Mr Danjou split his speech into three parts. He began by looking at the mega-trends that shape the IASB's technical work. Globalisation, currency changes, high leverage and asset valuation problems, low interest rates, diversification, and key performance indicators, non-GAAP figures and disclosure overload were the trends he identified.

Mr Danjou then turned to the adoption of IFRSs around the world. He offered a general overview as well as more detailed analyses of several jurisdictions including Japan, China, India and the United States.

Finally, Mr Danjou turned to the question of whether the adoption of IFRSs in the European Union brought the expected benefits. His analysis was based mainly on the responses to the European Commission's public consultation on the impact of  IFRS in the European Union. He concluded:

I am confident that IFRS has delivered most of the benefits that were expected and that the initial costs of learning and implementing the system, while they have not been capitalised on the balance sheets of companies and investors, would not need to be written off if they had been.

Please click to access the full text of the speech on the IASB website.

Participants at the meeting will hear from the European Financial Reporting Advisory Group (EFRAG) TEG Chairman Françoise Flores on the recent reform of EFRAG.  The meeting will also look at the new International Financial Reporting Standard (IFRS) 9 Financial Instruments which is currently being considered for endorsement by EFRAG.

Click for more information, including registration details on the ICAEW website.

The DR govern the tax treatment of derivatives and loan relationships that are intended to hedge certain business risks. Gains and losses on such financial instruments are ordinarily subject to tax in the year in which they are recognised in profit or loss under the corporation tax regimes for loan relationships and derivative contracts. The DR modify this by taxing such gains and losses in a manner broadly equivalent to hedge accounting under ‘old’ UK GAAP – provided the hedging instrument is in one of the defined types of hedging relationship covered by the rules. The latter are not comprehensive but include most of the common kinds of commercial hedge. The effect is thus broadly to disregard fair value or exchange gains arising from a hedge until the hedged asset or liability is recognised in the accounts. In some cases disregarded exchange gains and losses do not reverse.

Prior to 2015, companies were automatically within the scope of the DR, if they had qualifying hedging relationships that satisfied the relevant conditions. However, for periods beginning on or after 1 January 2015 – post the December 2014 changes – companies will need to consider whether they should elect into the regime in respect of relevant hedging relationships. A single election can be made for all or any of DR7 (currency contracts), DR8 (commodity and debt contracts) and DR9 (interest rate contracts) to a company’s hedging instruments. Note that the tax “matching” of exchange gains and losses arising in respect of debt or derivatives against the currency risk implicit in the shares of subsidiaries under DR3 and DR4 continues to be mandatory, where the conditions are satisfied (i.e. no election is necessary).

The deadline for making an election is six months after the beginning of the first accounting period under the new GAAP (or, if later, six months after entering into the first relevant contract). Companies wishing to make an election that have a year-end of 31 December will need to do so by 30 June 2015 to avoid or minimise taxable transitional adjustments. Companies are, however, deemed to have elected into the amended Regulations, where they have previously applied “disregard” treatment under DR7 to DR9 – for example UK GAAP companies previously accounting for financial instruments under FRS 26 or IFRSs and not having elected-out of the DR. Elections are revocable (prospectively) in principle, but there are restrictions where elections are made by new adopters.

Fair value gains and losses recorded in OCI (as opposed to in profit or loss) in respect of designated cash flow hedges involving the types of instrument covered by DR7 to DR9 are mandatorily disregarded, thus they are not affected by the elect-in decision. Accordingly, the decision whether or not to elect-in in respect of DR7 to DR9 contracts would usually be driven by a company’s willingness (or otherwise) to tax fair value effects recorded in profit or loss – for example in relation to hedge inefficiency, or an inability to hedge account under new UK GAAP or IFRS.

The DR are also extended to grandfather the tax treatment of existing (but not new) ‘permanent as equity’ loans on the transition from old UK GAAP. This accounting treatment is not permissible at the entity level under IFRSs, FRS 101 or FRS 102.

