IFRIC 21 provides guidance on when to recognise a liability for a levy imposed by a government, both for levies that are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and those where the timing and amount of the levy is certain. IFRIC 21 identifies the obligating event for the recognition of a liability as the activity that triggers the payment of the levy in accordance with the relevant legislation. The Interpretation clarifies that 'economic compulsion' and the going concern principle do not create or imply that an obligating event has occurred. 

EFRAG supports the adoption of IFRIC 21 and recommends its endorsement.  EFRAG has concluded that IFRIC 21 meets the technical requirements of the Regulation (EC) No 1606/2002 of the European Parliament and of the Council on the application of international accounting standards.     

EFRAG’s conclusion is supported by an Effects Study Report which considered the costs and benefits of implementing IFRIC 21. EFRAG’s assessment is that the benefits for preparers and users in implementing IFRIC 21 outweigh the costs.

The endorsement advice was passed by the EFRAG's Technical Experts Group (TEG) with two dissenting opinions.

Concurrently, EFRAG has updated its endorsement status report to reflect the final EFRAG endorsement advice on IFRIC 21. 

Click for (all links to EFRAG website):

• Press release
• EFRAG endorsement advice letter on IFRIC Interpretation 21 Levies.
• EFRAG Effects Study Report

The revised ED retains key features of the insurance contracts accounting model that was exposed by the IASB in 2010.  However, to address constituent’s concerns, a large number of modifications were made to the 2010 ED which the IASB sought feedback on in June 2013. 

The FRC appreciates the work that the IASB and their staff have carried out in addressing constituent’s concerns with the 2010 ED.  However the FRC are of the view that “certain aspects of the new proposals need further work”. 

• The FRC are concerned that “the introduction of the requirement in the 2013 ED to measure and present insurance liabilities in the Other Comprehensive Income (OCI) will have implications for current business practices in the industry”.  They further comment that this will “create extensive accounting mismatches and likely lead to asset liability measurement mismatch being hardcoded into accounting for insurance contracts”.  This increased complexity, the FRC feel, will reduce understandability of the financial statements for users. 
• Continuing the theme of accounting mismatch, the FRC comment that this will “incentivise insurers to hold assets that can be held at FV-OCI rather than those compulsorily required to be FV-PL”.  The FRC would like the requirements for classification and measurement of insurance contracts to be consistent with those applied for financial assets.
• The FRC believe that the mirroring approach proposed in the ED will likely be “complicated to apply and understand in practice”. 
• The FRC do not agree with the proposal in the ED to accrete interest on the contractual margin at locked-in rates.  Along with conceptual concerns with this proposal they comment that there will be a cost not least in “maintenance and tracking of cohorts for this purpose”.  The FRC would like the IASB to consider the costs and benefits of this proposal. 

Recognising the constituent’s concerns regarding implementation costs and transitioning systems and processes to comply with the new standard, the FRC recommend that there is “sufficient implementation time” after the final standard is published.  The FRC also recommend that early adoption should be permitted where companies feel that they are already ready. 

Please click for the draft comment letter on the FRC’s website.  Comments on the draft comment letter are requested by 10 October 2013.

The IASBs Exposure Draft (ED) Regulatory Deferral Accounts is intended to allow entities that currently recognise regulatory assets and regulatory liabilities in accordance with their previous GAAP to continue to recognise the effects of rate regulation under IFRSs until the longer term rate-regulated activities project is completed.  The proposed interim standard is only applicable upon the initial adoption of IFRSs. 

ESMA does not agree with the interim standard because: 

• It will create an interim standard which increases diversity in practice as deferral accounts “do not meet the definitions of assets and liabilities as set out in the IASB's Conceptual Framework.  ESMA comment that whether regulatory deferral accounts meet the definitions of assets and liabilities is one of the issues to be resolved in the comprehensive project of rate-regulated activities and until this project is finalised, the “IASB should not allow recognition of deferral accounts in IFRS financial statements”.
• Interim standards IFRS 4 Insurance Contracts and IFRS 6 Exploration for and Evaluation of Mineral Resources have demonstrated that “an interim standard is not a guarantee for a quick solution”.
• It will “seriously impair comparability among preparers depending on their timing of adoption to IFRS”. 
• It “will not contribute to better understandability of financial information as it will allow entities to recognise, measure and impair deferral accounts in their financial statements according to principles, policies and basis of preparation that are defined according to local GAAP which may not be in compliance with the principles, policies and basis of preparation that are set out in IFRS”.  ESMA believes that this will “impair investor confidence in IFRS”.
• There may be implications of applying the principles from the interim standard on other standards that are currently in place such as IFRS 3 Business Combinations and IAS 36 Impairment of Assets. 

