May

PRA consults on good board governance for PRA-regulated firms

27 May, 2015

The Prudential Regulation Authority (PRA) has published a consultation paper seeking views on a draft supervisory statement which looks to identify some key aspects of good board governance for boards to consider and to which the Prudential Regulation Authority (PRA) pays close attention in the conduct of its supervision.

The consultation paper CP 18/15 Corporate Governance: Board responsibilities is relevant for all PRA-regulated firms and provides guidance on the PRA’s expectations relating to:

  • Setting strategy
  • Culture
  • Risk appetite and risk management
  • Board composition
  • The respective roles of executive and non-executive directors
  • Knowledge and experience of non-executive directors
  • Board time and resources
  • Management information and transparency
  • Succession planning
  • Remuneration
  • Subsidiary boards
  • Board committees

The PRA indicate that the draft supervisory statement is not intended to be a comprehensive guide to good corporate governance with such guidance being contained within other sources such as the Financial Reporting Council’s UK Corporate Governance Code and the Corporate Governance Principles for Banks, published by the Basel Committee on Banking Supervision.

Comments on the draft supervisory statement are requested by 14 September 2015.

Click for (all links to Bank of England website):

FRC publishes latest edition of quarterly newsletter on financial reporting

26 May, 2015

The Accounting and Reporting Policy team of the Financial Reporting Council (FRC) has published its latest edition of its quarterly newsletter on financial reporting. The newsletter covers the period December 2014 to May 2015 and details the activities of the FRC since the last newsletter was published which covered the period July 2014 to November 2014.

The newsletter “Setting the Standard” covers the following key areas:

  • The FRC's three financial reporting exposure drafts (FREDs) proposing changes to the existing UK financial reporting framework resulting from the UK implementation of the EU Accounting Directive.  These are FRED 58, FRED 59 and FRED 60.
  • Other UK GAAP updates including:
    • Amendments to FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’ – pension obligations in February 2015. The amendments clarify aspects of the accounting for defined benefit pension plans under FRS 102.
    • The issuance of Financial Reporting Standard (FRS) 104 Interim Financial Reporting in March 2015 which sets out a new standard on interim reporting for entities that apply FRS 102 in the UK and Republic of Ireland’ in their annual financial statements.
    • The issuance of FRED 61 Draft amendments to FRS 102 – Share-based payment transactions with cash alternatives in April 2015 which proposes a narrow scope amendment to clarify and simplify the accounting for share and share option awards where a cash settlement alternative exists.
  • An update on the International Accounting Standard Board’s (IASB’s) Leasing, Insurance and Disclosure Initiative projects.  The newsletter specifically highlights the FRC’s comment letter in relation to the IASB’s exposure draft Disclosure Initiative (Proposed amendments to IAS 7) which aims to clarify IAS 7 to improve information provided to users of financial statements about an entity's financing activities and liquidity and the Financial Reporting Lab work in this area.
  • Current projects of the Financial Reporting Lab. 

Please click here for the full newsletter on the FRC website.

EFRAG to hold a Board meeting in June 2015

26 May, 2015

The European Financial Reporting Advisory Group (EFRAG) will hold a Board meeting on 3 June 2015 in Brussels.

An agenda with supporting papers and details on how to register for the public meeting can be found on the EFRAG website.

EFRAG publishes May 2015 issue of 'EFRAG Update'

26 May, 2015

The European Financial Reporting Advisory Group (EFRAG) has published an 'EFRAG Update' summarising public technical discussions held and decisions made during May 2015.

IFRS conference in Hong Kong announced

26 May, 2015

The IFRS Foundation has announced that its next IFRS conference in Asia will be held in Hong Kong on 12-13 October 2015. The conference will include discussions on the implementation plans for new standards (IFRS 9, IFRS 15) and on the forthcoming requirements for leases and insurance contracts. There will also be panel discussions on IFRS disclosures and IFRS measurements and other cross-cutting issues.

