This pub­li­ca­tion includes the EFRAG’s objectives, 2014 activities, and reports from the acting EFRAG Board President Roger Marshall and the TEG Chairman and CEO Françoise Flores.

The report is avail­able on the EFRAG’s Web site.

The publication’s observations regarding use of IFRSs in those jurisdictions include the following:

• There is general support for global accounting standards as well as for the use of IFRSs as the global standard.
• IFRSs are required for domestic listed companies in 116 jurisdictions, with 60 percent of those jurisdictions requiring IFRSs for unlisted financial institutions and 90 percent permitting IFRSs for unlisted companies.
• Most of the 24 remaining jurisdictions do not require IFRSs but do permit their use to some degree.
• Modifications to IFRSs are rare.
• The auditor’s report refers to compliance with IFRSs in most jurisdictions.
• An endorsement process is not performed for 67 percent of 107 jurisdictions (excluding the 33 countries of the EU, the EEA, and EU candidates).
• Adoption of the IFRS for SMEs is permitted or required in 73 of the 140 jurisdictions.

For more information, see the progress report on the IASB’s Web site.

As in a speech given last month at Baruch college, Mr Schnurr stated that his research to date has revealed that there is virtually no support to have the SEC mandate IFRS for all registrants, that there is little support for the SEC to provide an option allowing domestic companies to prepare their financial statements under IFRS, but that there is continued support for the objective of a single set of high-quality, globally accepted accounting standards. He therefore questioned former SEC Chairman Christopher Cox' comments at the same conference last year who had stated: "I come to bury IFRS, not to praise them". Given the continued support for convergence, Mr Schnurr commented that the real questions are: what is the path to achieve that objective and how do we get there? He opined:

In my opinion, in the near term, FASB and IASB should continue to focus on converging the standards. The boards should renew their commitment to cooperate and develop standards that eliminate differences between IFRS and U.S. GAAP whenever it meets the needs of its constituents and improves the quality of financial reporting. I recognize the boards will not always be able to eliminate differences during the standard-setting process, primarily because they serve different constituents that have different needs. However, when differences in standards arise, the boards should monitor the implementation of those standards with the objective of learning from the implementation and re-engaging with each other with the goal of converging to the standard with the highest quality financial reporting outcome.

Mr Schnurr also commented on revenue recognition and the new converged standards published in May 2014 and the work of the joint revenue transition resource group (TRG) which has led to proposed amendments to the FASB guidance in May and will see proposed IASB amendments in the third quarter of 2015.

The boards should apply the lessons learned from the recent revenue recognition standard and realize that even though the words may be the same, to achieve convergence, cooperation is needed after the standard-setting process is complete and during the implementation stage of the standards. [...] While the FASB and IASB approach to clarifying the guidance differs slightly, both boards, as evidenced by their discussions during their joint meeting, continue to believe they have a converged approach.

Please click to access the full text of Mr Schnurr's speech on the SEC website. All conference materials are available on the conference website.

Of those changes, the FCA proposes in CP 15/19: Quarterly Consultation No.9 to:

• Update the definition of the Code in the Glossary and in the Listing Rules and to make a number of consequential changes most notably to the Listing Rules and the Disclosure and Transparency Rules.
• Amend the Listing Rules (LR 9.8.6R (3)) to require the directors to make disclosure relating to both the going concern basis of accounting and to the long-term viability of the entity.
• Update LR 9.8.10R (1) relating to auditor reporting on going concern to refer to the revised requirement.
• Amend LR 9.2.10R (2) to refer to the revised disclosures which auditors are required to review as a result of the 2014 Code.

A number of other consequential amendments to the Handbook are also proposed which are contained within the full consultation, available on the FCA website.

Speaking at the conference, Sir Win Bischoff highlighted that smaller quoted companies were “critical to generating future jobs and growth in the economy”.  He highlighted that smaller quoted companies “often have limited resources and they face challenges in governance and reporting”. 

Sir Win Bischoff’s speech addressed three key areas where smaller quoted companies need support:

• Culture.  Sir Win Bischoff spoke about the importance of a strong company culture and such a strong culture established by a majority shareholder in smaller quoted companies was "a big attraction to investors".  He spoke of the need to maintain this good culture when the company grows.  Sir Win Bischoff highlighted that during 2015 the FRC will continue to assess how effective companies are at establishing company culture and practices and embedding good corporate behaviour.
• Succession planning.  Sir Win Bischoff also indicated that succession planning was vital to the on-going success of a company and its culture and that this was particularly important for smaller companies “as they are growing and gaining momentum”.  He indicated that the FRC will be publishing a “discussion document” in the next few weeks on succession planning and will use responses to this to consider whether any guidance in this area is required.
• Smaller company reporting.  Sir Win Bischoff re-emphasised the point that although smaller companies think that investors do not read their annual reports, evidence suggests that the opposite is true.  He highlighted the recent Discussion Paper on FRC proposals to help smaller listed and AIM-quoted companies that is intended to support such companies in this area. 

The full speech can be downloaded from the FRC website.

ESMA supports the proposals in the ED but believes that “there is a need to further improve the requirements on classification of liabilities as either current or non-current when rights in place at the reporting date are subject to a condition”.  ESMA also encourages the IASB, as part of this amendment, to “explicitly address” the criteria for classification of liabilities with uncertain timing as current or non-current.

Further comments are included within the full comment letter which is available on the ESMA website.

The comment letter refers to the IFRS IC’s tentative agenda decision not to add to its agenda the request related to the period over which the future minimum funding requirement for contributions to cover future service applies.

ESMA welcomes the clarification provided by the IFRS IC that an entity should assume that funding would continue after the minimum period that has been agreed with the trustees.  However, ESMA believes that further guidance is required on the accounting treatment in circumstances when the level of contributions will be subject to future negotiations after the minimum period.  ESMA comments:

While ESMA agrees that the issue could be addressed through an agenda decision, ESMA acknowledges that the need for clarifications referred to in this letter might lead the IFRS IC to reconsider whether the agenda decision is the appropriate tool to address the issue identified in the submission. Consequently, the IFRS IC might need to reconsider whether, in light of the need for this clarification, a sufficient guidance exists so that neither an interpretation nor an amendment to the Standard are necessary, and therefore, whether this issue should be added to its agenda.

The full comment letter is available on the ESMA website.

The amendments in the ED are as a result of the IASB’s Disclosure Initiative which comprises several smaller projects to improve presentation and disclosure requirements in existing standards.  The IASB proposes in ED/2014/6 amendments with two objectives:

• Improved information about an entity's financing activities, excluding equity items. The IASB proposes that an entity should disclose a reconciliation of the amounts in the opening and closing statements of financial position for each item for which cash flows have been, or would be, classified as financing activities in the statement of cash flows, excluding equity items. The reconciliation should include (i) opening balances in the statement of financial position, (ii) movements in the period, and (iii) closing balances in the statement of financial position. The proposed amendments also include an illustrative example.
• Improved disclosures about the liquidity of an entity. The IASB proposes to extend the disclosures by adding required disclosures about restrictions that affect the decisions of an entity to use cash and cash equivalent balances, including tax liabilities that would arise on the repatriation of foreign cash and cash equivalent balances.

EFRAG published its draft comment letter in February 2015 and its final comment letter in May 2015.

The feedback statement summarises the main comments received by EFRAG in relation to the draft comment letter and explains how those comments were considered by EFRAG in reaching its final position on the IASB ED set out in their final comment letter to the IASB.

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