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By Yoichi Wada (Square Enix boss) via Twitter:

“It seems someone is spreading a false rumor about Versus being canceled. Heh, just a few moments ago a regularity meeting for Versus ended. If you were to see the city [in the game] presented today, you’d wouldn’t be able to stand from surprise.”

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The executive took to Twitter to describe the rumours as a hoax.

Wada said he attended a regular meeting on the RPG’s progress today, and that fans would be surprised to see how the game is shaping up; he specifically mentioned the city setting.

http://www.vg247.com/2012/07/24/square-enix-boss-confirms-final-fantasy-versus-xiii-still-in-production/

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Edit: - (kotaku)

The rumor, it seems, was wrong! Today, Square Enix head Yoichi Wada confirmed that he just came out of a Final Fantasy Versus XIII meeting.

http://kotaku.com/5928488/square-enix-confirms-the-existence-of-final-fantasy-versus-xiii

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Take that doubters, I hate you all !!