The 'Red Book' contains all official pronouncements that have an effective date after 1 January 2015. Accordingly, the 2015 includes the following changes made since 1 January 2014: IFRS 9 Financial Instruments, IFRS 14 Regulatory Deferral Accounts, IFRS 15 Revenue from Contracts with Customers, Annual Improvements to IFRSs 2012–2014 Cycle, as well as amendments to IFRS 10, IFRS 11, IFRS 12, IAS 1, IAS 16, IAS 27, IAS 28, IAS 38, and IAS 41.

eIFRS and Com­pre­hen­sive sub­scribers can now access the elec­tronic files of the 2015 IFRS (Red Book) via the Latest Additions section of eIFRS (you will be required to provide your login details).

The Red Book is also available through the IASB's Web Shop. Copies are priced at £70 each, plus shipping. Discounts are available for multiple copies, academics/students and residents of middle and low-in­come countries.

Ideas take time to become embedded into corporate consciousness. And it often takes far longer than people expect. Something that seems obvious to the few can take years before it is seen as mainstream by the many. 

And this is what has happened with the perception of the value of corporate reputation. Lip-service has always been paid to the virtues of a company having a good reputation. The idea that the value of the perception of the reputation might be quantifiable, let alone significant to a company’s market valuation, has been largely ignored. For many people it is dropped into the same ‘pending’ basket as integrated reporting or environmental issues. 

But time, and gathering evidence, can change minds. The latest annual report from the research and consulting organization Reputation Dividend is its eighth. And the trends, messages, and comparison figures across those eight years are mounting up. They build a straightforward account of assessing the current state of corporate reputation and how that impacts shareholder value. But the real eye-opener is that: ‘At their most effective the corporate reputations of UK companies are contributing one pound in every two of market capitalisation’. In other words the companies that invested the most in their reputation found that almost half of their market capitalization was attributable to those efforts. The report cites the example of Next plc. Its continued attention to its reputation is estimated to contribute over 48% of its value and moved it up 18 places in the rankings to 3^rd overall. The openness of the disclosure between investors and the CEO was said to be a contributing factor. 

This sort of finding, and the more detailed work in the report, and the length of time over which it has now been recorded, should be changing attitudes and behaviours. And it should not be hard to assimilate. There is much logic and instinctive understanding behind what makes up successful and valuable reputations. The report says that at the opening of this year the most valuable components of corporate reputations were ‘perceptions of companies’ financial soundness and long-term potential’. Put those two together and they make up 30% of all reputation value. After them came what Reputation Dividend call the ‘softer qualities’ like the perceived quality of leadership and how well companies were deploying their assets. Those two together make up a further 27% of reputation value. At the other end of the chart comes ‘community and environmental’ credentials. These are often ignored as being nice extras rather than compelling objectives. And, true, they are at the bottom of the chart. But the amount this represents rather belies the lowly position. As the report says: ‘These alone contributed a total of £22bn of shareholder value [in the FTSE350] and an answer to the perennial question “what are companies’ CSR programmes actually worth?”’ 

Looking right across the board this report shows that the value of reputation in the FTSE 350 market amounts to some £620bn, representing around 28% of total value. These are large numbers. 

But the leverage figure is even more striking. At the beginning of this year, says the report, the average reputation leverage was 1.4%. Or, to put it another way, a 1% improvement in the underlying strength of a company’s reputation should result in a 1.4% uplift in market capitalisation. The average FTSE100 company looking to grow the strength of its corporate reputation by just that 1% would be expecting a return on that investment of something close to £266m. 

These sorts of figures and proportions are hard to ignore.

The study is based on 16 interviews with investors, researchers and standard-setters. Human capital is defined in the study as “the value of people at work and their collective knowledge, skills, abilities and capacity to develop and innovate”.  Human capital management is the process which "enables organisations to make more productive use of their people through measurements, analysis and evaluation".  Human capital management reporting refers to quantitative and qualitative information reporting on these activities.  

The research report highlights that whilst some organisations do present people-related data in their annual reports “very few” actually describe how this information links into value-creation for their business. 

