May

EFRAG Rate Regulated Activities Working Group composition announced

24 May, 2013

The European Financial Reporting Advisory Group Technical Expert Group (EFRAG TEG) in its May meeting has approved the composition and chairman for the EFRAG Rate Regulated Activities Working Group. The working group was created to advise and provide input on rate-regulated activities and its application within Europe to the EFRAG TEG and the EFRAG Consultative Forum of Standard Setters.

The composition of the working group contains a balance of different backgrounds and geographical origins and is chaired by Bill Hicks of the EFRAG TEG. The composition is as follows:

Member

Title

Bill Hicks (Chairman)

EFRAG TEG member

Anne Azzola

French, Morgan Stanley in the UK

Nicola Bruno

Atlantia SpA, Italy

Jeanette Calleja Borg

Water Services Corporation, Malta

Emmanuel Fraser

National Grid plc, UK

Cosimo Guarini

Terna Spa, Italy

Lieve Kerckhof

Elia System Operator NV, Belgium

Katja van der Kuij

Dutch, KPMG in the UK

Laura López Sotomayor

Ferrovial SA, Spain

Markus Lotz

50Hertz Transmission GmbH, Germany

Pascale Mourvillier

GDF Suez, France

Javier Parada

Deloitte, Spain

Javier Pastor Zuazaga

IBERDROLA SA, Spain

Thomas Possert

Energie Steiermark AG, Austria

Michael Reuther

PwC, Germany

Gerard van Santen

Ernst & Young, Netherlands

Per Timmermann

PwC, Denmark

Magali Viandier

EDF, France

Thomas Carlier (Correspondence member)

Deloitte, Belgium

Christophe Patrier (Correspondence member)

Deloitte, France

European Commission (Observer)

 

A press release is available on the EFRAG website.

Non-financial reporting will actively contribute to a new, more responsible corporate world, says Barnier

24 May, 2013

The European Commissioner for Internal Market and Services, Michel Barnier, spoke at the Global conference on sustainability and reporting in Amsterdam which also saw the launch of the new G4 guidelines developed by the Global Reporting Initiative (GRI). Barnier highlighted the measures taken by the Commission to promote long-termism in the corporate sector which also include a recent proposal on non-financial reporting.

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 G20, which also include reiterated calls on the IASB and FASB to finalise their work on key outstanding projects for achieving a single set of high-quality standards. However, as Barnier points out, if the soundness 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.

GRI updates sustainability reporting guidance

24 May, 2013

The Global Reporting Initiative (GRI) has released the fourth major revision of its Sustainability Reporting Guidelines, dubbed 'G4'. The GRI's guidelines are widely used in preparing sustainability reports and are designed to provide a standardised approach to reporting on economic, environmental, social and governance (ESG) performance. The revised guidelines are intended to be easier to use, place a greater emphasis on materiality in sustainability reporting, and include new and updated disclosures in various areas, including governance, ethics and integrity, supply chain, anti-corruption and greenhouse gas (GHG) emissions.

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:

 

Reporting principles

Principles for defining report content

  • Stakeholder inclusiveness
  • Sustainability context
  • Materiality
  • Completeness

Principles for defining report quality

  • Balance
  • Comparability
  • Accuracy
  • Timeliness
  • Clarity
  • Reliability
Standard disclosures

General standard disclosures

  • Strategy and analysis
  • Organisation profile
  • Identified material aspects and boundaries
  • Stakeholder engagement
  • Report profile
  • Governance
  • Ethics and integrity
  • General standard disclosures for sectors (if available)

Specified standard disclosures

  • Disclosures on management approach
  • Aspects, by category:
    • Economic - economic performance, market presence, indirect economic impacts, procurement practices
    • Environmental - materials, energy, water, biodiversity, emissions, effluents and waste, products and services, compliance, transport, overall, supplier environment assessment, environmental grievance mechanisms
    • Social - labour practices and decent work, human rights, society, product responsibility (with additional indicators for each)
  • Specified standard disclosures for sectors (if available)

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).

