July

IVSC consults on agenda and standards

14 Jul, 2014

The International Valuation Standards Council (IVSC) has issued two consultation papers seeking input into its future work plan and the structure and scope of International Valuation Standards (IVS).

Agenda consultation

The IVSC Standards Board Agenda Consultation seeks to garner constituent views on the agenda priorities of the IVSC for the three year period commencing January 2015. The IVSC expects to give highest priority to projects that are consistent with the objectives of the IVS, which are focused on building confidence and trust in valuation assignments, narrowing differences in valuation and promoting convergence through increased use and adoption of IVS. Projects will be evaluated against established project criteria when determining whether to be added to the agenda.

The agenda consultation outlines a number of existing projects that are expected to continue into 2015, and requests information about the extent to which difficulties are encountered as a result of a lack of a globally recognised valuation standard on those topics:

  • Extractive industries (mining and quarrying and extraction of energy resources such as oil and gas)
  • Forestry (valuation of forests or woodland used primary for timber production under IAS 41 Agriculture)
  • Trade related/going concern property (specialised buildings such as hotels and other structures designed for a specific business activity)
  • Specialised public sector assets (assets for which there are seldom active markets, typically held by public sector entities for public service purposes)
  • Derivatives (equity derivatives, fixed income, with later consideration of credit, foreign exchange and commodity derivatives)
  • Funding valuation adjustments (reflecting the cost of funding an uncollaterised instrument or position)
  • Valuation for resolution and recovery (when entities are in financial difficulty).

In addition, the consultation paper encourages suggestions for other projects to be added to the IVSC agenda.

IVS structure and scope

A separate consultation paper, Structure and Scope of the International Valuation Standards, seeks constituent feedback on how the IVSC can ensure that IVS are presented in the clearest possible manner, and what changes might be required to the structure of IVS to improve their clarity.

Issues discussed in the consultation paper include:

  • Should the word "standard" be reserved solely for rules that are intended to be mandatory?
  • Different views as to what is meant by "mandatory" in the context of standards
  • An apparent lack of clarity as to what constitutes a 'Technical Information Paper' (TIP) and its relationship with the other parts of the standards
  • Whether the IVSC should issues commentaries, guidance and information to support the concepts, principles and requirements in IVS.

The consultation paper also compares and contrasts four sets of international standards used in financial markets, namely International Financial Reporting Standards (IFRS), Engagement Standards issued by the International Auditing and Assurance Standards Board (IAASB), the International Standards of Actuarial Practice (ISAPs) and the Global Investment Performance Standards (GIPS). The consultation paper seeks feedback on aspects of the way these standards are presented that the IVSC should consider in improving the presentation and clarity of IVS.

 

Both consultation documents are open for comment until 10 October 2014. Click for (links to IVSC website):

FRC launches project into smaller listed and AIM company reporting

11 Jul, 2014

The FRC has launched a project to evaluate and plan how it might assist smaller listed and AIM companies to address the quality of their reporting so as to improve confidence in the integrity of their financial statements and of the markets as a whole.

The project is aimed at achieving a step change in the quality of financial reporting of smaller listed and AIM companies over a three year period.  The project will be in three phases:

  • Phase 1 - gather and assess evidence of the root causes of the challenges and exploration of ways in which the FRC can support companies to make improvements. 
  • Phase 2 - implementation of supporting actions
  • Phase 3 - evaluate whether the quality of financial reporting has improved. 

The FRC would like to gather the views of both preparers and users of annual reports, both to understand the challenges that smaller companies encounter when preparing their annual reports and to also obtain input on suggestions as to how smaller companies can be helped to improve the quality of their reporting.

More information on this project and how to contribute can be found on the FRC website.

Agenda for July 2014 IASB meeting

11 Jul, 2014

The International Accounting Standards Board (IASB) will meet at its offices in London on 22–24 July 2014. Part of the meeting will be held jointly with the Financial Accounting Standards Board (FASB) to discuss the leases project. Additionally, the IASB will discuss the disclosure initiative, insurance contracts, annual improvements (2012-2014 cycle), issues from the IFRS Interpretations Committee, the conceptual framework, the research programme, and rate-regulated activities.

The full agenda for the meeting, dated 11 July 2014, 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.

IFRS Foundation Trustees reappointed

11 Jul, 2014

The Trustees of the IFRS Foundation have announced the reappointment of six current Trustees of the IFRS Foundation.

With the approval from the IFRS Foundation Monitoring Board, the following Trustees have been reappointed:

  • Michel Prada (Chairman of the Trustees, Europe),
  • Ronald Arculli (Asia-Oceania),
  • Chandrashekhar Bhaskar Bhave (Asia-Oceania),
  • Sir Callum McCarthy (Europe),
  • Marco Onado (Europe), and
  • James Quigley (North America).

