Listing Rules: Changes to remuneration disclosure requirements

30 Aug, 2013

The Financial Conduct Authority (FCA) has issued a consultation document which proposes changes to the remuneration reporting requirements currently included in Chapter 9.

The FCA has reviewed the existing requirements in light of the new Directors’ Remuneration reporting regulations and Narrative Reporting regulations in order to ensure that any duplication is kept to a minimum and that unnecessary requirements are not imposed on listed companies. The proposal is therefore to remove those listing rules relating to directors’ remuneration unless the rule applies to both premium listed UK companies and companies incorporated overseas, as the latter group are not within the scope of the new regulations.

The proposals are intended to apply to premium listed companies incorporated in the UK with years ending on or after 1 January 2014. This means that companies with years ending on or after 30 September 2013 through to 31 December 2013 will still need to comply with the current listing rules requirements in addition to the new disclosure regulations.

Responses to the consultation are requested by 9 October 2013.

 Summary of the proposals

  • All of the disclosures relating to remuneration, currently contained in LR 9.8.8 are to be removed. The only exception to this is LR 9.8.8R (9). This rule requires the disclosure of the unexpired term of any directors’ service contract of a director proposed for election or re-election at the forthcoming general meeting. It is proposed to keep this rule, which is applicable to both UK and overseas companies with a premium listing, in order to maintain the current requirements for overseas companies. 
  • There are no changes proposed to LR9.8.6R. This rule relates to the disclosure of directors’ share interests at end of the period under review and any changes between this date (LR9.8.6R (1)); share interests disclosed to the listed company in accordance with Disclosure and Transparency Rules 5 (LR 9.8.6R (2)); a statement that the business is a going concern (LR 9.8.6R (3)); details of shareholder authority for purchase of its own shares and the details of such purchases (LR 9.8.6R (4)); a statement of how the company has applied the principles set out in the UK Corporate Governance Code (LR 9.8.6R (5)) and a statement of compliance with the Code, or details of non-compliance (LR 9.8.6R (6)). It should be noted that companies incorporated outside the UK with a premium listing must comply with LR 9.8.6R (5) and (6). 
  • There are also no changes proposed to LR 9.4.1R, which deals with the requirement for shareholder approval of employee share plans and long term incentive plans and LR 9.4.2R which allows exemptions for all employee plans and plans put in place for one director to facilitate, in unusual circumstances, the recruitment or retention of the relevant individual. It is however, worth noting that companies may need to ensure that the policy report, which is to be approved by shareholders, explicitly allows for the use of this provision. 
  • There is also a minor change to LR 9.8.13R in response to the Narrative Reporting Regulations which changes existing references to ‘summary financial statements’ to ‘strategic report with supplementary information’ which will reflect the new requirement for the production of a strategic report.

The consultation paper can be found here (link to FCA website). 

IASB Research Forum and ABR special issue on the Conceptual Framework

30 Aug, 2013

On 2 October 2014, the first IASB Research Forum will be held offering an interdisciplinary platform for academics from around the world to exchange their views with peers and with members of the International Accounting Standards Board (IASB) on topics that address the interaction between international financial reporting requirements, policy and the functioning of capital markets. The topic of this first research forum will be the Conceptual Framework for Financial Statements.

In July 2013, the International Accounting Standards Board (IASB) published a comprehensive Discussion Paper containing proposals for topical areas where it considers a revision and amendment of the existing Conceptual Framework necessary. In connection with the consultation, the IASB is interested in academic input on all aspects of the project, to help it to develop the revised Framework. It has therefore dedicated its inaugural IASB Research Forum to the topic.

At the same time, the IASB is cooperating with the Accounting and Business Research (ABR) which has issued a call for papers for a special edition of academic papers addressing issues relevant to the development and application of the Conceptual Framework. Authors of selected papers entered into the review process for the special issue will be invited to present their work at the IASB Research Forum, planned to be held at Said Business School, Oxford University, England. IASB members will provide commentary on each paper and the ABR special issue will be published in the latter half of 2015.

