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FRC (United Kingdom Financial Reporting Council) Image

FRC discussion paper on improving the statement of cash flows

21 Oct 2016

The UK Financial Reporting Council (FRC) has issued a discussion paper on improving the statement of cash flows with the aim of identifying possible evolutionary improvements to the requirements of IAS 7 'Statement of Cash Flows'.

Noting that IAS 7 is more than twenty years old and that it would be "surprising if improvements cannot be identified from the perspective of 2016", the paper presents some ideas to improve the usefulness of the statement of cash flows. The paper is divided into five sections:

  • The usefulness of information about cash flows
  • The classification of cash flows
  • Cash equivalents and the management of liquid resources
  • Reconciliation of operating activities
  • Direct or indirect method?

The discussion paper includes 11 specific questions relating to these sections but also invites any other comments on issues relating to possible improvements to the statement of cash flows.

The discussion paper and associated press release are available from the FRC website.

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October 2016 IASB meeting notes posted

20 Oct 2016

The International Accounting Standards Board (IASB) met at its offices in London on 18–19 October 2016. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

Tuesday 18 October

In April the IASB considered the general feedback it received on its proposed Practice Statement on materiality. In this meeting it discussed some of the specific issues raised. The Board supported most of the staff recommendations, but asked for more work to be done on materiality within the context of the primary financial statements versus notes, and the comparative versus corresponding approaches to presenting financial statements.

The Board continued its discussions on proposed changes to the Conceptual Framework, and is moving ahead with the sections addressing executory contracts, unit of account, asymmetry in treating gains and losses and materiality.

Two issues on the planned amendments to the segment reporting requirements were discussed.

The IASB decided that the comment period for the Discussion Paper on Principles of Disclosure should be 180 days, and noted that the expected publication date had been pushed back to February 2017.

The Board decided not to undertake an interim review of IFRS for SMEs, but will seek more input from the SME consultative group on how best to proceed with reviews.

Wednesday 19 October

The IASB ratified an Interpretation on advance consideration in a foreign currency. It also agreed to proceed with amendments on how proceeds from testing an asset are recognised.

In September the IASB blocked the publication of a draft Interpretation on the interaction between the impairment requirements in IFRS 9 and IAS 28. The Board voted to address the matter through an annual improvement.

The Board continued its discussions on its ongoing project on Financial Instruments with the Characteristics of Equity. It tentatively decided that economic incentives that are likely to compel an entity to settle an instrument in a particular way should not determine whether it is classified as a liability or equity.

The IASB was given a brief update of its research programme.

This was Philippe Danjou’s last meeting of the IASB, having completed 10 years as a Board member.

Please click to access the detailed notes taken by Deloitte observers for the entire meeting.

GRI (Global Reporting Initiative) (green) Image

GRI Standards launched

19 Oct 2016

The Global Reporting Initiative (GRI) has released the GRI Standards developed by the Global Sustainability Standards Board (GSSB). The GRI Standards are a set of 36 modular standards that facilitate corporate reporting on topics such as greenhouse gas emissions, energy and water use, and labor practices. The new format allows GRI to update individual topics based on market and sustainability needs, without requiring revisions to the entire set of GRI Standards.

The GRI Sustainability Reporting Standards will enable companies around the world to be more transparent about their impacts on the economy, the environment and society. There a three universal standards – 101 Foundation, 102 General Disclosures, and 103 Management Approach – that will be used by every organisation that prepares a sustainability report. Each organisation then chooses from the topic-specific standards (200 series on economic aspects, 300 series on environmental aspects, and 400 series on social aspects) to report on its material topics.

Please click for the press release on the GRI website. The GRI Standards are available for free download through the GRI Standards hub, along with extensive additional resources.

GRI is also organising free launch events around the globe in November: in North America on the 2nd, 16th and 29th, in Africa on the 10th, in Australia on the 15th and 17th, in Asia on the 21st. Launch events in Europe are currently being planned. More information on the launch events is available here.

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Agenda for current IASB meeting changed

19 Oct 2016

Yesterday, the IASB already concluded its discussions on the disclosure initiative and on the conceptual framework. Therefore, the sessions orginally scheduled for this afternoon have been moved forward and will be held this morning.

The new schedule is:

  • IFRS implementation issues – 9:00-11:00
  • Financial instruments with characteristics of equity – 11:15-12:15
  • Research update –12:15-12:30

Our pre-meeting summaries of the agenda papers to be discussed are available here.

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Trustees appoint IASB Vice-Chair

18 Oct 2016

After their meeting in New Delhi, the Trustees of the IFRS Foundation, have announced the appointment of Sue Lloyd as vice-chair of the IASB. Ms Lloyd succeeds Ian Mackintosh who served as vice-chair from 2011 to 2016. Her term is effective 1 November 2016 and expires on 31 December 2018 when she will be eligible for a second term.

Ms Lloyd has been an IASB Board member since 2014. Previously, she served as the Director of Capital Markets and Senior Director of Technical Activities at the IASB. In addition, Ms Lloyd is a former member of the Australian Accounting Standards Board.

For more information, see the press release on the IASB’s website.

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Saudi securities regulator limits valuation changes on move to IFRS

18 Oct 2016

Listed entities in Saudi Arabia will have to report under IFRSs as adopted by the Saudi Organization for Certified Public Accountants (SOCPA) as off 1 January 2017. The Saudi Capital Market Authority (CMA) has now issued a statement requiring that for the first three years after IFRS adoption, Saudi companies must continue to use the cost model when measuring property, plant, equipment and intangible assets.

