IFRS for SMEs was first issued in July 2009. At that time, the IASB announced that after two years, it would assess entities' experiences with implementing IFRS for SMEs. The IASB also said that, after an initial review, it would consider amendments to the IFRS for SMEs approximately once every three years.

The Request for Information is divided into two parts:

• Part A contains specific questions on particular sections of the IFRS for SMEs for respondents. These issues have been frequently raised by interested parties. Respondents are also invited to raise any other specific issues they may have relating to possible changes to particular sections of the IFRS for SMEs.
• Part B contains general questions about the IFRS for SMEs. Respondents are invited to raise any other general issues they may have relating to possible changes to the IFRS for SMEs.

A summary of the questions asked in each Part is set out in the table at the bottom of the article.

During the first half of 2013, the SMEIG is expected review comments on the Request for Information and make recommendations to the IASB on possible amendments. The IASB will convene to develop and approve an Exposure Draft of proposals. The IASB does not expect to publish final revisions to the IFRS for SMEs until the second half of 2013 or first half of 2014, with an estimated effective date of 2015.

Click for:

• Press release (link to IASB website)
• Request for Information: Comprehensive Review of the IFRS for SMEs (PDF, 242k, link to IASB website)

The publication, entitled Making investment grade — The future of corporate reporting, includes contributions from Ernst Ligteringen (Chief Executive, Global Reporting Initiative), Paul Druckman (Chief Executive, International Integrated Reporting Council), Mervin King (Chair, South African King Committee on Corporate Governance), together with representatives from academia, government, business and sustainability organisations, the accounting profession, and investors.

The publication provides a comprehensive look at sustainability and integrated reporting through the eyes of thought leaders, key industry players and others.  Structured as a series of short essays, the publication covers the following topics:

• Context and challenges
• Who drives reporting?
• One report or multiple reports?
• What are the material issues?
• Who reads the report?
• Who governs reporting?
• Who regulates reporting?
• What does the future hold?

We are pleased to host the publication on IAS Plus, with the kind permission of Deloitte (South Africa), the United Nations Environment Programme and the Centre for Corporate Governance in Africa at the University of Stellenbosch Business School.

Click to download Making investment grade — The future of corporate reporting

The Consultation Paper describes different types of public sector combinations, proposes a distinction between acquisitions and amalgamations and considers combinations of entities and operations that both are, and are not, under common control.  The paper makes it clear that it "considers the wide range of combinations that may occur in the public sector, and, consequently, this project is not an IFRS convergence project".

The Consultation Paper uses the term “public sector combinations” rather than “business combinations” (as used in IFRS 3 Business Combinations) on the basis of key differences between for-profit and public sector combinations identified.  These differences include public sector combinations lacking a profit motive, often being conducted by non-exchange transactions, and the frequent involuntary imposition of such combinations by law or other authority.

These differences also lead to some possible accounting approaches that are fundamentally different to the 'acquisition method' contained in IFRS 3 for for-profit entities.  In particular, the paper explores a possible approach for acquisitions where no or nominal consideration is transferred that would result in the recipient recognising acquired assets and liabilities at their carrying amounts in the acquired operation’s financial statements (after adjustment for any different accounting policies).  Similar approaches are also proposed for combinations under common control and amalgamations.

The paper also explores whether the amount of any consideration transferred in excess of net assets acquired should be recognised as goodwill, expensed, or for combinations under common control, as a distribution to or contribution by owners.

The Consultation Paper is open for comment until 31 October 2012.  Click for IPSASB press release (link to IFAC website).

The update reflects the fact that EFRAG has issued a draft endorsement advice regarding the Improvements to IFRSs issued on 17 May 2012. Currently, final endorsement of the improvements might be expected in the first quarter of 2013.

You can find all past endorsement status report here.

The Invitation to Comments asserts, on the basis of research and feedback the IAASB has received on its May 2011 Consultation Paper, that there is clear demand for auditors to provide greater transparency about significant matters in the financial statements, as well as the conduct of the individual audit. Further, the IAASB considers that meaningful change now, rather than incremental change over time, is seen as necessary in order to better meet the information needs of users of audited financial statements.