Some of the topics to be covered at the conference include:

  • The future of financial reporting
  • IASB update
  • Panel discussion on implementing the forthcoming lessee accounting requirements
  • Conceptual framework
  • IFRS - truly global accounting standards
  • IFRS disclosure issues
  • Panel discussion on IFRS disclosures - innovations
  • IFRS measurements and other cross-cutting issues
  • Panel discussion on IFRS measurements and other cross-cutting issues

The conference will also have break-out sessions on the afternoon of day 1. Participants can choose between the following topics:

  • Implementing IFRS 9 Financial Instruments: financial institutions
  • Implementing IFRS 9 Financial Instruments: other than financial institutions
  • Implementing IFRS 15 Revenue from Contracts with Customers
  • IASB project: Insurance contracts

Following the conference, a half-day workshop on implementing the IFRS for SMEs will be held.

More details, including registration information, are available on the IASB website.

Former Chairmen of IASB and FASB share thoughts on convergence

24 May, 2015

On Wednesday 1 April 2015, former IASB Chair Sir David Tweedie and former FASB Chair Robert Herz discussed their vision of 'Accounting Standards for Global Capital Markets: Past, Present, and Future' at Baruch College in New York City. A recording of their exchange has now been made available.

While Mr Herz stated that "I think right now, for good or for bad, in the U.S. we have become very comfortable with the idea that we’ll have U.S. GAAP. If there are things in IFRS that we kind of like or the markets like, maybe we’ll consider adopting those, but there’s no systematic program to further converge at this point", Mr Teedie replied that “You can have international standards without the U.S., but you can’t have global standards without the U.S.”.

Please click to access the recording of the discussion, which lasted about one hour, on the Baruch college website.

Agenda for May 2015 Emerging Economies Group meeting

22 May, 2015

The agenda is available for the ninth meeting of the Emerging Economies Group (EEG) and International Accounting Standards Board (IASB), which is being held in Mexico City on 25-26 May 2015. Topics being discussed at the meeting include present value measurements, other non-financial assets and related matters, and enhanced inflation disclosures. In addition, there will be an update on the IASB's current projects and discussion on topics to consider for the next meeting.

The full agenda is sum­marised below:

Monday 25 May 2015 (09:00-20:30)

  • Address by hosting country (Mexico)
  • Address by the EEG Chair and Vice-Chair
  • Presentation on discount rates — present value measurements
  • Discussion on discount rates — present value measurements
  • Ad­min­is­tra­tion issue — topics for next meeting
  • Welcome dinner

Tuesday 26 May 2015 (10:10-14:00)

  • IASB updates
  • Other non-financial assets and related matters
  • Enhanced disclosures about inflation
  • Discussion and approval of the Communiqué
  • Meeting summary
  • Working lunch

 Agenda papers from this meeting are available on the IASB's website.

FRC consults on changes to the Audit Firm Governance Code

22 May, 2015

The UK Financial Reporting Council (FRC) has issued the findings of its review of the implementation and operation of the Audit Firm Governance Code (the Code), introduced in January 2010. As a result of this review, the FRC is seeking views on possible changes to the Code. Comments are invited by 28 August 2015.

The Code was developed by an independent working group constituted jointly by the FRC and the Institute of Chartered Accountants in England and Wales (ICAEW), in response to concerns raised by market participants about the preservation of an adequate supply of high quality audits in a highly concentrated market following the collapse of Arthur Andersen.  It applies to firms which audit more than 20 listed companies, although adoption is not a regulatory requirement.

The FRC's principal conclusions from its review are as follows.

  • The quality of governance in the major UK audit firms is of considerable significance to
    investors and to the health of markets.

  • The firms are in the main well ahead of their international comparators in bringing external challenge into the partnership model through the introduction of Independent Non-Executive directors. However, there is scope for this to be built upon by adopting the principle of external challenge in the international network organisations as well as at national level.

In response to the findings of the review, the FRC is requesting views on the following.

