ICAEW and IFRS Foundation Financial Institutions IFRS Conference announced

11 Sep, 2013

The IFRS Foundation, along with the Institute of Chartered Accountants in England and Wales (ICAEW), will be hosting a conference in London on 3 December 2013 to discuss key Standards and current IASB projects.

The Financial Institutions IFRS Conference will feature a keynote address by IASB Chairman Hans Hoogervorst and consist of panel discussions and technical break-out sessions held by IASB members, senior IASB technical staff, and other IFRS experts on IFRS 9, IFRS 10, IFRS 12, and current IASB projects (classification and measurement, impairment, macro hedge accounting, leases, and insurance contracts).

More information on the conference is available on the ICAEW website.

Companies House report identifies inconsistent subsidiary disclosure in FTSE 350 company financial statements

11 Sep, 2013

A report by Companies House, at the request of the Secretary of State for Business, Innovation and Skills (BIS), reveals that 124 out of 290 FTSE 350 companies failed to adequately disclose a complete list of their subsidiaries in the notes to their financial statements, therefore not complying with UK company law.

Section 409 of the Companies Act 2006 requires that companies disclose a complete list of their subsidiaries in the notes to their financial statements which are submitted to Companies House.  Where the number of subsidiaries is too extensive, Section 410 of the Companies Act 2006 permits a company to list the ‘principal’ information in their financial statements and then provide the full listing within their next annual return. 

Companies House have written to those companies where disclosure was incomplete and will continue to monitor full compliance by FTSE 350 companies on a permanent basis.   

At a time when corporate transparency is coming under increasing scrutiny, not least with the recent endorsement by G20 finance ministers on a new global standard, it is important that all companies comply with the Companies Act requirements. 

Click for (all links to BIS website):

Simpler reporting requirements proposed for ‘micro companies’

10 Sep, 2013

The Department for Business, Innovation and Skills (BIS) has published their proposals for the implementation of EU Directive 2012/6/EU (the “Micros Directive”) in the UK. The BIS proposals largely follow those contained within the “Micros Directive” and will result in a reduced level of disclosure for UK businesses meeting certain criteria. The disclosure exemptions which can be taken at the option of owners and directors of micro-companies will come into force for accounting periods ending on or after 30 September 2013.

‘Micro companies’ are defined as those not exceeding two out of three of the following thresholds:

  • Balance sheet total: £316,000
  • Net turnover: £632,000; and
  • Average number of employees during the financial year: 10 (or fewer).

(The sterling equivalent figures are based on the exchange rate ruling when the directive came into force on 19 July 2013).

EU Directive

The “Micros Directive” (link to EU website), published by the EU, provides a number of reduced disclosures and certain recognition exemptions for ‘micro companies’, although these are Member State options (see below for BIS’s proposals for the UK).  Under the “Micros Directive” 'micro companies' need only prepare an abridged balance sheet and abridged profit and loss account and very limited disclosure notes. 'Micro companies' do not need to present prepayments and accrued income and accruals and deferred income.  They are also not required to recognise certain prepayments and accrued income and accruals and deferred income. The resulting accounts ‘shall be regarded as giving a true and fair view’ notwithstanding the omission of many disclosures which would generally be regarded as necessary to give such a view.

UK Implementation

In February 2013, BIS consulted on the implementation of the “Micros Directive” in the UK. The consultation stated that the Government was minded to implement changes to legislation to enable UK companies to take advantage of the exemptions contained within the directive. Views were sought on each separate exemption with a view to determining the correct approach to implementation in the UK.  Whilst many supported the application of the “Micros Directive” in the UK a number of respondents did express concern over certain areas such as:

  • The impact of the changes on the “true and fair” principle, most notably the relationship between accounting standards and the exemptions for 'micro companies';
  • The proposed exemption from the requirement to present certain prepayments and accrued income and accruals and deferred income and partial exemption from the requirement to recognise prepayments and accruals; and
  • The impact of the changes on the accruals accounting framework.

BIS has now prepared their final proposals entitled ‘Simpler Financial Reporting for Micro-entities: The UK’s proposal to implement the “Micros Directive”’ which takes all of the responses into account.

They propose:

  • To incorporate all parts of the “Micros Directive” with the exception of the parts which would remove the obligation to
    • (i) present prepayments and accrued income and accruals and deferred income; and
    • (ii) recognise only certain prepayments and accrued income and accruals and deferred income.
  • To exclude charities from the scope of the exemptions.

BIS have stated that they are “exploring how best to ensure that the directive’s requirement that “Micros” accounts are true and fair can best be reflected in the implementation”.  The Institute of Chartered Accountants in England and Wales (ICAEW) has warned that 'micro companies' will need to weigh up the risks involved in providing reduced financial information to finance providers and other stakeholders before deciding whether to take up the reduced disclosure options. 

BIS intend to lay regulations, based on these proposals, before parliament shortly.  Once approved it is likely that amendments will be required to the FRSSE, at least to disapply those disclosure requirements which go further than the very limited disclosures which will be required by law.

Click for (link to BIS website):

IFRS Foundation announces web app

10 Sep, 2013

The IFRS Foundation has launched a new web application (web app) for accessing IFRS content and related information from tablet computers and other mobile devices. The app currently supports Apple iPad and iPhone devices, with support for Android coming soon.

The beta version of this web app provides eIFRS Subscribers online and offline access to the Standards. Other related information—including news, the IASB Work Plan, project pages and meeting details—is available to non-subscribers.

More information and a link to the app are available on the IASB website.

EFRAG does not support interim standard on rate regulation

10 Sep, 2013

The European Financial Reporting Advisory Group (EFRAG) has published its final comment letter on the IASB's exposure draft ED/2013/5 'Regulatory Deferral Accounts'. The comment letter makes clear that EFRAG constituents do not support the pursuance of this interim project.

In May 2013, EFRAG published a draft comment letter on ED/2013/5 and asked for its constituents to comment. EFRAG's final comment letter to the IASB contained constituent feedback, and officially disagreed with the interim project.

EFRAG does not support the ED because:
  • It results in a lack of comparability between (a) entities that take advantage of the ED and (b) entities that already apply IFRS or do not wish to apply the ED (see paragraphs 3 to 5 of the Appendix); and
  • It is not limited to facilitating first-time adoption but maintains previous accounting policies for an indefinite period. Other interim standards such as IFRS 4 Insurance Contracts and IFRS 6 Exploration for and Evaluation of Mineral Resources have shown that there was no such thing as a short-term interim standard (see paragraph 6 of the Appendix).

EFRAG notes in its comment letter that if the IASB proceeds to issue an interim standard based on the ED, that the standard must be strictly limited to an option for first-time adopters.

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

The Bruce Column - A time of change, and of opportunities

10 Sep, 2013

The draft guidance on the strategic report suggests that companies will be encouraged to experiment and be innovative in their corporate reporting. Our regular resident columnist, Robert Bruce, reports on how communication of the corporate story is now centre stage. And how the launch of UK Accounting Plus will help this process.

At the end of this month a whole range of changes in UK corporate reporting comes into force. The part of the directors’ report that used to be known as the business review will become the strategic report. The Financial Reporting Council describes the changes in law as ‘relatively modest’ but they herald a new era of corporate communication.

There is a long history of efforts to encourage greater narrative explanation of what a company has done, is doing, and where it is going. Operating and financial reviews and similar initiatives have come and gone. They have tended to arrive with fanfares and then expire through a lack of commitment and regulatory interest.

But now we have a different approach. It is collaborative and gentler. But the aim is, if anything, more ambitious. This time the aim is to spark change rather than impose it. And also to pass the means of doing so to companies themselves.

