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News

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FRC makes amendments to FRS 102

24 May 2019

The Financial Report Council (FRC) has made amendments to Section 28 of FRS 102.

The amendments, which were consulted on within Financial Reporting Exposure Draft (FRED) 71 - Draft amendments to FRS 102 – Multi-employer defined benefit plans, respond to a current financial reporting issue by introducing new requirements to Section 28 of FRS 102 requiring that the impact of transition from defined contribution accounting to defined benefit accounting be presented in other comprehensive income.

Such a transition is required by FRS 102 when sufficient information becomes available for an employer participating in a multi-employer defined benefit plan to apply defined benefit accounting for the first time. The amendments do not affect the requirement to recognise the relevant liability (or asset) in relation to the plan.

The amendments are effective for accounting periods beginning on or after 1 January 2020, with early application permitted.

A press release and the amendments are available on the FRC website.

IFASS (International Forum of Accounting Standard Setters) (dark green) Image

Report on the spring 2019 IFASS meeting

23 May 2019

A report has been issued summarising the discussions at the meeting of the International Forum of Accounting Standard Setters (IFASS) held in Buenos Aires on 28 and 29 March 2019.

As reported earlier, among the topics discussed at the meeting were amendments to IFRS 17 and the EC fitness check on public reporting by companies.

The full list of topics discussed at the meeting was:

  • EFRAG's discussion paper on non-exchange transfers
  • FRC's research project on ‘Variable and contingent consideration’
  • Proposals for the NFP accounting technical advisory group
  • Presentation of finance cost - IAS 1, IFRS 7, IAS 23
  • Follow-up on AcSB's project on performance measures reporting
  • Climate related and other emerging risk issues on financial statements and the impact of practice statement 2 on materiality
  • Optional breakout sessions:
    • Inline XBRL and blockchain
    • IFRS for SMEs: Standard review; Relief for subsidiaries
  • IFRS 17 (I): Tentative views of the IASB on upcoming amendments to IFRS 17
  • IFRS 17 (II): Implementation activities, insights, experience
  • Financial reporting in an electronic format
  • The Fitness check on the EU framework for public reporting by companies: Result of the consultation
  • Financial instruments with characteristics of equity: Preferred approach and IFRIC 2
  • Improving the impairment testing model in IAS 36 Impairment of Assets

The meeting also saw the handover of official duties to the incoming IFASS Chair Mr. Yasunobu Kawanishi (Accounting Standards Board of Japan, ASBJ).

The next meeting of the IFASS will take place in London in October 2019.

Please click for the full report from the meeting.

FRC Image

FRC plan and budget highlights key areas of focus for 2019/20

23 May 2019

The Financial Reporting Council (FRC) has published its Plan and Budget for 2019/20, which sets out its priorities for 2019/20.

The FRC have indicated that 2019/20 will be a year of transition for the FRC. In response to the recommendations of Sir John Kingman’s Independent Review, the Department for Business, Energy and Industrial Strategy (BEIS) is consulting on proposals to replace the FRC in its current form with a new statutory regulator to be called the Audit, Reporting and Governance Authority (ARGA). The FRC indicates that it recognises the need for change and “believe the speedy implementation of the recommendations of the Independent Review can help increase public confidence in audit, reporting and governance in the UK”.

During 2019/20 the FRC’s strategic priorities include:

  • Supporting the transition to the new Audit, Reporting and Governance Authority (“ARGA”).
  • Driving a step change in audit quality through the use of its powers to set audit standards and its monitoring and supervision of auditors.
  • Promoting the quality and usefulness of corporate reporting through increasing the number of corporate reporting reviews undertaken and focusing on those areas that it believes boards and preparers needs to address. These reviews will also cover the whole of a company’s annual report.
  • Promoting corporate governance and investor stewardship that contribute to trust in business. The FRC will extend its monitoring of practice and reporting on corporate governance and assess how effectively companies are implementing the new UK Corporate Governance Code.
  • Working with Government to implement an effective regulatory framework following EU exit.

The FRC also sets out its proposed budget for 2019/20 for expenditure and funding. Overall, the funding requirement is expected to increase by 14% and this increase is expected to fund an expansion in audit quality reviews, audit firm monitoring and supervisory approach and enforcement work.

The press release and Plan and Budget 2019/20 are available on the FRC website.

