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).

Click through for direct access to the notes:

Wednes­day, 19 November 2014

• Insurance contracts

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

More in­for­ma­tion about the issues is set out below:

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

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.

Please click for:

• Press release (link to BIS website).
• Draft guidance ‘The Reports on Payments to Government Regulations 2014 – Industry Guidance’ (link to BIS website).
• Our previous UK Accounting Plus news item on the BIS response to its consultation on country-by-country reporting in the extractive industries.

Current status

The revised time table for the major projects is now as follows:

* In­di­cates a change since the previous work plan update on 28 October 2014.

Click for the IASB work plan dated 24 November 2014 (link to IASB website). We have updated our project pages to reflect the updated work plan and other known de­vel­op­ments.

The first comment letter refers to the IFRS IC’s tentative agenda decision on IFRS 12 Disclosure of Interests in Other Entities.   The IFRS IC took the tentative decision not to add to its agenda the request for clarification in respect of the requirements in paragraphs 12(e)-(g) of IFRS 12 which concern the disclosure of information about a subsidiary that has non-controlling interest that is material to the reporting entity.

ESMA agrees that neither an Interpretation nor an amendment to the Standard is necessary as “in the light of the existing IFRS requirements sufficient guidance exists”.  ESMA also “particularly welcomes” the reasoning in the tentative agenda decision that the approach chosen to present the required disclosures should reflect the disclosure objective of a Standard. 

The second comment letter refers to the IFRS IC’s tentative agenda decision on IFRIC 21 Levies.  The IFRS IC took the tentative agenda decision not to add to its agenda the requests to clarify accounting for the costs arising from recognising a levy.  ESMA has “serious concerns that the wording of the tentative agenda decision could have unintended consequences”.  ESMA comments that the tentative agenda decision “fails to clearly address the question whether a fixed production overhead can be recognised as part of the cost of a service provider’s inventory” and calls on the IFRS IC to clarify this point in its agenda decision.

Both the IFRS 12 and IFRIC 21 comment letters can be found on the ESMA website.

Click through for direct access to the notes:

Wednesday, 19 November 2014

• IFRS for SMEs

Thursday, 20 November 2014

• Leases

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

As part of the IASB’s Research Programme, the Research Centre was created to raise awareness with the research community of the work the IASB has done. It contains internal and external intellectual resources, including engagements with the academic community, as well as other resources related to the 2014 IASB Research Forum.

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