Please click for access to the final comment letter on the ESMA website.

The full agenda for the meeting is summarised below:

Agenda papers from this meeting are not yet available but will be made available on the IASB's website in due course.

The regulations, which apply for quoted companies, completely change the requirements for the contents of the directors’ remuneration report and include some significant new disclosures, particularly a ‘single figure’ for the remuneration of each director. They come into effect for periods ending on or after 30 September 2013. 

The guidance entitled ‘Directors’ Remuneration Reporting Guidance’ considers itself as “best practice” and has been developed after consultation with a number of interested parties.  The GC100 and Investor Group acknowledge that “the guidance is not intended to be exhaustive or definitive” and would expect companies not to adopt a “boilerplate” approach but instead be innovative in reporting to suit their specific company requirements. 

The guidance, which is in the same order as the regulations, is structured to include: 

• Each requirement from the regulations, by paragraph, which are then supplemented with guidance;
• Mandatory disclosures which a company would need to include to ensure compliance with regulations; and
• Other disclosures which, although not required by the regulations, would promote “effective engagement between investors and companies”. 

The GC100 and Investor Group notes that flexibility needs to be provided for in drafting the remuneration policy.  They highlight that “once the framework of remuneration has been approved by the shareholders; each year the remuneration committee will need flexibility to determine pay, short-term incentives and the terms of long-term incentives”.     

Note.  The guidance was updated on 14 October 2013 to reflect minor amendments including a clarification when the new requirements are applicable from. 

*Update 18 August 2016 - a revised version of the guidance was issued.  The revised guidance largely follows the previous version, but also includes a number of detailed changes which will need to be considered by companies in preparing their next policy and report including; the disclosure of the maximum level of each component of remuneration for each executive director and that the maximum salary that might be paid must be explained in monetary terms or any other way appropriate to the company (e.g. percentage of salary); the exercise of discretion and judgement in determining directors' pay; how the disclosure of commercially sensitive performance measures or targets should be approached; and the linkage between the directors' remuneration report and strategic report*

Click here for:

• Press release and link to 'Directors' Remuneration Reporting guidance' (link to Practical Law website)
• Our previous story on the Directors’ Remuneration Report regulations
• Deloitte ‘Need to Know’ on the new directors’ remuneration report regulations
• Deloitte 'Governance in brief' newsletter on the new directors' remuneration report regulations.
• Approved directors’ remuneration report regulations (link to statutory instrument)

The agenda for the meeting (as at 9 September 2013) is summarised below:

Agenda papers for the meeting are available on the IASB's website.

The agenda for the meeting is summarised below:

 Agenda papers for the meeting are available on the IASB's website.

For lessees, the Exposure Draft ED/2013/6 Leases 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 proposals are only applicable for leases with a lease term of more than 12 months.  

ESMA agrees that IAS 17 Leases, which does not require a lessee to recognise assets and liabilities arising from operating leases, “fails to provide complete and useful information regarding the financial position of lessees”.  They also agree with the improvements in lessor accounting proposed by the IASB. 

ESMA comment: 

By requiring the recognition of assets and liabilities arising from all lease contracts except for short term leases, we believe that financial statements will serve as a better basis for determining financial ratios, thus contributing to increased transparency for users of financial statements 

Commenting on the proposed dual model, ESMA feel that this “better reflects the significant differences in the economics of leases depending on the substance of the contract” and is an improvement on the 2010 ED. 

However, there are a number of areas where ESMA feels that the IASB should make improvements to the ED.  Their key concerns are: 

• Additional guidance should be provided to “assist preparers in assessing whether they have the right to control the use of an identified asset” and “for determining when protective rights are deemed to be substantive and prevent a lessee from controlling the use of the asset”.  ESMA feel that this will “promote consistent application and limit the potential issues of enforceability that may arise”.
• Additional clarification and guidance should be provided on “how to determine whether variable lease payments are “in-substance fixed payments”” as ESMA are of the view that the guidance in the ED may not cover all types of variable lease payments that might qualify as “in-substance fixed payments” and lack of guidance may lead to inconsistent application.
• Clarification should be provided as to the meaning of the concepts of “substantially all”, “major part” and “insignificant” used in the ED.
• That the application of paragraph 23(c) of the ED may “result in accounting for a contract as a lease when the lease component in the contract is significant”.
• That “structuring opportunities and issues of enforceability may occur in relation to leases of non-property assets”.  ESMA are concerned that companies may structure contracts to benefit from the different presentation requirements between Type A and Type B leases.

The full comment letter, including detailed responses can be found here (link to ESMA website).