Under the new rules, the societal role of auditors will be clarified, with the aim of increasing audit quality and transparency. Mandatory rotation of auditors will be introduced, requiring companies to retender at 10 years and change the auditor at least every 20 years. The reforms include further restrictions on the provision of non-audit services to audit clients and prohibit the use of restrictive clauses in contracts which limit a company’s choice of auditor.  

The next steps will be for a plenary vote in parliament with indications on the European Parliament website that this will be in April. 

Click for:

• Press release (link to the European Parliament website).
• Our previous UK Accounting Plus story on EU audit reform.

The Committee will:

• Continue discussion on a number of issues related to IAS 12, IAS 19, IFRS 10 and IFRS 11
• Consider finalising tentative agenda decisions on IAS 29 and IAS 32
• Consider a broad range of new issues on various standards (IAS 1, IAS 12, IAS 16, IAS 28, IAS 32, IAS 34, IAS 37, IFRS 3, IFRS 10)
• Discuss feedback from the IASB on the Committee's recommendations about disclosure requirements about an assessment of going concern.

The full agenda for the meeting, as of 20 January 2014, can be found here.  We will update this page for any changes to the agenda, and our Deloitte observer notes from the meeting as they become available.

GAAP 2014 comprises four volumes, as follows: 

• Volume A – Legal and regulatory framework deals with the common legal and regulatory issues that are relevant to all UK companies, whether they report under UK GAAP or IFRSs. It also addresses the requirements of Financial Reporting Standard (FRS) 101, the IFRS reduced disclosure framework. Many entities in the UK will be eligible to adopt FRS 101 under the ‘new’ UK GAAP regime, which may be adopted now if desired.
• Volume B – FRS 102 deals with the ‘new’ UK GAAP standard, FRS 102 which is mandatory for entities to apply from 2015, but may be adopted earlier;
• Volume C - IFRSs (comprising two books) deals with IFRS reporting in the UK, excluding financial instruments; and
• Volume D – IAS 39 and related Standards deals with financial instruments standards endorsed for use in the EU for those applying IFRSs. 

Volume C deals comprehensively with those new Standards that apply for periods beginning in 2013, and also covers those further pronouncements issued by the International Accounting Standards Board (IASB) up to 31 July 2013 that will apply from 2014 and later.  It provides expanded guidance on the application of the most recent Standards and Interpretations from the IASB, including:

• the 'suite of five' issued in May 2011 and effective in 2013 — IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, and the revised versions of IAS 27 Separate Financial Statements and IAS 28 Investments in Associates and Joint Ventures.
• IFRS 13 Fair Value Measurement.
• the revised version of IAS 19 Employee Benefits.
• Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27), issued in October 2012.
• Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36), issued in May 2013.
• IFRIC 21 Levies, issued in May 2013.

Volume B provides detailed analysis of the replacement for existing UK GAAP, FRS 102, as well as analysing the key differences between FRS 102, ‘old’ UK GAAP and IFRSs and providing useful practical guidance on implementation of the new requirements. 

The new set of manuals does not address ‘old’ UK GAAP (i.e. FRSs 1-30, SSAPs and UITFs, which will be withdrawn on adoption of FRSs 100-102). The existing manual, ukGAAP 2013, will continue to be relevant for companies currently reporting under ‘old’ UK GAAP. 

Orders for Deloitte’s GAAP manuals may be placed via the LexisNexis website.

Model financial statements are also available in the form of GAAP 2014 - Annual report disclosures for UK listed groups.

The FRC published their consultation in October 2013 and sought views on three main areas; clawback provisions, remuneration committee membership and actions companies may take if they fail to obtain a substantial majority in support of a resolution on remuneration. 

Extended clawback provisions

• We agree that the Code should adopt the terminology used within the new directors’ remuneration regulations.
• We do not think that the Code should be extended to include a “comply or explain” presumption that companies have provisions to recover and/or withhold variable pay.  We comment that “the binding vote on policy provides an opportunity for shareholders to register any concerns in relation to the recovery and withholding policy and therefore the current requirements to “consider” are appropriate”. 

