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November

Agenda for December 2013 IASB meeting

29 Nov 2013

The International Accounting Standards Board (IASB) is meeting at its offices in London on 12 December 2013. The IASB will receive an update from the Interpretations Committee and will consider the post-implementation review of IFRS 3, amendments to IAS 28, IAS 16/IAS 38 and IAS 19), possible amendments to IFRS 1 (short-term exemptions) and financial instruments impairment, the due process followed as well as impairment and classification and measurement.

The full agenda for the meeting, dated 29 November 2013, can be found here.  We will post any updates to the agenda, and our Deloitte observer notes from the meeting, on this page as they are available.

EFRAG strives to enlarge General Assembly

29 Nov 2013

In reaction to the Maystadt report released earlier this month, which received the unanimous support of the European Union's Economic and Financial Affairs Council (ECOFIN) to transform EFRAG, EFRAG is beginning to implement the changes concerning its own governance.

Enlarging EFRAG's General Assembly to include National Funding Mechanisms (NFM) and welcome other European organisations is aimed at satisfying an earlier request of NFM (more particularly those set in France, Germany, Italy and the UK) to gain greater ownership and responsibility in EFRAG and it is also intended as an encouragement for Member States that do not yet have such a mechanism to set up one up.

NFM (national systems that collect contributions to fund EFRAG) exist in Denmark, France, Germany, Italy, Norway, Sweden and the UK and until 2010, EFRAG was entirely funded by its Member Organisations and the NFM. Since 2010, the European Commission contributes to the funding through a grant but Mr Maystadt warned in his report that "due to budgetary constraints, the EU grant for 2014 will [...] be decreased".

The final report had therefore recommended to analyse the legal possibility of establishing a system of compulsory contributions/ levies paid by listed companies that use and benefit from IFRS. Pending the implementation of such a levy system, Mr Maystadt recommended for the meantime that Member States organise a National Funding Mechanism (NFM) if it has not yet been done.

EFRAG still needs to secure its funding for 2014. European funding for the whole year 2014 has not been confirmed as the draft regulation supporting such funding is still being debated by European institutions. EFRAG expects that it will continue to benefit from European funding but delays in issuing the final regulation are likely to delay the payments. Therefore, the EFRAG Supervisory Board has decided to call upon NFM to formalise their financial commitment to EFRAG in 2014 "so that EFRAG can face without any concern any potentially delayed payment of the EC contribution".

Please click for the press release on the EFRAG website.

EFRAG updates endorsement status report for IAS 19 amendments

28 Nov 2013

The European Financial Reporting Advisory Group has released an updated endorsement status report to reflect the recent issue by the International Accounting Standards Board (IASB) of amendments to IAS 19 'Employee Benefits'.

Defined Benefit Plans: Employee Contributions (Amendments to IAS 19) was issued on 21 November 2013 and clarifies the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service. In addition, the amendments permit a practical expedient if the amount of the contributions is independent of the number of years of service, in that contributions, can, but are not required, to be recognised as a reduction in the service cost in the period in which the related service is rendered. 

The amendments are effective for annual periods beginning on or after 1 July 2014, however the endorsement status report indicates that the EU endorsement process is currently expected in the third quarter of 2014.

The endorsement status report, dated 27 November 2013, is available here.

FRC clarification statement in relation to ISA (UK and Ireland) 700 (June 2013)

28 Nov 2013

The Financial Reporting Council (FRC) has issued a clarification statement in relation to paragraph 19A of International Standard on Auditing (ISA) (UK and Ireland) 700 ‘The independent auditor’s report on financial statements’(Revised June 2013). The FRC has clarified the requirements of paragraph 19A in a group audit situation in scenarios where there is a single auditors report covering both the group and parent company financial statements and where there are separate auditor reports for both the group and parent company financial statements.

Paragraph 19A of ISA (UK and Ireland) 700 (Revised June 2013) explains disclosures that must be made in the auditor’s report for companies that are required and those that choose to voluntarily comply with, the UK Corporate Governance Code.  Companies that do not make the disclosures must explain why they have not. 

Where there is a single auditor’s report (i.e. the auditor reports on both the group and parent company financial statements are combined within a single report) and separate auditor reports (i.e. where the auditor reports separately on the group and parent company financial statements), the FRC has clarified that it was their intention that the paragraph 19A disclosures would be in relation to matters arising during the audit of the group’s financial statements.  

However they clarify that the standard was not “written to exclude the application of the requirements to the separate audit of the individual parent company financial statements” and they recognise that it may also be appropriate to identify “any relevant risks and other information required by paragraph 19A that are unique to the parent company”.  

The FRC clarify that these parent company risks and other information required by paragraph 19A should be separately identified but integrated within the combined audit report (where there is a single audit report) and within the group auditor’s report (where there are separate auditor’s reports).  

In the latter situation, the FRC comment that the parent company audit report could make reference to the disclosure in the group auditor’s report “in the other matter paragraph that refers to the separate auditor’s report on the group financial statements” in order to avoid repetition of information. 

The full clarification statement can be accessed on the FRC website.

We comment on HM Treasury draft Regulations and draft guidance on CRD IV country-by-country reporting.

27 Nov 2013

We have published our comment letter on HM Treasury draft Regulations and draft guidance on CRD IV country-by-country reporting (CBCR). In our view there are a number of areas which still require additional consideration.

These are: 

  • The definition of “consolidation” and how it is interpreted in practice.  We comment that we have identified “many scenarios where the results of entities outside the scope of CRD IV will be disclosed which appear contrary to the government’s stated intentions at Paragraph 3.10 of the Summary of Responses document” (link to HM Treasury website).  This states that “it is not the government’s intention to capture institutions that are not in the scope of CRD4”.  We would like institutions “to be permitted to exclude non-institution subsidiaries from their CBCR disclosure if they prefer”.  
  • The inclusion of additional requirements into the statutory audit report.  We comment that “it is inappropriate to establish a precedent for information not directly relevant to the shareholders being included within the audit report”. 
  • The fixed deadline for reporting.  We comment that this deadline will be difficult for some to comply with.  We propose that the deadline “be set as the number of months after each institution’s year end”. 

There are also a number of areas where we feel that additional clarification and/or guidance is required.  These areas include; the definition of ‘corporation tax paid’ and the concept of materiality within CBCR. 

Our full comment letter can be obtained here.

We comment on BIS proposals for simplified company filing requirements.

27 Nov 2013

We have published our comment letter on the Department for Business, Innovation and Skills’ (BIS) proposals for simplified company filing requirements. The aim of the proposals, which are part of the government’s Red Tape Challenge, is to reduce the amount of information that companies need to file and the frequency that it is sent to Companies House. We welcome the consultation and are “broadly supportive” of the objective of the Red Tape Challenge.

Our key comments include: 

  • We do not agree with the proposals to rely solely on event driven notifications in place of the annual return highlighting that this “would lead to a decline in the quality of information held on the register”.
  • We strongly disagree with the proposals to include a list of all subsidiaries in a note to the accounts.  We comment that “a complete listing, where it is of excessive length for inclusion in the accounts, could either be provided with the annual return, as is currently permitted, or filed together, but as a separate document, with a company’s annual report and accounts”.
  • We disagree with the proposals for aligning the filing dates for accounts at both HMRC and Companies House. 

Further comments and a full response to all questions raised in the invitation to comment are contained within the full comment letter.

Sustainability and integrated reporting update

27 Nov 2013

A brief overview of recent topics related to sustainability reporting and integrated reporting, focused on a 'FAQ' on sustainability reporting, International Integrated Reporting Council (IIRC) developments, and a recent United Nations Environment Programme Finance Initiative (UNEP FI) conference.

Highlights of news and developments include:

  • FAQ on sustainability reporting. The United Nations Environment Programme (UNEP), Global Reporting Initiative (GRI) and Climate Disclosure Standards Board (CDSB) have collaborated to produce Frequently Asked Questions on Corporate Sustainability Reporting (link to CDSB website). The report seeks to provide context to the work of the 'Group of Friends of Paragraph 47' (formed by the governments of Brazil, Denmark, France and South Africa, and supported by UNEP and the Global Reporting Initiative (GRI) after the Rio+20 conference) and address key questions around sustainability reporting. The questions discuss the context and background to corporate sustainability reporting, the current practices of business, governments and others in sustainability reporting, and opportunities for the further development and increased uptake of corporate sustainability reporting
  • IIRC yearbook. The International Integrated Reporting Council (IIRC) has published its IIRC Pilot Programme Yearbook 2013 (link to IIRC website), providing insights into how those responsible for sustainability within organisations are moving towards integrated reporting as part of the IIRC's pilot programme. The document provides insights on how entities have considered the 'capitals' concept in integrated reporting, how integrated reporting impacts the way organisations define value, the critical nature of an entity's business model, the impact of integrated reporting on investors, and the developing regional networks supporting integrated reporting
  • UNCTAD and IIRC MoU. The United Nations Conference on Trade and Development (UNCTAD) has signed a Memorandum of Understanding with the International Integrated Reporting Council (IIRC), formalising ongoing collaboration between the UNCTAD and IIRC to to promote the global harmonisation and clarity of reporting frameworks. More information is available in the IIRC newsletter for November 2013 (link to IIRC website)
  • UNEP FI roundtable. The United Nations Environment Programme Finance Initiative (UNEP FI) held a global roundtable in Beijing on 12-13 November 2013 focusing on how the finance sector can contribute to global sustainability efforts. The session included the launch of the Online Guide to Banking and Sustainability (link to UNEP FI website), a tool designed to assist financial institutions to understand and implement sustainability based on the UNEP 'Statement of Commitment by Financial Institutions on Sustainable Development' (financial institutions joining the UNEP FI are required to adhere to the statement, which includes requirements around reporting). More information about the roundtable is available at the dedicated UNEP FI website for the event.