The hope is that this will result in much clearer corporate reporting with a greater emphasis on narrative and non-financial measures. And the current tranche of changes deal with everything from directors’ remuneration to carbon footprints and diversity. But the FRC wants the ‘modest’ changes to bring about far-reaching change. ‘They should’, it says, ‘act as a catalyst for entities to prepare more concise and relevant narrative reports’. Hence its recently-released exposure draft on ‘Guidance on the Strategic Report’. The accent is on encouraging innovation and experimentation. It is about companies taking more responsibility themselves over what they put into their narrative, where they put it, and how they go about explaining what they are doing. It is intended to improve their communications.

And the guidance has been produced alongside the current momentum towards integrated reporting. The FRC has ‘met and shared ideas with the International Integrated Reporting Council, (IIRC), throughout the development of this guidance’, it says. For his part the CEO of the IIRC, Paul Druckman, points out that the new draft guidance supports ‘a shift in the mind-set of a business away from rigid compliance, and towards the better communication of its individual value creation story for its providers of financial capital’.

That is where the difference lies. What we are talking about now is not slotting pedantic detail into pre-ordained places. This is about broad frameworks and the onus moving to companies to choose the best ways to get their story across.

And this is also what this new website is about. It is about providing a huge range of information and comment in an easy form to help directors and companies refine their strategic and decision-making processes.

Click for:


Welcome to UK Accounting Plus

10 Sep, 2013

Deloitte has launched UK Accounting Plus, a UK-focused subsite of its successful and long-established IFRS-related news and content site, IAS Plus.

UK Accounting Plus will give users a comprehensive free source for all UK accounting, reporting and corporate governance news and information. It provides latest news and commentary backed up by a vast archive of background information and insight to set current events in context. Formats of updates include news stories, commentary, think-pieces, videos and podcasts  As with the global IAS Plus site, users can personalise the site by selecting particular topics of interest and viewing news and publications about them. They can also subscribe to various financial reporting and corporate governance related communications and publications that interest them.

Access to the new UK Accounting Plus as well as the global IAS Plus site will continue to be free of charge for all users. The two sites remain connected, and switching between the UK site and the global site is easy using the pull-down menu in the upper right corner from anywhere on the site.

You can take a tour of UK Accounting Plus and its main features by watching our video

IASB publishes proposal for IFRS Taxonomy 2013

09 Sep, 2013

The IFRS Foundation has published for public comment an exposure draft of the IFRS Taxonomy 2013 Interim Release Package.

This interim release is part of an accelerated timeline for the release of the IFRS Taxonomy 2014. The final version is expected to be published in early 2014. 

The Exposure Draft IFRS Taxonomy 2013 Interim Release Package is open for comment until 11 November 2013.

The press release is available on the IASB website.

IASB chairman discusses Europe, IFRS and convergence

09 Sep, 2013

The IASB has posted to its website a speech given today by Chairman of the IASB, Hans Hoogervorst, titled 'Europe and the path toward global accounting standards'. In his speech, Mr Hoogervorst praised the strong relationship between the EU and IASB, discussed how the successes of IFRS and European capital markets are intertwined, provided an update on the IASB's major convergence projects with the FASB, and outlined the IASB's future agenda.

Mr Hoogervorst opened his speech with general comments on the relationship between the European Union, the IASB and IFRS. He acknowledged that Europe's decision to adopt IFRS "gave IFRS the credibility and critical mass it needed to become the single set of global accounting standards". He also noted that IFRS have benefited European markets in that transparency has been increased and costs of capital  for listed companies have decreased since adoption. Mr Hoogervorst also commended the EU for its thorough endorsement procedure and recognised that the EU adopting IFRS without significant adaptations speaks highly of the quality of IFRS. He went on to discuss the adoption of IFRS in other countries, mentioning the jurisdiction profiles recently released by the IFRS Foundation.

