This Comment Letter was sent by BDO Global Coordination B.V. on behalf of BDO International, to International Accounting Standards Board on 29 September, 2005:
Dear Sirs,
IASB proposed policy on technical corrections
We thank you for the opportunity to comment on the proposed ‘fast track’ process to deal with those changes to standards that are labelled by the IASB as ‘technical corrections’.
We would support such changes provided they are restricted to those urgent and, we would hope, rare instances:
- when it is clear that the words in a standard do not properly convey the Board’s intention, even when considered with the basis for conclusions and any related guidance or
- to address unexpected consequences of a standard that the Board would have corrected, had it been aware of them when the standard was issued.
Frequent technical corrections would indicate a serious failing in the Board’s due process procedures which should be addressed as a matter of urgency.
We have the following comments to make on the need for such proposals.
If the IASB were to arrange “field testing” of proposed standards by preparers of financial statements with subsequent debriefing on problems encountered it might better identify such technical corrections before the final standards are published.
In publishing technical corrections, reference should be made to earlier IASB discussions and IASB Update articles that evidence the Board’s original intention. This would address any concerns that technical corrections were being used to short-cut the normal due process procedures where, for example, the Board has changed its opinion.
It is important that the Board monitors the identification process, i.e. of all issues classified as technical corrections, IFRIC issues, active IASB projects, or other (paragraph 4). It is unclear from the paper whether the identification process is to be a matter of public record on a timely basis.
We agree there should be a rebuttable presumption in regard to the retrospective application of technical corrections (paragraph 6). If they are identified before the effective date of a standard, as per Paragraph 3, retrospective application would not be too difficult.
We have the following comments to make on the drafting of the proposals.
The start of paragraph 4 notes “When an issue is submitted for consideration by the Board or the IFRIC…”. It should be made clear who is able to make the submission and the procedures to be adopted. There should be a formal process for interested parties outside of the IASB to forward issues to the IASB/IFRIC.
Paragraph 5 begins "In all other cases". It should be made clearer to what this refers. We believe the phrase refers to the last sentence of paragraph 4, i.e. "in all other cases" means in all cases in which it is not clear whether the item is a technical correction. If that is correct we suggest making the last sentence of paragraph 4 the first sentence of paragraph 5. Alternatively paragraph 5 should begin "If it is not clear that the issue is a technical correction…".
We also suggest that the first bullet in paragraph 6 be reworded and expanded to two bullet points, as follows:
- "An issue is submitted for consideration by the Board or by the IFRIC. Both internal and external parties may submit an issue for consideration.
- The IASB staff identify the issue and, if it is not clear that it constitutes a technical correction, take it to the IFRIC Agenda Committee for assessment as described in paragraph 5”.
This recognises that external parties may well identify a potential correction and also clarifies the circumstances in which the matter is referred to IFRIC rather than the Board. It was not clear what the current phrase "if required" meant nor does it identify any "requirement" for the IASB staff to take an issue to the IFRIC Agenda Committee. For the same reasons, in Step 1 of the Appendix, we would either replace "if required" with "if appropriate", or simply delete "if required" and not replace it.
We hope the above comments are of assistance. If you wish to discuss any of the points raised in our submission please contact Helen Thomson on +32-2-779-0130.
Yours faithfully,
BDO Global Coordination B.V.
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IASB Proposed Policy, for comments by 30 September 2005: