• 2015 agenda consultation — Council members provided feedback concerning the method of presentation in the request for views.
• Review of the structure and effectiveness of the IFRS Foundation — The council made suggestions regarding the draft consultation document.
• 2015–2017 IFRS Foundation strategy — The staff gave an overview presentation to the council.
• IFRS adoption in Japan — The council noted the increasing number of companies adopting IFRSs in Japan because of the perceived benefits of doing so and discussed the implementation of the Japanese corporate governance code.
• Profiles of IFRS filing requirements by jurisdiction — The council requested that the staff consider whether there are additional strategic uses for the profiles.
• Research program — The council supported this program and provided several considerations. In addition, the council indicated that it supports changing rate regulation from a research project to a standards-level project.
• Leases — The council proposed steps to be taken after the issuance of the leases standard. Specifically, the council suggested that (1) there is no need to form a transition resource group; (2) educational meetings with national standard setters, investors, and regulators should be held; (3) the effects-analysis document should explain the differences between IFRSs and U.S. GAAP; and (4) the IASB should monitor implementation issues.

The next meeting of the IFRS Ad­vi­sory Council is sched­uled for 2–3 November 2015, in London. The full report on the council’s June meeting is avail­able on the IASB's website.

Topics discussed at the meeting included:

• Consideration payable to a customer.
• Credit cards.
• The portfolio practical expedient and application of the variable consideration constraint.
• Completed contracts at transition.
• Application of the series provision and allocation of variable consideration.
• The practical expedient for measuring progress toward complete satisfaction of a performance obligation.
• Measuring progress when multiple goods or services are included in a single performance obligation.
• Determining when control of a commodity is transferred.
• Accounting for restocking fees and related costs.

For more information, see Deloitte’s TRG Snapshot.

The new EU Accounting Directive was transposed into UK Company law in April 2015.  Concurrent with the implementation process of the Directive, the FRC consulted on consequential changes to accounting standards (FREDs 59 and 60).  The outcome of this consultation process, as well as other recent FRC consultations (FREDs 50, 57, 58 and 61) have now been published. As a result of these changes, there are now six different financial reporting regimes available (subject to various criteria) to entities in the UK and Ireland.  These are:

• IFRSs;
• FRS 101 Reduced Disclosure Framework, which allows 'qualifying entities' to apply the recognition and measurement requirements of IFRSs but with reduced disclosures;
• FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland; which incorporates three regimes:
  • the full requirements of FRS 102;
  • a reduced disclosure framework for 'qualifying entities'; and
  • section 1A Small Entities; and
• FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime.

The Financial Reporting Standard for Smaller Entities (FRSSE) is withdrawn from 1 January 2016 - entities currently applying the FRSSE will need to apply one of the regimes set out above.  Consequential amendments have also been made to FRS 100 Application of Financial Reporting Requirements. 

The main changes to the various regimes are set out below.

FRS 101 Reduced Disclosure Framework

The most significant changes to FRS 101 are:

1. An exemption from the requirement of IFRS 1 to present an opening statement of financial position for qualifying entities adopting FRS 101 for the first time.
2. An exemption from the requirement of IAS 24 to disclose amounts incurred by an entity for the provision of key management personnel services that are provided by a separate management entity.
3. Removal of the requirement that changes in the estimated amount of contingent consideration in a business combination should be treated as an adjustment to the cost of the combination, rather than as gains or losses recognised in the profit and loss account. This requirement, a modification of the requirements of IFRS 3, was previously necessary due to a conflict with company law.
4. An option for entities to use the income statement and statement of financial position formats specified by IAS 1, rather than the formats specified in the Accounting Regulations.

Items 1 and 2 are applicable for periods beginning on or after 1 January 2015, while items 3 and 4 are applicable for periods beginning on or after 1 January 2016, with early adoption required if and only if the entity is early adopting the new Accounting Regulations.

FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland

The most significant changes to FRS 102 are:

1. The addition of section 1A Small Entities, which sets out the presentation and disclosure requirements for a small entity that chooses to apply the small entities regime.  Such entities will still need to apply the recognition and measurement requirements set out in the existing sections of FRS 102. Appendices A to D to section 1A are also added and provide guidance on the application of section 1A.
2. Minimum requirements are set out for entities wishing to take advantage of the flexibility to adapt statutory balance sheet and profit and loss formats set out in the new Accounting Regulations.
3. The removal of some of the exemptions from disclosure requirements regarding financial instruments that were previously available for qualifying entities.
4. An increase from five to ten years in the maximum useful life allowed for goodwill and intangible assets for which, in exceptional cases, a reliable estimate of the useful life cannot be made.
5. Reversal of the default accounting treatment for share-based payments where the entity has the choice of settling in cash or shares.  Previously the default position for such arrangements was to treat them as cash settled, whereas now they will normally be accounted for as equity settled arrangements unless this is not reflective of the substance.
6. Reversal of any impairment of goodwill is now prohibited (subject to expected further changes in company law).

FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime

FRS 105, the new accounting standard for entities choosing to apply the Micro-entities regime, is based on FRS 102 but its accounting requirements are adapted to satisfy the legal requirements applicable to micro-entities and to reflect the simpler nature and smaller size of micro-entities.  In particular:

• Micro-entities are only required to prepare a balance sheet and profit and loss account and not any of the other primary statements required for larger companies.
• No assets can be measured at fair value or a revalued amount.
• No deferred tax or equity-settled share-based payments are recognised
• All of the accounting policy choices set out in FRS 102 are removed.
• Micro-entities' accounts are only required to provide very limited disclosures and are presumed to give a true and fair view by doing so.

FRS 105 is effective for periods beginning on or after 1 January 2016, with early adoption permitted.

The following documents can be obtained from the FRC website:

• a press release on the amendments;
• an overview of the financial reporting framework;
• the amendments to FRS 100, FRS 101 and FRS 102;
• the new FRS 105; and
• an Impact Assessment and Feedback Statement on the new and revised standards.

Deloitte's Need to know publication can be found here.

In April 2014 the EC published 'Recommendation on the quality of corporate governance reporting (‘comply or explain’) 2014/208/EU', alongside proposed revisions to the Shareholder Rights Directive. At the time that it was published, the FRC commented that the Recommendation would “help to enshrine good corporate governance throughout Europe”.  They also noted that the concept of 'comply or explain' was already a key feature of the UK corporate governance framework, underpinning the UK Corporate Governance Code (the Code).

In its formal response to the EC, the FRC states that it considers that the Code meets the provisions of the Recommendation.  In particular, it welcomes the commission's focus on the quality of explanations given under a 'comply or explain' framework and highlights the changes that it made in this respect to the Code as part of its 2012 updates.

The full response letter can be found on the FRC website.

The consultation asks for views on equal pay reporting regulations and ideas on wider actions that could be taken to reduce the Gender Pay Gap. The government is proposing that private and voluntary sector employers in Great Britain with at least 250 employees would be required to publish information about the pay of their male and female employees. As part of the consultation, it is requesting views on:

• what form this information should take;
• how often it should be published; and
• where the information should be published - for example, a prominent place on the employer's public website.

The consultation document can be found on the UK Government website.  Deloitte's Governance in brief is available here.

The changes consist of:

• a new standard, FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime;
• a new Section 1A Small Entities of FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland; and
• other changes necessary for continued compliance with company law.

Please click for more information and access to all revised documents in the press release on the FRC website.

EFRAG cites the following reasons:

• The Conceptual Framework project is very important and will have a profound and overarching effect on the outcomes of future standard-setting processes. It is essential that the IASB's constituents have sufficient time to study the proposals in the ED.
• The IASB argued that a 150-day comment period would suffice as constituents would already be familiar with the content of the ED as it is based on the July 2013 Discussion Paper. However, EFRAG argues that there have been significant changes since then.
• In EFRAG’s view, the ED does not provide sufficient principle based guidance on important issues such as the selection of measurement bases and what should be reported in OCI. EFRAG expects that constituents might want to develop and provide suggestions on how to deal with these issues, which would take additional time.
• In some jurisdictions, the period available for debating the ED would be shortened by the time it takes to translate the proposals.
• The time available could also be reduced by the need to react to other documents issued by the IFRS Foundation for comment (the forthcoming Agenda Consultation and the IFRS Foundation Review on structure and effectiveness).

Please click for additional information and access to the letter sent to the IASB in the press release on the EFRAG website. More information on EFRAG's consultation document on the Conceptual Framework ED is available here.

The EFRAG's 'Short Discussion Series' are designed to address topical and problematic issues with the aim of stimulating debate among European constituents and of helping the IASB to address cross-cutting dilemmas in financial reporting.

In the paper, the EFRAG discusses the following topics:

• Summary of requirements and intended benefits of IAS 7.
• Requirements in IAS 7 specifically relevant to financial institutions, including views on the usefulness to financial institutions.
• Dis­cus­sion of al­ter­na­tives related to:
  • Information on liquidity.
  • Information on changes in assets and liabilities.
  • Specific aspects relevant to insurance companies.
  • Narrower amendments.

Comments are due by 31 March 2016. For more information, see the press release and the dis­cus­sion paper on the EFRAG website.

With the introduction of the Strategic Report by the UK Government and the publication of the International Integrated Reporting Council (IIRC)'s Integrated Reporting (<IR>) framework in 2013, organisations are now required to or are choosing to report a much greater level of non-financial information to stakeholders.  Once the new EU non-financial reporting Directive is implemented in the UK, further mandatory requirements in this area will be introduced.

Some of the challenges faced by organisations in producing this information are how to ensure that controls are effective, the right things are measured and that systems and processes are in place to capture the data needed for reporting purposes. The quality of those systems and outputs must be, as far as possible, evaluated and stakeholders assured on them so that reporting is accurate and reliable.

This report sets out how an organisation's internal audit function can be harnessed by organisations to address these challenges.  It also includes some case studies, showing how certain organisations have already begun to use their internal audit function in this way.

The full report can be obtained from the CIIA website, as can their press release.