Report of the Effects Analysis Consultative Group published

28 Nov, 2014

The Effects Analysis Consultative Group - an independent group of experts that was established by the IFRS Foundation Trustees as a result of its strategy review in 2012 - presented its final report to the Trustees who welcomed the conclusions of the report on topics such as fieldwork and the reporting of likely effects.

The Effects Analysis Consultative Group (EACG) was established in 2013 to provide independent advice to the IASB on how it should consider the effects of changes it develops to its financial reporting requirements (IFRS). Membership of the EACG includes representatives from a geographically and professionally diverse group of stakeholders.

The report that has now been presented to the Trustees and that is also publicly available is intended to support the IASB in further embedding effects analyses within its due process, with the objective of strengthening the standard-setting process.

The EACG’s report identified a series of recommendations among which are the following:

The IASB should assess and explain how general purpose financial reports are likely to change because of new requirements, and why those changes will improve the quality of general purpose financial reports. Furthermore, the IASB should explain why it considers those changes to be justifiable, demonstrating how it assessed the likely effects on the direct costs to preparers of meeting the new requirements and the related costs to users.

The IASB should work co-operatively with local standard-setters so that it can plan its fieldwork and outreach to see whether there are opportunities to organise fieldwork in ways that are mutually beneficial for the IASB and those local jurisdictions.

The IASB should plan its fieldwork so that it is proportionate to the changes in financial reporting being proposed. A more pervasive or significant potential change would normally warrant a more comprehensive assessment programme. The type, and depth, of fieldwork undertaken should also reflect the stage of development of the project.

The IASB should aim to undertake consultation that is geographically broad-based so that its Standards are written with principles that can be applied globally. Other accounting standard-setters can help by providing the IASB with analysis and information about factors and possible effects that might be unique to their jurisdiction.

The IASB should make available information about the nature of fieldwork and outreach that it has undertaken. This information should be made available throughout the development of the project.

The format of the analysis of the likely effects of a proposed change in financial reporting should reflect the stage of the proposals. When a new Standard is issued, the IASB should generally prepare a separate Effects Analysis Report.


The full EACG report as well as the press release are available on the IASB's website.

We respond to the consultation issued by the FRC on accounting standards for small entities

28 Nov, 2014

We have published our response to the consultation issued by the Financial Reporting Council (FRC) addressing changes to accounting standards for small entities as a result of the UK implementation of the EU Accounting Directive.

Overall we support the proposals. Our key comments are as follows:

  • we believe that, since compliance with UK accounting standards is generally accepted as being necessary to give a true and fair view, the role of UK accounting standards will be significant under the new regime in guiding directors of small companies as to whether further disclosures may be necessary, in addition to those mandated by law, in order to present true and fair accounts;
  • we agree that a new accounting standard for micro-entities should be developed;
  • we agree that the FRSSE should be withdrawn and that small entities (other than micro-entities) should be brought within the scope of FRS 102;
  • we strongly support the provision of increased flexibility in the layout of primary statements, particularly to accommodate the application of IFRS layouts and terminology for companies adopting FRS 101; and
  • we recommend that the Financial Reporting Council (FRC) work closely with the Department for Business, Innovation and Skills (BIS) to make the new regime available to companies as soon as possible, including permitting early adoption.
Further comments and full response to all questions raised in the invitation to comment are contained within the full comment letter which can be downloaded below.
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IFRS Advisory Council membership update

28 Nov, 2014

The Trustees of the IFRS Foundation have announced the appointments of 15 new members to the IFRS Advisory Council.

The Advisory Council is the formal advisory body to the Trustees and the IASB. It advises the IFRS Foundation on its strategic direction, technical work plan and priorities.

