September 2014 IASB meeting notes — Part 2

30 Sep, 2014

The IASB's meeting was held on 22–24 September 2014. We have posted Deloitte observer notes from Wednesday's sessions on the post-implementation review of IFRS 3 and IFRS Interpretations Committee issues.

Click through for direct access to the notes:

Wednesday, 24 September 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.

EFRAG recommends public fatal flaw review of IASB pronouncements

30 Sep, 2014

The European Financial Reporting Advisory Group (EFRAG) has written a letter to the International Accounting Standards Board (IASB) recommending that prior to finalisation of a standard or a major amendment to a standard a public fatal flaw review should take place. EFRAG believes that this would enhance the IASB's quality control procedures.

The IASB at times uses the tool of fatal flaw reviews, however, membership of the review teams is restricted. EFRAG believes that a public fatal flaw review should be included as a formal step in the IASB's due process including discussion of the fatal flaw results in a public meeting of the IASB based on a public summary report of these results before the final text of a standard or major amendment is approved by the IASB. EFRAG had made a similar suggestion in its comment letter on the proposed IFRS Foundation Due Process Handbook, which was published in its final version in February 2013 without the change EFRAG suggested.

Please click for access to the letter to the IASB on the EFRAG website.

Update: Subsequently, the EFRAG published on its website a feedback statement summarising comments in response to the EFRAG Draft Letter and showing how those comments were considered. The feedback statement is available on the EFRAG website.

Council of the European Union adopts ESG disclosure Directive for large companies and groups

29 Sep, 2014

The Council of the European Union (“the Council”) has adopted the Directive on disclosure of non-financial and diversity information by large companies and groups.

The new Directive, which amends the Accounting Directive (Directive 2013/34/EU), applies to large public-interest entities with more than 500 employees.  Public-interest entities include listed companies as well as some unlisted companies, such as banks, insurance companies and other companies that are so designated by Member States because of their activities, size or number of employees.  

Such companies will be required to disclose information in their annual reports on environmental, social and employee matters, respect for human rights, anti-corruption and bribery matters.  The disclosure will need to include a description of the policy pursued by the company related to these matters, the results of these policies and the risks related to these matters and how the company manages those risks.   

Welcoming the adoption of the Directive, the European Commission highlighted: 

Companies in the scope of the Directive will disclose relevant, useful information necessary for an understanding of their development, performance, position and impact of their activity, rather than detailed reports. Furthermore, the Directive provides companies with significant flexibility to disclose relevant information in the way that they consider most useful, or in a separate report. Companies may use international, European or national guidelines which they consider appropriate.

The EU Commission proposed amendments in this area in April 2013.  These were subsequently approved by the Legal Affairs Committee (JURI) of the European Parliament in December 2013.­ In April 2014 the Directive was adopted by the EU Parliament.  The Directive will enter into force 20 days after its publication in the Official Journal of the European Union.  The Directive must be adopted by EU member states within 2 years of that date.  Therefore, companies concerned will start reporting under the new Directive as of their financial year 2017.

The new rules complement the narrative reporting regulations in the UK which apply for periods ending on or after 30 September 2013.  Through complying with the narrative reporting regulations UK quoted companies will already be disclosing specific information on the company’s strategy, business model, human rights and gender diversity in their strategic report and disclosing information on greenhouse gas emissions in their Directors’ report.  The new Directive will extend the level of disclosures required on diversity (for example policies on age, gender, educational and professional background and professional background) and will specifically require reporting on bribery and corruption matters for the first time.  However, for some large non-quoted UK companies that fall within the definition of a Public-interest entity, the Directive may bring about significant new disclosures in their annual reports that were previously not required by regulation.

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FRC responds to IESBA proposed independence changes

29 Sep, 2014

The Financial Reporting Council (FRC) has published its response to the International Ethics Standards Board for Accountants (IESBA) consultation on proposed changes to independence rules around non-audit services. The FRC supports the objective of the proposals but notes that they are very limited in comparison with those contained in the recently finalised EU Audit Regulation.

IESBA's exposure draft contains three key proposals in the following areas:

  • Management responsibility. The exposure draft proposes additional guidance and clarification regarding what constitutes 'management responsibility' and enhanced guidance on how the auditor can be satisfied that management are fulfilling their responsibilities.
  • Preparing accounting records and financial statements. The exposure draft proposes guidance and clarification on the concept of "routine or mechanical" services relating to the preparation of accounting records and financial statements.
  • Emergency exception. The exposure draft proposes removing the provision that permits an audit firm to provide certain bookkeeping and taxation services to public interest entity audit clients in emergency situations.

In relation to these proposals, the FRC support the majority of the proposals around management responsibility, as well as the changes in relation to the emergency exception and "routine or mechanical" services.

One area in with the FRC has concerns is IESBA's proposal that:

"providing advice and recommendations to assist management in discharging its responsibilities is not assuming a management responsibility."

