July

FRC publishes draft Accounting Council advice on Conceptual Framework Exposure Draft

23 Jul, 2015

The Financial Reporting Council (FRC) has published the tentative views of its Accounting Council on the International Accounting Standard Board’s (IASB’s) Conceptual Framework Exposure Draft.

The Accounting Council commenced consideration of the IASB’s Conceptual Framework Exposure Draft at its July meeting.  Tentative views were expressed in the following areas:

  • Stewardship, the business model, prudence and reliability
  • The Statement of Profit or Loss and Other Comprehensive Income 

The Accounting Council “welcomes” the changes that the IASB is proposing to make in relation to giving greater emphasis to stewardship, reintroducing an explicit reference to the notion of prudence and including a discussion of measurement uncertainty.  However a number of improvements are suggested specifically in the areas of stewardship, prudence and also a suggestion of reinstating the idea of reliability. 

The ED does not define profit or loss to provide a framework with what gets disclosed in profit or loss or other comprehensive income.  However, in providing a description of the purpose of the statement of profit or loss, the Accounting Council comments that this “is a useful first step”.  However it comments that the proposals should be based “upon a holistic and fundamental analysis of the concept of financial performance”.  The Accounting Council comments that in the absence of such an analysis (which would include clarification of terms such as ‘profit’, ‘return’ and ‘performance’) “there is no basis in the Exposure Draft’s proposals”. 

The press release and draft Accounting Council advice are available on the FRC website.

Government announces audit reform changes

23 Jul, 2015

The government has announced how it will implement the EU Audit Directive and Audit Regulation as part of the reform of audit in the UK.

New EU rules on audit reform were adopted by the Council of the European Union in April 2014.  The new rules are in the form of a Directive amending the Statutory Audit Directive(Directive 2006/43/EC) (link to Europa website) and a Regulation on specific requirements regarding the statutory audit of public-interest entities (PIEs).  The rules of the Directive have to be incorporated by Member States into national law by 17 June 2016 and the Regulation is effective from 17 June 2016. 

In line with the new EU rules, the Government has announced that all public interest entities (listed companies, banks, building societies and relevant insurers) will have to put their audit tender out at least every ten years and change auditor at least every 20 years.  The audit tender requirement is in line with that included within the Competition and Markets Authority (CMA) final Order implementing reforms of the audit market in the UK which include a requirement that FTSE 350 companies put their statutory audit out to tender at least every ten years.

The government has also announced that the Financial Reporting Council will be the UK competent authority for the regulation of auditors but that regulatory activities will continue to be carried out by the recognised supervisory bodies (RSB’s) (such as the ICAEW) that meet specific criteria under the delegation of the FRC.  It indicated that “overall this would mean the FRC would only have to conduct audit inspections, investigations and disciplinary cases in relation to public interest entities, and would oversee the work of the recognised supervisory bodies for other audits”.

The Government is due to publish a more detailed consultation which will build on responses received to its December 2014 Discussion Paper on audit reform.

The written government statement is available on the Parliament website.

IASB votes to defer the effective date of IFRS 15

22 Jul, 2015

The IASB has just unanimously affirmed its proposal to defer the effective date of IFRS 15 'Revenue from Contracts with Customers' to 1 January 2018. Earlier application of IFRS 15 continues to be permitted.

The IASB had proposed the deferral as it has tentatively decided to propose some targeted amendments to IFRS 15 that some entities may wish to apply at the same time as they first apply IFRS 15. The IASB also acknowledges that IFRS 15 was issued later than had been intended, so implementation time was shorter than anticipated.

Earlier this month, the FASB affirmed its proposal to defer for one year the effective date of its new revenue standard ASU 2014-09 Revenue From Contracts With Customers.

For more information, see the press release on the IASB's website.

Survey on the impact of the forthcoming new IFRS on leases on financial covenants in loan agreements

22 Jul, 2015

EFRAG, the IASB and the National Standard Setters of France, Germany, Italy, Lithuania, and the UK invite companies to participate in a public survey on impact of the forthcoming new IFRS on Leases on financial covenants in loan agreements.

The objective the survey is

  • to assess the possible impact of the new IFRS on leases on lenders' business practices,
  • to increase the awareness of the effects of the new IFRS on financial covenants, and
  • to better understand the extent to which covenants are based on figures reported in accordance with IFRS.

More information, a link to the survey, and a list of contacts in the different countries are available in the press release on the EFRAG website. Participants are requested to answer the survey questions and submit their replies not later than 30 September 2015.

17th ESMA enforcement decisions report released

22 Jul, 2015

The European Securities and Markets Authority (ESMA) has published further extracts from its confidential database of enforcement decisions taken by European national enforcers. This batch deals with decisions in relation to IAS 1, IAS 11, IAS 27, IAS 28, IAS 36, IAS 39, IFRS 3, IFRS 6, IFRS 10, IFRS 13, and IFRIC 19.

The European national enforcers of financial information monitor and review financial statements published by issuers with securities traded on a regulated European market and who prepare their financial statements in accordance with International Financial Reporting Standards (IFRS) and consider whether they comply with IFRS and other applicable reporting requirements, including relevant national law.

ESMA has developed a confidential database of enforcement decisions taken by individual European enforcers as a source of information to foster appropriate application of IFRS.

The publication of enforcement decisions is designed to inform market participants about which accounting treatments European national enforcers may consider as complying with IFRS, i.e. whether the treatments are considered as being within the accepted range of those permitted by IFRS. ESMA considers the publication of the decisions, together with the rationale behind them, will contribute to a consistent application of IFRS in the European Union.

