September

EFRAG, EFFAS/ABAF, and IASB issue summary of outreach event on profit or loss and OCI

09 Sep, 2015

The European Financial Reporting Advisory Group (EFRAG), the European Federation of Financial Analysts Societies (EFFAS) and the Association Belge des Analystes Financiers (ABAF), and the International Accounting Standards Board (IASB) have issued a summary report related to their joint outreach event held on 1 July 2015 related to Exposure Draft ED/2015/3 ‘Conceptual Framework for Financial Reporting’.

Specifically, members of the panel and participants of the outreach event discussed how profit or loss (P&L) could become more useful and what the role of other comprehensive income (OCI) may be. The main observations from the outreach event included:

  • The importance of P&L financial information when initiating an analysis. In addition, non-GAAP metrics based on P&L were considered important.
  • Investors often view financial reporting to be more relevant than management performance assessments when determining valuation objectives.
  • Sell-side analysts focused on short-term, while buy-side analysts considered a longer-term investment decision.
  • OCI is an important consideration when determining an accurate company evaluation.
  • P&L is often adjusted and the type of adjustments varies on the analysis performed.
  • OCI had a “confirmative role for investors” and it is important to evaluate how OCI performed over time.
  • Application of the valuation model needs a number reflecting the underlying performance of a business.
  • Prudence was considered by some as a conservative bias in accounting and the level of prudence seemed to depend on the type of investor.

The EFRAG will consider the feedback received from the outreach event for its comment letter to the exposure draft.

For more information, see the press release and the report on the EFRAG’s website.

September 2015 meeting of the ICAEW FRDG

09 Sep, 2015

The next meeting of the Institute of Chartered Accountants in England and Wales (ICAEW) Financial Reporting Discussion Group (FRDG) will be held on 14 September 2015 in London.

The meeting will look at the Financial Reporting Council’s recent proposals to improve the quality of reporting by smaller listed and AIM quoted companies.

Click for more information, including registration details on the ICAEW website.

EFRAG supports deferral of IFRS 10/IAS 28 amendments, recommends postponing the endorsement process

09 Sep, 2015

The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment letter on IASB exposure draft ED/2015/7 'Effective Date of Amendments to IFRS 10 and IAS 28'. It has also recommended to the European Commission to further postpone the endorsement process on these amendments.

In August 2015, the IASB published ED/2015/7 with proposed amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures. The amendments aim at deferring the effective date of the September 2014 amendments to these standards indefinitely until the research project on the equity method has been concluded.

In its draft comment letter, EFRAG supports the proposed amendments as EFRAG believes that this deferral will give the IASB the opportunity to address the application problems arising from the equity method requirements comprehensively, will give the IASB the opportunity to reconsider subsequently identified issues and challenges, and will  reduce the risk of requiring successive rounds of changes to IAS 28 in a short period of time.

EFRAG has also written to the European Commission to further postpone the endorsement of the September 2014 amendments. The endorsement process on these amendments is currently on hold following a February 2015 recommendation by EFRAG.

Please click to access the following information on the EFRAG website:

FCA consults on changes to audit committee requirements as a result of EU audit reform

08 Sep, 2015

The Financial Conduct Authority (FCA) has issued a consultation paper that, among other things, proposes changes to audit committee requirements for companies with securities admitted to trading on an EEA regulated market, as a result of the UK implementation of the EU Audit Directive (2014/56/EU). The consultation follows a recent policy announcement by the Department for Business, Innovation and Skills (BIS) on the UK implementation of the EU audit reforms.

