Deloitte comment letter on the IPSASB strategy consultation

31 Jul, 2014

Deloitte Touche Tohmatsu Limited has responded to the International Public Sector Accounting Standards Board’s (IPSASB) Strategy Consultation.

On 31 March 2014, the IPSASB issued its Strategy Consultation, which proposes its work program for 2015-2019 and strategic objectives. We support the strategic objective of the IPSASB to improve transparency in financial reporting by the public sector through increasing adoption of accrual-based IPSASs and continuing to develop high-quality financial reporting standards. We suggest that the IPSASB's focus should be on the development of IPSASs and allocate a limited amount of resources towards related activities since those activities can be carried out by governments, multilateral organisations and through the IFAC’s Transparency Now campaign.

We also recommend the review of the IPSASB’s current standard setting due process to ensure it is sufficiently robust and met the current best practices. Further, we support the approach of basing IPSASs on IFRSs when determining potential future projects and that convergence with IFRSs should be the normative action.

The full comment letter can be downloaded here.

IIRC issues two assurance on integrated reporting papers

31 Jul, 2014

The International Integrated Reporting Council (IIRC) has published two assurance papers which provide an overview of assurance and its relationship to integrated report (<IR>). The papers are intended to stimulate global discussion for those interested in assurance.

The first paper, Assurance on <IR>: an introduction to the discussion, provides a high-level outlines of the benefits of assurance and addresses practical and technical challenges. The paper notes that mechanisms, such as assurance, are “likely to be important for the long term credibility of integrated reports.” However, there are current challenges that need to be addressed to ensure consistency and robustness in assurance processes.

The second paper, Assurance on <IR>: an exploration of issues, provides a detailed look at the issues when applying assurance to integrated reporting, which include:

  • “The suitability of criteria
  • Auditing or assurance standards that might be applicable or considered to be useful in developing assurance methodologies related to <IR> and related implications
  • Whether assurance should be obtained in relation to the process of preparing the integrated report or the integrated report itself
  • Potential levels of assurance, including the same level of assurance, varying levels of assurance and carve-out of areas on which other assurance practitioners reported
  • Considerations when performing an assurance engagement, including those regarding narrative information, future-oriented information, connectivity, and using the work of others.”

The IIRC requests that any responses concerning the two papers be submit by 1 December 2014.

For more information, see (links to IIRC’s website):

FRC provides input to the IASB on its research project on materiality

31 Jul, 2014

The Financial Reporting Council (FRC) has issued a letter to the International Accounting Standards Board (IASB) providing input into the IASB’s research project on materiality.

The FRC welcome the IASB’s disclosure initiative and consider that the IASB should:

provide guidance on what materiality means from a disclosure perspective;

include an explicit statement around disclosure of material information in the Conceptual Framework; and

reduce and define the “magnitude” terms used in IFRSs, such as “significant”, “key” and “critical”.

The full letter is available on the FRC website.

IASB issues second work plan update for July

30 Jul, 2014

Following its July meeting, the International Accounting Standards Board (IASB) has again updated its work plan. The revised plan updates the expected redeliberation periods in the insurance contacts, leases and IFRS for SMEs projects, and extends the expected timing for the exposure draft in the conceptual framework project. The plan also reflects the IASB's decision to discontinue the 2013-2015 cycle of annual improvements in favour of a new 2014-2016 cycle, and updates the expected timing of board discussions on a number of research projects.


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 Redeliberations Exposure draft Q1 2015*
Financial instruments — Macro hedge accounting Discussion paper Public consultation Q3 2014*
Insurance contracts Re-exposure Redeliberations Q3 and Q4 2014*
Leases Re-exposure Redeliberations Q3 and Q4 2014*
Disclosure initiative — Principles of disclosure Agenda decision Board discussion Q3 2014*
Disclosure initiative — Amendments to IAS 1 Exposure draft Redeliberations Q3 2014
Disclosure initiative — Reconciliation of liabilities from financing activities Redeliberations Exposure draft Q4 2014
IFRS for SMEs — Comprehensive review Exposure draft Redeliberations Q4 2014*

* Indicates a change since the previous work plan update on 24 July 2014.

The IASB expects to issue an exposure draft in the newly introduced 2014-2016 cycle of annual improvements in the second quarter of 2015.  This exposure draft will carry over the one amendment originally expected to be included in the now discontinued 2013-2015 cycle.  Apart from these changes to the annual improvements projects, there are no other changes in expected timing of the narrow-scope projects. 

In addition to the principles of disclosure research project noted above, the expected timing of board discussion has been deferred for the following research projects:

Click for the IASB work plan dated 30 July 2014 (link to IASB website). We have updated our project pages to reflect the updated work plan and other known developments.

EFRAG outreach event on leases

30 Jul, 2014

The European Financial Reporting Advisory Group (EFRAG) will be holding an outreach event in Brussels on 15 September 2014 to discuss preliminary results of its public consultation on leases.

On 30 June 2014, the EFRAG, along with European standard setters (ANC, ASCG, FRC and OIC), launched a public consultation to obtain examples where contracts or transactions could qualify as leases under a single-model approach (IASB) or a dual-model approach (FASB), but are viewed by constituents as in-substance services. In addition, the EFRAG and European standard setters are seeking input on which of the two alternative approaches is preferred.