The COAP govern the tax treatment of accounting restatements in relation to loan relationships and derivative contracts where there is a change in accounting practice. Taxable restatements are usually spread over the period of ten years. The COAP have been amended to exempt restatement credits arising from a substantial modification of loan relationships (e.g. in respect of amend–and-extend transactions) in the context of corporate rescue arrangements. Any debits effectively reversing such credits are likewise disallowed. This mirrors proposals for the eventual introduction of a general corporate rescue exemption for release and substantial modification credits (and reversing debits) recognised in profit or loss.

Click for:

• The Loan Relationships and Derivative Contracts (Disregard and Bringing into Account of Profits and Losses) (Amendment) Regulations 2014 (link to government website)
• The Loan Relationships and Derivative Contracts (Change of Accounting Practice) (Amendment) Regulations 2014 (link to government website)
• The Changes in Accounting Standards (Loan Relationships and Derivative Contracts) Regulations 2014 (link to government website)

The accounting requirements of FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland in relation to share-based payment transactions where the entity can choose to settle in cash or equity instruments currently differ from those under International Financial Reporting Standard (IFRS) 2 Share-based Payment and old UK GAAP Financial Reporting Standard (FRS) 20 Share-based Payment.  Entities and their advisors have informed the FRC that the requirements under FRS 102 are more “onerous to apply” and, as a result, might result in “inappropriate accounting outcomes”.

As a result of this feedback, FRED 61 seeks to amend paragraph 26.15 of FRS 102 to:

align the requirements in FRS 102 with full IFRS and previous UK and Irish GAAP in cases where the entity can choose to settle in cash or equity;

retain the current requirements of FRS 102 to recognise a liability where the recipient can require settlement in cash; and

generalise the requirements to include those cases where the settlement method is dependent on an external event.

The FRC highlights that, as a result of these amendments, “entities would generally be able to continue with their existing accounting practices applied under previous UK and Irish GAAP which should reduce transition and application costs of FRS 102”.

The amendments are proposed to be effective from 1 January 2015.

Comments on FRED 61 are invited until 1 June 2015.

The press release and FRED 61 are available on the FRC website.

In the paper the IASB staff makes the following recommendations:

In May 2014, the IASB and FASB issued converged standards on revenue recognition and also agreed a common effective date. However, in April 2015 the FASB tentatively decided to defer for one year the effective date of its new revenue standard (ASU 2014-09 Revenue From Contracts With Customers) for public and nonpublic entities reporting under US GAAP. The IASB staff is now asking the IASB whether it wants to follow suit in the light of issues discussed at the TRG meetings and intended clarifications as well as in order to keep up convergence with the FASB.

Please click to access the agenda paper on the IASB website. It offers the staff's recommendations, historical background, an explanation of what the FASB has decided, and a summary of IFRS stakeholder feedback.

The guidance note sets out what in ICSA’s view makes a good annual report.  ICSA consider that the “best” annual reports will demonstrate:

an understanding of the links between governance, shareholder value creation, and the avoidance of value destruction

responding to the opportunities created by reporting requirements rather than seeing them as obligations

 innovative and creative forms of disclosure, which move away from ‘boilerplate’ reporting that repeat the language of the Code and explain how the board and company is run

explanations of the way the board runs itself and its committees, and how decisions are taken

a governance report that demonstrates clear ownership by the chairman and a real desire to use governance to enhance the business rather than as a ‘box-ticking’ exercise

comprehensive explanations of departures from the provisions of the Code a full description, and explanation, of the business model and the strategy, with key performance indicators (KPIs), performance against targets, and important information cross referenced to elsewhere in the report

discussion of the principal risks to the strategy, the company’s risk appetite and culture, how the risk profile is changing, and how the risks are being managed

joined-up thinking that links strategy, pay, performance and risk

evidence of directors having satisfied their statutory duties, including the duty to promote the success of the company over the longer term

recognition and balancing of the needs and expectations of different shareholder and stakeholder priorities.

