The EFRAG Nominating Committee believes it is important that there is a continuous inflow of new members to EFRAG TEG, whilst respecting continuity of existing and experienced members. This means that not all current members, who are eligible for reappointment, may expect to be reappointed despite their satisfactory contribution to EFRAG TEG.

The EFRAG effectively operates through the EFRAG TEG, which makes its decisions independently of the EFRAG Supervisory Board and all other interests.  It assists the European Commission in the endorsement of International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB) by providing advice on the technical quality of IFRS.

EFRAG is looking for candidates from a wide range of backgrounds and geographical origins and welcomes all applications.  The selection process will consider technical competence, background, experience and geographical spread.

EFRAG is calling for candidates to submit their applications by 1 October 2012.  Click for more information (link to EFRAG website).

The paper outlines three major aspects of the IPSASB’s current environment that are important over the next two years:

1. Sovereign debt crisis - highlighting potential poor reporting currently and leading to increasing demands for high quality standards and adoption and implementation guidance
2. Increase in adoption - International Public Sector Accounting Standards (IPSAS) are being adopted and applied, or are in the process of being applied, by nations that are very diverse geographically, economically and culturally, requiring the IPSASB to respond to this diversity in setting its agenda and standards
3. Public interest oversight and related governance changes - acknowledging the need for an appropriate public interest oversight regime for the IPSASB, IFAC and the IPSASB are committed to instituting such a public interest oversight of the IPSASB as soon as possible.  Once a public interest oversight structure is in place for the IPSASB, and related governance changes are implemented, as noted, the IPSASB anticipates conducting a comprehensive review of its broad strategic direction including public consultation on its strategies and work program beyond 2014.

The Consultation Paper identifies a number of public sector critical projects, and other projects to which the IPSASB has already committed - including for example such topics as reporting on the long-term sustainability of public finances, financial statement discussion and analysis and public sector combinations.

In addition, the paper outlines a number of additional potential projects as a result of discussions of the IPSASB during work planning sessions, analysis of existing IPSASs and work necessary for maintenance, analysis of the current IASB work program, and analysis of existing IPSASs and their alignment with Government Finance Statistics (GFS).

Comments on the Consultation Paper close on 31 October 2012.  Click for IPSASB press release (link to IFAC website).

The working drafts discuss the topics in each section, summarising the proposals in the original exposure draft relevant to that topic, constituent comments on those proposals, and the IASB's response in light of those comments.  The documents then show a 'mark up' of proposed changes from the wording in the exposure draft to reflect the impacts of the feedback analysis.

The documents are substantially the same as the papers posted for the 25-26 June 2012 Insurance Working Group meeting and do not reflect the input the IASB received on those papers. The IASB staff intend to update the documents to reflect all input received in due course.

The additional working drafts join a number of earlier working drafts on other topics in the insurance contracts project.  The IASB has also updated a number of complimentary documents providing an overview of the tentative decisions made in the project up to June 2012, including a detailed 'paragraph by paragraph' summary of the exposure draft and the related redeliberations.

The IASB encourages any feedback on the working drafts and information about any unintended consequences from those drafts.  The IASB intends to release either a review draft of the proposed insurance contracts standard, or a revised exposure draft, in the second half of 2012.

Access to the working drafts is available on the IASB website.

It is a year since Hans Hoogervorst took over as Chairman of the IASB. It has not, through no fault of his own, been an easy time. The difficult story of economic disruption continues to be told by financial reporting around the world. Last year, in our coverage on IAS Plus of his arrival and first actions, we suggested that they showed where the accounting high ground of the future would be situated. ‘It was not going to be in the field of arcane technical matters, which only the technocrats would comprehend and then argue over them for months and years’. Instead, we said: ‘The Hoogervorst future is at the heart of the widest economic and business issues. The global stature of the IASB will be reinforced further and take its place at the table where it will become even more obvious that financial reporting is at the heart of economic progress’.

And across the last few weeks we have had discussions amongst the IASB’s Advisory Council, a speech from the Chairman of the Trustees, Michel Prada, and one from Hoogervorst himself, taking a wider view of what he termed: ‘the imprecise world of accounting’.

