A new architecture announced by UN will help business support sustainable development

30 Sep, 2013

During the triennial UN Global Compact Leaders Summit, UN Secretary-General Ban Ki-moon discussed sustainability reporting and introduced a new architecture that is "designed to drive and scale up corporate actions to directly advance United Nations goals".

In a speech announcing this new architecture, Secretary-General Ban Ki-moon addressed the more than one thousand business executives in attendance by asking them to do more in regards to sustainable reporting:

Companies that take their responsibilities to people and the planet seriously will increasingly be in the vanguard. That is why the investment community is looking closely at sustainability and factors like environmental stewardship, labour standards, social responsibility and good governance. In short, business can no longer ignore its social and environmental responsibilities. We need it to help build sustainability through the marketplace. Ladies and Gentlemen, your companies have already committed to these principles. Most of you are reporting on your progress. But I want you to go further. First, I want you to see what more you can or should be doing in your own operations and in your relationships with trading partners. Second, I want you to act on your commitment by helping to swell the ranks of the Global Compact so we reach a critical mass. Third, I want you to consider how to use your expertise and resources to help to promote the changes we need for a truly sustainable future. We need you to advance innovations and forge collaborations that can have transformative impacts on some of the toughest issues we face. I am firmly committed to the power of partnerships, working with business and all key stakeholders to make progress on UN objectives.

The UN Secretary General was also joined by Georg Kell, Executive Director of the UN Global Compact (UNGC), Ernst Ligteringen, Chief Executive of Global Reporting Initiative (GRI), and Peter Bakker, President of the World Business Council for Sustainable Development (WBCSD), to "affirm plans for mutual collaboration between the three organizations to support and empower business to take action on sustainable development".

In the GRI press release following this announcement, the organisation noted how this collaboration will occur in the future:

A key factor will be the need for businesses to demonstrate accountability and transparency by publicly disclosing their sustainability impacts, according to widely accepted guidelines. The GRI Guidelines – the most widely used sustainability reporting framework in the world - are an effective tool for businesses to integrate sustainability into their strategies and to regularly assess and articulate their impact on sustainable development.

To achieve alignment with key partners, GRI plans to work with UNGC and WBCSD to develop private sector guidance that will help companies enhance their sustainability management and reporting with a view to global sustainable development goals and targets.

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EFRAG outreach on Conceptual Framework

30 Sep, 2013

EFRAG, the IASB and Dutch Accounting Standards Board (DASB) have announced a joint outreach event on the revision to the Conceptual Framework, to be held in Amsterdam on 30 October 2013. This is part of a series of EFRAG outreach events, being held throughout Europe from October to December 2013, in cooperation with national standard setters and the IASB whenever possible.

The objective of these events is to discuss the proposals in the IASB's July 2013 Discussion Paper, A Review of the Conceptual Framework for Financial Reporting. The feedback received at these outreach events will be used by EFRAG to finalise its comment letter to the IASB on the Conceptual Framework.

Registration for the Amsterdam session is available on the DASB website before 15 October. More information on other dates and locations will be available in due course on the EFRAG website.

Financial Reporting Lab highlights voluntary disclosures on debt and cash flows which investors find useful.

30 Sep, 2013

The Financial Reporting Lab has published a summary of voluntary disclosures which listed UK companies can make to improve their reporting about debt and cash flows and which investors find useful in making investment decisions.

The summary is a reminder of the messages first highlighted by the Financial Reporting Lab in their reports on debt and cash flow in 2012.  These were: 

  • Net debt reconciliations
  • Debt terms and maturity tables; and
  • Operating and investing cash flows. 

The summary of disclosures should be supplemented with the information contained within the reports listed above which explain the disclosures further and provide background to the research undertaken by the Financial Reporting Lab. 

The Financial Reporting Lab suggests that these voluntary disclosures could be especially helpful to companies with high levels of debt or those seeking to raise additional finance in the future. The disclosures will provide a platform for companies to communicate net debt and cash flow information - which an investor will be particularly concerned with - more effectively. 

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  • Financial Reporting Lab summary ‘Are you doing what you can to answer investors’ basic questions about debt and cash flows?’ (Link to FRC website).
  • Our previous story on the Financial Reporting Lab report ‘Net debt reconciliations’.
  • Our previous story on the Financial Reporting Lab reports ‘Debt terms and maturity tables’ and ‘Operating and investing cash flows’.

Report from recent IFASS meeting released

30 Sep, 2013

A report has been issued summarising the discussions at the meeting of the International Forum of Accounting Standard Setters (IFASS) held in São Paulo on 17‐18 April 2013.

