June

IFRS Foundation publishes jurisdiction profiles on the application of IFRSs

05 Jun, 2013

The IFRS Foundation has posted to its website a collection of 66 'jurisdiction profiles' detailing information about the adoption of International Financial Reporting Standards (IFRSs) and the IFRS for SMEs in all of the G20 jurisdictions and 46 other jurisdictions.

The starting point for the profiles were the answers provided by standard-setting and other relevant bodies in response to a survey that the IFRS Foundation conducted between August and December 2012 on the application of IFRSs around the world and to which to date the 66 jurisdictions responded. Respondents answered questions regarding the commitment in support of moving towards a single set of high quality global accounting standards, the state of IFRS adoption (for domestic and foreign companies), the endorsement process and translations. The survey also extended to the adoption of the IFRS for SMEs.

The profiles drafted by the Foundation on the basis of the information provided were circulated for comment to the original respondents, regulators, international audit firms, and others. We are proud to have been able to help the IFRS Foundation with this ambitious project, which is led by Paul Pacter, former IASB member and former webmaster of IAS Plus who originally set up our popular table on the use of IFRSs around the world which has been supplemented recently by the more detailed table on the use of IFRSs by the G20 jurisdictions.

On basis of the information provided in the profiles, the IFRS Foundation comes to the following observations regarding the adoption of IFRSs around the world:

  1. There is almost universal support for IFRS as the single set of global accounting standards. 95% of the 66 jurisdictions have made a public commitment of support for a single set of high quality global accounting standards and with the exception of Switzerland every jurisdiction stated that IFRSs should be that single set of standards.
  2. More than 80% of the profiles state that IFRSs have been adopted for all are almost all public companies.
  3. The jurisdictions that have adopted IFRSs claim to have made very few modifications to the standards. The modifications are mostly described as limited, temporary of of little impact.

In a speech on the posting of the profiles and the information they provide, Hans Hoogervorst, the IASB Chairman, was very encouraged by the results and concluded from then on the general adoption of IFRSs around the world:

This is only a subset of the information provided by this first batch of profiles and there is no reason to believe the remaining profiles to be published will tell a very different story.

He also rang a hopeful note that future adopters or jurisdictions that adopt each new pronouncement through an endorsement process will have little reason to make changes to IFRSs as issued by the IASB:

Even when our constituents disagree with part of our standards, they almost always resist the temptation to alter them. Local adjustments are viewed with suspicion by investors, so most jurisdictions will simply take IFRS in full. Also, most of our constituents accept that if local adaptations were to become rife, the benefits of having a global standard would be undermined.

Nevertheless, Hoogervorst also reflected on what remains to be done. Most obvious to him is the fact that some large and important economies have not yet (fully) adopted IFRS: Japan, the United States, and China. He also stated that "adoption in itself is not enough" and that proper and consistent application of the standards is equally important.

Further information

On the IASB website:

On IAS Plus:

Financial Reporting Council issues revisions to audit reports of listed companies

04 Jun, 2013

In response to calls from investors to make audits more transparent, the Financial Reporting Council (FRC) has today issued revisions to ISA 700 (UK and Ireland) 'The Independent Auditor’s Report on Financial statements'. The revisions require auditors reporting on companies which comply with the UK Corporate Governance Code to provide significantly increased disclosure around the work that they have performed on the audit and are a move away from the traditional binary pass/fail model of the past. The revisions are designed to complement changes to the UK Corporate Governance Code in October 2012 and are effective for the audits of financial statements for periods commencing on or after 1 October 2012.

The increased disclosure within the audit report, which received strong support during the consultation process, will provide better communication between auditors and investors and will give the investor real insight as to what audit work was performed, where the audit work was performed and the extent to which the work performed addressed the key risks facing their business.     

The new style audit report requires increased disclosures to be provided in three areas; risks, materiality and scope of the audit. 

Risks 

The audit report should describe the risks that had greatest effect on: 

  • The overall audit strategy;
  • The allocation of resources in the audit; and
  • Directing the efforts of the engagement team. 

Materiality     

The audit report should explain how the auditor applied the concept of materiality in planing and performing the audit 

Scope of the audit 

The audit report should give an overview of the scope of the audit, showing how this addressed the risk and materiality considerations.

Click here for: 

FRC press release (link to FRC website). 

Illustrative example of a UK auditor’s report (link to FRC website).

Consultation Paper: Revision to ISA (UK and Ireland) 700 (link to FRC website).

Feedback Statement: Proposed revision to ISA (UK and Ireland) 700 (link to FRC website).

Deloitte 'Governance in brief' newsletter on the revisions to ISA (UK and Ireland) 700.

 

Financial Reporting Council issues revisions to audit reports of listed companies

04 Jun, 2013

In response to calls from investors to make audits more transparent, the Financial Reporting Council (FRC) has today issued revisions to ISA 700 (UK and Ireland) 'The Independent Auditor’s Report on Financial statements'. The revisions require auditors reporting on companies which comply with the UK Corporate Governance Code to provide significantly increased disclosure around the work that they have performed on the audit and are a move away from the traditional binary pass/fail model of the past. The revisions are designed to complement changes to the UK Corporate Governance Code in October 2012 and are effective for the audits of financial statements for periods commencing on or after 1 October 2012.

The increased disclosure within the audit report, which received strong support during the consultation process (link to FRC website), will provide better communication between auditors and investors and will give the investor real insight as to what audit work was performed, where the audit work was performed and the extent to which the work performed addressed the key risks facing their business.     

The new style audit report requires increased disclosures to be provided in three areas; risks, materiality and scope of the audit. 

Risks 

The audit report should describe the risks that had greatest effect on: 

  • The overall audit strategy;
  • The allocation of resources in the audit; and
  • Directing the efforts of the engagement team. 

Materiality     

The audit report should explain how the auditor applied the concept of materiality in planing and performing the audit 

Scope of the audit 

The audit report should give an overview of the scope of the audit, showing how this addressed the risk and materiality considerations.

Click here for: 

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