  • Whether the purpose of the Code should be restated to more sharply define the public interest. In this context the FRC believe that the public interest rests in:
    • audit quality;
    • the broader reputation of audit firms, including oversight of non-audit businesses; and
    • prevention of a firm failure.
  • Whether there should be separate governance structures for firms' audit businesses that are ring-fenced from the rest of the firm.
  • Whether the Code should include more detail and impose more requirements in relation to the "tone at the top" and the culture of ethics and professionalism within audit firms.
  • Whether the concept of the Code should be spread elsewhere in the world and how this might be achieved.
  • How Independent Non-Executives should be appointed, including whether regulators should have a role in this, and how their independence should be protected and demonstrated.
  • Whether additional aspects of the UK Corporate Governance Code should be incorporated into the Code.
  • Issues relating to the accountability of boards, Independent Non-Executives and public interest committees of the firms, including transparency and engagement with regulators.
  • Whether the Code should be applied to a wider group of firms.

The full report and consultation document, as well as the press release, can be obtained from the FRC's website.

IVSC consults on recommendations of external review group

22 May, 2015

The International Valuation Standards Council (IVSC) has issued an engagement paper seeking comment and feedback on a number of recommendations and proposals that result from an external review of the IVSC. One of the recommendations had been that the IVSC should discontinue work on all its financial instruments projects until it has been ensured that they serve the public interest and fulfil a market need.

In November 2014, the IVSC Trustees commissioned an independent assessment of their organisation. To this end, an external review group was formed that submitted its final report in April 2015. The review group called on the Trustees to take rapid action to enhance the organisational structure and capabilities and to define its strategic direction. Key immediate priorities should be to improve the organisation's credibility among key stakeholders and improve the quality of its standards. Regarding technical recommendations, the review group stated that especially regarding the valuation of financial instruments, stakeholders and regulators had expressed the need for caution. Their concerns did not negate the need for standards in this area, but they emphasised the need for a well thought out approach. Therefore, the review group recommended:

Recommendation 4: The IVSC should withdraw current proposals and exposure drafts related to Financial Instruments and work to first bring key stakeholders together to agree on solutions that serve the public interest and fulfil a market need.

The IVSC Trustees now propose:

  • to discontinue work on its current financial instruments projects and to withdraw any existing proposals or exposure drafts;
  • to bring the various financial instruments stakeholders together in a series of roundtables to seek broad support on a direction to address issues regarding the development of financial instruments standards and potential solutions; and
  • to develop a conceptual framework for Financial Instruments valuation standards along with a detailed work plan to implement this initiative that reflect the input of the proposed stakeholder roundtable meetings.

The IVSC also considers setting up a permanent working group for financial instruments in addition to the permanent working groups on real estate and business valuation that had been recommended in the review group's report.

Comments on the IVSC Trustees' proposals and questions, which also include structural changes and the development of a robust consultation process with maybe looking at the IASB or the FASB as an example, are invited before 1 September 2015. Please click to access the following information on the IVSC website:

ESMA suggests that a common accounting standard might help EU SMEs become more attractive for cross-border investors

21 May, 2015

In its response to the European Commission (EC) Green Paper: Building a Capital Markets Union, published today, the European Securities and Markets Authority (ESMA) has suggested that that development of a common specific EU level accounting standard for SMEs listed on multilateral trading facilities (MTFs) might facilitate an improvement in access to cross-border financing.

In its consultation document the EC asks whether there is value in developing a common EU level accounting standard for small and medium-sized companies (SMEs) listed on MTFs.  In its response, ESMA notes that:

"The lack of a common EU level accounting standard for SMEs listed on MTFs does not seem to be the key barrier to accessing financing by these companies at national level; however, use of a common accounting standard might help companies become more attractive for cross-border investors."

ESMA believes that it would be of more immediate benefit to allow companies listed on MTFs in all EU Member States to use IFRS for their consolidated accounts as an alternative to national accounting standards, something that is not currently the case in the majority of jurisdictions although it is allowed in the UK.

The press release and full response letter to the EC consultation are available from the ESMA website.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.