The research report also indicates that “respondents believe that company reporting on HCM should be promoted and improved” and “that the quality of HCM reporting is not as good as it should be”; although no respondents indicated a desire to include the value of human capital on a company’s balance sheet.   The research concludes that:

It’s evident that investors want to use HCM data in combination with other perspectives on company performance to develop a more holistic view of their investments.

A number of barriers to HCM reporting such as confusion over HCM terminology and measures and also a lack of encouragement from investors for better quality HCM reporting  are highlighted in the research report.  Significantly, the research report indicates that investors “don’t recognise this information as powerful and pertinent”.  Investors do, however, consider that four key metrics (total cost of workforce employed, recruitment costs, total investment in training and development and employee engagement survey scores) proposed to standardise external HCM reporting represented “a step forward in CM reporting”.

In light of the findings and perceived barriers to HCM reporting, the research report offers a series of recommendations for both increasing demand among investors and for improving reporting practice.  It is hoped that this reported information will then “improve decision-making, justify investments in people, and demonstrate to external stakeholders [that organisations] are led and managed for the long-term”.    

The research report provides recommendations under a number of headings:

• what interest investors can do;
• what asset owners can do;
• what gatekeepers can do;
• what professional education bodies can do;
• what reporting companies can do; and
• what policy-makers and government can do.

The full report can be downloaded from the CIPD website.

In the first paper, the ASBJ provides its view on the IASB's tentative decisions regarding identification, description and categorisation of measurement bases. The ASBJ believes that the IASB's tentative decision to have a binary classification (classifying measurement bases into historical cost and current value) is insufficient. Therefore, the ASBJ suggests an alternative approach that would classify measurement bases on the basis of (a) whether inputs for measurements need to be updated (the ASBJ envisions three categories: fully-updated inputs, partially-updated inputs, and locked-in inputs) and (b) whether market participants assumptions or entity-specific assumptions need to be adopted when measuring an asset or a liability.

In the second paper, the ASBJ underlines its view that the nature of an entity's business activities has significant effect on various aspects of accounting standard-setting and that there should be an overarching description in the Conceptual Framework that should be applied consistently throughout the standard-setting process. The ASBJ thus disagrees with the IASB's tentative decision that the forthcoming Exposure Draft of possibles changes to the Conceptual Framework should not provide a single over-arching description of how the nature of an entity's business activities would affect standard-setting. In the paper, the ASBJ identifies questions that need to be ansered in this context and suggests principles for classifying and describing the nature of an entity's business activity.

Both papers can be accessed through the press release on the ASBJ website.

The first document is a linkage document similar to the document on linking the G4 Guidelines and the new EU Directive on disclosure of non-financial and diversity information (published by GRI in February 2015) and the table connecting corporate non-financial reporting approaches (published by the CDSB in February 2015). The guidance reveals how GRI's G4 Guidelines and CDP's 2015 climate change questions are aligned so that duplication of disclosure efforts can be avoided. This harmonisation will help companies to streamline their disclosure efforts and improve the consistency and comparability of environmental data. Please click to download Linking GRI and CDP from the GRI website.

The second document provides the results of research into materiality from the reporter's perspective, as expounded in GRI reports, and compares this with the investor perspective of materiality. The research reveals an overall high degree of overlap between the topics considered material by reporting organisations, and those considered material by investors. The research also underlines the value that an analysis of the most material issues provides for both companies and investors. Please click to download Defining materiality from the GRI website.

• a letter to the European Commission recommending postponement of the endorsement process for Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28);
• final endorsement advice on the Annual Improvements to IFRSs 2012-2014 Cycle;
• a draft comment letter on the IASB Exposure Draft Disclosure Initiative (Proposed amendments to IAS 7);
• a feedback statement summarising input from constituents and how it was taken into account in the finalisation of the comment letter in response to the IASB Discussion Paper Reporting the Financial Effects of Rate Regulation;
• a feedback statement summarising the responses received to the EFRAG Short Discussion Series paper Levies: what would have to be changed in IFRS for a different accounting outcome?; 
• a feedback statement summarising the responses received to the EFRAG Short Discussion Series paper Presentation of the reversal of acquisition step-ups; and  
• a feedback statement summarising the responses received to EFRAG/OIC/ASBJ Discussion Paper Should Goodwill Still Not Be Amortised?.

