Sir Chairman and Members of European Financial Reporting Advisory Group. August

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1 Denise Silva Ferreira Juvenal Accountant Commentary individual Rio de Janeiro / Brazil Sir Chairman and Members of European Financial Reporting Advisory Group EFRAG 35 Square de Meeûs 1000 Brussels Belgium commentletters@efrag.org August CONSIDERING THE EFFECTS OF ACCOUNTING STANDARDS 31 August 2011 DISCUSSION PAPER JANUARY I m Denise Juvenal this is pleased to have the opportunity to comment on this consultation for CONSIDERING THE EFFECTS OF ACCOUNTING STANDARDS DISCUSSION PAPER. This is my individual commentary for EFRAG Discussion about THE EFFECTS OF ACCOUNTING STANDARDS. This proposal has The content of this paper is as follows: Section 1 provides background information; Section 2 explores the process of effects analysis ; Section 3 explores the concept of effects ; Section 4 considers the key principles underpinning effects analysis; Section 5 considers the practicalities of performing effects analysis; and Section 6 contemplates next steps. QUESTIONS FOR RESPONDENTS 1) Do you agree that effects analysis should be defined, for the purposes of accounting standard setting, as a systematic process for considering the effects of accounting standards as those standards are developed and implemented (paragraph 2.2)? 1

2 If you disagree with the proposed definition, or would like it to be amended, please provide an alternative definition, and please explain why you favour that alternative definition. Yes, I think that is very important delimited effects analysis for accounting standard setting, but I observed that must be included, as suggest, results of implementation with relation impacts and problems that will be occurred besides developed and implemented. I know that impact assessment isn t described, as in item 2.3, but I observed that this effect of analysis is more important for impact than developed and implementation. I understand that this relation is responsibility of regulators of each countries that have send information of the process for principal regulator for control principally in elaborated new rules and high quality of these accounting standards. 2) Do you agree that effects analysis should be integrated (or further embedded) into the standard setting due process (paragraph 2.7)? If not, why not? Please explain the reasons for your answer. No, I think that due process the idea is different. The proposal effect analysis is been observed and changed international standards for others regulators for adequate a new rules of accounting standards elaborated for IASB, if considered integrated I think that can be occurred problems in relation a responsibility, transparency and high quality of the accounting standards, principally for control in implementation in the countries. The IASB/IFRS Foundation for due process have objective as described in your Constitution Review 1 for develop and promote, as follows, I think that intended to provide enhanced criteria to assist the IASB and interested parties when determining whether a matter relating to the clarification or correction of IFRSs should be addressed using the annual improvements process. 2 The Constitution Review 3 of IASB described that the objectives of the IFRS Foundation are: (a) to develop, in the public interest, a single set of high quality, understandable, enforceable and globally accepted financial reporting standards based upon clearly articulated principles. These standards Constitution+Review+part+two/ Constitution+Review+part+two.htm 2 Letter - CL 37 Due process of IASB Constitution+Review+part+two/ Constitution+Review+part+two.htm 2

3 should require high quality, transparent and comparable information in financial statements and other financial reporting to help investors, other participants in the world s capital markets and other users of financial information make economic decisions. (b) to promote the use and rigorous application of those standards. (c) in fulfilling the objectives associated with (a) and (b), to take account of, as appropriate, the needs of a range of sizes and types of entities in diverse economic settings. (d) to promote and facilitate adoption of International Financial Reporting Standards (IFRSs), being the standards and interpretations issued by Constitution Review the IASB, through the convergence of national accounting standards and IFRSs. The difference European Commission and UK about impact assements is policy proposals for help policy makers, I think that idea is different for due process, I have doubt in relation the arguments points , I suggest that observed these points that I make described in discussion paper for IASB, as follows: I think that questions among policymakers and other stakeholders in relation about perspectives are differents, reconciled these opinions is difficult because policymakers has a broader scope and may include legislative authorities 4 and stakeholders have responsibility for understanding and execution of the implementation standard-setting of the IASB, not necessarily can be policymakers. 5 3) Do you agree that the standard setter should be responsible for performing effects analysis, and that the performance of effects analysis by any other body is not a sufficient or satisfactory substitute (paragraph 2.11)? If not, why not? Please explain the reasons for your answer. The definition 2.2 for the purposes of accounting standard setting, as a systematic process for considering the effects of accounting standards as those standards are developed and implemented and arguments item , I think that the standard setter shouldn t be responsible for performing effects analysis because the performance of effects analysis by any other body is not a sufficient not depends of this proposal in relation a satisfactory substitute Letter - CL 13 Strategy Review of IASB 3