Mr Hoogervorst then provided an update on the remaining IASB-FASB convergence projects:

  • Revenue recognition: A new standard is expected within the next 3 months.
  • Leases: The contentious issue is putting lease contracts on the balance sheet.
  • Impairment: The FASB and IASB agree that an expected loss model is needed but have trouble agreeing on the mechanics. Mr Hoogervorst explains "One reason why we find it difficult to come to a common answer is that an expected loss model inherently has a relatively high degree of subjectivity, because it deals with uncertain outcomes in the future. There is no straightforward answer on how this can be done." He also confident that progress will be made at the September joint board meeting.
  • Insurance contracts: The IASB's recent exposure draft is a step toward the ultimate goal of creating a more realistic view of the true performance of the insurance industry. Mr Hoogervorst cited the EIOPA's recent concern that some insurance companies will not be able to meet their capital requirements because of persistent low interest rates on the industry. There is concern that the ambiguity in current insurance reporting may keep this potential crisis from being fully exposed. 

After a brief excursion on the Conceptual Framework Discussion Paper, Mr Hoogervorst went on to discuss the importance of improving financial reporting disclosures — developing more concise, understandable and helpful documentation. He also mentioned the 10-point plan he presented in June 2013 to improve disclosures in financial reporting.

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

G20 continues calls for convergence

09 Sep, 2013

The Group of 20 (G20) has released its G20 Leaders' Declaration and accompanying documents from the G20 Leaders' summit held in St. Petersburg on 5-6 September 2013. Focused on the theme of "cooperation, coordination and confidence", which aims for a stronger and sustainable growth to end the global financial crisis, the Declaration also discusses again the need for convergence of accounting standards.

In the lead up to the summit, the Financial Stability Board (FSB) had published a report which summarises the outcomes over the past five years of the fundamental reforms of the global financial system, which were launched by the G20 in 2008 in response to the global financial crisis.

The outcomes noted in the report are included in the preamble to the Declaration:

In the five years since we first met, coordinated action by the G20 has been critical to tackling the financial crisis and putting the world economy on a path to recovery. But our work is not yet complete and we agreed that it remains critical for G20 countries to focus all our joint efforts on engineering a durable exit from the longest and most protracted crisis in modern history.

In terms of accounting standards, the Declaration repeats the call for convergence in much the same terms as previously, but includes an explicit call for the convergence projects to be completed by the end of 2013.  Also included for the first time is specific reference to the need to improve risk disclosures by banks as recommended by the Enhanced Disclosure Task Force (EDTF) in October 2012, which were subject to a progress report from the task force in August 2013:

We underline the importance of continuing work on accounting standards convergence in order to enhance resilience of financial system. We urge the International Accounting Standards Board and the US Financial Accounting Standards Board to complete by the end of 2013 their work on key outstanding projects for achieving a single set of high-quality accounting standards. We encourage further efforts by the public and private sector to enhance financial institutions’ disclosures of the risks they face, including the ongoing work of the Enhanced Disclosure Task Force.

The Declaration touches on other important themes, such as:

  • the high level of public debt and its sustainability in some countries, echoing earlier statements by the G20 Finance Ministers and Central Bank Governors which included discussion of the need for reform of public sector reporting, consistent with the broader G20 vision of open and transparent governments
  • the focus of 'development for all', which links to the post-2015 development goals of the United Nations, the Rio+20 'The Future We Want' outcome document and other global initiatives around economic, social and environmental goals, which includes increasing moves towards greater sustainability reporting
  • support for initiatives aimed at increasing extractive transparency, including voluntary participation in the Extractive Industries Transparency Initiative (EITI)
  • approval of the OECD/G20 Action Plan on Base Erosion and Profit Shifting which seeks to improve the fairness and integrity of global tax systems, including the introduction of new transfer pricing documentation which would require entities to disclose income, economic activity and taxes paid using a common template.

The final Leaders Declaration is is available on the G20 website. In addition, there are various annexures available, such as the EDTF report and and the G20/OECD high-level principles of long-term investment financing by institutional investors.

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