The Invitation to Comment includes the following key proposals:

• Auditor commentary.  Additional information would be included in the auditor’s report to highlight matters that, in the auditor’s judgement, are likely to be most important to users’ understanding of the audited financial statements or the audit. This information would be required for public interest entities (PIEs) – which includes, at a minimum, listed entities – and could be provided at the discretion of the auditor for other entities.  In the IAASB's view, this new concept of Auditor Commentary is consistent with, and builds upon, the existing concepts of Emphasis of Matter and Other Matter paragraphs included in some audit reports.  It also responds to calls for similar reforms from the US Public Company Accounting Oversight Board (PCAOB), the European Commission (EC)
• Going concern. The auditor's report would contain the auditor's conclusion on the appropriateness of management’s use of the going concern assumption in preparing the financial statements and an explicit statement as to whether material uncertainties in relation to going concern have been identified.  The report would also include a description of management’s responsibilities with respect to going concern
• Other information included with the financial statements. The report would have an auditor statement as to whether any material inconsistencies between the audited financial statements and other information have been identified based on the auditor’s reading of other information, and specific identification of the information considered by the auditor
• Other matters. Further suggestions to provide clarity and transparency about audits performed in accordance with ISAs - including the ordering of the items in the auditor's report (prominently displaying the auditor's opinion), disclosure of the engagement partner’s name in the auditor’s report, an explicit statement of compliance with relevant ethical requirements, disclosure about the involvement of other auditors in the audit, enhancements to the description of the auditor’s responsibility to explain more fully the concept of a risk-based audit and address fraud, internal control and other matters.

The Invitation to Comment includes a section illustrating an example auditor's report prepared in accordance with the proposals.

The Invitation to Comment is open for comment until 8 October 2012.  The IAASB will continue deliberations during 2012 and 2013, including holding roundtables on the proposals, and the next consultative document will be an exposure draft.

Click for IAASB press release (link to IFAC website).

As reported in our earlier story on the precursor Rio+20 Corporate Sustainability Forum, the final outcome document is quite different from the original 'zero draft' proposals which called for a "global policy framework" effectively requiring sustainability reporting.

Instead, the final outcome document reads as follows (with only slight wording changes from the pre-meeting final draft text):

We acknowledge the importance of corporate sustainability reporting and encourage companies, where appropriate, especially publicly listed and large companies, to consider integrating sustainability information into their reporting cycle. We encourage industry, interested governments and relevant stakeholders with the support of the United Nations system, as appropriate, to develop models for best practice and facilitate action for the integration of sustainability reporting, taking into account experiences from already existing frameworks and paying particular attention to the needs of developing countries, including for capacity-building.

Prior to the release of the outcome document, the governments of Brazil, Denmark, France and South Africa announced at the Rio+20 conference the formation of a group of "friends of paragraph 47".  The group's vision is that corporate transparency and accountability are key elements to enhancing the private sector’s contribution to sustainable development and that making sustainability reporting standard practice among companies will contribute to monitor the impacts on and the contribution to sustainable development by the corporate sector.

Brazil, Denmark, France and South Africa are considered pioneers in sustainability reporting practice and policy, having various degrees of sustainability reporting requirements in place.   In the press release announcing the group, it is noted that these countries are now "taking the opportunity provided by the global political agreement at Rio+20 to share their experience with the rest of the world and contribute to making corporate sustainability reporting standard practice".  The Global Reporting Initiative (GRI) and the United Nations Environment Programme
(UNEP) have been invited  to support them, and other governments have been invited to join the group.

Other governments have also announced related initiatives, such as the United Kingdom government's announcement of the introduction of mandatory carbon footprint reporting for FTSE main market listed companies.

Click for:

• Access to the Rio+20 outcome document (link to UN website, available in various languages)
• Press release "Brazil, Denmark, France & South Africa Join in Commitment to Sustainability Reporting" (link to UN website).

The Corporate Sustainability Forum was designed to provide a launching ground for greater private sector and investor involvement in sustainable development, and to call on governments to take steps that would support corporate sustainability globally.  The forum involved nearly 3,000 participants, approximately half from the business and investor community and half from civil society, academia, cities, government and the United Nations.

Some goals relevant to sustainability reporting and related topics included:

• Demonstrating the critical influence of other stakeholders – including investors, stock exchanges, business schools and universities, and cities – in stimulating corporate sustainability
• Motivating a rising number of companies to commit to universal sustainability principles and report on performance.

