The role of the Financial Reporting Advisory Board (FRAB) is “to ensure that government financial reporting meets the best possible standards of financial reporting by following Generally Accepted Accounting Practice (GAAP) as far as possible”.  The FRAB includes representatives from the accountancy profession in the private and public sectors, academia and government bodies.  The board meets regularly to consider proposed changes to policy and practice.

Key topics discussed during the meeting included:

• The use of discount rates in financial reporting including discount rates applied to liabilities recognised under IAS 37 Provisions, Contingent Liabilities and Contingent Assets and IAS 19 Employee Benefits. 
• Changes to the treatment of research and development costs under the European System of Accounts 2010 (ESA 10) which came into effect for Member States in September 2014.  The change is to treat such costs as capital expenditure rather than current expenditure.
• IFRS 9 Financial Instruments.  A paper was presented to the Board summarising the options and requirements for transition arrangements for the introduction of IFRS 9.
• A verbal update on IFRS 15 Revenue from Contracts with Customers.  An update was provided on the implementation work in relation to IFRS 15.  The Board were given a summary of the key impacts of transition.  A consultation on the implications of IFRS 15 and any proposed adaptations will be issued in late 2015.
• An update on the International Accounting Standard Board’s (IASB’s) Annual Improvements to IFRSs 2012-2014 Cycle and whether they have any specific public sector reporting impacts.  No further immediate work was deemed necessary as a result of the amendments and no amendments were proposed to the Government Financial Reporting Manual (FReM).
• An exposure draft of the Code of Practice on Local Authority Accounting in the United Kingdom 2016/17 (“the Code”).  Changes proposed in the exposure draft include measuring the Highways Network Asset at depreciated replacement cost; changes to the ‘Accounting and Reporting by Pension Funds’ section of the Code and changes as a result of narrow scope amendments to IFRSs.
• Whole of Government Accounts 2013-14

Click here for detailed minutes and other supporting documents on HM Treasury website.

The annual report provides an assessment of the progress that the FRC has made against its three year strategy, set in 2013.  The strategy, focusing on five areas, seeks to promote:

• High quality corporate governance and investor stewardship which foster trust in the way companies are run.
• High quality corporate reporting that is fair, balanced and understandable.
• High quality audit and confidence in the value of audit.
• Actuarial oversight and standards which underpin high quality actuarial practice, and integrity, competence and transparency of the actuarial profession.
• Effective, proportionate and independent investigative, monitoring and disciplinary procedures.

The annual report indicates that it believes that it has made “significant progress” against each of these strategic priorities.  Some of the key areas of activity for the FRC in 2014/15 included:

• Amending the UK Corporate Governance Code to promote a better focus on risk, internal control and the assessment and reporting of the longer-term viability of companies.
• Issuing a report in March 2015 on the take-up of the requirements on extended auditor reporting.
• Review of the implementation and operation of the Audit Firm Governance Code in May 2015.

In 2015/16 the FRC will complete the delivery of its three year strategy set in 2013 by “by building on or embedding actions taken in the previous two years”.  Key priorities for the FRC include (many of which are included in its plan and budget for 2015/16):

• Continuing the programme of work to promote audit that is of a consistently high standard and which meets investor’s needs.
• Taking forward work on corporate governance and stewardship, in particular measures to enhance levels of engagement between investors and companies.
• Promoting clear & concise reporting, including through the project to help smaller listed and AIM companies with the quality of their reporting.
• A major new project to focus on company culture and succession planning and how to promote good practice in both areas.

A “significant” part of the FRC’s work in the coming year will also be to support the Department for Business, Innovation and Skills (BIS) in the UK implementation of the EU Audit Directive and Regulation.  As a result of Competition and Markets Authority final Order implementing reforms of the audit market in the UK, the FRC has indicated that in 2015/16 it will take on a number of additional responsibilities.

Click for (all links to FRC website):

• FRC press release
• FRC annual report 2014/15

This consultation has been issued as part of the government's drive to improve large business tax compliance, as announced at the 2015 Summer Budget.  

As well as asking respondents where businesses should publish their tax strategy, it also asks for views on other issues, including the size of company that would be required to comply with the new requirements. It suggests that the measures might apply to all businesses who have a turnover of more than £200 million and/or a relevant balance sheet total of more than £2 billion for the preceding financial year.

Views are requested by 14 October 2015.

The full consultation can be obtained from the UK government website.

*Update 10 December 2015 - In publishing the responses (link to HMRC website) to the above consultation, HMRC have stated that businesses should publish their tax strategies on their websites or in some other accessible place on the internet and not within their annual reports and accounts*  

*Update 31 March 2016 - HMRC has published guidance (link to HMRC website) explaining the qualifying criteria for publishing a tax strategy, what a tax strategy must contain, what penalties may be charged and the appeals process.  The guidance also confirms that the strategy should be published for the first time in the first financial year after the Finance Bill 2016 receives Royal Assent.  It should then be published between 9 and 15 months after the day on which the previous strategy was published.  As above, it should be published on the internet "as a separate document or a self-contained part of a wider document.*

On 18 June 2015, the IASB issued ED/2015/5 to address two issues submitted to the IFRS Interpretations Committee. The two issues are to clarify (1) the calculation of current service cost and net interest when an entity remeasures the net defined benefit liability (asset) when a plan amendment, curtailment or settlement occurs; and (2) whether a trustee's power to augment benefits or to wind up a plan affects the employer's unconditional right to a refund and thus, in accordance with IFRIC 14, restricts recognition of an asset.