Remuneration Committee membership

• We do not support changing the Code to deter the practice of non-executive directors who are also executive directors in other companies sitting on the remuneration committee.  We comment that “there may be value in having the experience of an individual with executive experience on the committee”. 
• We comment that the current provisions within the Code relating to the independence of non-executive directors, “should ensure that the constitution of the committee is appropriate and that it operates effectively”. 

Voting

• We do not support the inclusion of a specific requirement to report to the market where a company fails to obtain at least a substantial majority.  We comment that the definition of ‘substantial’ will be “different for different companies making it difficult to define in the Code”.
• We consider that the provisions under the new directors’ remuneration regulations, where companies are required to provide, in the Annual Remuneration Report, a summary of the reasons for failing to obtain at least a substantial majority in support of a resolution on remuneration are “sufficient”. 

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

Paul Cherry was appointed Chairman of the (then) Standards Advisory Council (SAC) in December 2008.  His initial three year term commenced on 1 January 2009 and was extended in June 2011 for a further two years to end on 31 December 2013. During his term, the SAC was renamed the IFRS Advisory Council and underwent a number of changes.

In his article, Mr Cherry notes the following:

• A number of important changes made to the structure and role of the IFRS Advisory Council, including most members now being appointed as representatives of organisations rather than as individuals
• The appropriateness of the size and composition of the Council, including broad geographic and constituent diversity and efforts to increase representation of financial statement users
• Improvements in feedback from constituents on the performance of the Council
• A change in focus from technical matters to more a strategic and cross-cutting matters, which has been facilitated by the establishment of the Accounting Standards Advisory Forum (ASAF)
• Future changes in the operation of the Council, including topics such as whether the Council should have a higher profile, how the Council should assist the IASB in the promotion and adoption of International Financial Reporting Standards (IFRS), and the consultation process and interaction of the Council's activities with the IASB's current agenda.

In relation to the last two points above, Mr Cherry provides the following assessment:

The strategic focus will need to be a conscious approach in the future, including (i) a longer-term view of the IASB’s agenda beyond the current agenda, (ii) a wider view of the financial reporting environment, including corporate reporting trends and the issues that are likely to affect financial reporting in the future, and (iii) the broader context of corporate reporting and of developments related to corporate reporting. These developments include integrated reporting, technological/digital developments and other areas that are likely to affect financial reporting in the future.

In December 2013, the Trustees announced the appointment of Joanna Perry as Chairman of the IFRS Advisory Council with effect from 1 January 2014.

The full text of Paul Cherry's article is available on the IASB website.

EFRAG-SDS-paper on the equity method

Currently, the guidance in IAS 28 relating to the application of the equity method lacks clarity and is causing diversity in practice. It is not always clear whether the measurement basis or one-line consolidation concept should be applied to situations and issues that are not specifically addressed in IAS 28. The objective of this SDS paper is to gather feedback from constituents on their views regarding the equity method, which the EFRAG will consider when addressing this issue with the IASB and thus assisting the IASB to develop a clear set of principles for the basis of the equity method.

Comments are requested by 15 May 2014.

For more information, see the press release and the Short Discussion Series paper on the EFRAG website.

EFRAG-SDS-paper on the implications for standard setting following from the results of a literature review on the use of information by captial providers

The academic literature review was published by the EFRAG and the ICAS in December 2013. It examined how capital providers use financial statements. As a second step in its proactive project, EFRAG discusses in this SDS paper the implications for standard setting following from the findings of the academic literature review. While it seems not to be possible to meet the needs of all types of users simultaneously, the findings may, however, provide some directions for, for example, measurement, other comprehensive income, the importance of the statement of profit or loss, and other topics.

For more information, see the press release and the Short Discussion Series paper on the EFRAG website.

Statistics released by the Professional Boards Forums’ BoardWatch highlight that women made up 20.4 per-cent of FTSE 100 directors (as of 9 January 2014), up from 19 per-cent as of October 2013 and 12.5 per-cent as of February 2011 when Lord Davies reported.  The figures also highlight that 27 per-cent of all board appointments since 1 March 2013 have been women.  To achieve the target set by Lord Davies, 51 more board seats on FTSE 100 companies are required to be held by women.  This figure has reduced from 66 as of October 2013. 