In this regard, the EU Audit Regulation prohibits auditors from playing any part in the management or decision-making of an audit client which is a Public Interest Entity (PIE), which the FRC believes may potentially conflict with the IESBA proposal. They recommend IESBA consider this further.

The full response can be accessed on the FRC website.

CMA finalises UK audit market reforms

29 Sep, 2014

The Competition and Markets Authority (CMA) has published its final Order implementing reforms of the audit market in the UK, following on from the Competition Commission's report into the market and in light of agreement at a European level on audit reform.

Following on from the draft Order published in July, the CMA has now finalised its package of remedies to increase competition within the provision of statutory audit services to FTSE 350 companies in the UK.

The final Order includes:

  • a requirement for FTSE 350 companies to put their statutory audit engagement out to tender at least every 10 years, in line with the EU Regulation on the statutory audit of public interest entities; and
  • measures to strengthen the accountability of the external auditor to the Audit Committee and reduce the influence of management.

The Order will come into force on 1 January 2015 and apply to financial years beginning on or after 1 January 2015.  This means that the audit committee’s terms of reference will need to be revised for 2015.  However, in relation to tendering it contains transitional provisions, which align with those contained in the EU Regulation.

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ICAEW webinar on financial reporting changes for small companies and micro-entities

29 Sep, 2014

The Institute of Chartered Accountants in England and Wales (ICAEW) will be hosting a webinar on 21 October 2014 on the planned financial reporting changes for small companies and micro-entities in light of the implementation of the EU Accounting Directive (“the Directive”).

The Financial Reporting Council (FRC) has issued a consultation setting out proposed amendments to UK accounting standards proposing, among other things, that the Financial Reporting Standard for Smaller Entities (FRSSE) is withdrawn.  For small companies and micro-entities, the FRC proposes that:

  • FRS 102 The Financial Reporting Standard Applicable in the UK and Ireland will replace the FRSSE for small companies and will be amended to include a new section for the presentation and disclosure requirements for small entities; and
  • a new Financial Reporting Standard for Micro-Entities (FRSME) will be published and will only contain the requirements applicable to micro-entities.  It will include only those disclosures required by law for micro-entities. The recognition and measurement criteria of FRS 102 (from which the FRSME will be developed), will be simplified.

The webinar will provide an overview of these changes and will be of benefit to those interested in small company reporting.

Registration details for the webinar can be found on the ICAEW website.

ACCA roundtable on 'Evaluating the impact of IFRS in the EU'

28 Sep, 2014

On 25 September, the Association of Chartered Certified Accountants (ACCA) organised a high level conference in order to both present and discuss the recently published consultation on the evaluation of the IAS Regulation and the potential ways forward. The event was hosted by Theodor Dumitru Stolojan, MEP, at the European Parliament.

MEP Stolojan opened the event. He noted that the Commission's report following the consultation should send signals regarding the Conceptual Framework project and that the progress with respect to IFRSs to date was encouraging.

Didier Millerot, Head of the Financial Reporting and Accounting Unit in the Internal Market and Services Directorate General, gave an overview of the Commission's consultation. He noted the need to ensure regulation delivers and is meeting objectives, pointed out that the report will not necessarily lead to legislative proposals and mentioned that certain MEPs are 'passionate' about IFRSs, which makes discussion difficult.

The speakers at the conference discussed various topics in the EC's questionnaire:


  • Speakers noted that IFRSs meet investors' expectations but that there are areas for improvement. However, they stressed that this is not unique to IFRSs and for example also the case with US GAAP.
  • They pointed at some 'avoidable complexity' for example regarding hedge accounting and suggested that the presentation of some matters could be improved.
  • Some speakers noted limited comparability, but stressed that this might also be a question of enforcement.
  • One speaker noted a lot of 'noise' in financial statements which would make for challenges.
  • It was also suggested that the business model could be used as a 'filter'.
  • Speakers underlined the benefits of a 'common vocabulary'.


  • It was pointed out that any system has costs and they have to be balanced with the efficiencies gained. It was noted that it is difficult to really identify the costs, which the EC should be mindful of. It was also pointed out that it is hard to compare local GAAPs with IFRSs as the former would have evolved in last decade too - it is not sure that the maintenance costs would have differed much. The same would hold true for implementation costs from changes ahead.
  • It was noted that IFRSs are very helpful from a competitiveness point of view for Europe.


  • Speakers stressed that tremendous improvements have been made in national enforcement and that the 'different accents' in the 'single language' are slowly fading.
  • ESMA's common enforcement priorities were considered helpful. However, speakers also stated that they were wary of 'standard setting via the back door'. It was suggested that ESMA should focus on disclosures.
  • It was also pointed out that there is a need for a level playing field but also for some flexibility in member states.
  • Concerns voiced mainly regarded the question of how to interpret IFRSs with respect to materiality.