In its draft comment letter, EFRAG supports the proposed amend­ments; however, the EFRAG would like input from constituents regarding any impediments concerning the limited retrospective application proposals.

Comments on the draft comment letter are due by 9 October 2015.

For more in­for­ma­tion, see the press release and draft comment letter on the EFRAG’s website.

Local authorities in the United Kingdom are required to keep their accounts in accordance with ‘proper practices’. They must comply with the terms of the Code of Practice on Local Authority Accounting in the United Kingdom prepared by the CIPFA/LASAAC Local Authority Accounting Code Board (CIPFA/LASAAC).

The exposure draft includes a number of key proposals for change including:

• To change the Code as a result of the move to measuring the Highways Network Asset as depreciated replacement cost; a change originally announced in the 2014/15 Code.  The changes include specific recognition, measurement and derecognition policies for Highways Network Assets.
• Changes to the ‘Accounting and Reporting by Pension Funds’ section of the Code to bring pension fund investments within the scope of the fair value measurement disclosures under IFRS 13 Fair Value Measurement. 
• Consideration of the effects of a number of narrow scope amendments to International Financial Reporting Standards (IFRSs) including amendments to:
  • IAS 1 Presentation of Financial Statements under the IASB’s Disclosure Initiative;
  • IAS 19 Employee Benefits: Defined Benefit Plans – Employee Contributions;
  • Annual Improvements to IFRSs 2010-2012 and 2012-2014 Cycles;
  • IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets: Clarification of Acceptable Methods of Depreciation and Amortisation;
  • IFRS 11 Joint Arrangements: Accounting for Acquisitions of Interests in Joint Operations;
  • IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures: Sale of Contribution of Assets Between an Investor and its Associate or Joint Venture;
  • IAS 27 Separate Financial Statements: Equity Method in Separate Financial Statements.

Additionally the exposure draft includes proposed changes to the Code’s provisions on Concepts (section 21) following the issuance of the International Public Sector Accounting Standards Board (IPSASB) Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities.  A number of legislative changes and other minor drafting amendments are also proposed. 

Views are also sought as to whether the future adoption of IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments will have significant application issues when they are adopted by the Code.  

In addition, CIPFA/LASAAC has issued a parallel consultation on improving the presentation of local authority financial statements ("the consultation").  The consultation, Telling the story: improving the presentation of local authority financial statements, proposes changes to Sections 3.1 and 3.4 of the Code.  CIPFA has also issued a consultation on proposed changes to the service reporting code of practice (SeRCOP) ("the SeRCOP consultation").  

The consultation builds on previous CIPFA/LASAAC projects which aimed to streamline the presentation of local authority financial statements/statutory accounts.  CIPFA/LASAAC considers that the changes proposed in the consultation “will reconnect the financial statements of local authorities with the way those authorities are both organised and funded”.  The consultation has two key strands:

• To allow local authorities to report on the same basis they are organised by breaking the formal link between the SeRCOP and the Comprehensive Income and Expenditure Statement (CIES).
• To introduce a new Funding Analysis as part of the narrative report which provides a direct reconciliation between the way local authorities are funded and budget and the CIES .  This Funding Analysis would be supported by a streamlined Movement in Reserves Statement (MiRS) and replace the current segmental reporting note.

The SeRCOP consultation consults on the 2016/17 CIPFA Service Reporting Code of Practice that will apply to accounting periods commencing 1 April 2016.  Changes are proposed to the service expenditure analysis (SEA) for England and Wales to reflect organisational and operational changes to services within authorities.  The main changes to the SEA sections of the SeRCOP are in relation to Public Health (England) and Housing Services (HRA - Wales).

Comments on both the exposure draft and consultation are invited until 9 October 2015.  Comments on the SeRCOP consultation are requested by 16 September 2015.

 Click for (all links to the CIPFA website):

• The 2016/17 Code of Practice on Local Authority Accounting in the United Kingdom - Invitation to comment and related links
• Consultation on improving the presentation of local authority financial statements - Invitation to comment and related links
• Consultation on changes to the service reporting code of practice - Invitation to comment and related links

The scope of the business model reporting project will include:

• definition of ‘business model’;
• preparation of business model disclosures;
• investor use of business model disclosures; and
• attributes that characterise good business model reporting. 

The Lab is inviting companies (especially smaller quoted companies), investors and analysts to participate in the project.  The project will be undertaken in the second half of 2015 with a report expect to be published during Q1 2016. 

Companies, investors and analysts that are interested in participating in the project should contact the Lab by 15 September 2015. 

The Lab has also announced that it will undertake two further projects in 2016.  These projects will consider principal risk reporting and viability statement reporting. 

Please click for further information on the FRC website.

The topics discussed in the newsletter include:

• Financial reporting consequences related to (1) general disclosures, (2) impairment, and (3) going concern.
• An outlook of additional measures the Greek government must take to secure its third bailout.
• Direct consequences and broader economic consideration in case of Greek exit from the Eurozone.

 Please click to view the Need to know — The Greek debt crisis: Financial reporting implications for 30 June.

This issue features:

• Current projects that need input from the in­vest­ment community.
• Spotlight: The Es­sen­tials — discussing how investors can use note disclosures to understand bank leverage.
• In profile: An interview with Anne Simpson, Investment Director at the Global Governance division at California Public Employees’ Retirement System, discussing her views on financial reporting, integrated reporting and corporate governance.
• Stay up-to-date: current events calendar.

The IASB Investor Update newslet­ter is available on the IASB's website.