The outreach on 15 September 2014 will include discussions on the initial feedback gathered from the public consultation concerning the two lessees models, as well as possible improvements on how to identify a lease arrangement.

Registration for this outreach event is requested by 8 September 2014.

For more information, see the press release on the EFRAG’s website.

July 2014 IASB meeting notes — Part 2

29 Jul, 2014

The IASB's meeting was held on 22–24 July 2014, some of it a joint meeting with the FASB. We have posted Deloitte observer notes from Wednesday's joint session on leases and the IASB only session on IFRS Interpretation Committee issues, as well as Thursday's session on rate-regulated activities.

Click through for direct access to the notes:

Wednesday, 23 July 2014

Thursday, 24 July 2014

You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting. Notes from the remaining sessions will be posted in due course.

FRC comment letter on the IAASB’s Exposure Draft on an auditor's responsibilities relating to 'other information'

29 Jul, 2014

The Financial Reporting Council (FRC) has published its comment letter on the International Audit and Assurance Standards Board’s (IAASB’s) revised Exposure Draft of International Standard on Auditing (ISA) 720 'The auditor’s responsibilities relating to other information in documents containing or accompanying audited financial statements and the auditor’s report thereon'.

The IAASB issued an Exposure Draft for a revised International Standard on Auditing (ISA) 720 in November 2012.  The revised Exposure Draft responds to significant concerns raised in response to the IAASB's original proposals.

The FRC’s comment letter has been informed by comments received from respondents to its call for comments on the IAASB proposals in May 2014

Overall, conditional on a number of recommendations, the FRC are “very supportive” of the changes proposed in the IAASB’s revised Exposure Draft.

The key comments of the FRC are:

  • That it supports “in principle” the introduction of the new requirements in paragraphs 14 and 15 and the related enhanced application material that clarify the auditor’s responsibilities with respect to other information.  However the FRC suggest a number of improvements to make it clearer as to the extent and nature of the work effort required.
  • That the proposals do not communicate clearly that the auditor’s obligation does not extend to knowledge of matters identified in all other engagements performed by the firm.  In this respect the FRC recommend that the IAASB change the requirement in paragraph 14(b).
  • That the FRC does not agree with the IAASB’s conclusion to require the auditor to read and consider other information only obtained after the date of the auditor’s report, but not to require identification of such other information in the auditor’s report or subsequent reporting on such other information.  The FRC comments that “we believe that considerable benefit would accrue to stakeholders from the identification of such other information” and that it “strongly” suggests that the IAASB enhance the requirements in paragraph 21 “Reporting” in respect of these areas.

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

CIPFA/LASAAC consults on new Code of Practice on Local Authority Accounting

28 Jul, 2014

The Chartered Institute of Public Finance and Accountancy (CIPFA) and the Local Authority (Scotland) Accounts Advisory Committee (LASAAC) are seeking comments on an exposure draft of the 2015/16 Code of Practice on Local Authority Accounting in the UK (the Code) which would apply to accounting periods beginning on or after 1 April 2015 (“the exposure draft”). CIPFA and LASAAC are also seeking comments on a consultation to simplify and streamline the presentation of local authority financial statements.

Local authorities in the United Kingdom are required to keep their accounts in accordance with ‘proper practices’. They must comply with the terms of the Code of Practice on Local Authority Accounting in the United Kingdom prepared by the CIPFA/LASAAC Local Authority Accounting Code Board (CIPFA/LASAAC).

The exposure draft includes proposals to incorporate the requirements of IFRS 13 Fair Value Measurement to the measurement of property, plant and equipment in the public sector.  The exposure draft proposes that operational property, plant and equipment should be measured based on the service potential that the assets provide in support of the services of the authority.  The exposure draft proposes that such assets are measured at existing use valuation and where no market is in existence or assets are specialised, measured at depreciated replacement cost.  For these assets, the exposure draft notes that IFRS 13 “will be out of scope” as “these assets will not formally be valued at fair value”.  These measurement bases are the same as within the current 2014/15 Code and hence are not subject to change as part of the consultation.

The exposure draft proposes a change for property, plant and equipment that is not being used to supply goods and services and that do not meet the criteria of assets held for sale (i.e. surplus assets).  It is proposed that these assets are measured at fair value in accordance with IFRS 13 where they are currently measured by an existing use valuation based on their use before coming surplus.  This change will also require IFRS 13 disclosures for such assets.

Other significant amendments proposed in the exposure draft are in relation to:

  • The impact of the Annual Improvements to IFRSs 2010 – 2012 and 2011 – 2013 Cycles.
  • The Impact of IFRIC 21 Levies
  • The implications of Financial Reporting Standard (FRS) 102 The Financial Reporting Standard applicable in the UK and Republic of Irelandwith respect to:
    • Value Added Tax –no significant changes.
    • Heritage Assets.  The exposure draft proposes to retain the current valuation methods for heritage assets (i.e. that entities can select the most appropriate and relevant method according to their specific circumstances) and to retain the provision that depreciation need not be provided for heritage assets with indefinite lives.
    • Pension Funds.

