This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

October

BIS consults on package of measures to implement the EU Audit Regulation and Directive

30 Oct 2015

The Department for Business, Innovation and Skills (BIS) has published a consultation on measures to implement the EU Audit Directive (2014/56/EU) (‘the Directive’) and Audit Regulation (537/2014) (‘the Regulation’) in the UK as well as other changes that may be made to enhance confidence and strengthen the audit regime.

The Directive and Regulation were published in the Official Journal of the European Union in May 2014.  The Directive which amends the Statutory Audit Directive (Directive 2006/43/EC) (link to Europa website) applies to all audits required by EU law and the Regulation applies to all audits of “Public Interest Entities” (PIEs).

The consultation builds on a previous Discussion Paper issued by BIS in December 2014.  It is focused on “identifying legislative, and non-legislative, actions necessary to:

  • strengthen standards for the audit of PIEs;
  • improve confidence in the independence of auditors;
  • avoid excessive concentration in the audit market; and
  • make audit reporting more informative.

The consultation includes draft implementing regulations and draft amendments to the Companies Act to implement changes in a number of areas.  Some of the key areas included within the consultation include:

Definition of a PIE

  • BIS intends not to include additional entities in the definition of a PIE.  BIS are, as previously announced, retaining the PIE definition as the EU minimum – in the UK, entities with debt or equity traded on an EEA regulated market, banks, building societies and insurance undertakings will fall within this definition. 

Rotation and tendering

  • PIEs will need to put their audit out to tender at least every ten years and change their auditor at least every 20 years. 

Regulation of auditors

  • The FRC will be the “single competent authority” – with ultimate responsibility for most matters of audit regulation and oversight.  The FRC will only have to conduct audit inspections, investigations and disciplinary cases in relation to PIEs.  It will delegate the conduct of inspections and investigations and application of sanctions for non-PIEs to the Recognised Supervisory Bodies (RSBs) (for instance the Institute of Chartered Accountants in England and Wales (ICAEW)).  The RSB will still be able to agree that the FRC undertakes the work that it has been delegated and the FRC will be able to take over any particular inspection or investigation, if it deemed it to be in the public interest. In practice, this means that the ICAEW Quality Assurance Department (QAD) will take back inspection of the larger private companies, large pension schemes and large charities and larger unit trusts and OEICs, and potentially larger AIM companies, from the FRC’s Audit Quality Review Team (AQRT).
  • Audit registration for firms and Responsible Individuals (RIs) and approval of rules on Continuing Professional Development (CPD) will be overseen by the FRC as currently, with the ICAEW dealing with this at an operational level and monitoring CPD.
  • Cross-border auditing changes slightly. 

Restrictive clauses in contracts

  • From 17 June 2016, such clauses will cease to have any legal effect.

The consultation also includes details on further provisions that will be included in the final implementing regulations on the following areas:

  • removal of auditors of PIEs by application to the court by the competent authority or a significant minority of shareholders or members;
  • cooperation between competent authorities, transferring information and confidentiality;
  • the reporting by auditors of PIEs to supervisory authorities; and
  • the role of competent authorities in relation to the functioning of the audit market for PIEs.

The BIS consultation is one of four consultations being consulted on in the context of audit reform in the UK.  The other consultations out for comment are:

  • A Financial Conduct Authority and Prudential Regulation Authority consultations on changes to audit committee requirements as a result of EU audit reform.
  • A Financial Reporting Council (FRC) consultation on changes to Ethical Standards for Auditors, International Standards on Auditing (ISAs), the UK Corporate Governance Code and the Guidance on Audit Committees arising from the UK implementation of the EU Audit Regulation and Directive.  The underpinning legislation needed for the FRC to introduce these changes is included within the BIS consultation.

Comments are invited until 9 December 2015.  BIS intends that the implementing regulations should come into force for accounting periods beginning on or after 17 June 2016.

Click for:

HMRC updates its paper on the tax implications of FRS 102

30 Oct 2015

HM Revenue and Customs has updated its paper which provides an overview of the key accounting changes and the key tax considerations of moving from ‘old’ UK GAAP to FRS 102 ‘The financial reporting standard applicable in the UK and the Republic of Ireland’.

The paper is an update of a previous paper published in January 2014 to reflect:

  • additional commentary in relation to non-interest bearing loans;
  • updated commentary on the application of the Disregard Regulations and Change of Accounting Practice Regulations, reflecting the changes made to these statutory instruments in December 2014;
  • updated accounting commentary to reflect the amendments to FRS 102 issued in August 2014 and July 2015; and
  • updates for any commentary specific to section 1A of FRS 102. 