The framework provides a concise set of questions and offers companies clear and straightforward guidance on how to answer these questions with relevant and meaningful information about their human rights policies, processes and performance. It is also intended as an incentive to improve these policies and processes and the performance over time.

The framework is the first of two guidance frameworks around the UNGPs. The second  - expected to be published in early 2016 - will be an assurance framework. It will provide guidance for assurance providers on how to appropriately assess and assure the information reported by companies in line with the UN Guiding Principles Reporting Framework.

Please click to access the framework on the newly created UNGP reporting website.

IFIAR comprises 51 independent audit regulators from jurisdictions in Africa, the Americas, Asia, Europe, the Middle East and Oceania.  IFIAR provides a forum for regulators to share knowledge of the audit market and share the practical experience gained from their independent audit regulatory activity.   The Financial Reporting Council (FRC) is a member.

The report summarises the key inspection findings from audits of public companies (including systematically important financial institutions) as well as from reviews of audit firms’ own quality control systems.  Findings were submitted from the most recent audit inspection reports of members that ended by July 2014.

The report identified that in inspected audits of listed public interest entities (PIEs), the areas with most deficiencies were the core audit focus areas of fair value measurement, internal controls and revenue. In particular, deficiencies relating to audit of internal controls were identified in 24% of PIEs inspected. 

For audits of systemically important financial institutions, including global banks and insurers, the survey found the highest number of deficiencies related to auditing of allowance for loan losses and loan impairments, internal control testing, and auditing the valuation of investments and securities. 

In December 2014 the FRC published a thematic review of the quality of auditing of banks and building societies and in May 2014 published its own report of audit quality inspection work carried out by its Audit Quality Review (AQR) team.  In its draft plan and budget, the FRC indicated that in 2015/16 there will continue to be a focus on bank audits, especially loan loss provisioning. 

Click for:

• Press release (link to IFIAR website)
• IFIAR report ‘International Forum of Independent Audit Regulators – Report on 2014 survey of inspection findings’ (link to IFIAR website)
• Our previous UK Accounting Plus news item on the FRC Audit Quality Inspection Report 2013/14
• Our previous UK Accounting Plus news item on the FRC Audit Quality Thematic Review on loan loss provisioning
• Our previous UK Accounting Plus news item on the FRC draft plan and budget 2015/16

In December 2014, the International Accounting Standards Board (IASB) published Disclosure Initiative (Amendments to IAS 1).  The amendments result from the IASB’s Disclosure Initiative which comprises several smaller projects to improve presentation and disclosure requirements in existing standards.  The amendments aim at clarifying IAS 1 to address perceived impediments to preparers exercising their judgement in presenting their financial reports. 

Disclosure Initiative (Amendments to IAS 1) makes the following changes:

• Materiality. The amendments clarify that (1) information should not be obscured by aggregating or by providing immaterial information, (2) materiality considerations apply to the all parts of the financial statements, and (3) even when a standard requires a specific disclosure, materiality considerations do apply.
• Statement of financial position and statement of profit or loss and other comprehensive income. The amendments (1) introduce a clarification that the list of line items to be presented in these statements can be disaggregated and aggregated as relevant and additional guidance on subtotals in these statements and (2) clarify that an entity's share of OCI of equity-accounted associates and joint ventures should be presented in aggregate as single line items based on whether or not it will subsequently be reclassified to profit or loss.
• Notes. The amendments add additional examples of possible ways of ordering the notes to clarify that understandability and comparability should be considered when determining the order of the notes and to demonstrate that the notes need not be presented in the order so far listed in paragraph 114 of IAS 1. The IASB also removed guidance and examples with regard to the identification of significant accounting policies that were perceived as being potentially unhelpful.

EFRAG supports the adoption of the amendments to IAS 1 and recommends their endorsement.  EFRAG’s initial assessment is that the amendments to IAS 1 meet the technical requirements of the Regulation (EC) No 1606/2002 of the European Parliament and of the Council on the application of international accounting standards.      

EFRAG also considers that the overall benefits of the amendments are likely to outweigh the associated costs to implement them.

Comments are requested by 27 March 2015.  

EFRAG has also updated its endorsement status report to reflect the issuance of the draft endorsement advice.

Click for (all links to EFRAG website):

• Press release including invitation to comment
• Draft endorsement advice letter to the European Commission