FTSE 250 companies are also reporting an increase with 15.1 percent of women directors on their boards, up from 14.9 percent as of October 2013 and 7.8 percent as of February 2011.  Thirty-one per cent of all board appointments to FTSE 250 companies since March 2013 have been women.  To achieve the target set by Lord Davies, 197 more board seats on FTSE 250 companies are required to be held by women.  This figure has reduced from 202 as of October 2013. 

There has been a decrease in the number of all-male boards in the FTSE 100 which has fallen from six in October 2013 to two in January 2014.  The number of all-male boards for FTSE 250 companies has decreased from 51 in October 2013 to 50 in January 2014. 

The government has challenged companies to “seize the opportunity and increase the number of women in their boardrooms”.  The government has asked FTSE 350 Chairs to:

aim to appoint one additional female director in the year ahead

consider giving two female candidates from senior management the opportunity to serve as a non-executive director at another company

state clear targets for the number of women at senior management and board level and what steps they are taking to achieve those targets

The latest Women on Boards update report is expected in March 2014.

Click for:

• Department for Business, Innovation and Skills (BIS) press release (link to BIS website)
• Latest women on boards statistics (Link to Professional Boards Forum BoardWatch website)
• Latest annual progress report (April 2013) from Lord Davies into Women on Boards (Link to BIS website)
• The original Lord Davies Women on Boards report from 2011 (Link to BIS website)
• Our previous UK Accounting Plus story on women on boards

In October 2013, the Competition Commission announced a final package of remedies to increase competition within the provision of statutory audit services to FTSE 350 companies in the UK.  Among other things, the proposals required that all FTSE 350 companies put their statutory audit engagement out to tender at least every ten years.  A timetable (link to Competition Commission website) published by the Competition Commission had indicated that these remedies would be effective from 1 October 2014 after Orders had been finalised. 

Subsequent to the release of the Competition Commission proposals, a preliminary agreement was reached in December 2013 between the Lithuanian EU Council Presidency and the European Parliament on EU audit reform.  These reforms proposed mandatory audit rotation with companies required to retender every ten years and change auditor every 20 years.  They are likely to be finalised and come into force in the second quarter of 2014. 

The Competition Commission are keen to ensure that their “Orders do not contradict or duplicate EU regulation”.  They further comment: 

in light of these developments we have extended our administrative timetable to enable us to consider fully the implications of the EU proposals on our own Orders. 

The revised timetable indicates that after the release of the EU audit reforms, there will be a period of informal consultation on the effect of the EU proposals.  The Competition Commission Orders will be redrafted in light of the results of these consultations and will then be subject to a further period of consultation.  The new Orders are now expected to commence in Q4 2014. 

Click for:

• Competition Commission explanatory note accompanying revised timetable (link to Competition Commission website).
• Revised timetable (link to Competition Commission website).
• Our previous story on the Competition Commission provision proposals
• Our previous story on the preliminary agreement on EU audit reform.

Both will take up their position from 1 March 2014.

Please click for the corresponding press release on the FRC website.

The material was developed to support those teaching IFRS, helping them to progressively develop students' abilities to make the necessary estimates and judgements when applying IFRS and IFRS for SMEs. The material is presented in three stages, to accommodate students at different levels in their learning process:

• Stage 1 — A student’s first financial reporting course.
• Stage 2 — A financial reporting course midway to qualifying as a CA or CPA.
• Stage 3 — A course immediately before qualifying as a CA or CPA.

The additional educational material is presented as follows:

• Stage 3 material covering the IAS 8 hierarchy.
• Multimedia presentations introducing IFRS teachers to Framework based teaching and other material.
• Updates to non-financial assets (2014 edition) material in Stages 1 through 3.

For more information, see (links to IASB website):

• Press release on the IASB website with links to the teaching material.
• Upcoming IFRS teaching sessions being held worldwide.