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FRC Image

FRC publishes a suite of factsheets on FRS 102

14 Dec 2018

The Financial Reporting Council (FRC) has issued a suite of staff factsheets on aspects of FRS 102, including the 2017 triennial review.

FRC Image
Auditing Image

FRC issues revised auditing standard and consults on guidance for quality bank audits

14 Dec 2018

The Financial Reporting Council (FRC) has issued an International Standard on Auditing Accounting Estimates and Related Disclosures (ISA UK 540), covering the audit of expected credit losses in banks. It is effective for audits of financial statements for periods beginning on or after 15 December 2019.

The FRC is also consulting on updates to its Practice Note on The Audit of Banks and Building Societies in the United Kingdom.  The consultation reflects findings from the FRC’s audit inspection work covering bank audits, which were covered extensively in public reports in June 2018The comment period closes on 8 March 2019.

The press release, revised ISA UK 540, the feedback statement and impact assessment of the revised ISA UK 540, the exposure draft of the practice note and the consultation paper and impact assessment of the revised practice note are all available on the FRC website.

Corporate Governance  Image

New Code launched for corporate governance of large private companies

14 Dec 2018

A new code for the corporate governance of large private companies has been launched.

In June 2018 the Government introduced secondary legislation (The Companies (Miscellaneous Reporting) Regulations 2018) which requires all companies of a significant size that are not currently required to provide a corporate governance statement, to provide a corporate governance statement, to disclose their corporate governance arrangements.  This applies for periods commencing on or after 1 January 2019.

The Coalition Group was asked to prepare principles to help those companies which are subject to the thresholds comply with the new reporting requirement.  By explaining the application of these Principles large private companies will be able to meet their obligations under The Companies (Miscellaneous Reporting) Regulations 2018. 

The six principles are:

  • Purpose and Leadership – An effective board develops and promotes the purpose of a company and ensures that its values, strategy and culture align with that purpose.
  • Board Composition - Effective board composition requires an effective chair and a balance of skills, backgrounds, experience and knowledge, with individual directors having sufficient capacity to make a valuable contribution. The size of a board should be guided by the scale and complexity of the company.
  • Board Responsibilities - The board and individual directors should have a clear understanding of their accountability and responsibilities. The board’s policies and procedures should support effective decision-making and independent challenge.
  • Opportunity and Risk - A board should promote the long-term sustainable success of the company by identifying opportunities to create and preserve value and establishing oversight for the identification and mitigation of risks.
  • Remuneration - A board should promote executive remuneration structures aligned to the long-term sustainable success of a company, taking into account pay and conditions elsewhere in the company.
  • Stakeholder Relationships and Engagement - Directors should foster effective stakeholder relationships aligned to the company’s purpose. The board is responsible for overseeing meaningful engagement with stakeholders, including the workforce, and having regard to their views when taking decisions.

A company which chooses to adopt the Wates Principles should follow them using an “apply and explain” approach in a way that is most appropriate for their particular organisation. Boards should be able to explain, in their own words, how they have addressed each of the principles in their governance practices.

By providing broad principles with supporting guidance, the intention of the Wates Principles is to move beyond a tick box approach to describing and explaining how the company’s governance practices achieve the principles and demonstrate the desired outcomes. This approach offers increased transparency for stakeholders and links to the other new reporting requirement on how the directors have discharged their section 172 duty. Cross-referencing is encouraged – there is no need to duplicate information.

There is no obligation on companies to adopt these principles but the intention is that the Wates Principles provide an approach to corporate governance that offers sufficient flexibility for a diverse range of companies without being too prescriptive.

A press release the Wates Corporate Governance Principles can be found on the Financial Reporting Council (FRC) website.

IASB document (blue) Image

IASB completes post-implementation review of IFRS 13

14 Dec 2018

The IASB has completed its post-implementation review (PIR) of IFRS 13 'Fair Value Measurement'. The summary report published today shows that the standard works as intended.

