ACCOUNTING EVOLUTION FOR
INVESTMENT COMPANIES The gaps between the different accounting standards regimes are
closing, but some remain, as Ben Leung and Rennie Khan explain. Although there has been signifi cant progress since the Memorandum
of Understanding (MoU) was developed between the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) in 2002, there are still differences between International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Principles (US GAAP) [Accounting Standards Codifi cations (ASC)]. Investment company (IC) accounting is mainly governed by the standards set out in Tables 1 and 2, opposite.
Table 3 shows the main differences when comparing a set of fi nancial statements prepared under IFRS and one prepared under US GAAP 9.
The impact of the ‘written but not yet effective’ and ‘proposed’ standards
IFRS 9 IAS 39 sets out the requirements for recognising and measuring
fi nancial assets, fi nancial liabilities and some contracts to buy or sell non-fi nancial items. Many users of fi nancial statements and other interested parties told the IASB that the requirements in IAS 39 were diffi cult to understand, apply and interpret. They urged the IASB to develop a new standard for the fi nancial reporting of fi nancial instruments that was principle-based and less complex. Although the IASB amended IAS 39 several times to clarify requirements, add guidance and eliminate internal inconsistencies, it had not previously undertaken a fundamental reconsideration of reporting for fi nancial instruments.
IFRS 9 contains guidance on recognition and derecognition, 58 CAYMAN FUNDS | 2012
classifi cation and measurement of fi nancial instruments. The IASB intends that IFRS 9 will ultimately replace IAS 39 in its entirety. However, in response to requests from interested parties that the accounting for fi nancial instruments should be improved quickly, the IASB divided its project to replace IAS 39 into three main phases. As the IASB completes each phase, it will delete the relevant portions of IAS 39 and create chapters in IFRS 9 that replace the requirements in IAS 39.
The IASB has agreed to change the mandatory effective date of
IFRS 9 to annual periods beginning on or after January 1, 2015, rather than for annual periods beginning on or after January 1, 2013, as was initially the case.
It appears that IFRS 9 will not have a signifi cant impact on the differences noted above.
IFRS 13 and ASU 2011-04 Inconsistencies in the requirements for measuring fair value, and
for disclosing information about fair value measurements, have contributed to diversity in practice and have reduced the comparability of information reported in fi nancial statements. IFRS 13 remedies that situation by creating one standard that defi nes fair value, sets out in a single IFRS a framework for measuring fair value and requires disclosures about fair value measurements. An entity shall apply this IFRS for annual periods beginning on or after January 1, 2013.
The amendments in ASU 2011-04 change the wording used to
describe the requirements in US GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments include the following:
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