All reappointments will be serving their second three-year term, which will become effective on 1 January 2015 and expire on 31 December 2017.

For more information, see:

ICAEW and IFRS Foundation Financial Institutions IFRS Conference announced

11 Jul, 2014

The IFRS Foundation, along with the Institute of Chartered Accountants in England and Wales (ICAEW), will be hosting a IFRS conference for financial institutions in London on 8 December 2014 to discuss key Standards and current IASB projects.

Speakers at the conference in include Ian Mackintosh, Vice-Chairman of the IASB, other IASB members, senior IASB technical staff, and other IFRS experts.

The programme for the conference features a panel discussion and two rounds of break-out sessions:

Financial Institutions IFRS Conference, London, 8 December 2014
Welcome

Panel discussion: accounting for the financial crisis

IFRS implementation break-out session: Financial instruments - classification and measurement IFRS implementation break-out session: Financial instruments - impairment
IASB project break-out session: Financial Instruments - macro hedge accounting IASB project break-out session: Insurance contracts IASB project break-out session: Leases

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

EFRAG calls for nominations of candidates for the new EFRAG Board

10 Jul, 2014

The European Financial Reporting Advisory Group (EFRAG) has called on European Stakeholder Organisations and National Standard Setters to nominate candidates for the new EFRAG Board.

The new EFRAG governance structure will become effective from 31 October 2014.  In the new structure, and with the objective of Europe speaking with one voice, a new EFRAG Board will be established and will be responsible for all EFRAG positions, after having considered the technical advice provided by the EFRAG Technical Expert Group (EFRAG TEG).  The Board must also ensure that the EFRAG has an open and transparent due process including a public consultation process with European constituents on draft EFRAG positions such as discussion papers, draft comment letters, draft consultation documents and draft endorsement advices.

European stakeholder organisations and National Standard Setters are invited to nominate EFRAG Board members taking into account the profile and criteria for EFRAG Board members.  The seats are allocated as follows:

European Stakeholder Organisations: eight members:

Industrial and trading companies: two members proposed by BUSINESSEUROPE;

Banks: two members proposed by the European Banking Federation, the European Association of Cooperative Banks, the European Savings and Retail Banking Group and the European Association of Public Banks;

Insurance companies: one member proposed by Insurance Europe;

Accountancy profession: two members proposed by the FEE ("Federation of European Accountants") and the EFAA ("European Federation of Accountants and Auditors");

Users: one member proposed by the associations representing private investors (“end users”) and financial analysts;

National Standards Setters (NSS): eight members of which the NSS of France, Germany, Italy and the UK will each nominate one member.

Nominations are requested by 5 September 2014.

Click for:

Inaugural Tommaso Padoa-Schioppa Memorial Lecture

10 Jul, 2014

The first Tommaso Padoa-Schioppa Memorial Lecture took place during the IFRS Foundation Trustees' meeting held on 9 July 2014 in London. Michel Prada, Chairman of the IFRS Foundation, delivered the opening remarks, Mario Draghi, President of the European Central Bank, gave the keynote speech and Richard Portes, Tommaso Padoa-Schioppa Chair at the European University Institute, responded with closing remarks.

The IFRS Foundation Trustees, the European University Institute and the Padoa-Schioppa family have established the Tommaso Padoa-Schioppa Memorial Lecture to honour the memory of Mr Padoa-Schioppa and to promote discussion on the importance of high quality financial reporting to global economic development.

In his opening remarks, Mr Prada noted Tommaso Padoa-Schioppa's professional achievements but also reminded the audience of the personal charm, warmth and charisma of the late Chairman of the IFRS Foundation.

During his keynote speech, Mr Draghi spoke about sovereignty as a positive concept and fiscal and structural policies within a monetary union. He recognised the significant progress made in the last ten years towards International Financial Reporting Standards (IFRS) becoming global standards and called upon policymakers in Europe to "progress swiftly in the adoption of IFRS 9".

In his closing remarks, Mr Portes picked up Mr Draghi's point that the financial crisis had led to fragmentation and renationalisation and called for a reversal of the disintegration of the past five years.

The following documents are available on the IASB's website:

ESMA publishes final accounting enforcement guidelines

10 Jul, 2014

The European Securities and Markets Authority (ESMA) has published its final Guidelines on the enforcement of financial information published by listed entities in the European Union (EU). The aim of the guidelines is to strengthen and promote greater supervisory convergence in existing enforcement practices amongst EU accounting enforcers.

ESMA published a consultation paper on the proposed guidelines in July 2013 and received 32 responses to it. Some responses had been very critical, especially regarding the relationship between the guidelines and the European Transparency Directive, the impression that ESMA seemed to want to assume the role of a standard-setter and the perception that ESMA was assuming an interpretative role. The suggested scope of the proposed guidelines had also been viewed critically by respondents.

