Barnier started out by drawing a very bleak picture of the current situation with Europe still recovering from the worst crisis in 50 years, a crisis which spread from the financial sector to the every-day life of many citizens and companies. And he made out one key reason why Europe (and the world in general) ended up in the current situation: "short-termism that has dominated the corporate sector for too long".

Restoring the soundness of the financial sector is of course an immediate goal and has been tackled through various measures following recommendations of the G-20, which also include reiterated calls on the IASB and FASB to finalize their work on key outstanding projects for achieving a single set of high-quality standards. However, as Barnier points out, if the soundsness is to be sustainable, the short-termism dominating the corporate sector needs to be eliminated. Ageing challenge and climate change are very long-term problems; arriving at gender, geographical, educational, professional and age diversity in companies and meeting obligations towards employees, consumers, local communities and public authorities are goals we want to permanently achieve.

For Barnier there is only one way this can be brought about: creating transparency about all these issues. Therefore, so Barnier, Europe has taken a series of measures:

• In April 2013, the European Commission published proposed amendments to European accounting legislation in order to require certain large companies to provide additional information on social and environmental matters.
• Also in April 2013, the European Council, Parliament and Commission agreed on the finalisation of a new Accounting Directive that includes new requirements regarding an enhanced transparency in the extractive and logging industries. 
• Commissioner Barnier also announced that the Commission will expand the reporting obligations that banks must comply with to disclose their profits, taxes and subsidies in each country to all large companies and groups.

Barnier also responded to criticism that Europe should have waited with these initiatives, which will involve costs and efforts, until the economic crisis was over and his response was "But I say: Transparency is part of the solution, not the problem!" However, he stated that while the proposals regarding transparency as well as social and environmental responsibility and the new reporting requirements on banks and extractive and logging industries were the right way to progress, the European Commission will continue to pay attention to not overburdening companies – in particular small and medium businesses – with unreasonable requirements. He concluded:

This is how we will make good practice the norm. And this is how non-financial reporting will actively contribute to the new, more responsible corporate world we need to build together.

Please click for access to the full text of the speech on the European Commission website.

The G4 guidelines are presented in two parts:

• Reporting principles and standard disclosures - this includes the criteria to be applied when preparing sustainability reports in accordance with the guidelines, the reporting principles underlying sustainability reports (in terms of content and quality), and the standard general and specific disclosures required
• An implementation manual - providing further explanation on how to apply the reporting principles and prepare the standard disclosures.

The table below provides an overview of the G4:

The Guidelines offer two options on how to prepare a sustainability report ‘in accordance’ with G4:

• 'core' - essential elements providing a background for sustainability reporting
• 'comprehensive' - requiring additional standard disclosures around strategy and analysis, governance, ethics and integrity, and more comprehensively communicate performance.

Reports prepared 'in accordance' with G4 are also required to include a 'GRI Content Index' which effectively cross references disclosures made to the individual report elements required by G4. The GRI also requests organisations using the guidelines to notify GRI upon release of the report if they are 'in accordance' with the guidelines or contain the standard disclosures but have not fulfilled the other requirements meet the 'core' or 'comprehensive' classifications.

In terms of materiality, the guidelines outline the principle that an entity should report on items from the list of subjects covered by the guidelines (called 'Aspects') that reflect an organisation's significant economic, environmental or social impacts or which substantially influence the assessments and decisions of stakeholders. Materiality is considered the "threshold at which Aspects become sufficiently important that they should be reported". The Implementation Manual provides additional guidance on applying the principle, including, among other aspects, a focus wider than only on the financial condition of an organisation, consideration of internal and external factors, alignment with established methodologies and concerns for expert communities, and focusing on those areas requiring active management or engagement by the organisation. A series of 'tests' are also provided.

G4 also provides guidance on how to present sustainability disclosures in different reporting formats, such as standalone sustainability reports, integrated reports, annual reports, and online reporting. There is also an emphasis on harmonisation with other important global frameworks, and the guidelines outline 'links' to including the United Nations (UN) Global Compact Principles, the UN ‘Guiding Principles on Business and Human Rights’, and the OECD Guidelines for Multinational Enterprises. It also considers the relationship between integrated reporting and sustainability reporting, noting:

Although the objectives of sustainability reporting and integrated reporting may be different, sustainability reporting is an intrinsic element of integrated reporting. Sustainability reporting considers the relevance of sustainability to an organization and also addresses sustainability priorities and key topics, focusing on the impact of sustainability trends, risks and opportunities on the long term prospects and financial performance of the organization. Sustainability reporting is fundamental to an organization’s integrated thinking and reporting process in providing input into the organization’s identification of its material issues, its strategic objectives, and the assessment of its ability to achieve those objectives and create value over time.

Organisations reporting using the GRI guidelines can continue to use the previous guidelines ('G3' and 'G3.1') until they transition to the G4 guidelines. However, GRI is expecting all entities to complete the transition to G4 in reports published after 31 December 2015.