A number of other minor and drafting amendments are also proposed.  Comments on the exposure draft are invited until 10 October 2014.

In addition, CIPFA/LASAAC are also consulting on proposals to simplify and streamline the presentation of local authority financial statements/statutory accounts to “better meet the needs of users” and to “remove unnecessary burdens from local authority accounts preparers” (“the consultation”).  The consultation follows an earlier consultation in July 2013 on simplifying and streamlining the presentation of local authority financial statements.  Based on the earlier consultation respondents’ key messages were:

agreement with the consultation that local authority accounts have a tendency to be too long and are often burdened with too much detail

it was difficult to identify traditional local authority measures of performance i.e. movements on General Fund and HRA balances, and

there were a number of challenges to the application of the segmental reporting requirements and some of the reporting requirements of the Service Reporting Code of Practice (SeRCOP).

Following these comments, CIPFA/LASAAC’s consultation focuses on the reporting of local authority performance (i.e. the Comprehensive Income and Expenditure Statement and the Movement in Reserves Statement).  The consultation also focuses on the segmental reporting requirements specified in the Code and also considers narrative reporting requirements that accompany the financial statements.  The consultation seeks views from “interested parties and is encouraging respondents to be both creative and challenging in their responses”.

Comments on the consultation are invited until 19 September 2014.

Click for (all links to CIPFA website):

IAESB proposes revised framework for International Education Standards

25 Jul, 2014

The International Accounting Education Standards Board (IAESB) has released for public exposure proposed revisions to its Framework for International Education Standards (IES).

The proposed Framework is split into four sections:

  1. Identification of the purpose and scope.
  2. Explanation of concepts in the IESs.
  3. Description of the nature of the IESs and related IAESB publications.
  4. Role of IFAC members related to the IESs.

The proposal is part of the IAESB’s initiative to improve the relevancy, clarity, and consistency of its standards by redrafting all eight IESs in accordance with its new drafting conventions. To date, IESs 1 to 6, as well as the redrafting of IES 7, have been completed. The IES 8 revision is expected in the fourth quarter of 2014.

Comments are requested by 27 October 2014.

For more information, see the press release and the revised framework on the IFAC’s website.

Financial Reporting Lab publishes project report providing investor insight on accounting policies and integration of related financial information

25 Jul, 2014

The Financial Reporting Lab has published a project report which seeks to provide investor insight on the presentation, position and content of accounting policy disclosures and notes, and their views on the integration of financial information with the primary financial statements (“the project report”). By providing a view of what investors want, the project report also seeks to aid companies when they develop their future reporting in order to better meet the needs of investors.

Both companies (16) and institutional investors (19) took part in the project.  Further input was received from “over 200” retail investors. 

The project report; ‘Accounting policies and integration of related financial information’ is part of the Financial Reporting Council’s (FRC’s) programme  of work to support clear and concise reporting; a project which began with the publication of ‘Guidance on the Strategic Report’, in June 2014.

The project report provides a number of observations in the areas of accounting policies, notes to the financial statements and integration of financial review:

Accounting policies

The project report highlights a number of “clear messages” for companies in relation to improving the placement of significant accounting policies and enhancing the quality of their disclosures.  It highlights that institutional investors “consider that policies that are not significant are clutter” and were more concerned with the quality of disclosures rather than their placement. 

The project report notes that investors are “generally happy” for companies to make their own judgements as to what their significant accounting policies are.  However investors identified a number of attributes that, if taken alone or together, may indicate that a significant accounting policy would need to be disclosed:

materiality of transactions classes and amounts, and importance to the nature of the business;

policies for all distinct revenue streams;

where there is choice of policy under IFRS, or significant judgement in selecting the policy; and

where there is need for management to apply significant levels of estimation or judgement in applying the policy. 

The project report also identifies what “good quality” looks like for investors in relation to policy disclosures and highlights that “accounting policy disclosure should be company-specific” and avoid “boiler-plate” disclosures.

Investors identified that policies should:

be written using plain, understandable language;

describe any judgements made in selecting the policy applied, and the rationale for them;

describe the company’s application of accounting policies (not summarise the IFRS standard), including the estimation/judgements made and their significance to reported amounts; and

describe new IFRS requirements only if they significantly, or are likely to significantly, impact the financial statements; and present the impact of changes in tabular format.

Many companies currently disclose additional accounting policies (beyond those that are significant) and the project report indicates that there are “diverse views” among investors with “some” retail investors preferring a complete list of policies to be disclosed in the annual report and others, such as institutional investors, preferring that only significant accounting policies are disclosed.

Notes to the financial statements

The project report highlights that, among other things, consistency of note order across companies and time is “highly valued” by investors.  

Integration of financial review

The project report indicates that most investors “prefer the traditional approach of placing management commentary and financial statement information in separate sections of the annual report”.

A number of examples are provided in the project report of current good practice in these areas.

The press release and the full project report are available from the FRC website. A slide deck summarising the key findings of the report is also available to download from the FRC website.

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