The final report ESMA Guidelines on enforcement of financial information published today provides an overview of the feedback received from stakeholders and the ESMA Securities and Markets Stakeholder Group (SMSG) and ESMA's responses. The final guidelines, which reflect ESMA's consideration of the comments received, are presented in an annex to the report.

In response to the comments regarding the need to ensure that ESMA and European enforcers do not interfere with standard-setters' role, ESMA confirms that the role of the enforcers is restricted to regularly bringing to the attention of the standard-setters issues in accounting standards which have come to the enforcers' attention in the course of their work. ESMA also confirms it's view that materiality for enforcement purposes should be the same as defined in the relevant reporting framework. To avoid misunderstandings, ESMA has decided to adjust some terms used, such as 'unlimited scope' and 'focused' examinations in the enforcement process or the description of the actions taken by enforcers when infringements are discovered. As respondents provided extensive comments on whether the financial information provided in prospectuses should be in the scope of these guidelines, ESMA has decided to address this matter separately as part of its work related to the Prospectus Directive.

The guidelines will now be translated into the official languages of the EU. The final texts will be published on ESMA's website and will become effective two months after that publication.

Please click for access to the final report on the ESMA website.

HM Treasury issues application guidance on IFRS implementation for the public sector

09 Jul, 2014

HM Treasury has issued application guidance on International Financial Reporting Standards (IFRS) implementation for the public sector to help preparers of central government annual reports and accounts.

Preparers of annual reports and accounts in the public sector are required to follow the Government Financial Reporting Manual (FReM) which is the technical accounting guide to the preparation of financial statements.  It complements guidance on the handling of public funds published separately by the relevant authorities in England and Wales (HM Treasury and the Welsh Assembly Government respectively), Scotland (the Scottish Government) and Northern Ireland (the Executive Committee of the Northern Ireland Assembly). 

Alongside the FReM, the latest manual of which was published in December 2013, HM Treasury has today issued supporting guidance including guidance on:

  • Asset valuation.
  • The accounting for business combinations under common control.

The application guidance is available on the HM Treasury website.

EFRAG Discussion Paper on the classification of claims

09 Jul, 2014

The European Financial Reporting Advisory Group (EFRAG) has published a Discussion Paper (DP) aimed at assisting the IASB in the development of its project on distinguishing between equity and liabilities in the context of the revision of the Conceptual Framework for Financial Reporting. The EFRAG DP addresses the classification of claims in general and thus goes beyond the discussion around the mere distinction between equity and liabilities.

Under current IFRSs claims on an entity are classified into liabilities and equity and generally only instruments classified as liabilities are directly measured with changes in such measurement are presented in comprehensive income. In order to determine if a claim is classified as a liability or as a claim on equity, IFRSs generally use the conceptual definition of a liability. Sophisticated financial instruments have been developed to exploit the differentiation between equity and liability and instruments that are economically similar may fall on different sides of the divide and therefore be reported very differently. In some cases, the current requirements of IAS 32 Financial Instruments: Presentation also lead to the classification of what are felt to be ownership instruments in various corporate structures as liabilities.

Therefore, the IASB picked up the topic again in its July 2013 Discussion Paper DP/2013/1 A Review of the Conceptual Framework for Financial Reporting, suggesting to continue to define equity as residual interest but to refine the definition. In its comment letter on DP/2013/1, EFRAG recommended that the IASB consider the equity/liability distinction in parallel to, and separate from, the wider project and has now published the DP Classification of Claims to further the discussion and to assist the IASB in developing a discussion paper of its own, which is currently expected to be published at the same time as an Exposure Draft of the revised Conceptual Framework.

The EFRAG DP does not say how the distinction between claims should be made, but discusses approaches to defining elements and aims to identify the choices that must be made in classifying the claims on an entity and the consequences of those choices requirements, including the choices taken in current IFRS. The paper also identifies the extent to which each of the choices is consistent with identified objectives and how these objectives may conflict with each other. Finally, the paper also suggests a possible order in which these choices could be taken and identifies which ones appear to have been taken in developing current IFRS requirements. Choices that need to be taken in developing classification requirements, including the choices taken in current IFRSs, are illustrated by means of a helpful flowchart.

To assist in reducing the identified conflicts between objectives in a two-element approach, the paper also identifies three additional elements that are believed could help in reducing conflicts. These additional elements, which were identified based on current problems with financial reporting, are participating obligations, obligations to transfer claims on equity, and instruments that are contractually bail-inable. The paper shows how they may interact with existing elements and some advantages and disadvantages of including them.

The DP also contains a glossary of terms as discussions around the classification of claims showed that there is not a common vocabulary for describing and understanding the issues. Therefore, a glossary has been developed with the aim of developing a common terminology to increase shared understanding.

Comments on the DP, which also contains several specific questions, are requested by 31 October 2014. Please click to access the Discussion Paper and a corresponding press release on the EFRAG website.

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