The key proposals contained within part 8 of the FCA consultation paper (CP15/28: Quarterly Consultation Paper No. 10) are:

  • For financial years commencing on or after 17 June 2016, the audit committee requirements of DTR 7.1 change:
    • Composition: A majority of audit committee members must be independent, rather than at least one - this will not be an issue for entities which comply with the UK Corporate Governance Code, but may affect those entities which do not, for example those with a standard listing of debt or equities. The members of the audit committee as a whole must have competence relevant to the issuer’s industry sector
    • Role: The rules clarify that the audit committee’s role in monitoring internal quality control and risk management systems and, where applicable, its internal audit, regarding the financial reporting of the issuer must not breach its independence. The audit committee must explicitly take into account any findings and conclusions of external inspections when monitoring the audit, and must report to the board the outcome of the audit, explaining how the audit contributed to the integrity of financial reporting and the audit committee’s role in that process. 
  • Issuers are exempt from the statutory audit committee requirement if they are:
    • a subsidiary of another issuer which is subject to DTR 7.1 or equivalent rules in another EEA state;
    • an issuer of asset backed securities, provided the reason why no audit committee is needed is explained;
    • a credit institution which has only debt securities admitted to trading which has not been required to publish a prospectus; or
    • are a UCITS or AIF fund.
  • The requirement in DTR 7.2.10R for a UK issuer to include in its directors’ report a description of the group’s internal control and risk management systems has been broadened from the process for preparing consolidated accounts to the financial reporting process for the undertakings included in the consolidation, taken as a whole. This is unlikely to be a difference in practice unless the existing disclosure had been drafted in a very legalistic way.
  • The reference in DTR 4.2.10R(4)(b) for the basis of preparation for half-yearly reports under UK GAAP will be updated to refer to Financial Reporting Standard (FRS) 104 Interim Financial Reporting.

The Prudential Regulation Authority (PRA) will consult separately in mid-September as regards corporate governance and audit committee requirements for banks, building societies and insurance undertakings. If such an entity is also admitted to trading on an EEA regulated market, it will have to follow both sets of rules.  The FRC will also be consulting later in the year on possible changes to the UK Corporate Governance Code and its associated Guidance on Audit Committees which might be required as a result of the implementation of the EU Audit Directive.

The FCA are also consulting on implementation of the Accounting Directive (largely tidying up of cross-references), referring to the FRC rather than Accounting Standards Board (ASB)/Auditing Practices Board (APB), implementing a regulation regarding prospectuses, and tidying up an anomaly regarding cancellation of listing after a takeover where there is a small free float.

Comments are invited until 5 November 2015.

Click for:

Joint outreach event on the conceptual framework (Paris)

07 Sep, 2015

On 14 September 2015, the EFRAG, the French Accounting Standards Authority (ANC), and the IASB will host a joint outreach event on the Conceptual Framework in Paris.

The event is designed to offer an opportunity to discuss the proposals in the IASB Exposure Draft ED/2015/3 Conceptual Framework for Financial Reporting. The event will feature EFRAG TEG Chair Françoise Flores, IASB member Philippe Danjou, and ANC President Patrick de Cambourg.

Please click to access the formal invitation on the ANC website.

Applying the Integrated Reporting concept of ‘capitals’ in the banking industry

07 Sep, 2015

A paper, written on behalf of the <IR> Banking Network, analyses the application of the multi-capitals approach in the IIRC framework for integrated reporting in the banking sector. The paper also aims at providing industry specific guidance on the application of <IR>.

The capitals are one of the three fundamental concepts underpinning <IR>. They are the resources and the relationships used and affected by the organisation, which are identified in the <IR> Framework as financial, manufactured, intellectual, human, social and relationship, and natural capital.

Highlights of the findings in the paper include:

  1. Although the capitals framework is not easily implementable in the banking industry at first sight, there are an increasing number of best practice examples.
  2. Of the 20 surveyed banks, eight applied the <IR> 'capitals' terminology as outlined in the <IR> Framework and three others applied a similar concept but used different terms.
  3. Banks tend to provide provide key performance indicators for 'output and outcomes' only rather than for 'input' (usage of resource) or net contribution. When 'input' is reported, banks do so to comply with other frameworks such as the GRI guidance.
  4. Not surprisingly, the highest consistency of key performance indicators relates to financial capital. It is commonly viewed as the capital most directly relevant to investors, and most easily quantified. Information for the other capitals tends to be more varied.