Click for press release on the launch - the G4 guidelines can be downloaded here (both links to GRI website).

Click through for direct access to the notes:

Wednesday, 22 May 2013

• IFRS 3 Business Combinations — Mandatory purchases of non-controlling interests (NCI)
• IAS 34 Interim Financial Reporting — Disclosure of information “elsewhere in the interim financial report”
• IFRS 3 Business Combinations — Contingent consideration
• IAS 41 Agriculture and IFRS 13 Fair Value Measurement — Valuation of biological assets
• IAS 27 Separate Financial Statements — Use of equity method in separate financial statements
• Conceptual framework

You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

In his "Report of the Chairman of the IFRS Foundation Trustees" Michel Prada describes the organisation in two chapters. The first chapter depicted by the developments and accomplishments between 2001 to 2011 and chapter two, which began in 2012, “will be characterised by consolidating and building on the successes of the first chapter.” Additionally, for 2013, the report states the following three priorities for the IFRSF:

First, we will work to ensure that the initiatives resulting from the strategy and governance reviews are fully bedded in. Second, we will work in close co-operation with the Monitoring Board and others to further develop the long-term funding arrangements for the organisation. Third, we will undertake several initiatives to encourage the adoption and consistent application of IFRS globally. These include the development of country and jurisdictional profiles on the use of IFRS, which are to be published and maintained on the IFRS website.

In his “Report of the Chairman of the IASB” Hans Hoogervorst describes various standard setting projects, including the convergence project with the FASB (revenue recognition, financial instruments, and leases) and conceptual framework. Regarding the convergence project, Chairman Hoogervorst states:

The decade-long convergence programme has been quite an achievement. While full convergence has not been possible in all areas, our work with the FASB has harmonised and improved financial reporting requirements globally. It is a credit to both boards that we have been able to achieve so much coming from, in many cases, very different starting points.

The full report which contains additional statements from the Monitoring Board, Due Process Oversight Committee, IFRS Interpretation Committee, and Advisory Council, as well as audited financial statements is available on the IASB's website.

Ms Lloyd is a Senior Director of Technical Activities at the IASB and currently responsible for leading the technical staff in the development of new International Financial Reporting Standards (IFRSs).

Ms Lloyd is originally from New Zealand and a former member of the Australian Accounting Standards Board. Before joining the IASB's staff as Director of Capital Markets, with responsibility for the IASB’s work to reform the accounting for financial instruments, she held various senior positions within the banking sector in the United Kingdom and in Australasia.

For more information and comments on the appointment by the Chairman of the Trustees’ Nominating Committee, the IASB Chairman, and Ms Lloyd herself please see the press release on the IASB website.

Statement 141R, codified in United States Accounting Standards Codification Topic 805, Business Combinations, was issued in 2007 as a result of a joint IASB-FASB project and is largely consistent with IFRS 3 Business Combinations published by the International Accounting Standards Board (IASB) in January 2008. The Statement introduced a number of changes designed to improve the accounting for business combinations, focusing on the recognition of assets acquired, liabilities assumed, and non-controlling interests in the acquiree, at their fair values at acquisition date (subject to some exceptions).

The FAF post-implementation review was undertaken by a review team whose procedures included reviewing the FASB’s historical files, conducting stakeholder surveys and questionnaires, interviewing stakeholders, reviewing academic publications, and reviewing disclosures and other public information of selected public companies. Accordingly, the conclusions of the review were based on consideration of the input received from a broad range of constituents, including investors preparers, auditors, academics, and financial regulators.

The review sought to evaluate whether Statement 141R is accomplishing its stated objectives of improving the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. It also considered the implementation and continuing compliance costs and related benefits of Statement 141R, and is designed to provide feedback on improving the standard setting process.

Although the review found Statement 141R resolved some practice issues, that its principles and requirements are understandable and generally can be applied as intended, and achieved improvements in the relevance and completeness of business combination information, a number of additional findings were also noted:

• Some practice issues remain unresolved, including identifying when a new basis of accounting is appropriate and accounting for combinations between joint ventures and organisations under common control. Stakeholders participating in the review indicated guidance in these areas is still needed
• Although Statement 141R is converged with IFRS 3 in many areas, some substantive differences remain between their requirements
• Some stakeholders, particularly preparers for medium to small organisations, had difficulty applying Statement 141R in the areas of measuring the fair value of assets acquired and liabilities assumed, measuring the fair value of contingent consideration, and determining whether a transaction is a business combination or an asset purchase (the latter issue also recently considered under IFRS by the IFRS Interpretations Committee)
• Some review participants question the reliability or decision usefulness of the reported information for business combinations that include assets and liabilities that are difficult to measure at fair value, result in a bargain purchase gain, or in substance may be asset purchases
• The costs and complexity of applying Statement 141R are higher than the FASB anticipated, particularly due to costs of determining measurements required by the standard
• Improvements in the area of comparability, reliability, and representational faithfulness of business combination information were not fully achieved in large part because of the questions about the reliability of fair value measurement requirements.