The first decade of the IASB was an enormous achievement, as Prada pointed out, but, inevitably, it was a time of building the structure fast and relying often on what could be achieved in the short-term, rather than what might in the long term be more useful. And it was also a time when the global economy woke up to the implications of quite what a universally applied financial reporting regime might mean. Many people in the policy-making world found themselves wrong-footed. They had taken the traditional attitude. Hoogervorst explained this in his Amsterdam speech the other day. ‘Accounting should be the most straightforward of topics for policy-makers to deal with. Accounting is mainly about describing the past – to reflect faithfully what has already happened’, he said. ‘This should be dull business, best left to “bean-counters”. Surely counting beans cannot cause too many problems?’

That has been the traditional attitude for years amongst policy-makers. ‘Yet, over the years’, said Hoogervorst, ‘many securities regulators have told me of their surprise upon finding out that accounting policy is one of the most difficult and controversial topics to deal with. It is the same around the world. Just ask the Japanese FSA, the US SEC, or the European Commission’.

Part of this surprise is the under-estimation of the implications of good financial reporting. Hoogervorst quoted his predecessor, Sir David Tweedie, that it was the job of accounting to keep capitalism honest. And the second issue was ‘the inescapable judgement and subjectivity of accounting methods’. ‘Put simply’, he said, ‘there is a lot to disagree about’.

And there are. He ran through examples involving measurement techniques; the rise in importance of OCI, the place where the ill-defined but very important jumble of ‘other comprehensive income’ is put; intangible assets, and more. This is the technical detail which can be, and is argued about incessantly. But as the IASB has matured it has become the underpinning of a grander and more global purpose. ‘We should concentrate on further improving the quality of our standards’, said Hoogervorst. Principles, pragmatism and persistence were his watchwords. In Prada’s speech he said that Hoogervorst’s words in Amsterdam ‘remind us of the fundamental objective and of the intrinsic complexity of accounting and financial reporting: to provide those market participants who do not have direct access to basic data with a true and fair representation of the situation and performance of companies that they invest in or deal with’.

The last year has also seen much effort and work put in by the Trustees and the Monitoring Board to safeguard and ensure the independence of the standard-setting process and to place it within a clearly defined framework that should deliver public accountability and robust governance structures. ‘Accounting standard-setting’, Hoogervorst emphasised, ‘should be sensitive to legitimate business concerns, but should also be firm and independent in the face of special interests’. Testing the ground and understanding the impacts of the accounting proposals is an important part of delivering robust standard-setting and achieving global buy-in for IFRS.

The year has also seen great efforts at encouraging the creation of regional bodies around the world to expand discussion and act as a conduit for views. As Prada put it: ‘The benefit will be better integration of the global perspective into the standard-setting process and perhaps a reduction in the risk of non-endorsement of a new standard’.

Put all of these measures together and you are left with little doubt that the IFRS process is starting to come of age.

The tentative agenda is available on our meeting page for the meeting.

ESMA discharges of the responsibility of monitoring of compliance of financial information with International Financial Reporting Standards (IFRS) and taking of appropriate enforcement action mainly through the European Enforcers Co-ordination Sessions (EECS) which co-ordinate the enforcement activities of Member States in order to increase convergence amongst European enforcer’s activities. The EECS also provide feedback to the International Accounting Standard Board (IASB) on issues related to the application of IFRSs identified as part of the enforcement process.

As a result of sovereign debt developments and the increased market interest in this area, ESMA focused its attention on the impact of those developments on the accounting practices of listed companies in Europe, and financial institutions in particular. ESMA issued two public Statements (in July 2011 and November 2011) stressing the importance of consistent application of recognition and measurement principles in IFRSs and the need for enhanced transparency in relation to issuers’ exposure to sovereign debt. ESMA intends to publish in 2012 a review of the accounting practices with respect to exposure to sovereign debt in the 2011 year-end IFRS financial statements.

Overall, European enforcers find that the quality of the IFRS financial statements improves every year reflecting an increased level of issuers’ capacity to apply IFRS principles to their business. However, they have also identified some areas in which additional efforts should be taken. Examples of such areas are: disclosures related to fair value hierarchy of financial instruments, disclosures of assumptions used as part of impairment tests, presentation of risk factors and uncertainties with an impact on going concern assumptions, various aspects related to consolidation of entities.