During the PIR, the Board focused on the following matters:

  • the usefulness of information disclosed about fair value measurements — to gain a deeper understanding of both users’ and preparers’ perspectives on the usefulness and costs of fair value measurement disclosures;
  • whether to prioritise Level 1 inputs or the unit of account — to further assess the extent and effect of the issue as well as to examine current practice;
  • application of the concept of the highest and best use when measuring the fair value of non-financial assets —  to better understand the challenges of applying this concept and decide whether further support could be helpful; and
  • application of judgement in specific areas — to assess the challenges of making judgements and decide whether further support could be helpful.

The conclusions were that the information required by IFRS 13 Fair Value Measurement is useful to users of financial statements. Some areas of IFRS 13 present implementation challenges, largely in areas requiring judgement, However, evidence suggests that practice is developing to resolve these challenges. No unexpected costs have arisen from application of IFRS 13. Thus, the Board concluded that the standard works as intended.

The findings from the PIR regarding the usefulness of information disclosed will feed into the Board's work on better communication, in particular into the projects on targeted standards-level review of disclosures and on the primary financial statements. The Board will also continue liaising with the valuation profession, monitor new developments in practice and promote knowledge development and sharing. Other than that the Board does not intend to conduct any other follow-up in response to findings from the PIR.

For more information, please see the press release and the PIR report on the IASB’s website. In addition, see our project page on the PIR of IFRS 13.

CAQ (US Center for Audit Quality) (light green) Image

Hyperinflationary economies - updated IPTF watch list available

14 Dec 2018

IAS 29 'Financial Reporting in Hyperinflationary Economies' defines and provides general guidance for assessing whether a particular jurisdiction's economy is hyperinflationary. But the IASB does not identify specific jurisdictions. The International Practices Task Force (IPTF) of the Centre for Audit Quality (CAQ) monitors the status of 'highly inflationary' countries. The Task Force's criteria for identifying such countries are similar to those for identifying 'hyperinflationary economies' under IAS 29.

The IPTF's discussion document for the 27 November 2018 meeting is now available and states the following view of the Task Force:

Countries with three-year cumulative inflation rates exceeding 100%:

  • Angola
  • Argentina
  • South Sudan
  • Sudan
  • Suriname
  • Venezuela

Countries with projected three-year cumulative inflation rates exceeding 100%:

  • Democratic Republic of Congo
  • Libya

Countries where the three-year cumulative inflation rates had exceeded 100% in recent years:

There are no countries in this category for this period.

Countries with recent three-year cumulative inflation rates exceeding 100% after a spike in inflation in a discrete period:

  • Ukraine

Countries with projected three-year cumulative inflation rates between 70% and 100% or with a significant (25% or more) increase in inflation during the current period

  • Egypt
  • Islamic Republic of Iran
  • Liberia
  • Yemen

The full list, including exact numbers, detailed explanations of the calculation of the numbers, and observations of the Task Force are available on the CAQ website. We also offer an overview of the IPTF's assessment of hyperinflationary jurisdictions at the end of our summary of IAS 29.

EFRAG (European Financial Reporting Advisory Group) (dk green) Image

EFRAG publishes summary report for the joint outreach event on FICE

13 Dec 2018

The EFRAG has issued a summary report on the joint outreach event on the financial instruments with characteristics of equity (FICE) Discussion Paper (DP) co-hosted with the Accounting Standards Committee of Germany (ASCG) on 20 November 2018 in Frankfurt.

Specifically, the event focused on the following aspects of the IASB's FICE project:

  • Objective, scope and challenges;
  • The IASB's preferred approach and classification of non-derivative instruments;
  • Classification of derivative financial instruments;
  • Compound instruments and redemption obligation arrangements;
  • Presentation requirements;
  • Disclosure; and
  • Contractual terms.

For more information, see the press release and summary report on the EFRAG website.

Auditing Image

FRC withdraws Practice Notes 25 and 27

13 Dec 2018

The Financial Reporting Council (FRC) has withdrawn Practice Note 25 'Attendance at Stocktaking' and Practice Note 27 'The Audit of Credit Unions in the United Kingdom'.

A press release with further information is available on the FRC website.