The paper does not reflect:

  • amendments to FRS 102 - Pension Obligations issued in February 2015;
  • the requirements of FRS 104 - Interim Financial Reporting; and
  • proposed changes to the tax rules, for example changes to the loan relationship and derivative contract rules and changes to the intangibles legislation included in the summer finance bill 2015.

As before it is split into two sections:

  • The first section provides a comparison of the accounting and tax differences between ‘old’ UK GAAP and FRS 102
  • The second section provides a summary of the key accounting and tax considerations upon transition.  

The paper, which is also relevant for small companies who elect to apply Section 1A of FRS 102, includes the requirements of the law as they stood at the date of the publication.  HMRC intend to update the papers “as further information is available and as new accounting standards and tax law develop”.  

FRS 102 is one of the three main standards that were introduced as a package to replace 'old' UK GAAP.  It must be applied for accounting periods beginning on or after 1 January 2015, with early adoption available, subject to certain conditions.  The July 2015 amendments to FRS 102 are applicable for periods beginning on or after 1 January 2016, with early adoption permitted and required if and only if the entity is early adopting the new Accounting Regulations (or from 1 January 2015 if the entity is not subject to company law).

For companies that transition from Old UK GAAP to FRS 101 a separate paper providing an overview of the key accounting and tax considerations was published in January 2014.

Click for:

European Union will not adopt IFRS 14

30 Oct 2015

The European Commission (EC) will not propose for endorsement the interim standard on rate regulated activities, IFRS 14.

The EC argues that IFRS 14 Regulatory Deferral Accounts is a temporary standard offering an accounting option to companies that adopt IFRS for the first time. Therefore the EC will not propose IFRS 14 for endorsement in the EU as very few European companies would fall within its scope. The Commission will consider any future standard on rate regulated activities for endorsement in the EU under its normal process.

The EC's decision is reflected in an updated EFRAG endorsement status report.

Third work plan update for October

30 Oct 2015

The IASB has updated its work plan yet again. The update of note is an Exposure Draft on the definition of a business that is expected "within three months".

Following the post-implementation review of IFRS 3, several projects related to IFRS 3 were added to IASB’s research agenda. At their joint meeting in September, the IASB and FASB discussed their respective projects related to their Business Combinations Standards, and how the boards could work together on these projects. At its October meeting, the IASB decided to follow a staff recommendation to propose changes to IFRS 3 that are the same as the amendments proposed by the FASB, and to issue an Exposure Draft rather than a Discussion Paper.

Consequently, the new version of the work plan shows the definition of a business project no longer as a research project but as an implementation project with an Exposure Draft expected in the next three months.

One small additional update regards yet again the practice statement on materiality. Although ED/2015/8 IFRS Practice Statement - Application of Materiality to Financial Statements was published on 28 October, the work plan published later that day still had it as "upcoming". This has now been rectified.

For a full analysis any other changes please see our news item dated 27 October. The newly revised IASB work plan is available on the IASB's website.

IFRS Advisory Council membership update

30 Oct 2015

The Trustees of the IFRS Foundation have announced 16 appointments and re-appointments to the IFRS Advisory Council.

The Advisory Council is the formal advisory body to the Trustees and the IASB. It advises the IFRS Foundation on its strategic direction, technical work plan and priorities.

The new Advisory Council members are:

    1. William Coen - Basel Committee on Banking Supervision
    2. Aziz Dieye - La Fédération Internationale Des Experts-Comptables Francophones (FIDEF)
    3. Isabelle Ferrand - International Co-operative Alliance (ICA)
    4. Yibin Gao - Ministry of Finance, People’s Republic of China
    5. Andrew Marshall - KPMG
    6. Colin McDonald - The Investment Association
    7. Melanie McLaren - Group of European National Standard-setters
    8. John Stanford - International Federation of Accountants (IFAC)

With the exception of Isabelle Ferrand, who is representing an organisation newly admitted to the Advisory Council, the new members will replace retiring members Peter Chambers, Egbert Eeftink, Stephenie Fox, Alberto Giussani, Daniel McMahon, René van Wyk, and Min Yang.

The following members of the Advisory Council have been reappointed: Linda Diaz del Barrio, Gavin Francis, Jake Green, Igor Kozyrev, Ghiath Shabsigh, Anne Simpson, Lynda Sullivan, and Stephen Taylor.

Ernesto López Mozo and Maarika Paul are stepping down from the Council.

All appointments take effect 1 January 2016 and are for a three-year period.

The press release announcing the new appointments can be found on the IASB's website.