The new Advisory Council members are:

    1. Areewan Aimdilokwong - International Organization of Securities Commissions
    2. Vania Borgerth - BNDES Brazilian Development Bank
    3. Prasan Chuaphanich - Federation of Accounting Professions, Thailand
    4. Pascale Déprez - Association for the participation of French companies in international accounting harmonisation (ACTEO)
    5. Garth Coppin - Financial Reporting Standards Council of South Africa
    6. Roxana Damianov - European Securities and Markets Authority
    7. Holger Daske - The International Association for Accounting Education and Research
    8. Paul Fitzsimon - PricewaterhouseCoopers
    9. Hidetake Ishihara - Nippon Keidanren, Japan
    10. Ann Jorissen - European Accounting Association
    11. Jürgen Kirchhof - European Central Bank
    12. Robert Koethner - European Round Table of Industrialists and European Issuers
    13. Ton Meershoek - International Organization of Securities Commissions
    14. Pam O’Connell - World Bank
    15. Uğur Yaylaönü - Capital Markets Board of Turkey

The new members will replace retiring members Valeska Barros, Roger Best, Michael Bradbury, Thomas Blöink, Laurent Degabriel, Begoña Giner, John Hitchins, Christoph Hütten, Charles Macek, Bruce Mackenzie, Fumio Muraoka, Patrick Parent, Panagiotis Strouzas and Zinga Venner as of 1 January 2015.

The following members of the Advisory Council have been reappointed: Rudolf A Bless, Wang Haoyu, Shizhong Huang, Anne Molyneux, Vincent Papa, Rajagopal Sankaraiah, Gregory Smith and Min Yang.

The press release announcing the new appointments can be found on the IASB's website.

November 2014 IASB meeting notes — Part 3

27 Nov, 2014

The International Accounting Standards Board (IASB) met at its offices in London on 19-20 November 2014. We have now posted the Deloitte observer notes from Wednesday's session on the Conceptual Framework. Additional notes will be posted in due course.

Click through for direct access to the notes:

Wednesday, 19 November 2014

  • Conceptual Framework
    • Sweep issues
    • Update on the conceptual framework projects of the FASB and IPSASB
    • Measurement – transaction costs.

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

BIS publishes consultation on circumstances in which UK companies could continue to have corporate directors

27 Nov, 2014

The Department for Business, Innovation and Skills (BIS) has published a consultation as to the circumstances in which UK companies could continue to have corporate directors. BIS had previously announced that, as part of the government’s Transparency and Trust programme, it intends to ban most UK companies from having corporate directors so that all of the directors will have to be natural persons.

The key areas suggested where BIS believes corporate directors may continue to be allowed are:

  • UK companies with shares admitted to trading on regulated markets (e.g the main market of the London Stock Exchange) or prescribed markets (like AIM), on the grounds they are already subject to significant transparency requirements.
  • Large public (PLC) and private (limited) companies in group structures, where BIS believe the case is more finely balanced. A supplementary question asks if the exemption should only be available if all of the directors of any corporate director are themselves natural persons.
  • Companies subject to sectoral regulation including charitable companies, trustee companies of pension funds and open ended investment companies.
  • Societas Europaea and Limited Liability Partnerships.

BIS is of the view that a corporation sole should continue to be able to act as a director. An example of a corporation sole would be “The Secretary of State for Business, Innovation and Skills” rather than the named holder of that office at any particular time.

The ban on corporate directors is contained in the Small Business, Employment and Enterprise Bill which is currently before Parliament. The Bill provides that the Secretary of State may make regulations exempting certain companies from the ban.

The deadline for comments is 8 January 2015.

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IESBA proposes update to ethics code for professional accountants in business

26 Nov, 2014

The International Ethics Standards Board for Accountants (IESBA) has issued an exposure draft of proposed changes to the 'Code of Ethics for Professional Accountants' (the Code). The proposals focus on the requirements of professional accountants in business involved in the presentation of financial and non-financial information, and also provide guidance on dealing with pressure from superiors and other to engage in unethical or illegal acts.

The exposure draft, Proposed Changes to Part C of the Code Addressing Presentation of Information and Pressure to Breach the Fundamental Principles, is focused on accountants who work on their own or in organisations other than public accounting practices, such as in commerce, industry, education, and the public and not-for-profit sectors. The exposure draft addresses key priorities for such accountants contained in Part C of the Code, which were identified through a consultation process involving working groups, the International Federation of Accountants (IFAC) Professional Accountants in Business Committee (PAIB), IFAC member bodies and the IESBA Consultative Advisory Group (CAG).