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Recent sustainability and integrated reporting developments

23 May 2019

A summary of recent developments at SASB/CDSB, UNEP FI, IIRC, ACCA, IRC, WICI, GRI, and SSE.

The Sustainability Accounting Standards Board (SASB) and the Climate Disclosure Standards Board (CDSB) have jointly released the TCFD Implementation Guide intended to help companies to more effectively take the TCFD recommendations from principles to practice, to offer greater insight into the material climate-related financial risks and opportunities they face, equipping investors with reliable, comparable, decision-useful information, and enhancing the resilience and stability of global capital markets to drive sustainable, long-term economic development. Please click to download the guide on the SASB website.

Twenty institutional investors from eleven countries convened by the UN Environment Finance Initiative (UNEP FI) have launched comprehensive investor guidance to help assess how climate change and climate action could impact investor portfolios around the world. These assessments enable investors to be more transparent about their climate-related risks and opportunities in line with the TCFD recommendations. They will also help investors contribute to and benefit from the transition to low-carbon and climate-resilient economies. The press release on the UNEP FI website offers a short overview and access to the guidance.

A majority of executives, nearly 9 out of 10, say that organisations need to do a better job focusing on wider value considerations beyond financial performance, according to a pulse check survey included in a new brief Purpose and Profit published by the International Integrated Reporting Council (IIRC). The press release on the IIRC website offers a short overview and access to the full brief.

The Association of Chartered Certified Accountants (ACCA) has published Insights into integrated reporting 3.0: The drive for authenticity. The report examines the reporting practices of organisations in the IIRC’s <IR> Business Network. It highlights the progress made towards integrated reporting over the past year, discusses the challenges that preparers face, and gives practical recommendations to guide more organisations on the path to integrated reporting. Please click to access the report on the ACCA website.

The Integrated Reporting Committee (IRC) of South Africa makes a comparative analysis of integrated reporting in ten countries available. The authors selected five companies from each of the following countries: Brazil, France, Germany, Italy, Japan, The Netherlands, South Africa, South Korea, United Kingdom, and the United Statesfor the study. They found that countries could be fairly clearly grouped into three categories of qualities of disclosure: High (Germany, the Netherlands, and South Africa), Medium (France, Italy, South Korea, and the United Kingdom), and Low (Brazil, Japan, and the United States). Please click to access the study on the IRC website.

The World Intellectual Capital/Asset Initiative (WICI) has published Implementation Guidance: Integrated Reporting for SMEs aimed at giving the IIRC's <IR> Framework a specific connotation addressed to small-sized entities as interest in integrated reporting has grown amongst non-listed companies. Please click to access the guide on the WICI website.

The Global Reporting Initiative (GRI) notes the following developments:

  • A draft GRI Waste Standard is out for public comment until 15 July (press release);
  • The Global Sustainability Standards Board (GSSB) is launching a project to review the universal GRI Standards - an online survey is open until 9 June to enable stakeholders to provide feedback on the current standards to inform the review of them (press release);
  • New French and Chinese translations of GRI Standards are available;
  • A global search has been launched to find new members for GRI's decision making and advisory functions (press release).

The United Nation's Sustainable Stock Exchanges (SSE) initiative notes that Nasdaq has fulfilled a commitment it made as an SSE Partner Exchange to provide guidance on environmental, social and governance (ESG) reporting to its markets with the launch of its new global ESG reporting guide for public and private companies. Please please click to access the guide through the press release on the SSE website.

European Union Image

Micro-entities accounting option in Europe

22 May 2019

The European Federation of Accountants and Auditors for SMEs (EFAA) has published the results of a survey on the acceptance of the micro-entities accounting option in Europe, which was introduced to ease the administrative burden on very small companies.

Over 700 practitioners from 7 countries responded to the survey which revealed that accountants are instrumental in the decision of micro-entities to take-up the option for simplified accounting. Nevertheless, many eligible micro-entities are unaware of the option.

The key findings presented in the survey report include:

  • The level of awareness of the existence of the micro-entities option varies significantly from country to country;
  • A clear majority of accountants recommended their eligible clients to take-up the micro-entities option and actual rates of take-up closely mirror this;
  • The main reasons accountants gave for recommending the micro-entities option were cost savings and greater privacy from reduced disclosures; and
  • While most accountants did not expect to change their view of the micro-entities regime most did expect the take-up to increase in the future.