4 This isn t objective of this commission I think that standard setter have your priorities and rules describes in each standard, if considered that effect analysis is responsible I observed that this commission have difficult for make control of your implementation and in the jurisdiction of each country. 4) Do you agree that effects should be considered throughout the life-cycle of a project to introduce a new accounting standard or amendment, but that publication of a document setting out the key elements of the effects analysis should be specifically required, as a minimum, at the following points in time in that life-cycle (paragraph 2.15)?: A. When an agenda proposal on the project is considered by the standard setter; B. When a discussion paper is issued for public consultation (this effects analysis is an update to A, to reflect the latest information available); C. When an exposure draft is issued for public consultation (this effects analysis is an update to B, to reflect the latest information available); D. When a final standard or amendment is issued (this effects analysis is an update to C, to reflect the latest information available); and E. For new accounting standards and major amendments, a post implementation review is required, which is an analysis of actual effects that should be performed and published when the pronouncement has been applied for at least 2 years, together with the publication of an associated document setting out the key elements of the review; a post-implementation review is not required for minor amendments. If you do not agree, why is this? Please explain the reasons for your answer. I agree that effects should be considered throughout the life-cycle of a project to introduce a new accounting standard or amendment, but I think that more effectiveness is letter E because the results of effects will occurred after a firstly implementation, but will be observed this is a similar a Practice Statement of The IASB. The letters B-D in the practice I think that is very difficult effectiveness because of this discussed of the exposure draft and time. The letter A is possible when a new amendments is mentioned a specific topic. I understand that publication of a document setting out the key elements of the effects analysis should be no more longer time. 4

5 5) Do you agree that effects analysis should be undertaken for all new accounting standards or amendments, but that the depth of the analysis work should be proportionate to the scale of the effects (in terms of their likelihood of occurring and the magnitude of the consequences if they do occur), the sensitivity of the proposals and the time available (paragraph 2.19)? If not, why not? Please explain the reasons for your answer. Yes, but I observed that is very important a description of time of execution and elaborated this effect. The analysis work should proportionate to the scale of the effects with high quality and transparency for results effectiveness of implementation. 6) Do you agree that effects should be defined, for the purposes of accounting standard setting, as consequences that flow, or are likely to flow, from an accounting standard, referenced against the objective of serving the public interest by contributing positively to delivering improved financial reporting (paragraph 3.2)? If you disagree with the proposed definition, or would like it to be amended, please provide an alternative definition and please explain why you favour that alternative definition. I think that effects are different than consequences in relation the communication and reporting will be result in aspects that will be increased performance and evaluation of organization or not, in this case if considered the effects for the purposes of accounting standard setting, as consequences that flow, or are likely to flow, from an accounting standard, can be occurred problems when have difficult for identified for organizations and regulators what s effect and consequences, that is very different in relation a public interest and your contributing for financial reporting. For example when I described that discussion paper for IASB that the objective for IASB is not defined public interested about financial information, I observed that each country has jurisdiction, regulations and laws that are specific of them, financial crisis is aspect that influence every decision about standard-setting and others subjects if IASB and IFRS Foundation initially process in this relation specific, can be have problems with relation in your independence. 6 6 Letter - CL 13 Strategy Review of IASB 5

6 7) Do you agree that the term effects, rather than the term costs and benefits, should be used to refer to the consequences of accounting standards, in order to distinguish effects analysis from a CBA, on the grounds that it would not be appropriate to require a CBA to be applied to standard setting (paragraph 3.7)? If not, why not? Please explain the reasons for your answer. I think that cost benefit analysis cannot used to refer as consequences of accounting standards, the costs are the principal aspect for process of development, effectiveness, high quality of standards. I think that costs and benefits depend of quantity and quality of organizations that to want implementation and don t depend of applied and consequences of this organizations. 8) Do you agree that the scope of the effects to be considered, for the purposes of performing effects analysis, should include all effects, both microeconomic effects and macro-economic effects (paragraph 3.12)? If you disagree, please provide an alternative way of specifying what the scope of the effects to be considered should be, and please explain why you favour that alternative. I disagree this scope because in relation a micro-economic effect described in point 3.14 as costs and benefits and economic behavioral impacts that are specific to the entity, and in relation a macro-economic effect in the point 3.14 that are not usually specific to the entity, they may go beyond the remit of contributing positively to delivering improved financial reporting, and they often relate to the entire economy. I understand that if considering micro-economic or macro-economic effect must be described other economic effect that isn t proposal of accounting standards, this is useful in reporting specific for economic analysis. 9) Do you agree that a standard setter can only be expected to respond to an effect which is outside of its remit (or for which an accounting standard is not the most effective means of addressing the particular effect) by communicating with the relevant regulator or government body to notify them of the relevant issue and to obtain confirmation from them that they will respond appropriately to it (paragraph 3.17)? If not, why not? Please explain the reasons for your answer. I think that respond to an effect must be only relevant regulator, as process that exist, the actual process for decision cannot change, if the government included in this 6