Highlights from the meeting included:

Relationships between the IASB and national standard-setters/regional bodies

  • IASB staff provided background and details of the IASB's Accounting Standards Advisory Forum (ASAF) and discussed the comment letters regarding the proposal to form ASAF, that body's role, structure and size, membership criteria, the selection of members, ASAF's relationship to other bodies, and the memorandum of understanding that appointees are required to sign. Participants were also updated on the results of ASAF's inaugural meeting.
  • Participants discussed the future of IFASS and the character/objectives of its activities. There was a consensus that IFASS should continue to meet twice a year.


International Public Sector Accounting Standards Board (IPSASB) update

The following two key messages were provided:

  • There are huge challenges involved in encouraging decision‐useful information for accountability by governments.
  • Can a global public standard-setter be more effective if it reflects cultural diversity?

Update on the IASB's work plan

Participants were informed about the status of the major projects (revenue recognition, leases, insurance, macro hedging, classification and measurement, impairment, and rate regulation) as well as the progress regarding several (in part new) narrow-scope projects.

Reports from regional groups

Reports were received from the AOSSG, EFRAG, GLASS, and PAFA representatives.

Topical issues

The meeting saw discussions of the following issues:

  • Accounting for investment tax credits,
  • Discount rate in IAS 19,
  • Accounting issues where controlling and controlled entities prepare financial statements under different frameworks,
  • Emissions trading schemes,
  • Goodwill amortisation and impairment,
  • Measurement framework,
  • IFRS for SMEs,
  • Conceptual framework,
  • Role of the business model in financial reporting, and
  • Use of Other Comprehensive Income.

Click for the full report (link to Malaysian Accounting Standards Board website).

FRC objects to IASB proposed amendments to IAS 16 and IAS 41

30 Sep, 2013

The Financial Reporting Council (FRC) has issued their final comment letter on the International Accounting Standard Board’s (IASB’s) Exposure Draft, ED/2013/8 ‘Agriculture: Bearer Plants’. Although the FRC are supportive of the proposals to account for bearer plants under IAS 16 ‘Property, Plant and Equipment’, they feel that the amendments are “too narrow” and should include other “biological assets which could also be more usefully valued in accordance with IAS 16” such as livestock.

The IASB Exposure Draft (ED) proposes amendments to IAS 16 ‘Property, Plant and Equipment’ and IAS 41 ‘Agriculture’ to include bearer plants within the scope of IAS 16.  Currently, IAS 41 requires that all biological assets that are related to agricultural activity must be measured at fair value less costs to sell. The amendments would bring bearer plants (e.g. fruit trees and grape vines) which no longer undergo significant biological transformation into the scope of IAS 16 so that they would be accounted for in the same way as property, plant and equipment.  

Bearer plants are defined as plants that are used in the production or supply of agricultural produce, are expected to bear produce for more than one period, and are not intended to be sold as a living plant or harvested as agricultural produce.  Plants that are grown both to bear produce and for sale as living plants or agricultural produce remain in the scope of IAS 41 (for example, trees that are cultivated for their lumber as well as their fruit). Equally, the produce on the bearer plants would continue to be accounted for under IAS 41.  The IASB proposes that before bearer plants are placed into production (i.e. before they reach maturity and bear fruit) they should be measured at accumulated cost.  After they reach maturity, bearer plants would be accounted for either under the cost model or a revaluation model. 

The FRC comment that they “see no reason” why livestock that is held purely for breeding purposes and not for sale should not also be able to be accounted for under IAS 16 rather than IAS 41 and highlight that this would “lead to greater consistency across agricultural entities” rather than the ED proposals that will “reduce comparability for the user”. 

Additionally, the FRC would not like to see additional non-financial disclosures for bearer plants, such as disclosures about productivity of bearer plants and considers that these would be “too onerous” for preparers.  

Rather than the limited scope amendments proposed to IAS 16 and IAS 41, the FRC advocates a fully comprehensive review of IAS 41 “from first principles”. 

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Results of outreach meetings with investors and analysts on the proposed accounting by lessees

27 Sep, 2013

The IASB staff have published a summary of feedback from investors and analysts on the lessee accounting proposals. The outreach events summarised were held between May and September 2013.

During the outreach events the IASB and the FASB asked investors and analysts three main questions about the proposals in the ED/2013/6 Leases which was published in May 2013:

  • Do leases create assets and liabilities for a lessee and, if so, should they be recognised on a lessee’s balance sheet?
  • What are your views on the proposed changes to a lessee’s income statement?
  • What are your views on the proposed note disclosure package?