Topics covered in the latest batch of extracts, covering the period from February 2012 to November 2014, include:

 

StandardTopic

IAS 27 Separate Financial Statements
IAS 39Financial Instruments: Recognition and Measurement
IFRS 10Consolidated Financial Statements
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments

Extinguishment of debt

IAS 39 Financial Instruments: Recognition and Measurement

Impairment charge for a decline in the fair value of available for sale financial assets

IFRS 13 Fair Value Measurement

Measurement of financial instruments at fair value

IFRS 3Business Combinations
IFRS 13Fair Value Measurement

Fair value measurement in business combination

IAS 1Presentation of Financial Statements
IAS 28Investments in Associates and Joint Ventures

Presentation of financial statements

IAS 11 — Construction Contracts

Accounting for claims in construction contracts

IAS 36Impairment of Assets
IFRS 6
Exploration for and Evaluation of Mineral Resources 

Impairment testing

Click for access to the full report (link to ESMA website). The ESMA has also published an updated overview of all enforcement decisions ever published.

IASB tentatively decides to amend IFRS 4

22 Jul, 2015

At its meeting on Monday, the International Accounting Standards Board (IASB) followed a staff recommendation to amend IFRS 4 'Insurance Contracts' to address the consequences of different effective dates of IFRS 9 'Financial Instruments' and the new insurance contracts standard expected to be published in 2016.

The amendments would permit an entity to exclude from profit or loss and recognise in other comprehensive income the difference between the amounts that would be recognised in profit or loss in accordance with IFRS 9 and the amounts recognised in profit or loss in accordance with IAS 39 Financial Instruments: Recognition and Measurement provided that the entity issues contracts accounted for under IFRS 4, applies IFRS 9 in conjunction with IFRS 4, and classifies financial assets as fair value through profit or loss in accordance with IFRS 9 when those assets were previously classified at amortised cost or as available-for-sale in accordance with IAS 39.

The IASB intends to discuss the scope of the amendments to IFRS 4 and whether the effective date of IFRS 9 should be deferred for the insurance industry during its September meeting. Please click for our Deloitte observer notes for details of the IASB's discussion.

FRAB publishes its 2014-2015 report

21 Jul, 2015

The UK Government's Financial Reporting Advisory Board (FRAB) has published its report on public sector accounting for the period April 2014 to March 2015.

The FRAB's primary objective is "to promote the highest standards of financial reporting by government".  The report is addressed to the Committee of Public Accounts and the Treasury Select Committee in the Westminster Parliament, to the Northern Ireland Assembly, to Scottish Ministers and to the Public Accounts Committee of the National Assembly for Wales. 

The FRAB report highlights changes to accounting guidance approved by the FRAB Board during 2014-15 and also details areas of financial reporting, both new and continuing, which may lead to accounting guidance in the future and an indication of how these issues will impact future Board work.

In the period from April 2014 to March 2015, the main issues considered by the FRAB were:

  • Application of IFRS 13 Fair Value Measurement in the public sector context.  It was highlighted that IFRS 13 will be adopted for use in the public sector from 2015-16.
  • IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments and considering the implications of these standards for the public sector.  The FRAB report indicates that these standards will continue to be considered by the FRAB Board next year and will be introduced by their effective dates in the public sector.
  • Improvements in financial reporting with the Simplifying and Streamlining Accounts project, launched in July 2014.

Priorities for 2015-16 include:

  • Ensuring that IFRS 15 and IFRS 9 are fully considered in the public sector context so that they are adopted timely and with minimal disruption.
  • Monitoring the International Accounting Standard Board’s (IASB’s) Leasing project and implications on public sector bodies which are expected to be “substantial, particularly on reported liabilities”. 

The full report is available on the HM Treasury website.  The minutes of the FRAB meetings for April, June 2014, November 2015 and March 2015 are available on UK Accounting Plus providing further details of the areas highlighted above.

July 2015 IFRS Interpretations Committee meeting notes posted

21 Jul, 2015

The IFRS Interpretations Committee met in London on 14 July 2015. We've posted the Deloitte observer notes for the sessions on IAS 2/IAS 38, IAS 12, IAS 23, IFRS 2, IFRS 11, IFRIC 14, and the administrative session.

The following topics were discussed at the meeting (click the links to access detailed Deloitte observer notes for each topic):

TUESDAY, 14 JULY 2015

Deliberation of comments received

Items for continuing consideration

Finalisation of a tentative agenda decision

New issues

Administrative session:

The pre­lim­i­nary and un­of­fi­cial notes taken by Deloitte observers for the entire meeting are also available.


July 2015 IASB meeting notes posted — part 1

21 Jul, 2015

The IASB met at its offices in London on 20 July 2015. We have posted the Deloitte observer notes from the session on insurance contracts.

Please click through for direct access to the notes:

Monday, 20 July 2015

Additional notes from the sessions held on 22–23 July 2015 will be posted when available.

You can also access the pre­lim­i­nary and un­of­fi­cial notes taken by Deloitte observers for the entire meeting.

US and Japanese companies moving to the UK to be given four years to adopt UK accounting principles

20 Jul, 2015

The Department for Business, Innovation and Skills (BIS) has today announced that it intends to remake and enhance existing rules to give US and Japanese companies moving to the UK up to 4 years to adopt UK accounting standards in their group accounts.

In 2012, temporary measures were introduced allowing parent companies listed on stock exchanges in USA or Japan that relocated their headquarters to the UK to continue to use their existing accounting rules when preparing group accounts.  Such companies were allowed up to 3 years before being required to apply British accounting principles.  In December 2014 the government began a review of the costs and benefits of these existing regulations and has decided to make them permanent and allow such companies a four year transition period.

Further details and the original consultation can be found on the UK government website.

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