IASB work plan updated

26 Nov 2013

Following its recent meeting, the International Accounting Standards Board (IASB) has updated its work plan. The redeliberations on insurance contracts have been deferred to the first quarter of 2014 and the discussion paper on rate regulation is now expected in the second quarter of 2014. Next steps in the narrow scope project on put options will be determined in the first quarter of 2014.

Current status

The revised time table for the major projects is now as follows:

Project

Current status

Next project step

Expected timing

Conceptual Framework — Comprehensive IASB project

Discussion paper

Redeliberations

Q1/Q2 2014

Financial instruments — Impairment

Redeliberations

Finalised IFRS

Q1/Q2 2014

Financial instruments — Macro hedge accounting

Research/deliberations

Discussion paper

Q1 2014

Financial instruments — Limited reconsideration of IFRS 9 (classification and measurement)

Redeliberations

Finalised IFRS

Q1/Q2 2014

Insurance contracts

Re-exposure

Redeliberations

Q1 2014*

Leases

Re-exposure

Redeliberations

Q4 2013

Rate-regulated activities — interim IFRS

Exposure draft

Finalised IFRS

Q1 2014

Rate-regulated activities — Comprehensive project

Research/deliberations

Discussion paper

Q2 2014*

Revenue recognition

Redeliberations

Finalised IFRS

Q1 2014

* Indicates a change since the prior work plan update.

Next steps in the narrow scope project IAS 32 — Put options over non-controlling interests will be determined in the first quarter of 2014. The conceptual framework discussion paper published in July 2013 contains a proposal which would provide a solution that could be applied to this project. Comments on the discussion paper close on 14 January 2014 and constituent feedback will probably figure in determining how to proceed with the narrow scope project on put options.

Click for the IASB work plan dated 26 November 2013 (link to IASB website). We have updated our project pages to reflect the updated work plan and other known developments.

IFRS Foundation appoints Trustees

26 Nov 2013

The IFRS Foundation has announced the appointment of Maria Helena Santana and Lynn Wood as Trustees of the IFRS Foundation. Both replace retiring Trustees with similar background. The appointments will begin on 1 January 2014 and will expire on 31 December 2016.

Mrs Santana was Chair and President of the Comissao de Valores Mobiliarios (CVM), the Brazilian Securities and Exchange Commission, from 2007 until 2012. In that position, she oversaw the successful transition and adoption of IFRS in Brazil. Mrs Santana also served as Chair of IOSCO's Executive Committee and a member of the International Integrated Reporting Council (IIRC). She replaces Pedro Malan, former Finance Minister of Brazil and former President of the Central Bank of Brazil. Mr Malan's term expires 31 December 2013.

Ms Wood has served as Chairman of the Australian Financial Reporting Council (FRC) and as a member of the New Zealand External Reporting Board (XRB) since 2011. Ms Wood follows Jeffrey Lucy, former Chairman of the FRC and former Chairman of the Australian Securities and Investments Commission (ASIC). Mr Lucy's term also expires 31 December 2013.

Please click for the IFRS Foundation press release on the IASB website.

November 2013 IASB meeting notes — Part 3 (concluded)

25 Nov 2013

The IASB's meeting was held in London on 20-22 November 2013, some of it a joint meeting with the FASB. We have posted the final Deloitte observer notes from the meeting, covering the discussions on classification & measurement and impairment.

Click through for direct access to the notes:

Wednesday, 20 November 2013

Thursday, 21 November 2013

You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

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