These financial statements illustrate the presentation and disclosure requirements of IFRSs for the year ended 31 December 2012 by an entity that is not a first-time adopter of IFRSs. They illustrate the impact of the application of IFRSs that are mandatorily effective for the annual period beginning on 1 January 2012.

The publication includes:

• Section 1 — Overview of new and revised International Financial Reporting Standards (IFRSs)
  • An overview of new and revised International Financial Reporting Standards (IFRSs) that are mandatorily effective for the year ended 31 December 2012
  • An overview of new and revised IFRSs that are not yet mandatorily effective but allow early application for the year ended 31 December 2012
• Section 2 — Model financial statements of International GAAP Holdings Limited for the year ended 31 December 2012

Click to view IFRS Model Financial Statements 2012.

The speakers discussed the current state of adoption of IFRS in Europe. Currently, more than two thirds of the G20 countries have adopted IFRS. The goal of the European Union is to adopt all IFRS issued by the IASB, provided that they are acceptable to and met the needs of European constituents. To meet this goal, views from the EU should be consolidated into ‘one message’ and expressed early in the standard setting process.

Also discussed at the conference were the financial reporting developments in the US. Specifically, representatives from the European Commission expressed their disappointment and frustration regarding the outcome from the SEC staff paper regarding US adoption of IFRS. The lack of a decision in the SEC staff paper was perceived as a negative outcome and has caused a slow down on global convergence efforts. The European Commission has label 2013 as the ‘year of truth’ regarding globalisation of IFRS and convergence.

Prominent speakers at the conference included Nadia Calviño, Deputy Director General, European Commission Directorate General Internal Market and Services; Françoise Flores, EFRAG Chairman; Hans Hoogervorst, Chairman of the IASB; Sven Hayn, Ernst & Young; Wolf Klinz, MEP; Elisabetta Magistretti, non-executive independent Director in listed Italian companies and Peter Malmqvist, Board member of the European Federation of Financial Analysts Societies.

The press release on this conference is available on the EFRAG website.

The paper, entitled Thinking about disclosures in a broader context: A road map for a disclosure framework, follows on from an earlier FRC paper published in 2009.

The FRC notes that the paper complements the discussion paper Towards a Disclosure Framework for the Notes which it joint published in July 2012 with the European Financial Reporting Advisory Group (EFRAG) and the Autorité des Normes Comptables (ANC) in France.

In contrast to the narrower focus of the EFRAG/ANC/FRC paper, the FRC paper sets out the FRC’s thinking on how a disclosure framework might apply in a broader context - particularly considering placement criteria, which in the FRC’s view, are an integral part of a disclosure framework.  In doing so, the paper focuses on 'financial reporting' as a subset of overall corporate reporting and sees placement criteria as providing a structure for the financial report so that disclosures are organised in a way that is more informative to the reader and can be consistently applied.

The paper reiterates the 'disclosure problem', which it describes in terms of both quantity and quality issues, which result in disclosures that are "more about compliance than communication".  The paper sees a disclosure framework as a coherent framework that draws together all the various strands of financial reporting that relate to disclosures, within which standard setters and other regulators can set disclosure requirements and preparers and auditors can apply them.

The paper sets out the following benefits of such a disclosure framework:

• Ensuring that regulators only add disclosures to financial reports where those disclosures meet the objective of financial reporting
• More consistent setting of disclosure requirements across standards
• A reduction in the burden of disclosures arising from setting proportionate disclosure requirements
• The elimination of duplicate information within financial reports
• Better organisation of disclosures, which will make financial reports easier to navigate, as information fulfilling set objectives will be positioned within the same section of a financial report
• Empowering preparers to apply materiality more robustly to disclosures
• Elimination of boilerplate disclosures.

The paper also provides insights into how to reduce the disclosure burden through the application of the concepts of proportionality and materiality, and develops some principles for the communication of disclosures.

Recommendations for the IASB

The paper outlines what the FRC believes the IASB should do to contribute to the development of a disclosure framework, including setting the principles as part of its conceptual framework project.  For this purpose, the paper recommends the IASB should:

• Define the boundaries of financial reporting for their purposes
• Develop placement criteria for establishing where information should be disclosed
• Develop a clear objective for disclosure, as well as a distinct objective for presentation.