Please click for access to the report on the ESMA website.

The amendments are intended to provide additional transition relief in IFRS 10 , IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities, by “limiting the requirement to provide adjusted comparative information to only the preceding comparative period”. Also, amendments were made to IFRS 11 and IFRS 12 to eliminate the requirement to provide comparative information for periods prior to the immediately preceding period.

The effective date of these amendments, annual periods beginning on or after 1 January 2013, is aligned with the effective dates of IFRS 10, IFRS 11 and IFRS 12.

Click for the press release (link to IASB website). A PDF of the amendments are available to subscribers through the IASB website.

This document calls for comments on five specific areas of revision on which GRI is seeking public feedback:

• Application levels - it is proposed to discontinue the 'Application Levels', originally designed to assist organisations in communicating the degree of transparency of their sustainability reports against the Guidelines.  This is on the basis the levels are currently wrongly understood by some report users to be an opinion on the quality of the report, or even a reflection of the sustainability performance of the organisation
• Boundary - Revisions are proposed to the process in the existing protocols to better direct organisations on how to define the content and boundaries of a sustainability report in one sequence of process steps, thus to answer the question of what to report
• Disclosure on management approach - The ED outlines a generic approach for all topics and proposes that the 'Disclosures on Management Approach' (explaining how an entity is managing material economic, environmental, and social impacts) should be provided at the Aspect level to reflect management practices
• Governance - The ED has proposed a number of changes to governance and remuneration disclosures to strengthen the link between governance and sustainability performance
• Supply chain - New and amended disclosures on the supply chain are proposed, including new definitions and disclosure of the procurement practice, screening and assessment as well as remediation.

The Exposure Draft also outlines proposed amendments to improve the clarity and technical quality of the text as well as to facilitate the implementation of the guidelines.

The Exposure Draft does not deal with the following matters, which are expected to be dealt with in due course:

• proposed updates to two or more of the following thematic topics: Anti-corruption, Biodiversity, Greenhouse Gas (GHG) Emissions and Occupational Health and Safety - a further comment document is expected in August 2012
• how to link the sustainability reporting process to the preparation of an integrated report aligned with the guidance to be developed by the International Integrated Reporting Council (IIRC).

Comment on the exposure draft are open until 25 September 2012, with the GRI seeking to launch the new sustainability guidelines in 2013.

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

Michel Prada opened his speech with an overview of the history of standard setting. He traced the beginning of the international success of International Accounting Standards (IASs) to Europe's decision in 2002 to adopt them, from 2005, for the consolidated accounts of listed companies on regulated markets: "Overnight, this transformed the IASB from an interesting but somewhat obscure accounting think-tank into Europe’s accounting standard-setter." And Prada continued to illustrate the increasing demand for global accounting standards with many examples - among them the global financial crisis that showed "the pressing need for a single set of high quality global accounting standards".

For the present, Prada drew a very positive picture pointing at the many countries around the world that require or permit the use of IFRSs, the acceptance of IFRSs among the G20 members and the use of IFRSs by almost half of Global Fortune 500 companies. He also mentioned very encouraging experiences in China and Japan.

However, Prada claimed, the IASB is currently an international standard setter, not the global standard setter. The last part of his speech he devoted to the future of standard setting. According to him, the reviews conducted by the Monitoring Board and the Trustees showed three major areas for improvement and therefore for increased success of IFRSs:

• Standard setting in co-operation with national and regional bodies with an interest in accounting standard setting will increase the effectiveness of the work of the IASB. This will also offer a better integration of the global perspective into the standard setting process and might reduce the risk of non-endorsement of a new standard.
• A stronger focus on the implementation of the standards, in part in co-operation with IOSCO and other international organisations, will ensure that standards are endorsed and enforced on a globally consistent basis.
• Enhancements to the IASB’s due process will enhance confidence in the standard setting process and will improve the robustness of the standards.

Prada closed on the note that international standard setting has made tremendous progress in the past, still does, and has a good chance of doing so in the future if the above aims are achieved.

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