Please click to access the full survey report on the EFAA website.

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IFRS Foundation Trustees seek to fill Advisory Council vacancies

22 May 2019

The Trustees of the IFRS Foundation are calling for candidates to fill vacancies occurring at the end of 2019 for membership to the IFRS Advisory Council.

The terms of 17 current members will be completed on 31 December 2019. Of those 17 current members, seven are eligible for reappointment. New members would serve three-year terms, starting on 1 January 2020, renewable once. This year, the Trustees are particularly seeking interest from corporate governance organisations, private equity firms,organisations involved in wider corporate reporting, technology organisations and organisations representing small and medium-sized entities.

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

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IASB publishes proposals for amendments under its annual improvements project (cycle 2018-2020)

21 May 2019

The International Accounting Standards Board (IASB) has published an exposure draft ED/2019/2 'Annual Improvements to IFRS Standards 2018–2020'. It contains proposed amendments to four International Financial Reporting Standards (IFRSs) as result of the IASB's annual improvements project. Comments are requested by 20 August 2019.

The IASB uses the annual improvements process to make necessary, but non-urgent, amendments to IFRSs that will not be included as part of another major project.

The ED proposes the following amendments:

Standard Subject of proposed amendment
IFRS 1 First-time Adoption of International Financial Reporting Standards Subsidiary as a first-time adopter. The proposed amendment would require a subsidiary that applies paragraph D16(a) of IFRS 1 to measure cumulative translation differences using the amounts reported by its parent, based on the parent’s date of transition to IFRSs.
IFRS 9 Financial Instruments Fees in the ‘10 per cent’ test for derecognition. The proposed amendment clarifies which fees an entity includes when it applies the ‘10 per cent’ test in paragraph B3.3.6 of IFRS 9 in assessing whether to derecognise a financial liability. Applying the proposed amendment, an entity would include only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other’s behalf.
IFRS 16 Leases Lease incentives. The proposed amendment to Illustrative Example 13 accompanying IFRS 16 would remove from the example the illustration of the reimbursement of leasehold improvements by the lessor. The proposed amendment would resolve any potential confusion regarding the treatment of lease incentives that might arise because of how lease incentives are illustrated in that example.
IAS 41 Agriculture Taxation in fair value measurements. The proposed amendment would remove the requirement in paragraph 22 of IAS 41 for entities to exclude taxation cash flows when measuring the fair value of a biological asset using a present value technique. The proposed amendment would ensure consistency with the requirements in IFRS 13.

In June 2018, the Board tentatively decided to also propose some amendments to IFRS 17 Insurance Contracts as part of its next cycle of annual improvements. However, these proposed amendments have now been moved the general project regarding proposed amendments to IFRS 17 that will see an exposure draft in June 2019.

ED/2019/2 Annual Improvements to IFRS Standards 2018–2020 does not contain proposed effective dates for the proposed amendments as the intention is to decide on these after the exposure period.

Please click for the following additional information:

IFRS IC (IFRS Interpretations Committee) (blue) Image

IFRS Foundation appoints four IFRS Interpretations Committee members

20 May 2019

The Trustees of the IFRS Foundation have announced the appointment of Lisa Bomba, Karsten Ganssauge, Jake Green, and Brian O'Donovan as IFRS Interpretations Committee members.

In addition to the four new appointments, Bertrand Perrin and Yang Zheng have been reappointed for a second term.

All appointments and reappointments take effect from 1 July 2019 and are for a three-year period.

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

IASB (International Accounting Standards Board) (blue) Image

Updated IASB work plan — Analysis

18 May 2019

Following the IASB's May 2019 meeting, we have analysed the IASB work plan to see what changes have resulted from the meeting and other developments since the work plan was last revised in April. Changes are few, however, not all known developments are reflected in the work plan yet.

Below is an analysis of all changes that were made to the work plan since our last analysis on 12 April 2019.