7 process for international standards, depends of specific matter, can be occurred problems in others jurisdictions in countries that make financing accounting standards. I disagree in the point when explain all effects as describe in page 28 The preliminary view set out in paragraph 3.12 was that the scope of effects to be considered, for the purposes of performing effects analysis, should include all effects, both micro-economic effects and macro-economic effects and it is then for the relevant regulator or government body to use the range of policy instruments at its disposal to intervene to ameliorate the economic consequences associated with the effect that has been identified. I think that proposal cannot considered that included all effects, because if forget one the regulator can have problem in relation a definition aspect of accounting standards. 10) Do you agree that effects should be defined by reference to an objective, and that the objective should be that of serving the public interest by contributing positively to delivering improved financial reporting, where serving the public interest means taking into account the interests of investors, other participants in the world s capital markets and other users of financial information (paragraph 3.19)? If you disagree because you consider that effects should not be defined by reference to an objective, please explain the reasons for your answer. If you disagree because you consider that effects should be defined by reference to an objective other than that specified above, please provide an alternative objective and please explain why you favour that alternative objective. No, public interest is very complexity definition principally when refers a contributing positively to delivering improved financial reporting that can be included others participants, financial markets and investors have other idea and proposal for accounting standards, I think, I don t know, that independence of the structure and proposal for accounting standards, isn t economic information, are different. The idea of accounting standards don t be described and included in the practice statement or other management reporting, economic information that can be impact in this demonstration of the organization, this is my understanding. 11) Do you agree with the following clarifications of the term effects?: 7

8 a) Effects can be positive, negative or neutral, as determined by whether they support, frustrate or have no impact on the achievement of the objective of serving the public interest by contributing positively to delivering improved financial reporting (paragraph 3.23); b) Effects analysis will usually involve assessing the marginal effects of an accounting standard or amendment, relative to the status quo that existed before its introduction, so the term effects should, in general, be interpreted to refer to marginal effects (paragraph 3.24); c) The term effects can be used to refer to both one-off effects and ongoing effects (paragraph 3.26); and d) The term effects can be used to refer to both anticipated effects and actual effects, depending on what stage the effects analysis is at before, during or after implementation of the new accounting standard or amendment (paragraph 3.28). If you do not agree with any of the above clarifications of the term effects, which one(s) do you disagree with and why? Please explain the reasons for your answer. In relation a clarifications as follows, my comments are: a) I agree this point, simple definition more useful and practical - Effects can be positive, negative or neutral, as determined by whether they support, frustrate or have no impact on the achievement of the objective of serving the public interest by contributing positively to delivering improved financial reporting (paragraph 3.23); b) In this point marginal will be clearly and transparency in your definition for don t have doubt for your applied - Effects analysis will usually involve assessing the marginal effects of an accounting standard or amendment, relative to the status quo that existed before its introduction, so the term effects should, in general, be interpreted to refer to marginal effects (paragraph 3.24); c) I disagree this point is very confused and doubt - The term effects can be used to refer to both one-off effects and ongoing effects (paragraph 3.26); and d) I disagree this point because stage effect is very difficult identified - The term effects can be used to refer to both anticipated effects and actual effects, depending on what stage the effects analysis is at before, during or after implementation of the new accounting standard or amendment (paragraph 3.28). 12) Do you agree with the following further considerations concerning effects: 8

