP and
  3. US GAAP.

  In addition, the same decision identified four further GAAPs which are permitted to be used for periods commencing before 1 January 2012.  These are:

  1. Chinese GAAP
  2. Indian GAAP
  3. Korean GAAP and
  4. Canadian GAAP

  What is important to note is that these equivalent and permitted GAAPs have arisen from the positive moves by the relevant local standard setters to converge with IFRS. The situation, particularly for the permitted GAAPs, is being monitored in the period to 31 December 2011.

  It is vital for companies to recognise therefore that the equivalent and permitted GAAPs are those that apply with effect from 1 January 2009, and not necessarily those that have applied before that date, so some re-statement or additional disclosures are likely.

  AIM has not currently changed its permitted GAAPs for non-EEA registered companies; these remain IFRS as adopted in the EU, and the GAAPs of the US, Japan, Australia and Canada.
  
  *International Financial Reporting Standards, (IFRSs) including International Accounting Standards (IASs) as issued by the International Accounting Standards Board (IASB)

• EU endorsement

  As a reminder, the EU has a two tier endorsement process which may affect companies financial reporting depending which market rules apply.

  Since the previous edition, most of the new or amended Standards or Interpretation Statements summarised therein have been endorsed, but some issued during 2008 or before, but effective for accounting periods commencing on or after 1 January 2009 (or prior) are yet to be endorsed.

  At the time of writing, those past changes together with those effective for accounting periods beginning on or after 1 July 2009 (or prior) which are yet to be endorsed are summarised below:

  Standard/Interpretation statement		Effective date: Periods commencing on or after	Endorsement status: Expected (as at 30 Apr 09)
  	Consolidated and Separate Financial Statements	1 Jul 09	Q2 2009
  IFRS3	Business Combinations (Revised 2008)	1 Jul 09 (see note below)	Q2 2009
  IFRIC15	Agreements for the Construction of Real Estate	1 Jan 09	Q2 2009
  IFRIC16	Hedges of a Net Investment in a Foreign Operation	1 Oct 08	Q2 2009
  IFRIC17	Distributions of Non-Cash Assets to Owners	1 Jul 09	TBC
  Amendments to
  IFRS 1	First-time Adoption of IFRS	1 Jul 09	TBC
  IFRS 7	Financial Instruments: Disclosures: Effective Date and Transition	From 1 Jul 08	Q2 2009
  IAS39	Reclassification of Financial Assets: Effective Date and Transition	From 1 Jul 08	Q2 2009
  IAS39	Financial Instruments; Recognition and Measurement: Eligible Hedged Items	1 Jul 09	Q2 2009

  Note: effective for transactions on or after the effective date, not for periods commencing on or after that date

  Endorsement does not affect the date from which the standard is effective; in this regard it is worth drawing attention to IFRIC12: Service Concession Agreements which is effective for accounting periods starting on or after 1 January 2008 but was only endorsed in late March 2009.

  As noted above, non-EEA companies may now use full IFRS but only with the explicit and unreserved statement of compliance. Therefore it is important to note the differences between full IFRS and IFRS endorsed by the EU while standards, amendments or interpretations remain subject to the endorsement process.

  For new changes summarised below, see the “Quick Check” table below for the endorsement status at the time of writing.

  The latest endorsement status should be checked at: http://www.efrag.org/content/default.asp?id=4090 (external link)

• What is changing?

  The “Quick Check” table sets out the known changes as at 30 April 2009. Unless otherwise stated, early adoption is permitted, although companies should be aware that transitional arrangements might apply in some cases and certain requirements are interlinked such that early adoption requires the related amendment to the other standard(s) to be early adopted at the same time.

  A large number of the changes are prospective, but where there is a major change which applies retrospectively, this will require the restatement of comparatives, where applicable, and so companies may need to gather the information for both the old and new accounting requirements. However, in practical terms much of this information would have to be collated anyway to comply with the mandatory disclosure of the impact of standards and interpretations issued but not yet effective, in accordance with IAS8.

  In the pipeline

  The IASB and IFRIC remain busy with convergence, particularly with FASB (the US standard setter) and also have a number of discussion papers and exposure drafts open for comment.

  Some examples are:

  • Exposure draft for a new standards for: Income Taxes (to replace IAS12); Consolidated Financial Statements (combining IAS 27 & SIC 12); and amendments to derecognition requirements in IAS 39 and associated IFRS 7 disclosures
  • Discussion Papers on Revenue Recognition in Contracts with Customers Leases and Financial Statement Presentation.

  As the final standards or amendments to standards and interpretation statements are issued, they will be summarised in future updates.

  The IASB website is regularly updated, see http://www.iasb.org/Home.htm (external link).

Download the IFRS accounting update* (PDF - 70.4kb)

* For an accessible version (i.e. for screen readers) of the PDF please contact us.