Agenda posted for the November 2015 Global Preparers Forum meeting

29 Oct 2015

Representatives of the International Accounting Standards Board (IASB) will meet with the Global Preparers Forum (GPF) in London on Wednesday, 4 November 2015. The agenda for the meeting has been released, which includes updates from the IASB and IFRS Interpretations Committee, discussions on specific topics including the conceptual framework, role and activities of the IFRS Advisory Council, the 2015 Agenda Consultation and the Review of Structure and Effectiveness, fair value measurement, and the disclosure initiative.

The full agenda for the meeting is sum­marised below:

Wednesday, 4 November 2015 (09:30-17:45)

  • IASB update:
    • Major standards.
    • Research activities.
    • Other activities.
  • IFRS In­ter­pre­ta­tions Committee update:
    • IFRS 9 Financial Instruments and IAS 28 Investments in Associates and Joint Ventures — Measurement of long-term interests.
    • IAS 16 Property, Plant and Equipment — accounting for proceeds and costs of testing of PPE.
    • Overview of Interpretations Committee activities.
  • Conceptual framework.
  • IFRS Advisory Council: Role and recent activities.
  • IASB Agenda Consultation and Trustees’ Review of Structure and Effectiveness of the IFRS Foundation.
  • Fair Value Measurement: Unit of Account.
  • Disclosure Initiative: Materiality Practice Statement.

Agenda papers for this meeting are available on the IASB's website.

IFRS Foundation Trustee speaks on the relevance of IFRSs

29 Oct 2015

Lynn Wood, IFRS Foundation Trustee, gave a keynote speech at a conference in Melbourne, Australia today. She focussed on 'Financial reporting in the global economy: Facilitating better business and investor decision-making'.

Ms Wood, who herself served as Chairman of the Australian Financial Reporting Council, was convinced that in the 21st century, capital markets are mutually dependent and globally interconnected and that as a country that looks both East and West, Australian capital markets were the perfect example of this. This was the reason international standards were needed.

She noted that one of the most frequent criticisms she heard was the ongoing concern about complexity in financial reporting. However, she also voiced the conviction that people do understand that there are many root causes of complex financial reporting, including increasingly complex business operations. She also conceded that IFRS and financial reporting in general are a long way from being perfect.

Therefore she urged the members of her audience to a) familiarise themselves with developments in IFRS and how they may affect their company and b) to get involved in the process at an early stage. Because she believed that there was no way back or around IFRSs:

I strongly believe that the momentum is now unstoppable towards every country in the world adopting IFRS, and so the question is no longer ‘if’ but ‘when’ we will have truly global accounting standards.

Please click to download the manuscript of Ms Lynn's speech from the IASB website.

Five-year summary report highlights that FTSE 100 companies have exceeded women on boards target

29 Oct 2015

A report has been published today which indicates that the proportion of women on the Boards of FTSE 100 companies has now exceeded the 25% representation by 2015 as set by Lord Davies in his report in February 2011.

The report, the final report into women on boards by Lord Davies, summarises the progress made over the last five years in achieving the initial target set in his 2011 report (link to BIS website).  It also charts the progress made in achieving female representation on the boards of FTSE 250 companies.  The report indicates that:

  • The representation of women on boards has doubled since 2011.
  • The percentage of female-held directorships on FTSE 100 boards has increased to 26.1% from 23.5% in March 2015, 20.7% in March 2014 and 12.5% as of February 2011 when Lord Davies reported.
  • The percentage of female-held directorships on FTSE 250 boards has increased to 19.6% from 18% in March 2015, 15.6% in March 2014 and 7.8% as of February 2011 when Lord Davies reported.
  • There are now no all-male boards in the FTSE 100 – this figure was 21 in 2011.  The number of all-male boards for FTSE 250 companies stands at 15; down from 23 in March 2015.  This figure was 131 in 2011. 

The report calls the reaching of the 25% target a “significant achievement”.  However it highlights that this is part of a “longer journey to improving the gender balance at the top of British business” In order to achieve this, the report highlights that “further work and a renewed focus is required”.  Five “next step” recommendations are proposed in order to continue to increase women’s representation further (taken direct from the report):

1. Voluntary approach

  • The report recommends that the national call for action and voluntary, business-led approach is continued for a further five year period, ensuring substantive and sustainable improvement in women’s representation on Boards of FTSE 350 companies into the future

2. Increased target, more chairs and action from all listed companies.

The report recommends:

  • Increasing the voluntary target for women’s representation in boardrooms of FTSE 350 companies, to a minimum of 33% to be achieved in the next 5 years.
  • All stakeholders to work together to ensure increasing numbers of women are appointed to the roles of Chair, Senior Independent Director and into Executive Director positions on boards of FTSE 350 companies.
  • All FTSE listed companies now assess the gender balance on their boards and take prompt action to address any shortfall.