The key proposals include:

  • Widening the scope of the existing requirements around the preparation and reporting of information to reduce the emphasis on external financial information, and instead focus on both financial and non-financial information for both internal and external purposes. This would mean that the requirements of the Code for information to be prepared "fairly and honestly" would apply consistently to all information produced by a PAIB. Examples provided in the exposure draft of information captured include operating and performance reports, budged and forecasts, information provided to internal and external auditors, risk analyses, general and special purpose financial statements, tax returns and regulatory reports
  • Providing additional guidance around the "fair and honest" principle when preparing financial and non-financial information, including:
    • Preparing or presenting information in a manner that is intended neither to mislead nor influence contractual or regulatory outcomes inappropriately
    • Not omitting information with the intention of rendering the information misleading
    • Presenting the information in accordance with a relevant reporting framework where applicable (this is currently a separate requirement of the Code, but is proposed to be repurposed as guidance on applying the "fair and honest" principle)
  • In relation to the "fair and honest" preparation and presentation of financial information, to introduce additional guidance that a PAIB should not exercise judgements and discretion available under the applicable financial reporting framework in a manner that is intended to mislead, including when determining estimates, selecting a particular accounting method among two or more alternatives, determining the structuring of transactions and determining disclosures
  • Proposing a new section of the Code to provide more robust and practical guidance on how a PAIB should respond when facing pressure from a superior or others that may result in a breach of the fundamental principles of the Code. The new section would introduce a explicit requirements for a PAIB not to allow pressure to result in a breach of the fundamental principles, and to prohibit a PAIB from placing pressure on others that would result in such a breach.

The exposure draft is open for comment until 15 April 2015. Click for IESBA press release (link to IFAC website).

November 2014 IASB meeting notes — Part 2

25 Nov, 2014

The International Accounting Standards Board (IASB) met at its offices in London on 19-20 November 2014. We have now posted the Deloitte observer notes from Wednesday's session on insurance contracts. Additional notes will be posted in due course.

Click through for direct access to the notes:

Wednes­day, 19 November 2014

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

We comment on a number of tentative agenda decisions of the IFRS Interpretations Committee

25 Nov, 2014

We have published our comment letters on IFRS Interpretations Committee agenda decisions on IAS 28, IAS 39, IFRS 12, IFRS 13, and IFRIC 21, as published in the September IFRIC Update.

More in­for­ma­tion about the issues is set out below:

IssueMore information

IAS 28 Investments in Associates and Joint Ventures — Fund manager’s significant influence over a fund

IAS 39 Financial Instruments: Recognition and Measurement — Accounting for embedded foreign currency derivatives in host contracts

IFRS 12 Disclosure of Interests in Other Entities — Disclosures for a subsidiary with a material non-controlling interest and for a material joint venture or associate

IFRS 13 Fair Value Measurement — The fair value hierarchy when third-party consensus prices are used

IFRIC 21 Levies — Levies raised on production property, plant and equipment

You can access all our comment letters to the IASB, IFRS Foun­da­tion, and IFRS In­ter­pre­ta­tions Com­mit­tee here.

BIS consults on draft guidance for country-by-country reporting by extractive industries

25 Nov, 2014

The Department for Business, Innovation and Skills (BIS) has today published draft guidance to help extractive industries meet the requirements for country-by-country reporting introduced by Chapter 10 of the EU Accounting Directive (Directive 2013/34/EU) and changes made by Directive 2013/50/EU to the Transparency Directive (2004/109/EC) (“the draft guidance”).

Chapter 10 of the EU Accounting Directive (Directive 2013/34/EU (link to European Commission website)) (and changes made by Directive 2013/50/EU (link to the European Commission website) to the Transparency Directive (2004/109/EC)) require extractive companies – those in mining, oil and gas sectors, as well as those who log primary forests – to prepare a report on a project-by-project basis of all payments to governments (including, but not restricted to, licence fees, taxes and royalties). Parent companies must prepare a report for the group which they head; subsidiaries are exempt if they are part of a larger EEA incorporated group which publishes a consolidated report including their payments. 