Please click to access the paper on the IIRC website.

Fifth instalment of the IASB's Conceptual Framework webcast series

04 Sep, 2015

In August 2015, the IASB launched a webcast series on the proposed changes to its Conceptual Framework. Eight pre-recorded webcasts will be posted to the IASB's website weekly. The fifth instalment was posted today.

The on-demand webcasts provide detailed discussions of each part of the IASB's May 2015 Exposure Draft ED/2015/3 Conceptual Framework for Financial Reporting.

The webcast on Chapter 5 — Derecognition of assets and liabilities is available today. For information about the upcoming webcasts and a complete archive, see the webcast page on the IASB's website.

EFRAG believes IASB should only clarify IFRS 15 where absolutely necessary

04 Sep, 2015

The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment letter on the IASB exposure draft ED/2015/6 'Clarifications to IFRS 15'.

EFRAG states that, whilst supporting the convergence of IFRS 15 with the FASB's standard Revenue from Contracts with Customers and the proposals in the exposure draft, EFRAG agrees with the IASB’s decision not to clarify certain issues where the FASB has decided to provide further guidance in the standard. EFRAG believes that, at this stage, before the implementation of IFRS 15, the IASB should only clarify those issues that are strictly necessary for a proper understanding of IFRS 15.

Comments on the draft comment letter are due by 22 October 2015.

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

Agenda for the upcoming IFASS meeting

04 Sep, 2015

As part of a series of meetings of international standard-setters, the International Forum of Accounting Standard Setters (IFASS) will meet in London on 29 and 30 September 2015. The IFASS secretariat has kindly allowed us to inform our readers about the agenda for the meeting.

The agenda is summarised below:

Tuesday, 29 September 2015 (13:30-17:15)

  • Opening remarks
  • Global IFRS issues - presentation with question and answer session including EC Review of the IAS Regulation
  • Reports from regional groups: AOSSG, EFRAG, GLASS, PAFA
  • IPSASB matters:
    • Social policy benefits obligations
    • Strategy, governance and technical issues update
  • Administrative matters:
    • Assessment of last meeting
    • Technical issues
    • Process and timetable for election of new Chairman


Wednesday, 30 September 2015 (08:30-17:15)

  • Discussion of IASB work and research programmes - question and answer session based on presentations at WSS meeting
  • Report back on member project - Goodwill impairment and amortisation
  • IFRS implementation issues
  • Overview of proposals to revise financial statement presentation for not-for-profit organisations (FASB)
  • Topical issues
    • Core inventories
    • Reporting frameworks in accordance with U.K. GAAP
    • Types of reporting frameworks (other than IFRS) used by entities raising capital in non-traditional markets
  • New member projects
    • The statement of cash flows – issues for financial institutions
    • Reporting income and expenses in profit or loss or OCI
    • Use of financial information by investors – preliminary results of academic research
  • Wrap up

A report from meeting will be made available in due course; the report from the last IFASS meeting (spring 2015, Dubai) is available here.

The IFASS meeting will be preceded by the World Standard-setters meeting (28-29 September 2015) and followed by a meeting of the Accounting Standards Advisory Forum (1-2 October 2015).

Agenda for the September 2015 IFRS Interpretations Committee meeting

03 Sep, 2015

The IFRS Interpretations Committee will meet at the IASB's offices in London on 8-9 September 2015. The agenda for the meeting is now available.

The Committee will:

  • continue discussion of issues arising on IAS 16, IAS 16/IAS 38/IFRIC 12, IAS 32, IFRS 5, and IFRS 1;
  • discuss the agenda consultation; and
  • consider new issues on IAS 39 and IFRS 9.

The full agenda for the meeting can be found here. We will update this page for any changes to the agenda, and our Deloitte observer notes from the meeting as they become available.

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.