Please click for the following information on the IASB website:

EFRAG feedback statement on the results of the roundtable on financial reporting for long-term investing business models

30 Aug, 2013

On 8 July 2013, the European Financial Reporting Advisory Group (EFRAG) held a roundtable meeting in Brussels to facilitate a discussion with European constituents regarding the financial reporting aspects of long-term investing business models and financial reporting issues raised in the EC Green Paper on the long-term financing, more particularly on the use of fair value accounting for long-term investments.

The event was part of EFRAG’s public consultation connecting the European Commission green paper and the limited scope amendments to IFRS 9 Financial Instruments proposed by the IASB that indicate that fair value measurement and long-term horizons are not mutually exclusive.

The part of discussions regarding the question of whether fair value measurement leads to short-termism revealed that the users of financial statements believe that fair value information is important to understand a company's exposure to financial market risks and is a good indication of the liquidity of the market. A user panellist also pointed out that there was no academic evidence that fair value was leading to short-termism.

The panellists from the insurance and banking industry noted they would prefer that fair value did not impact the profit and loss account when the business model is long-term investing. They stressed that volatility due to short-term variations does not provide information on real performance and should be communicated through appropriate disclosures. They also expressed concern regarding the amount of non-GAAP measures companies feel compelled to use to present a long-term investing business model in a way that is understandable to users.

Please click for the following information on the EFRAG website:

Insurance contracts web presentations available

29 Aug, 2013

The IASB staff has made available a web presentation recorded on 21 August 2013 detailing the transition proposals included in the revised insurance contracts exposure draft.

In addition, previous web presentations are also available on the proposals included in the revised exposure draft:

  • 31 July 2013 — Web presentation on the proposals for unlocking the contractual service margin
  • 19 July 2013 — Web presentation on contracts linked to underlying items proposals
  • 15 July 2013 — Discussing the revenue proposals of the revised ED Insurance Contracts
  • 25 June 2013 — Introduction to the revised ED Insurance Contracts

All of the web presentation recordings are available on the IASB website. The IASB expects to add additional web presentations over the next few weeks.

Conceptual framework web series

28 Aug, 2013

The International Accounting Standards Board (IASB) will be hosting a series of web presentations on its 'Conceptual Framework' Discussion Paper. Seven dates between September–November have been announced.

Following the introductory web presentations on 26 July 2013, the IASB will host seven more live web presentations on the issues raised in the DP. Each presentation will also feature a question and answer session.

Date Topic
Tuesday 3 September 10:00 am Definitions of assets and liabilities
Friday 13 September 2:30 pm Other comprehensive income
Friday 27 September 10:00 am Definition of equity and distinction between liability and
equity elements
Wednesday 2 October 10:00 am Measurement
Thursday 10 October 2:00 pm Additional guidance to support the liability definition
Tuesday 22 October 4:00 pm Objective and Qualitative Characteristics
Friday 15 November 3:00 pm Presentation and disclosure

Click for:

EDTF progress report on the implementation of disclosure recommendations

22 Aug, 2013

In October 2012 the Enhanced Disclosure Task Force (EDTF) presented a report to the Financial Stability Board (FSB) recommending key enhancements to the risk disclosures made by banks. The report identified seven fundamental principles for enhancing risk disclosure and included 32 specific recommendations. The EDTF has now published a progress report in line with its October 2012 report.

For the progress report the EDTF conducted a survey on the level and quality of the implementation of their report Enhancing the Risk Disclosures of Banks in major banks’ 2012 annual reports.

The survey results demonstrate that the recommendations are beginning to make a positive impact on the reporting practices of global banks. The banks’ self-assessment is that they have implemented 50% of the EDTF recommendations in aggregate in 2012 disclosures. 2011 this number was at 34%; and the banks expect to implement 72% of the recommendations in 2013.

Geographically, banks in the United Kingdom showed the highest implementation rates (80%), while implementation was lowest in the United States and Canada (39% and 41%, respectively). Canadian banks expect to implement an additional 50% of recommendations in 2013, though.