The announcement does not give a reason for this decision, however, Saudi Arabia lacks liquid markets. Also, the currently applied SOCPA standards require assets to be valued at cost when acquired with no subsequent revaluation, so valuation expertise might not be as comprehensive as yet.

For intangible assets, the CMA decision is of little impact as the revaluation model under IAS 38 states that intangible assets may only be carried at a revalued amount (based on fair value) less any subsequent amortisation and impairment losses if fair value can be determined by reference to an active market.

Requiring companies to adopt the cost model for property, plant, equipment, and investment property is an allowable option under IAS 16 and IAS 40. Consequently, the resulting financial statements of Saudi companies will be in compliance with IFRS.

The CMA notes, however, that the companies affected should disclose estimated changes in the fair value of their assets in the footnotes of their financial statements. Also, the CMA states that it will revisit the decision after three years to see whether the practice of only allowing the cost model should be continued or whether revaluations will be allowed.

Please click for the announcement on the CMA website.

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Recent sustainability and integrated reporting developments

17 Oct 2016

A summary of recent developments at the WBCSD, the CCR and the Finance for the Future Awards.

The World Business Council for Sustainable Development (WBCSD) has released the 2016 edition of Reporting matters. The 2016 research shows that 76% of the leading companies have improved their disclosures on non-financial information since the first WBCSD baseline report in 2013, with materiality disclosures in particular showing the greatest signs of improvement. Nearly a third of companies (31% total) communicate on the new Sustainable Development Goals (SDGs); 42% of organisations take a “digital first” approach to reporting by putting comprehensive sustainability information on the company’s website; and 28% of companies combined their financial and non-financial reporting into annual reports. The report also shows that GRI (Global Reporting Initiative) guidelines remain the most widely used. Please click to access a press release and the full report on the WBCSD website.

The Center for Corporate Reporting (CCR) and the University of Leipzig, Germany have initiated a joint research project on the benefits and challenges of the  implementation of integrated reporting. First results are available in the study How valuable is Integrated Reporting? – Insights from best practice companies. Arguments for and against the implementation of integrated reporting as a management approach include better understanding of value creation, improved risk management and a more holistic view of the entire company as well as embedding integrated thinking in to the corporate strategy and the support of management against increased costs and work effort, new potential risks, and (currently) a lack of vision and leadership skills. Arguments for and against the implementation of integrated reproting as a reporting format include a more efficient reporting process and step-by-step adjusted reporting processes and experiences against a long implementation process before the initial report is published, unclear division of roles and responsibilities, and limited resources and internal resistance to change. Please click to access a press release and the key results on the CCR website.

The winners of the Finance for the Future Awards have been announced. The awards, founded by ICAEW and The Prince’s Accounting for Sustainability Project (A4S), were first awarded in 2012 to highlight the essential role that finance plays in integrated thinking and building sustainable business models. New this year was an award for ‘Communicating integrated thinking’. The award is for organisations that are demonstrating clearly, through communicating to their providers of financial capital, how sustainability, in its broadest sense, is embedded into their overall strategy and decision making process and how this ‘integrated thinking’ is contributing to a sustainable business model which delivers long term value. In this context, integrated thinking is seen as coming before reporting with reporting being the end result from this process and a way to communicate progress to the outside world. The winners in all categories of the awards have been announced on the Finance for the Future website.

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IFRS conference in Lima

14 Oct 2016

The IFRS Foundation has announced that its next IFRS conference in the Amaricas will be held in Lima, Peru on 3-4 November 2016.

The English- and Spanish-language conference will include discussions on the implementation plans for new standards (IFRS 9, IFRS 15, IFRS 16), on the Conceptual Framework, and on implementing for the first time the IFRS for SMEs. There will also be panel discussions on consistent application and on the future of corporate reporting.

Before the conference, a half-day workshop cross-cutting IFRS measurement issues will be held.

More details, including registration information, are available on the conference website (Spanish language only).

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Communiqué from latest China-Japan-Korea accounting standard-setters meeting

14 Oct 2016

A communiqué has been issued from a meeting of the standard-setters from China, Japan and the Republic of Korea held in Tokyo on 13 October 2016.

Representatives were present from the China Accounting Standard Committee (CASC), Accounting Standards Board of Japan (ASBJ), Korea Accounting Standards Board (KASB), and the International Accounting Standards Board (IASB), together with guests from Hong Kong and Macao.

The meeting saw an update on activities during 2016 und in-depth discussions of leases, financial instruments, and goodwill.

Delegates agreed to continue to follow the work of the IASB and to have more frequent communication among the three countries to contribute to the development of International Financial Reporting Standards (IFRS) and to play a leading role in the Asia-Oceania region and to increase the prominence of the Asian-Oceanian Standard Setters Group (AOSSG) in the global accounting standard-setting community.

The next meeting will be held in China in 2017.

Please click for the full communiqué (link to ASBJ website).

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ESMA (European Securities and Markets Authority) (dark gray) Image

ESMA and IFRS Foundation announce updated Statement of Protocol

13 Oct 2016

The European Securities and Markets Authority (ESMA) and the IFRS Foundation have updated their Statement of Protocol agreement.

The statement, which builds upon the 2014 protocol agreement, provides provisions for supporting the development of IFRSs as well as the consistent implementation and application of IFRSs worldwide.

For more information, see the press release and Statement of Protocol on the IASB’s website.

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