  • Some speakers saw a possible benefit in group and subsidiaries' accounts alignment and also suggested that the use of IFRSs by small listed companies would help attract investment.
  • Other speakers confessed they were 'nervous' and mentioned that there was a need to draw boundaries based on the simplicity of the business model.

Endorsement mechanism

  • Speakers showed themselves pleased with the conclusion that more flexibility was not endorsed - they didn't want to lose the benefits of global standards. They questioned whether it was necessary to more criteria for endorsement when considering the primary purpose of IFRSs.
  • Others mentioned that the process must be 'European' while making sure at the same time that the Commission's advice is stemming from technical expertise.
  • Speakers placed hope in the new EFRAG structure and stressed that lengthy legislative processes should be avoided.
  • It was also pointed out that standards should be endorsed before the IASB's effective date.

After some questions from the audience, Olivier Boutellis-Taft of the Federation of European Accountants (Fédération des Experts-comptables Européens, FEE) closed with a spirited summary statement.  He noted:

Today our panel of experts struggled a bit to clearly identify the costs – but they were very clear in saying that the benefits outweigh the costs. It was also outlined that some of these costs are not related to IFRS but indeed to other sources such as local regulation. However it seems that this does not prevent a few people to blame IFRS. [...] I fail to understand why the IFRS debate often becomes so emotional. It should be dispassionate, objective and factual; it should not be hijacked to pursue objectives that are not related to improving transparency and quality of companies' financial information. It is good to consult on this matter but feedback will have to be interpreted with caution. Although the panel today was very consensual, there is a risk of over-representation of "unhappy customers" which should not lead to frustrating the silent majority – silent majority that expressed itself loudly today.

He also warned against flexible endorsement: "Some are calling for a "more specific version of IFRS (EFRS)": the result will be sub-global standards i.e. sub-optimal standards. It means less consistency, less comparability, less transparency and more cost e.g. reconciliation cost."

Please click for a transcript of Mr Boutellis-Taft's concluding remarks on the FEE website.

IASB issues work plan update for September

26 Sep, 2014

Following its September meeting, the International Accounting Standards Board (IASB) has updated its work plan. The revised plan updates the expected redeliberation periods in the amendments to IAS 1 and recognition of deferred tax assets for unrealised losses projects, as well as noting the extension for the expected timing of the exposure draft in the conceptual framework and liabilities projects. The rate-regulated activities project now appears as a major project, while the principles of disclosure remained as a research project. Both the rate-regulated activities and unit of account project have their public consultation periods noted in the revised work plan. Further, the revised plan provides an expected date for a final IFRS on amendments to IAS 1 (Q4 2014) as well as a discussion paper on principles of disclosure (Q1 2015). Lastly, it includes updates to the expected timing of board discussions for various 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


Exposure draft

Q1 2015

Financial instruments — Macro hedge accounting

Discussion paper

Public consultation

Q4 2014*

Insurance contracts



Q4 2014




Q4 2014

Disclosure initiative — Principles of disclosure

Board discussion

Targeted Discussion Paper

Q1 2015*

Disclosure initiative — Amendments to IAS 1

Exposure draft

Redeliberations and Target IFRS

Q4 2014*

Disclosure initiative — Reconciliation of liabilities from financing activities


Exposure draft

Q4 2014

IFRS for SMEs — Comprehensive review

Exposure draft


Q4 2014

Rate-regulated activities

Discussion paper

Public consultation

Q4 2014 and Q1 2015*

* Indicates a change since the previous work plan update on 30 July 2014.

In addition, the expected timing of board discussion has been deferred for the following research projects:

Click for the IASB work plan dated 26 September 2014 (link to IASB website). We have updated our project pages to reflect the updated work plan and other known developments.

September 2014 IASB meeting notes — Part 1

25 Sep, 2014

The IASB's meeting was held on 22–24 September 2014. We have posted Deloitte observer notes from Monday's discussion on the research programme, and Tuesday's session on insurance contracts.

Click through for direct access to the notes:

Monday, 22 September 2014

  • Research programme
    • Project update
    • Research project on post-employment benefits
    • Business combinations under common control

Tuesday, 23 September 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.

Updated EFRAG endorsement status report includes 2012-2014 annual improvements cycle

25 Sep, 2014

The European Financial Reporting Advisory Group (EFRAG) has updated its Endorsement Status Report to include 'Annual Improvements to IFRSs 2012–2014 Cycle', published on 25 September 2014.

The amendments respond to issues addressed during the 2012–2014 cycle and affect IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, IFRS 7 Financial Instruments: Disclosures, IAS 19 Employee Benefits, and IAS 34 Interim Financial Reporting. The amendments are effective for annual periods beginning on or after 1 January 2016, with earlier application being permitted. Endorsement for the use in Europe is currently expected in the third quarter of 2015.

The endorsement status report, dated 25 September 2014, is available here.

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