The review's recommendations on improving the FASB's standard-setting process included:

• The process for identifying, prioritising, tracking, and resolving significant financial reporting issues should be enhanced and formalised, and issues subject to regular reporting and updates
• The decision making around the need for a project or resuming a deferred project should be clearly identified and documented
• Key research (such as field work and reviewing academic studies) should be consistently conducted as early as possible in the agenda-setting and deliberation phases of a project, and research and economic principles relied upon fully identified in a standard's basis for conclusions.

The IASB also has a post-implementation review of IFRS 3 on its active agenda, with formal launch of the project expected in the second or third quarter of 2013.

Click for FAF press release (link to FAF website).

The overall package of pronouncements issued consists of:

• Standard XRB A1 Accounting Standards Framework (For-profit Entities plus Public Sector Public Benefit Entities Update) that will apply to all reporting entities and sets the requirements for which entities apply which set of pronouncements under New Zealand's new Accounting Standards Framework issued by the XRB Board in April 2012
• A suite of 39 standards comprising both:
  • PBE Standards, applied by 'tier 1' PBE entities, which are those with 'public accountability' based on the IASB's definition or which are 'large' as defined. These entities are not eligible to adopt any of the disclosure concessions available for 'tier 2' entities
  • PBE Standards 'Reduced Disclosure Regime' (PBE Standards RDR), applied by 'tier 2' entities, which are those that do not meet the criteria to be a 'tier 1' entity, and which additionally are not eligible to apply the 'transitional' requirements for certain (mostly smaller) entities that qualify for classification as 'tier 3' and 'tier 4' entities. 'Tier 2' entities are exempt from particular disclosure requirements in the standards, such disclosures being identified throughout the standards with an asterisk (*)
• The Public Benefit Entities (conceptual) Framework

The initial suite of PBE Standards are broadly similar to the proposals contained in a suite of exposure drafts issued in June 2012. However, there are some changes, including a significant decision to introduce the notion of Other Comprehensive Income (OCI). Although OCI is not included in IPSAS, the NZASB decided to include it based on the strong degree of support in submissions for its continuing use.

A further issue reflected in many submissions on the exposure drafts was a desire for minimal differences between the PBE Standards and New Zealand IFRS applied by for-profit entities. Constituent comment included 'big picture' and detailed standards concerns, and were primarily driven by concerns about the implications for 'mixed groups' (PBEs groups with for-profit subsidiaries). The Feedback Statement published with the new suite of standards notes:

With this in mind the NZASB and the XRB Board have established a joint working group to establish with greater clarity exactly when it is appropriate for the PBE Standards to depart from IPSAS – as this is the only practical way of minimising differences between the two suites of standards given that it is not possible to amend International Financial Reporting Standards and still be able to assert compliance with IFRS. One of the factors being considered by the working group is the impact unnecessary differences will have on preparers who are mixed groups. The deliberations of the working group are on-going and it is expected that the results will be reported later in 2013.

The financial years of the majority of New Zealand PBEs end on 30 June, and accordingly the new requirements will be applied by these entities for the first time in the 2014/15 financial year ending on 30 June 2015. As the standards require comparative information, this means that the new requirements will effectively be applied to relevant transactions and balances from 1 July 2013.

Click for more information (link to XRB website).

Click through for direct access to the notes:

Tuesday, 21 May 2013

• Fair value measurement — Unit of account for investments
• Comprehensive review of IFRS for SMEs

You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

From a business perspective, the formula linkbase provides additional validation opportunities for preparers to help ensure that the facts reported in their filings are of a high quality. From a technical perspective, it improves the quality of IFRS Taxonomy filings based on the final IFRS Taxonomy 2013.

For more information, please view the IASB press release.

For lessees, the ED published on 16 May 2013 proposes the recognition of a liability and a right-of-use asset for all leases with a profit or loss impact dependent on the classification of a lease. The lessor model in the ED is similar to current lease accounting with some nuances for the recognition of revenue and discounting of the residual asset.

The field-test initiated by EFRAG and the big national standard-setters in Europe is meant to help to understand the nature, terms and conditions of lease arrangements currently in use and the implications of the proposed guidance. It is designed to find out whether the proposed guidance creates implementation or operational difficulties, and one of the aspects is also the question what effort would be required to implement and apply the proposed guidance.

The field-test is conducted with the help of a survey. It will start on 3 June 2013 and completed questionnaires should be returned by 31 July 2013. Entities wishing to participate in the field-test are asked to contact their national standard-setters (where applicable) or EFRAG. Copies of the questionnaire will be sent to them.

Further information is available through the press release on the EFRAG website.