9 a) Effects analysis should involve considering effects in terms of both their incidence (who is affected) and their nature (how they are affected), and that the standard setter should be transparent about whether and why they consider that the effects on one group should receive greater weight, less weight or equal weight to the effects on any other group (paragraph 3.30); and b) Effects analysis should involve prioritising effects, possibly by ranking them in terms of their likelihood of occurring and the magnitude of the consequences if they do occur (paragraph 3.32). If you do not agree with any of the above further considerations concerning effects, which one(s) do you disagree with and why? Please explain the reasons for your answer. In relation a further considerations I comment as: a) I agree this definition - Effects analysis should involve considering effects in terms of both their incidence (who is affected) and their nature (how they are affected), and that the standard setter should be transparent about whether and why they consider that the effects on one group should receive greater weight, less weight or equal weight to the effects on any other group (paragraph 3.30); and b) I disagree this definition can be doubt in relation a applied and transparency of idea of effects Effects analysis should involve prioritising effects, possibly by ranking them in terms of their likelihood of occurring and the magnitude of the consequences if they do occur (paragraph 3.32). 13) Do you agree that there should be a set of key principles underpinning effects analysis (paragraph 4.2)? If not, why not? Please explain the reasons for your answer. I think that effect analysis will be related key principles must be integrated and relationship as accounting principles for don t has doubt and identify problems in the elaborated of the accounting reporting. 14) Do you agree that the set of key principles underpinning effects analysis should be as follows (paragraph 4.2)?: Principle 1: Explain intended outcomes (refer to paragraph 4.2); Principle 2: Encourage input on anticipated effects (refer to paragraph 4.2); Principle 3: Gather evidence (refer to paragraph 4.2); and Principle 4: Consider effects throughout the due process (refer to paragraph 4.2). 9

10 If you disagree with the proposed set of key principles, or would like the principles to be amended, please provide an alternative set of key principles and please explain why you favour that alternative set. In relation a key principles I described as: Principle 1: Explain intended outcomes (refer to paragraph 4.2); - I agree Principle 2: Encourage input on anticipated effects (refer to paragraph 4.2); - I agree Principle 3: Gather evidence (refer to paragraph 4.2); - I agree; and Principle 4: Consider effects throughout the due process (refer to paragraph 4.2) I disagree this point is very difficult for applied. 15) Do you agree that the process that a standard setter should apply for validating the intended outcomes of a proposed accounting standard or amendment should include steps a to d of paragraph 5.2? If you disagree with the proposed steps, or would like the steps to be amended, please provide alternative steps and please explain why you favour those alternative steps. Yes, I agree as validating intended outcomes point ) Do you agree that the process that a standard setter should apply for identifying and assessing the effects of a proposed accounting standard or amendment should include steps a to f of paragraph 5.3? If you disagree with the proposed steps, or would like the steps to be amended, please provide alternative steps and please explain why you favour those alternative steps. Yes, I agree as identifying and assessing effects point ) Do you agree that the process that a standard setter should apply for identifying options for the proposed accounting standard or amendment (options for achieving the intended outcomes of the proposed accounting standard or amendment), and for choosing the preferred option, should include steps a to f of paragraph 5.4? If you disagree with the proposed steps, or would like the steps to be amended, please provide alternative steps and please explain why you favour those alternative steps. 10

11 Yes, I agree as identifying options and choosing the preferred option point ) Do you agree that the IASB should, to some degree, delegate to national standard setters and similar institutions some of the activities involved in gathering evidence of the effects of accounting standards, particularly consultation with constituents, and that these bodies should play a more active part in the due process to ensure that IFRSs contribute positively to delivering improved financial reporting (paragraph 5.5)? No, I think that the objectives are different, the National Standard Setters will be participated as every organizations contributed in the process of accounting standards. Delegated this function can have some problems as countries that financing of IASB principally as responsibility that IASB assumes with each country. 19) Do you agree that the next steps in developing and, subject to the results of public consultation, implementing the proposals put forward in this paper should include steps a and b of paragraph 6.2? If you disagree with the proposed next steps, or would like there to be additional next steps, please provide alternative and/ or additional steps and please explain why you consider that those alternative and/ or additional next steps are appropriate. Yes, I agree with letter a and letter b, but I think that the National standard setters and similar institutions will be make implementations and controls of the proposals and UK ASB and EFRAG for make new proposals and new studies for IASB is very important. Thank you for opportunity for comments this proposal, if you have questions don t hesitate contact to me, rio @terra.com.br. Yours Sincerily, Denise Silva Ferreira Juvenal rio @terra.com.br