In addition, there are other steps that the FRC believes the IASB can take to enable preparers and others to critically assess the disclosures they should provide within financial reports. The paper suggests the IASB should:

1. Engage with users at an early stage in the development of a disclosure framework
2. Provide guidance on what materiality means from a disclosure perspective
3. Reduce and define the terms used within IFRSs, e.g. significant, key, critical, and then use the defined terms consistently
4. Provide overarching principles for disclosures and present these within one standard
5. Update IAS 1 so that presentational and disclosure aspects are clearly separated
6. Make it clear that measures not defined within IFRSs (e.g. net debt) and adjusted measures (e.g. EBITDA) can be disclosed within the notes to the financial statements (as a type of disaggregation) as long as these measures are defined, reconciled back to IFRS figures, include comparative information and are consistently calculated and presented
7. Where disclosure requirements within individual standards are not mandatory, these should be moved into implementation guidance that is not part of the standard.

The FRC is requesting comments on the Discussion Paper by 31 January 2013.  Click for press release (link to FRC website).

Agenda for the meeting

Sheila Fraser. Ms Fraser is a Chartered Accountant and has served as the Auditor General of Canada from 2001 to 2011. She was also the former Chair of the Canadian Public Sector Accounting Board and is currently a member of the International Public Sector Accounting Standards Board (IPSASB).

Professor Wiseman Nkulu. Professor Nkulu is a Chartered Accountant currently serving as a chancellor of the University of Pretoria. He was a former Economic Adviser in South Africa, the first Chairman of the Steering Committee and Chief Executive of the Secretartiat of the New Partnership for Africa's Development (NEPAD), a former President of the South African Institute of Chartered Accountants, a former Chairman of the South African Council of Higher Education and a former President of the International Organization of Employers.

Dr Heidi Miller. Dr Miller has over 30 years of experience in the financial services industry, where she held senior executive positions at firms such as JPMorgan Chase & Company, Bank One, Citigroup and Travellers Group.

In a wide-ranging speech covering numerous topics, Commissioner Walter, speaking in her own capacity, discussed the SEC's role in conforming regulations globally within the context of the SEC's mission, where she noted "coordination efforts in some areas take longer than perhaps our foreign counterparts would hope".

In relation to IFRS specifically, Commissioner Walter stated:

... SEC staff from the Office of the Chief Accountant has published its final report on the IFRS Work Plan.  This report has given the Commission much to consider.  While I continue to believe that converged standards are important to serving the interests of investors in the increasingly global capital markets, we cannot incorporate IFRS unless and until we are confident that it will serve U.S. investors well.

Speaking more broadly, Commissioner Walter noted the "Commission cannot take actions in areas merely for the sake of international consistency if it is not the right thing to do for U.S. investors and U.S. markets" but added her belief that "more often than not, what is in the best interest of the U.S. markets and what is in the best interest of the global market will not be mutually exclusive".

Ms Walter also discussed other global regulatory issues such as over-the-counter derivatives, swaps regulation, the proposed unified legal entity identifier system, and monitoring the financial system in the context of automated trading and interconnected markets.

Click for the full text of the speech (link to SEC website).

The European national enforcers of financial information monitor and review financial statements published by issuers with securities traded on a regulated European market and who prepare their financial statements in accordance with International Financial Reporting Standards (IFRS) and consider whether they comply with IFRS and other applicable reporting requirements, including relevant national law.

ESMA has developed a confidential database of enforcement decisions taken by individual European enforcers as a source of information to foster appropriate application of IFRS.

The publication of enforcement decisions is designed to inform market participants about which accounting treatments European national enforcers may consider as complying with IFRS, i.e. whether the treatments are considered as being within the accepted range of those permitted by IFRS.   ESMA considers the publication of the decision, together with the rationale behind them, will contribute to a consistent application of IFRS in the European Union.

Topics covered in the latest batch of extracts, twelfth in the series, include:

Click for access to the full report.

The newsletter contains a summary from the EFRAG meeting held in October 2012 between the EFRAG Technical Expert Group and Consultative Forum of Standard Setters. The topics discussed were:

• The FRC note for the IFRIC’s The Sharman Report and disclosure of material uncertainties under IFRS,
• Update on IAS 28,
• EFRAG operational and due process improvements,
• Update on the latest developments on the proposed EU Accounting Directive,
• IFRIC draft interpretation Put-option written on non-controlling interests,
• Canadian Institute of Chartered Accountants paper Toward a Measurement Framework for Financial Reporting by Profit-Orientated Entities,
• Autorité des Normes Comptables paper Proposals for Accounting for GHG Emissions Rights reflecting companies’ business models,
• IASB Review Draft General Hedge Accounting,
• IASB Project Leases, and
• EFRAG’s Proactive Project The Role of the Business Model in Financial Reporting.

Click for the EFRAG Update (link to EFRAG website).