At the forum, the following sustainability reporting initiatives were announced:

• A commitment by five stock exchanges - NASDAQ OMX, BM&FBOVESPA, the Johannesburg Stock Exchange (JSE), the Istanbul Stock Exchange (ISE) and The Egyptian Exchange (EGX) - collectively listing over 4,600 companies - to promote sustainable investment.  This is considered a first step towards a larger global call by stock exchanges for sustainability disclosure and performance by listed companies as part of the Sustainable Stock Exchanges initiative (link to press release)*
• Chief executives of 37 banks, investment funds, and insurance companies submitted a Natural Capital Declaration (NCD) aimed towards integrating natural capital considerations into their products and services - including a call for "requiring companies to disclose the nature of their dependence and impact on Natural Capital through transparent qualitative and quantitative reporting" (details, link to NCD website)
• The release of a Declaration for Higher Education Institutions, endorsed by over 60 major business schools and universities around the world committed to incorporating sustainability issues into teaching, research, and their own management and organisational activities (details, link to initiative-specific website).

*Separately, the United Kingdom Deputy Prime Minister announced at the Rio+20 conference that all businesses listed on the Main Market of the London Stock Exchange will have to report their levels of greenhouse gas emissions from the start of the next financial year (April 2013).   The UK is the first country to make it compulsory for companies to include emissions data for their entire organisation in their annual reports (see our separate story).

Various individual organisations also pledged specific actions.

The executive summary also notes a call by investors for integration of sustainability issues within annual reports of all listed and large private companies.  To this end, the outcome document from the main Rio+20 conference contains the following updated text:

We acknowledge the importance of corporate sustainability reporting and encourage companies, where appropriate, especially publicly listed and large companies, to consider integrating sustainability information into their reporting cycle. We encourage industry, interested governments as well as relevant stakeholders with the support of the UN system, as appropriate, to develop models for best practice and facilitate action for the integration of sustainability reporting, taking into account the experiences of already existing frameworks, and paying particular attention to the needs of developing countries, including for capacity building.

This is substantially changed from the 'zero draft' version which referred to a "global policy framework" effectively requiring sustainability reporting.

The final version of the Rio+20 outcome document will be issued at the completion of the conference, being held on 20-22 June 2012.

Click for Rio+20 Corporate Sustainability Forum executive summary (link to UN Global Compact website).

Mr Goldschmid was the Commissioner of the US Securities and Exchange Commission (SEC) from 2002–2005. Currently, he is Dwight Professor of Law at Columbia University.

Please click the press release for more information.

The IASB Chairman started his speech by declaring that accounting must not be taken as an exact science - the fact that it is often regarded a bean-counting and the expectation that it can, as Sir David Tweedie, Hans Hoogervorst's predecessor, said, "keep capitalism honest" and prevent through transparency crises such as the financial crises have put accounting under a lot of pressure.

However, as Hoogervorst pointed out, accounting is full of judgments and decisions. In his speech, he cited measurement techniques, business models and intangible assets as examples. At some length he discussed the problem of the other comprehensive income ("There is a vague notion that OCI serves for recording unrealised gains or losses, but a clear definition of its purpose and meaning is lacking.") and admitted that the IASB needs to address it as there is much important information in OCI about what gains or losses are ‘sitting’ in the balance sheet. He promised a thorough review of OCI and net income in the upcoming revision of the Conceptual Framework.

After giving reasons for accounting not being an exact science, Hoogervorst turned to the question of what accounting can achieve. He stressed that IFRSs as global standards have already contributed a great deal to transparency and international comparability. He illustrated his point by comparing private sector accounting with the "anarchy" of public sector accounting. Hoogervorst left no doubt that there will always be room for improving the standards but he also stressed that this improvement should follow sensible lines that take into account what accounting can do and what it can't. To his mind, any attempt at improving the standards should be governed by three terms:

• Principles
• Pragmatism
• Persistence.

Principles to avoid rules reflecting pseudo-exactness, pragmatism in accepting that there will not always be a precise answer to every question, and persistence vis-à-vis the pressure that the IASB is continually facing in form of special interests.

Please click for the full text of the speech on the IASB's website.