The amendments in ED/2014/4 would confirm that the unit of account for investments in subsidiaries, joint ventures and associates is the investment as a whole, but that the fair value measurement of quoted investments in subsidiaries, joint ventures and associates should be the product of the quoted price multiplied by the quantity of financial instruments held, without adjustments.

EFRAG published its draft comment letter in October 2014 and its final comment letter in January 2015. 

The feedback statement (link to EFRAG website) summarises the main comments received by the EFRAG Board in relation to the draft comment letter and explains how those comments were considered by the EFRAG Board reaching their final position on the IASB ED set out in their final comment letter to the International Accounting Standards Board (IASB).  

The press release and full feedback statement are available on the EFRAG website.

 The three-page newsletter discusses the "modest" changes proposed to IAS 7 for additional disclosure requirements.

[T]he proposed changes will require companies to reconcile the movement in debt from one period to another. Combining this with the existing information from the cash flow statement will facilitate a net debt reconciliation.

The primary purpose of this paper is to consult on the UK implementation of the remaining changes to the Transparency Obligations Directive made by the Transparency Directive Amending Directive (TDAD). These rules apply to entities with securities admitted to trading on an EEA regulated market that have the UK as their "home state" for securities regulation.

The consultation covers a number of topics. The key points of accounting, auditing and governance interest are:

• relaxing the publication deadline for half-yearly reports from two months to three months;
• extending the period for which an issuer must retain its annual and half-yearly reports on a website from five years to ten years;
• requirements to notify the FCA of changes in voting rights held. The UK already goes further than the directive by requiring disclosure of positions in financial instruments that have a similar economic effect to owning shares; minor adjustments are needed to align with the TDAD; and
• a proposal to extend the regime to allow sanctions to be applied to "the members of administrative, management or supervisory bodies of the legal entity concerned". The existing provisions of the Financial Services and Markets Act 2000 only apply to directors - this change is necessary to allow for different forms of legal entity. In addition, the law will be amended to allow the voting rights of such persons to be suspended if they fail to make necessary notifications to the market.

Finally, the FCA notes that some parts of TDAD do not require UK implementation at this stage. These include facilitating easier cross-border access to regulated information by providing for a central point of access for the EU, rather than one point of access per member state, and working towards electronic submission of filings of regulated information (including annual and half-yearly reports) by 1 January 2020. Work on both of these areas will be taken forwards by the European Securities and Markets Authority (ESMA) and is likely to involve the use of XBRL.

Comments are invited by 20 May 2015. The changes must be transposed into UK law by 26 November 2015.

The consultation paper can be accessed here (link to FCA website).

The report highlights the increase in legislation and regulation around environmental issues in recent years, summarising changes to UK law as a result of EU legislation, addressing related initiatives which have influenced the development of environmental regulation and legislation and identifying accounting standards that have relevance for environmental issues.

It explains that companies will benefit from having a sound internal information system in place, such as an environmental management system, to capture sufficient data to provide meaningful disclosure about environmental issues affecting the business. In doing so, the report also notes that preparers of annual reports should consider not only investors but other stakeholders who may be important to the business.

The report also considers reporting on environmental issues from the perspective of the auditor, noting that auditors will need to develop sufficient knowledge to be able to understand the environmental issues that could have a significant impact on the financial position and performance of the business, and to be able to form a judgement as to whether those are accounted for and disclosed are consistent with that understanding. In some cases the auditor may need to engage with an external expert to obtain independent advice.

The report can be downloaded from the ICAEW website.

Click through for direct access to the notes:

Tuesday, 17 March 2015

• Leases

Wednes­day, 18 March 2015

• Research update
• Disclosure initiative

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

The BIS discussion document and FRC consultation paper together sought views of stakeholders on the implementation of the EU Audit Regulation and revised Audit Directive. The Regulation applies to the statutory audit of public interest entities, the Directive to all statutory audits. The UK is required to implement the Directive in national law by 17 June 2016, and to make choices about certain member state options in the Regulation by the same date. BIS proposed in many cases to make enabling provisions in the law, allowing the FRC to implement the detailed requirements.

Key points of our responses are:

• We agree with BIS that the FRC should be designated as the single competent authority. However, the FRC should delegate significant amounts of activity to the professional bodies, to help ensure they remain strong and relevant. Where practicable, detailed requirements should be included in the FRC’s standards, providing a one-stop reference for audited entities, auditors, audit committees and investors.
• We agree that BIS should not extend the definition of a public interest entity beyond that in the Directive (entities with securities admitted to trading on an EEA regulated market, credit institutions and insurers). However, the FRC should retain the option to extend some of the requirements of the Regulation to other classes of entity where appropriate. For example, we suggest that the degree to which non-audit services apply to AIM companies should reflect the outcome of the FRC’s soon to be published study of AIM and small cap company reporting; the Regulations requirements on tendering and rotation, however, appear disproportionate for AIM companies.
• We support the idea of a detailed “black list” of prohibited non-audit services, with other services subject to a consideration of threats and safeguards. We prefer this to a “white list” of permitted non-audit services, with all other services banned. In our view, a white list could stifle innovation, for example the introduction of independent assurance over narrative reporting. A “black list” approach is also consistent with that adopted in most other countries, and is familiar to audit committees and investors alike.
• We suggest that the FRC should take up the option to permit certain tax and valuation services which have no direct, or only immaterial direct impact on the financial statements; by definition, the judgements involved here cannot be material. Whilst the arguments are finely balanced, allowing companies a choice provides more competition in the market for non-audit services.
• We agree with the FRC that stakeholders may not understand the distinction between the audit firm and the network of which it is part. To that end, bans on non-audit services should extend to all network firms, as well as to component auditors outside the network.
• The Regulation requires that non-audit fees cannot exceed 70% of a rolling three year average of audit fees. Whilst there is uncertainty as to whether this applies to the audit firm or the wider network, we suggest that the rules should compare like with like – it would be inappropriate to compare non-audit fees charged by the network with only those audit fees charged by the auditor, for example.
• We welcome the clarifications BIS offered in their supplementary information around rotation and tendering. We suggest that the principle should be simple; no auditor can serve a PIE continuously for more than twenty years, and a tender should be required at least every ten years. We agree with BIS that audited entities should be given credit for tenders carried out prior to 2016, and suggest that the FRC could usefully issue guidance on the application of the rules in situations where a new PIE is closely related to an existing PIE e.g. by merger or division.
• We recommend that the FRC introduce the changes required to auditor reporting by EU law earlier than required by the Directive. We suggest that they will provide useful information for investors, and prevent changes in consecutive financial years.

Further comments and full responses to the questions raised in both documents are contained within the full comment letter to BIS and the full comment letter to the FRC.

The IASB's exposure draft, published in November 2014, addresses the following issues that had been brought to its attention in relation to accounting for share-based payments:

• 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.

In their response, the ICAEW express support for the IASB's proposals. However, they note that IFRS 2 Share-based Payment continues to attract a wide range of application and interpretation issues and for this reason encourage the IASB to continue with its longer-term research project on the standard.

In addition, the ICAEW express a preference that the IASB's proposed new paragraphs outlining the principles for accounting for modifications to cash-settled share-based payments should appear in the body of the standard, rather than in an appendix as proposed.  They also agree that entities should be given a choice over whether to apply the amendments prospectively or retrospectively but do not agree that the current drafting of the amendment is entirely clear.

The full response can be downloaded from the ICAEW website.