Analysed by sections, qualitative disclosures related to the EDTF's general recommendations and other risks show the highest implementation rates (exceeding 71% over all banks) while the lowest implementation rates were observed in relation to market risk and funding disclosures.

The findings of the EDTF are in line with the results of a survey conducted by Deloitte (UK) that reviewed the implementation of the 32 recommendations by banks that were members of the EDTF Working Group.

Please click for the following information on the FSB website:

IAASB Chairman speaks about evolving role of auditors and auditor reporting

16 Aug, 2013

At the 2013 CReCER Conference in Nicaragua, Prof. Arnold Schilder, Chairman of the IAASB, delivered a speech on the evolving role of auditors and auditor reporting. He specifically discussed how he felt the proposals outlined in the recent exposure draft on auditor reporting would provide more value to users of financial statements.

The IAASB recently issued an exposure draft that proposes changes to audit reports, including provisions to include more information on how audits are performed. During his speech, Mr Schilder highlighted certain aspects of the proposal that would create substantial changes in how auditors communicate their opinion to users of their reports, including:

  • Movement of the opinion to the first item in the auditor's report.
  • A new section of the report where the auditor communicates significant matters during the audit.
  • A specific statement in the report about the entity's ability to continue as a going concern.
  • A statement about the auditor's independence from the audited entity.

The transcript of his speech is available on the IFAC website.

Comments invited on new draft SORP for Further and Higher Education

15 Aug, 2013

The Further and Higher Education SORP Board (the SORP Board) has published an Exposure Draft (ED) on a revised Statement of Recommended Practice (SORP) setting out proposals for accounting for further and higher education institutions in the UK. Comments are invited by the SORP Board until 17 November 2013.

SORPS issued by the SORP Board apply to further and higher education institutions preparing accounts under UK GAAP to present a ‘true and fair view’ and are intended to supplement accounting standards and other legal and regulatory requirements to reflect transactions or circumstances that are unique to the sector within which such institutions operate.  The SORP is also intended to “promote comparability in reporting across the sector”.

The ED updates the previous SORP to include the requirements of FRS 100 ‘Application of Financial Reporting Requirements’, FRS 101 ‘Reduced Disclosure Framework’ and FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'; the three main standards that were introduced as a package to replace UK GAAP.

The new SORP will result in a number of changes on how further and higher education institutions present financial performance, assets and liabilities in their financial statements.  The most significant changes are:

  • Changes to existing terminology to reflect FRS 102 most notably the Income and Expenditure Account becoming the ‘Statement of Comprehensive Income’, the Balance Sheet becoming the ‘Statement of Financial Position ‘ and the Statement of Recognised Gains and Losses becoming ‘Changes to Reserves and Funds’;
  • Changes to accounting for endowments and donations and capital grants as a result of the new revenue recognition rules.  Significantly the current practice of deferring capital grants on the Balance Sheet and then releasing to the Income and Expenditure Account will no longer occur.  Most capital grants will now be credited to the Statement of Comprehensive Income rather than the Statement of Financial Position (deferred capital grants);
  • The requirements to record a liability in respect of a defined benefit multi-employer scheme.  The ED states “where an institution participates in a defined multi-employer plan and sufficient information is not available to use defined benefit accounting and the institution has an obligation to fund past deficits within the scheme, the institution must recognise a liability on the Statement of Financial Position for this obligation”.  The SORP Board highlights that this liability is different to the actuarial deficit currently reported in the balance sheet which they say will “add to the confusion of how pension funds are reflected in our Financial Statements and make comparing different HEIs difficult”;
  • The requirements to account for certain student accommodation arrangements with third parties as finance leases on the Statement of Financial Position; and
  • Changes required to report assets and liabilities at fair value in the Statement of Financial Position.

The SORP Board will consider all of the responses received with a view to issuing a final version of the SORP in June 2014. 