The guidance note then explores what ICSA consider are the features of the best strategic reports, board disclosures, audit and risk reports, remuneration reports and sustainability and stakeholder reports.

In addition, following a consultation in May 2014, ICSA has also published a contents check list to assist preparers of annual reports.  ICSA comments that the guidance “should be regarded as an indicative framework rather than a rigid template” and indicate that the checklist is not intended to be prescriptive or a comprehensive list of all legal and regulatory requirements.  Although the checklist is primarily intended for UK quoted companies, ICSA indicate that it will be “useful for all companies”.

The ICSA guidance note Good practice for annual reports and guidance note Contents list for the annual report of a UK company are available on the ICSA website.

Additional guidance for looking to improve their annual reports should refer to Deloitte's 2014 annual reporting survey.  This examines how organisations have dealt with the latest corporate reporting challenges, including the narrative and financial elements,  identifying new innovations and highlighting industry best practice as a take away for preparers to consider.

Further guidance on the preparation of a strategic report can be found in the Financial Reporting Council’s (FRC’s) guidance on the preparation of the strategic report published in June 2014 and Deloitte’s publication The Strategic Report — A practical guide.

The full agenda for the meeting can be found here. We will post any updates to the agenda, as well as our De­loitte ob­server notes from the meeting, on this page as they become avail­able.

The FRC has previously issued editorial amendments and clarification statements to FRS 102 in both November 2013 and March 2014.  Further amendments were made in July 2014 in relation to hedge accounting and classification of financial instruments and a revised version of FRS 102 was issued in August 2014.  This latest set of amendments reflects changes since August 2014.

The areas of FRS 102 affected are: 

• Section 12 ‘Other Financial Instruments Issues’.  The FRC has issued editorial amendments regarding ‘Example 1' in the examples of hedge accounting within Section 12 of FRS 102.  The FRC have also clarified that a hedge of a net investment in a foreign operation remains a permitted type of hedging relationship under FRS 102.  It clarifies, therefore, that FRS 102 continues to permit hedge accounting for net investments in foreign branches in the separate financial statements of a parent, provided that the conditions in paragraph 12.18 are met.
• Section 29 ‘Income tax’.  The FRC have provided clarity of the phrase “the amount that can be deducted for tax” included within paragraph 29.11 of FRS 102 in relation to deferred tax arising on a business combination.  The FRC clarify that in applying this paragraph of FRS 102 “an entity should consider the manner in which it expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities”.  The FRC indicate that this assessment should “include consideration of all taxes, including operating taxes and taxes arising from the sale of the item, if appropriate”.

The document of editorial amendments and clarification statements to FRS 102 can be found on the FRC website.

The statement Mr Hoogervorst presented was, in a nutshell:

Our mission is to develop IFRS that bring transparency, accountability and efficiency to financial markets around the world. Our work serves the public interest by fostering trust, growth and long-term financial stability in the global economy.

Mr Hoogervorst went on to explain that the transparency was to be achieved by enhancing the quality and international comparability of financial information, accountability would improve by reducing the information gap between the providers of capital and the people to whom they have entrusted their money, and economic efficiency would be enhanced by helping investors to identify opportunities and risks across the world. These three aspects together would then make up the contribution of IFRSs to the public good.

As always, Mr Hoogervorst also touched upon adoption of IFRSs around the world. One of his points was commending Canada, that has close ties to the United States, for adopting IFRSs although "there has been no further breakthrough for IFRS in the United States". He also warned against giving up whatever convergence has so far been achieved. On revenue recognition he stated:

Completing IFRS 15 took more than a decade of hard work by both Boards, three formal rounds of public consultation, thousands of hours of meetings and countless outreach meetings. The perfect accounting standard does not exist. An endless process of tinkering will certainly not bring us close to perfection.

The full transcript of Chairman Hoogervorst’s speech is available on the IASB’s website.