3. Focus on the executive layer

  • The report recommends that FTSE 350 companies extend the best practice seen at board level to improve gender balance and fundamentally improve the representation of women on the Executive Committee and senior-most leadership positions.

4. Independent steering body

  • The report recommends that an independent steering body, made up of business and subject matter experts with a newly appointed Chair and members, is reconvened to support business in their efforts, act as a catalyst for sustained progress, monitor and report periodically upon progress.

5. Maintaining momentum

  • The report recommends that the newly convened steering body will review the recommendations 1 to 4 above and in consultation with key stakeholders, publish more detailed comments as appropriate, at the beginning of 2016.

The report comes at the same time as the government announced new measures requiring larger employers to publish information about their bonuses for men and women in addition to extending plans for gender pay gap reporting.  The government also announced plans for the elimination of all-male boards within the FTSE 350.  A government consultation which concluded in September asked employers and employees for their views on how, when and where the data should be published. New regulations to set out how this will be achieved in practice are intended to be set out in due course.

Click for:

IASB publishes update on the definition of a lease

29 Oct 2015

The IASB staff have published a short project update providing an overview of how a lease will be defined in the IASB's new standard on leases. It also includes a working draft of the application guidance and accompanying illustrative examples to be included in the forthcoming standard on the definition of a lease.

The staff are providing the update to help stakeholders prepare for the implementation of the new standard. They point out that it is likely that the first step to be undertaken in implementing the standard will be to determine the population of contracts to which the standard applies - which will be determined by the definition of a lease. Please note that although the IASB has completed its decision making for the leases project, the final standard is still in drafting and is subject to possible further refinements.

Please click to download the update from the IASB website.

Summary of the October ASAF meeting now available

29 Oct 2015

The staff of the International Accounting Standards Board (IASB) have made available a summary of the discussions of the Accounting Standards Advisory Forum (ASAF) meeting held in London on 1-2 October 2015.

The first two discussions also featured feedback from the World standard-setters meeting held earlier that week. The topics covered during the meeting were the following (numbers in brackets are references to the corresponding paragraphs of the summary):

  • 2015 Agenda consultation (1-22). ASAF members discussed (a) the factors used to allocate resources between standards-level projects, research and maintenance and implementation, (b) the prioritisation of the research programme, (c) the level and mix of implementation support provided, (d) the pace of change and the level of detail given in IFRS, and (e) a proposal to extend the interval between agenda consultations to five years.
  • Conceptual Framework (23-54). ASAF members discussed (a) possible implications for IAS 37 Provisions, Contingent Liabilities and Contingent Assets of the proposals in the Conceptual Framework exposure draft, (b) the proposals on measurement in the ED, and (c) possible implications of the ED for the rate-regulated activities project.
  • Clarifications to IFRS 15 (55-58). The IASB staff provided an overview of the exposure draft of clarifications to IFRS 15 and asked the ASAF members (a) to comment on the high hurdle applied by the IASB when considering whether and how to amend IFRS 15 and (b) to provide their preliminary views on the questions in the ‘Invitation to comment’ section of the ED.
  • Measuring quoted investments in subsidiaries, joint ventures and associates at fair value -unit of account (59-82). ASAF members were asked to provide their views on the relevance of the proposed measurement model included in the exposure draft Measuring Quoted Investments in Subsidiaries, Joint Ventures and Associates at Fair Value published in September 2014.
  • Pollutant pricing mechanisms (83-96). ASAF members considered a possible model to account for a cap-and-trade type of emissions trading scheme that reflected the feedback received from ASAF members at the July 2015 meeting.
  • Equity method of accounting (97-104). The FASB briefly outlined its simplification project on the equity method of accounting, which includes eliminating the requirement for an entity to measure at fair value its share of the investee’s identifiable assets and liabilities. The IASB staff then sought the views of the ASAF’s members on the IASB staff’s preliminary proposals to amend the equity method of accounting.
  • IASB project update including insurance contracts (105-113). The IASB staff provided an overview of the recent IASB’s tentative discussions on the insurance contracts project, which focussed on (a) requirements for insurance contracts with participation features and (b) the different effective dates of IFRS 9 and the new insurance contract. The staff then presented an overview of the IASB’s current projects, a summary of the actions taken on the advice provided by the ASAF in previous meetings and the suggested agenda topics for the December 2015 and April 2016 ASAF meetings .

A full report of the meeting is available on the IASB's website.

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.