EFRAG (European Financial Reporting Advisory Group) (dk green) Image

EFRAG Board meeting December 2018

13 Dec 2018

The European Financial Reporting Advisory Group (EFRAG) will hold a Board meeting on 18 December 2018 in Brussels.

An agenda with supporting papers and details on how to register for the public meeting can be found on the EFRAG website.

IASB meeting (blue) Image

IASB decides on first potential amendments to IFRS 17

13 Dec 2018

At its meeting currently held in London, the IASB discussed IFRS 17 'Insurance Contracts' and 13 of the 25 concerns regarding the standard that were identified in October 2018 as candidates for potential amendments.

Applying the criteria for evaluating proposed amendments agreed on in October, the Board came to the following conclusions (all votes with at least 13 Board members in favour):



Agenda paper with detailed description (link to IASB website)

Board decision - consider amendment yes or no?


Separate presentation in the statement of financial position of groups that are assets and groups that are liabilities

Agenda paper 2A


Presentation and measurement

Separate presentation and measurement of premiums receivable and claims payable



Use of locked in discount rate to adjust the contractual service margin (CSM)

Agenda paper 2B



Subjectivity in determining discount rates and risk adjustment



Risk adjustment in a group of entities



Other comprehensive income (OCI) option for insurance finance income and expense


Defined terms

Definition of insurance contract with direct participation features

Agenda paper 2C



Limited applicability of risk mitigation exception

non-transitional requirements: no

transitional requirements: no vote — deferred to the more general discussion of transition requirements, especially related to OCI


Business combinations: classification of contracts

Agenda paper 2D



Business combinations: contracts acquired in their settlement period



Reinsurance contracts held: expected cash flows arising from underlying insurance contracts not yet issued

Agenda paper 2E



Interim financial statements: Treatment of accounting estimates

Agenda paper 2F


The IASB has released a podcast on the IFRS 17 session of its December meeting, featuring IASB Board member Darrel Scott and IASB technical manager Roberta Ravelli. The podcast can be accessed through the press release on the IASB website.

The remaining nine topics from the list of issues presented at the October meeting will be considered at a future meeting.

The IASB has published a press release announcing that it will propose to amend IFRS 17 in the one respect noted above.

Accounting Roundup - Closing Out 2018 Image

Closing Out 2018

13 Dec 2018

Welcome to our one-stop guide covering the issues relevant to the preparation of December 2018 annual reports.

The FRC's annual review of corporate reporting and ESMA’s common enforcement priorities provide areas of regulatory scrutiny which reporters of all sizes should focus on within in the coming reporting season.

Whether this is reporting of risks associated with ‘Brexit’, clear presentation and appropriate reconciliation of APMs or proper disclosure of the judgements and estimates applied in preparing financial statements; there are many things to consider.  

Significantly, two new accounting Standards, IFRS 9 on financial instruments and IFRS 15 on revenue come into force for the first time and the FRC expects companies to apply these major standards properly and provide sufficient disclosure of their impact. The FRC has published a series of thematic reviews to help companies improve disclosures in this area.

With the mandatory effective date of IFRS 16 on leases being only one year away, both the FRC and ESMA expect companies to provide both qualitative and quantitative company-specific disclosures on the effects of their adoption.

In addition the strategic report in general remains an area that the FRC continually challenges in its monitoring work.

Companies should ensure that their reports include a fair review of the company’s business that is a balanced and comprehensive analysis of both performance and position. Those with complex supplier arrangements are expected to disclose the nature and amount and impact on liquidity and those within the scope of the EU Non-Financial Reporting (NFR) Directive should provide a separate non-financial information statement within the strategic report to satisfy its requirements.

With initiatives from players such as the TCFD bringing climate reporting into the spotlight, companies are expected to disclose the impact on a company’s operations on the environment and how environmental matters may affect a company’s development, performance and position.

And, with the issue of the disclosure of dividend policy and practice gaining recent traction, companies are reminded to report clearly in one place their policies in this area.

Our Closing Out 2018 publication covers all these topics and more, providing an invaluable guide to the issues affecting today’s corporate reporting.

Correction list for hyphenation

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