In the UK, BIS confirmed in August 2014 that Regulations (‘The Reports on Payments to Governments Regulations 2014’) will be laid before parliament detailing how the country-by-country reporting requirements will be implemented in the UK.  The Regulations will require extractives companies to prepare and file country-by-country reporting for financial years commencing on or after 1 January 2015, a year in advance of the EU deadline.

The draft guidance, which has been developed by industry associations, is intended to “help companies engaged in oil and gas, mining and logging of primary forest activities meet the requirements of the UK Regulations”.  It is not intended to be a binding set of rules.

The draft guidance will assist with answering the following:

Which entities are under an obligation to prepare and deliver a report?

Does every entity have to prepare a report or can a consolidated report be prepared for a group?

Are any entities exempted from preparing reports under the UK Regulations?

What are the reporting requirements for entities that are subject to equivalent disclosure regimes?

Do the reports only cover payments made by the entities that have to prepare reports or do the reports cover payments made by other group entities?

Which business activities are within the scope of the UK Regulations?

Which types of payment have to be included in the report?

Who has the obligation to include payment information in a report in situations where a payment is made on behalf of multiple parties?

Which government entities that receive payments have to be covered in the reports?

How should payments be attributed to projects?

When and how should reports be delivered?

Comments are invited on the draft guidance until 17 December 2014.

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IASB proposes amendments to IFRS 2 to clarify the classification and measurement of share-based payment transactions

25 Nov, 2014

The International Accounting Standards Board (IASB) has published an Exposure Draft (ED) of proposed amendments to IFRS 2 'Share-based Payment' that would clarify the classification and measurement of share-based payment transactions. The ED addresses several requests the IASB and the IFRS Interpretations Committee received and the IASB decided to deal with in one combined narrow-scope project. Comments are requested by 25 March 2015.


The IASB and the IFRS Interpretations Committee received a number of requests related to IFRS 2 Share-based Payment. Respondents asked for clarification on:

  • the accounting for cash-settled share-based payment transactions that include a performance condition;
  • the classification of share-based payment transactions with net settlement features; and
  • the accounting for modifications of share-based payment transactions from cash-settled to equity-settled.

After debating the issues in earlier meetings, the IASB decided in April 2014 to address them together in one narrow-scope project.

Suggested changes

ED/2014/5 Classification and measurement of share-based payment transactions proposes the following clarifications and amendments regarding the issues:

Accounting for cash-settled share-based payment transactions that include a performance condition

IFRS 2 currently contains no guidance on how vesting conditions affect the fair value of liabilities for cash-settled share-based payments. The IASB proposes to clarify that the accounting in the case of cash-settled share-based payments should follow the same approach as used for equity-settled share-based payments.

Classification of share-based payment transactions with net settlement features

The IASB proposes to include an exception into IFRS 2 so that a share-based payment where the entity settles the share-based payment arrangement net whould be classified as equity-settled in its entirety provided the share-based payment would have been classified as equity-settled had it not included the net settlement feature.

Accounting for modifications of share-based payment transactions from cash-settled to equity-settled

IFRS 2 currently does not specifically address situations where a cash-settled share-based payment changes to an equity-settled share-based payment because of modifications of the terms and conditions. The IASB proposes the following amendments:

  • On such modifications, the original liability recognised in respect of the cash-settled share-based payment is derecognised and the equity-settled share-based payment is recognised at the modification date fair value to the extent services have been rendered up to the modification date.
  • Any difference between the carrying amount of the liability as at the modification date and the amount recognised in equity at the same date would be recognised in profit and loss immediately.

Effective date and transition requirements

The ED does not contain a proposed effective date but states that earlier application would be permitted. The amendments would be applied prospectively. However, retrospective application would also be permitted if an entity has all necessary information and if the information is available without the use of hindsight.

Additional information

ED/2014/5 is open for comment until 25 March 2015. Please click for:

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