Standard-setting projects

  • Primary financial statements — at this month's meeting the IASB decided that the next consultation document will be an exposure draft, not a discussion paper; the timing remains unchanged (H2 2019)

Maintenance projects

  • IBOR reform and the effects on financial reporting — an exposure draft of proposed amendments was published on 3 May 2019; a first discussion of the feedback received is scheduled for Q3 2019
  • Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37) — at this month's meeting the IASB discussed the feedback received; the next step will now be a decision on the project direction (no date given)

Research projects

  • No changes

Other projects

  • Due Process Handbook Review — an exposure draft of proposed amendments was published on 30 April 2019; a first discussion of the feedback received is scheduled for Q4 2019

Known changes not reflected in the work plan update

The IASB has announced that it expects to publish an exposure draft Annual Improvements to IFRS Standards 2018–2020 on 21 May 2019. In the work plan the projects concerned are still noted as expecting an exposure draft in June 2019. The following projects are part of the annual improvements 2018-2020:

  • Fees in the ‘10 per cent’ Test for Derecognition (Amendments to IFRS 9)
  • Lease Incentives (Amendment to Illustrative Example 13 accompanying IFRS 16)
  • Subsidiary as a First-time Adopter (Amendments to IFRS 1)
  • Taxation in Fair Value Measurements (Amendments to IAS 41)

    The above is a faithful comparison of the IASB work plan at 12 April 2019 and at 18 May 2019. For access to the current IASB work plan at any time, please click here.

    IASB meeting (blue) Image

    May 2019 IASB meeting notes posted

    17 May 2019

    The IASB met in London on 14–16 May 2019. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

    The Board decided to add some minor amendments “sweep issues” related to its package of amendments to IFRS 17 Insurance Contracts to that package. Additionally, the staff provided a summary of the discussions of the Transition Resource Group for IFRS 17 (TRG) meeting held on 4 April 2019. (See our IFRS in Focus for a summary of the meeting).

    For Goodwill and Impairment the staff responded to issues raised by the Board in April in relation to possible new disclosures that the acquirer of a business would be required to provide to help a user assess whether a business combination was a good investment decision and whether that business is performing as expected. The papers included a discussion of ways to present equity (or net assets) excluding goodwill. The staff are also suggesting that the Discussion Paper propose that the requirement for an annual test for impairment of goodwill and intangible assets with an indefinite life staff be removed and an indicator-only approach be used. The staff will bring their recommendations for preliminary views to be expressed in the Discussion Paper to the meeting in June.

    One of the threads in the Disclosure Initiative is a targeted Standards-level review of disclosure requirements. The Board has been developing internal guidance for setting disclosure requirements which it decided to test on IAS 19 Employee Benefits and IFRS 13 Fair Value Measurement. The staff presented summaries of the outreach they have been undertaking since November 2018 and the different approaches they plan to take when reviewing IAS 19 and IFRS 13 disclosures. The Board was generally supportive of the approach.

    For Primary Financial Statements, the Board decided to develop an Exposure Draft for a new IFRS Standard revising or replacing IAS 1 Presentation of Financial Statements, and that a Discussion Paper is not required.

    The staff presented a summary of the feedback received on the Exposure Draft Onerous Contracts—Cost of Fulfilling a Contract (see our IFRS in Focus for a summary of the ED). Board members noted that the proposals received mixed feedback. No decisions were made.

    Now that the IASB has published a revised Conceptual Framework, the IASB is considering whether IAS 37 Provisions, Contingent Liabilities and Contingent Assets should be revised. The staff are recommending that the Board align the definition of a liability in IAS 37 with the definition in the Conceptual Framework, including potentially replacing IFRIC 21 Levies with new requirements and illustrative examples in IAS 37. They also recommend that the Board clarify which costs to include in the measure of a provision and specify whether the rate at which an entity discounts a provision for the time value of money should include or exclude the entity’s own credit risk. Many Board members expressed a strong preference for keeping any proposed changes as narrow as possible. The staff will bring their recommendations to a future meeting.

    In an an education session for Rate-regulated Activities the Board discussed ways to improve the understanding and clarity of the model that has been developed thus far.

    The staff set out their approach to revising the Management Commentary Practice Statement and that the Board provide additional guidance on the objective of management commentary, how to consider qualitative characteristics of useful financial information when providing management commentary and the content of management commentary. Board members said that it needs to be clear what information is expected to be provided in the financial statements and what information is better presented in the management commentary. No decisions were made.

    The Board decided that the IFRS for SMEs Standard should be aligned with new and amended IFRS Standards. The Board also thinks stability is important and they will consider ways to phase in updates. The Board also discussed IFRS 16 Leases to identify ways to simplify the requirements for SMEs.

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

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