The Update reports on the meeting of the EFRAG Board on 14 January and the meeting of the EFRAG Technical Expert Group (EFRAG TEG) on 28 - 30 January as well as written procedures of the EFRAG Board in January and two EFRAG TEG conference calls. The Update also lists EFRAG publications issued in January:

• a letter to the Trustees of the IFRS Foundation as part of their review of the Accounting Standards Advisory Forum (ASAF),
• a letter to the IFRS Interpretations Committee regarding tentative agenda decisions on the application of IFRS 11 Joint Arrangements,
• final comment letters in response to the IASB Exposure Drafts ED/2014/3 Recognition of Deferred Tax Assets for Unrealised Losses and ED/2014/4 Measuring Quoted Investments in Subsidiaries, Joint Ventures and Associates at Fair Value and the IASB Discussion Paper DP/2014/2 Reporting the Financial Effects of Rate Regulation,
• a feedback statement summarising constituent input and how it was taken into account in the finalisation of the comment letter in response to the IASB Discussion Paper DP/2014/1 Accounting for Dynamic Risk Management: a Portfolio Revaluation Approach to Macro Hedging.

The full agenda for the meeting, dated 6 February 2015, can be found here.  We will post any updates to the agenda, and our Deloitte observer notes from the meeting, on this page as they are available.

William Hill, from 2011 onwards, has only defined and disclosed what it considers are its significant accounting policies being revenue recognition, intangible assets – licences, going concern and exceptional items.  A complete list of accounting policies is then provided outside of the financial statements.  This contrasts to other companies that may present a longer list within their annual report.

Views were sought from eight of the company’s institutional investors and analysts, together with three retail investors in the company.

The case study highlights that institutional investors view William Hill as “the leader in good reporting in its sector in Europe, with high quality and clear disclosure”.  Investors supported the disclosure of only significant accounting policies which were supported by sufficiently detailed entity-specific related notes that “adequately explain how the company accounts for its significant transactions”.  Investors confirmed that “they would like companies to follow the lead of William Hill, and identify which of their accounting policies are significant and give these more prominence than other policies”.

Investors also supported effective disclosure of policy information in order to understand the business and its performance.  The case study indicates that investors “predominantly prefer” the significant accounting policies to be presented in the ‘Statement of Group Accounting policies’ section with the complete list provided as an appendix to the annual report.  Some would like to see each of the significant accounting policies placed in the related note(s) to the financial statements “as this presents the context and numbers together”. 

The case study is part of the FRC’s ‘Clear and Concise’ reporting initiative, launched in June 2014 and builds on the Lab’s recent report ‘Accounting Policies and integration of related financial information’ published in July 2014.

Click for:

• Press release (link to FRC website).
• Lab case study report: William Hill – accounting policies (link to FRC website).
• Our previous UK Accounting Plus news item on the Lab’s report ‘Accounting policies and integration of related financial information’
• Our UK Accounting Plus ‘Clear and Concise’ initiative project page.
• Our UK Accounting Plus Lab project page

The paper, published in September 2014, addressed the presentation and disclosure of information on the reversal of step-ups recognised in a business combination. Respondents were not in favour of introducing new presentation or disclosure requirements and generally supported allowing entities to provide the information when considered relevant and material.

The feedback statement is available on the EFRAG website.

According to the new Directive, which entered into force in December 2014 and must be transposed into national law by the Member States by December 2016, large public-interest companies with more than 500 employees are required to disclose relevant and material environmental and social information in their annual reports. The linkage document specifies how G4 can be used to gather information, and formulate responses, to each element of the European Directive. Making headway in Europe can be downloaded for free from the GRI website.

In response to the paper, the research group received twenty nine comment letters.

The majority of respondents supported reintroducing the amortisation of goodwill. Nonetheless, these respondents provided mixed views on whether the IASB should indicate a maximum amortisation period. Some respondents also acknowledged the subjectivity and high level of judgement in determining the useful life of goodwill, but they believed the level of subjectivity and judgement to be not higher than that in the impairment test. In general, respondents who supported the amortisation of goodwill believed that the IASB should develop guidance to help preparers to determine the useful life of the acquired goodwill.

A minority of respondents, mostly users, were supportive of the current impairment-only approach. These respondents explained that the amortisation model was fairly meaningless and it would not be beneficial to users of financial statements.

The full feedback statement is available on the EFRAG website.

As Mr Hoogervorst had pointed out in his keynote address preceding the panel discussion, the high complexity IFRSs in comparison to Swiss GAAP FER, particularly regarding goodwill, pension accounting and disclosures, is one reason often cited for turning away from IFRSs. Panelists discussed (a) whether companies leaving IFRSs were exceptional cases or whether more were to be expected in the future (especially in connection with the upcoming Leases standard), (b) the reaction of capital markets to companies moving from IFRSs to Swiss GAAP FER, and (c) the topic of 'one size does not fit all' and the appropriate cost-benefit ratio for smaller listed entities.

In conclusion, all panelists agreed that rivaling accounting standards would lead to an ideas competition. However, they all also agreed that IFRS ensure a good international comparability, which is important to investors.

The complete summary of the discussion (including a list of panelists) and the event in general is available on the TREUHAND-KAMMER website.

In March 2013, the Monitoring Board had announced its final membership criteria and the appointment of Mr Kono, then Acting Chair of the Monitoring Board, to serve as its Chairman. Mr Kono's first first term as Chair will therefore expire in February 2015. He will now serve a second term with effect from 1 March 2015, expiring in February 2017.

Please click for the Monitoring Board's press release availabe on the Financial Services Agency of Japan's website.