On the balance sheet question the credit analysts and analysts consulted within the credit rating agencies generally supported the changes proposed to a lessee’s balance sheet while the views of equity analysts were more mixed.

Regarding the income statement proposals most, but not all, investors and analysts consulted agreed that there are economic differences between most leases of real estate and leases of equipment and vehicles and understand the rationale behind the dual approach proposed. Most of those who supported the balance sheet proposals, and yet disagreed with the dual approach in the income statement, still support the project overall. They are willing to accept the proposals in the income statement to achieve what they consider to be an improvement to financial reporting.

Not all investors and analysts consulted expressed views on the disclosure proposals. Of those who did, there was general support for those proposals. However, some investors and analysts suggested not changing the recognition and measurement of leases at all, but only improving note disclosures.

Please click for access to the full summary on the IASB's website.

A Guide to the IFRS Education Initiative

27 Sep, 2013

The IFRS Foundation has published 'A Guide to the IFRS Education Initiative' highlighting the progress made in each of the IFRS Foundation Education Initiative’s main projects.

The main projects of the Education Initiative are:

  • Framework-based teaching - supporting IFRS teachers,
  • IFRS adoption and implementation support,
  • IFRS for SMEs adoption and implementation support, and
  • Investor-focused IFRS education.

These projects are aimed at reinforcing the IFRS Foundation's goal of promoting the adoption and consistent application of IFRS. In fulfilling this objective, the Education Initiative especially takes into account the particular needs of small and medium-sized entities (SMEs) and emerging economies and aims at contributing to the rigour and consistency in which IFRS is applied worldwide by enhancing the understanding of IFRS in the investor community.

Please click for access to A Guide to the IFRS Education Initiative on the IASB's website.

EFRAG draft comment letter on the conceptual framework discussion paper

27 Sep, 2013

The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment letter on the IASB's Discussion Paper (DP) containing proposals for topical areas where the IASB considers a revision and amendment of the existing Conceptual Framework necessary.

EFRAG agrees with the high priority the IASB has given to this project and appreciates the work that the IASB has done in analysing areas that have proven problematic in the past. While EFRAG supports the practical approach taken in the project aimed at completing the project within a few years, EFRAG does not agree with all of the proposed solutions and thinks that in some cases issues should be addressed on a more conceptual basis.

EFRAG's key comments are:

  • EFRAG disagrees with the decision not to reconsider Chapters 1 and 3 of the existing Conceptual Framework. EFRAG believes that especially the approaches regarding stewardship, reliability and prudence should be opened for discussion again.
  • EFRAG appreciates the IASB’s preliminary view that financial statements can be made more relevant if the IASB considers how an entity conducts its business activities.
  • EFRAG agrees that measurement should be based on how assets contributes to future cash flows and liabilities will be settled or fulfilled.
  • EFRAG also welcomes that the DP addresses the distinction between liabilities and equity but EFRAG does not support all proposals made in this connection.

EFRAG is giving the conceptual framework project a lot of attention and has found several ways of contributing to the discussion and of soliciting constituents views. A publication series has been developed that discusses issues that arise in the course of the IASB's project - so far seven of the Conceptual Framework bulletins have been published, among them bulletins on  accountability, reliability and prudence. EFRAG has also initiated a series of outreach events are being held across Europe to discuss the proposals in the DP.

Please click for access to the following information:

FRC to update XBRL tagging to reflect new UK accounting standards

26 Sep, 2013

The Financial Reporting Council (FRC) has announced a project to update the XBRL tagging conventions (taxonomies) to reflect the new financial reporting standards for the UK and Ireland – FRS 100, FRS 101 and FRS 102 introduced in March 2013.

The project, which is being overseen by a governance committee, is a collaboration with Companies House, HMRC, large accounting firms and the Department for Business, Innovation and Skills (BIS).  

The FRC are targeting the updates for 1 January 2015, the date on which the new financial reporting standards are effective from. 

The press release is available on the FRC website.

IASB outreach events for conceptual framework - agenda papers available

26 Sep, 2013

The International Accounting Standards Board (IASB) will be hosting a series of public outreach events on its 'Conceptual Framework' Discussion Paper. The agenda papers for the round-table events in London have been posted on the IASB website.

The agenda for the meeting includes the following topics, which will be discussed in a similar format to all round table events:

  1. Measurement,
  2. Profit or loss and other comprehensive income, 
  3. Asset and liability definitions, recognition and derecognition, and
  4. General discussion: other areas.

Agenda papers for topics 1. and 3. have been made available already, the other papers will follow soon. All papers will be available through this IASB page.

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