May 2013 IASB meeting notes — Part 2

23 May, 2013

The IASB's meeting is being held in London on 21-24 May 2013. We have posted Deloitte observer notes from Wednesday's sessions on mandatory purchases of NCI (IFRS 3), interim financial report (IAS 34), contingent consideration (IFRS 3), valuation of biological assets (IAS 41/IFRS 13), equity method in separate financial statements (IAS 27), and conceptual framework.

IFRS Foundation Annual Report 2012

23 May, 2013

The IFRS Foundation (IFRSF) under which the IASB operates has published its Annual Report for 2012. The report is split into three sections: IFRS Foundation, Standard-setting activities, and Financials.

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.

IASB Senior Director of Technical Activities appointed as Board member

23 May, 2013

The Trustees of the IFRS Foundation have announced the appointment of Sue Lloyd as IASB member beginning 1 January 2014. She replaces Prabhakar Kalavacherla (PK) who will retire from the IASB on 31 December 2013 after having served a full, five-year term.

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.

May 2013 IASB meeting notes — Part 1

22 May, 2013

The IASB's meeting is being held in London on 21-24 May 2013. We have posted Deloitte observer notes from Tuesday's sessions on fair value measurement and comprehensive review of the IFRS for SMEs.

Click through for direct access to the notes:

Tuesday, 21 May 2013

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

IFRS Formula Linkbase 2013 is now available

22 May, 2013

The IFRS Foundation has issued the 2013 IFRS Taxonomy Formula Linkbase. The IFRS Taxonomy Formula Linkbase is designed to help improve the data quality of IFRS Taxonomy filings and to provide additional guidance for both technical and financial reporting audiences so that they can better understand the IFRS concepts and their meanings.

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.

European field-test of the proposed accounting guidance for leases

22 May, 2013

The European Financial Reporting Advisory Group (EFRAG) and the national standard-setters of France (ANC), Germany (ASCG), Italy (OIC) and the United Kingdom (FRC) are performing a field-test in order to evaluate how the proposals contained in the IASB Exposure Draft ED/2013/6 'Leases' would affect European companies applying IFRS.

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.

Agenda for the IASB Emerging Economies Group May 2013 meeting

21 May, 2013

The Emerging Economies Group (EEG) of the IASB will be holding its fifth meeting in Seoul, Korea on 30 and 31 May 2013. Topics to be discussed include rate regulated activities, goodwill accounting, IAS 19 (discount rate), IAS 28 (elimination of gains arising from a transaction between a joint venturer and its joint venture), and the Issues paper on the scope of IFRS 2.

The agenda for the meeting is presented below.

Time (Korea Standard Time)

Event

Presenter

May 30 (Thursday)

09:00-09:15

Address by hosting country

Korea

09:15-09:30

Reports of the Liaison Office

China

09:30-10:00

Presentation: Accounting for Rate Regulated Activities

India

10:00-10:15

IASB presentation: Accounting for Rate Regulated Activities

Wayne Upton

10:15-10:30

Coffee Break

 

10:30-11:30

Discussion: Accounting for Rate Regulated Activities

 

12:00-13:30

Working Lunch

 

14:00-16:00

Discussion(Cont.): Accounting for Rate Regulated Activities

 

16:00-16:15

Coffee Break

 

16:15-17:00

Administrative Issue:

• Updates on IASB activities

• Topics for next meeting

Ian Mackintosh

Wayne Upton

19:00-21:30

Welcome Dinner

Korea

May 31 (Friday)

08:30-09:10

Discussion: Alternatives for goodwill accounting

Korea

09:10-09:50

Discussion: IAS 19 – Discount rate

Wayne Upton

09:50-10:00

Coffee Break

 

10:00-10:40

Discussion: IAS 28 – Elimination of profits with a joint venture

Wayne Upton

10:40-11:30

Discussion: Issues on IPOs with dual pricing

Malaysia

11:30-11:45

Discussion and approval of the Communiqué

Wayne Upton

11:45-12:00

Summary of the meeting

Ian Mackintosh

More information on the meeting is available on the IASB website.

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