The final SORP will be effective for accounting periods beginning on or after 1 January 2015. 

Click for further information from the SORP Board on the draft SORP and the Exposure Draft Statement of Recommended Practice: Accounting for Further and Higher Education (all links to further and higher education SORP website).

FRC publishes draft guidance to Directors on preparing Strategic Reports

15 Aug, 2013

The Financial Reporting Council (FRC) has published an Exposure Draft (ED) of guidance to assist directors of listed companies to apply the Strategic Report requirements set out in The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 (the “narrative reporting regulations”). The FRC invites comments until 15 November 2013.

Whilst the narrative report consists of a Strategic Report and a Director’s Report, the FRC draft guidance (link to FRC website) does not cover the Directors’ Report which must include information on greenhouse gas emissions under the narrative reporting regulations.  The UK Department for Environment, Food & Rural Affairs (DEFRA) has published guidance as to how companies should report their greenhouse gas (GHG) emissions.  

The narrative reporting regulations require all companies (except small companies) to prepare a Strategic Report which will replace the current business review.  The existing guidance on the business review is contained within the Accounting Standard Board’s Reporting Statement: Operating and Financial Review (RS) published in January 2006.         

The non-mandatory guidance, contained within ‘Exposure Draft: Guidance on the Strategic Report’, has been developed in response to a request from the Department for Business, Innovation and Skills (BIS) and is intended “to encourage preparers to consider how the Strategic Report fits within the annual report as a whole and help enhance the quality of narrative reporting more generally”. 

The FRC guidance aims to be: 


shorter and more streamlined than the RS;

mindful of recent developments in narrative reporting best practice; and,

aligned with the requirements in the UK Corporate Governance Code. 

The key points from the Exposure Draft are: 

  • It is applicable to all entities preparing Strategic Reports, although the FRC note that the guidance has been written “with quoted companies in mind”
  • Only information that is material to shareholders should be included in the Strategic Report. 
  • Strategic Reports should include information that:

- is fair, balanced and understandable;

 - is concise;

 - is forward looking

 - is specific to the entity in question; and

 - that links to other information included within the Annual Report.  The FRC provide supplementary guidance which provides suggested examples where information should be linked within the Annual Report. 

  • The content of the Strategic Report is driven by the Companies Act 2006 as amended by the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 and should include “a description of the entity’s objectives, strategies and business model”.  The ED also highlights that a Strategic Report should include “an explanation of the main trends and factors affecting the entity; a description of its principal risks and uncertainties an analysis using key performance indicators and an analysis of the development and performance of the business”.
  • The Strategic Report should include “disclosures around the environment, employees, social issues and diversity”.

The non-mandatory guidance is structured in a way which provides the main principles supported with additional supplementary application guidance and practical examples. 

The FRC will be holding an outreach event to discuss the proposed guidance in October.

Click for (all links to FRC website):

IIRC releases further background papers on 'connectivity' and 'value creation'

14 Aug, 2013

The International Integrated Reporting Council (IIRC) has released two more 'background papers', providing further information about key concepts in its proposed International Integrated Reporting Framework. The new papers cover the topics of 'connectivity' and 'value creation'.

The paper on 'connectivity' notes themes such as the linkage between 'integrated thinking' and 'integrated reporting', the need to convey a holistic view of strategy, governance, performance and prospects, that connectivity does not mean 'monetisation', and that connectivity is "enhanced when the integrated report features a logical structure, linked sections, cross-referencing and navigation devices such as icons, color coding or other tools". It also notes that communications technology such as extensive business reporting language (XBRL) play a critical role in sharing and connecting information electronically.

The 'value creation' background paper relates the concept to the other fundamental integrated reporting concepts of the business model and capitals, noting that inputs of capital are transformed through the entity's business model to produce both positive and negative effects. It then goes on to conclude that an integrated report should allow for the assessment of whether an entity's business model affects the wider context that supports or threatens value creation in the short, medium and long term.

Click for access to the background papers (link to IIRC website).

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.