The publication of ED/2015/8 IFRS Practice Statement - Application of Materiality to Financial Statements means that the project on materiality is now in public consultation phase, no longer in exposure draft drafting phase. All other entries remain as reported two days ago. The newly revised IASB work plan is available on the IASB's website.

The Blue Book will sell for £72 plus shipping (academic, developing country, and volume discounts apply). You will find more information and ordering details here.

In our comment letter, we welcome the Board’s initiative in addressing a number of issues that were likely to cause significant practical difficulties in the application of IFRS 15 and support the proposed amendments. Also, we provide general comments regarding (1) the value of convergence, (2) clarity and stability of the platform and timing of further amendments, (3) the importance of drafting and updating the Standard itself, and (4) the ongoing role of the Transition Resource Group.

Please click to access the full comment letter.

The changes which were consulted on in CP 15/19: Quarterly Consultation No.9 include:

• Updating the definition of the Code in the Glossary and in the Listing Rules and to make a number of consequential changes most notably to the Listing Rules and the Disclosure and Transparency Rules.
• Amending the Listing Rules (LR 9.8.6R (3)) to require the directors to make disclosure relating to both the going concern basis of accounting and to the long-term viability of the entity.
• Updating LR 9.8.10R (1) relating to auditor reporting on going concern to refer to the revised requirement. 

A number of other consequential amendments to the Handbook have also been made which are discussed within the FCA Handbook Notice No. 26 (link to FCA website) and the legal instrument (Corporate Governance Code And Miscellaneous Amendments Instrument 2015) that gives effect to these updates.

Over the 2013/16 period, the FRC has been focussed on addressing the lessons learned from the global financial crisis. Significant regulatory changes have been introduced across all areas for which the FRC is responsible, some by the FRC itself and others by the UK Government and European Union (EU).

The FRC believes that, those actions having been taken, there is a need for a change of emphasis and that its priority now should be to help companies embed these requirements. Their overall objectives over the next three years will be to promote:

• corporate governance and cultures that support long-term success;
• effective investor stewardship;
• clear and concise corporate reporting;
• high quality and relevant international standards, in relation to both accounting and auditing;
• high quality auditing; and
• successful implementation of the EU Audit Regulation and Directive (ARD).

In particular, over the next three years it plans to take the actions set out below.

Corporate governance and investor stewardship

In relation to governance and stewardship, the FRC plans to do the following:

• Amend the UK Corporate Governance Code in 2016 to implement the changes required by the ARD. They will then aim to avoid introducing any further changes to the Code over the three year period.
• Complete their project on corporate culture and behaviour.
• Focus on promoting effective investor engagement, including monitoring of reporting by UK Stewardship Code signatories.
• Implement those parts of the EU Shareholder Rights Directive for which they are responsible in a way that minimises the costs for those affected.

Corporate reporting

In relation to corporate reporting, they plan to undertake these actions:

• Direct their corporate reporting review work towards improving the quality of reports, as well as increasing the transparency of their work in this area.
• Build on the work of the Financial Reporting Lab and extend its collaborative approach to other aspects of their work.
• Provide thought leadership on the development of reporting frameworks, in particular in relation to:
• digital reporting;
• communication principles;
• preliminary reporting; and
• smaller listed and AIM company reporting.
• Continue to influence EU and international developments, including the work of the International Accounting Standards Board (IASB), European Financial Reporting Advisory Group (EFRAG), European Securities and Markets Authority (ESMA) and International Integrated Reporting Council (IIRC).
• Undertake a post implementation review of the changes to UK GAAP (towards the end of the period).

Audit

In their work on auditing, the actions they have planned are as follows:

• Implement the ARD in 2016, supported by a consultation later in 2015 or in early 2016.
• Establish sound ethical and technical standards for auditors that meet the requirements of the ARD, on which they recently published a consultation.
• Complete their work to implement the recent changes in extended audit committee and auditor reporting, including assessing the consequences of retendering and rotation.
• Issue a revised Audit Firm Governance Code in 2016/17
• Aim to improve audit quality so that, by the end of the period, ninety percent of FTSE 350 audits will require no more than limited improvements, as assessed by their Audit Quality Review (AQR) monitoring programme.
• Re-scope their AQR activities to increase monitoring of smaller audit firms and commence inspections of local authority and health body audits, both required due to regulatory changes.

They will also consider the consequences of the implementation of the ARD on their oversight and disciplinary activities in relation to the accountancy profession, as well as how best to promote and support quality in public interest assurance activities more widely.

The press release and full Strategy report can be found on the FRC website.

The FRC Discussion Paper aims to “look at the key issues, to identify suggestions for good practice and, more specifically, to examine how the nomination committee can play its role effectively”.  It has been published in response to calls from stakeholders and also to address the recommendations of the Parliamentary Commission on Banking Standards which provided recommendations to the FRC around director nomination.

The Discussion Paper highlights that “good succession planning contributes to the long-term success of a company” and that the absence of a succession plan “can undermine a company’s effectiveness and its sustainability”.  It then goes on to say that “unless boards plan in advance for both executive and non-executive positions, they will struggle to ensure that the right mix of diverse skills and experience is in place”

The Discussion Paper explores six areas that the FRC considers are important to succession planning:

• how effective board succession planning is important to business strategy and culture;
• the role of the nomination committee;
• board evaluation and its contribution to board succession;
• identifying the internal and external ‘pipeline’ for executive and non-executive directors;
• ensuring diversity; and
• the role of institutional investors.

The FRC is seeking to provoke discussion, and welcomes feedback on the approach and to the issues and questions posed.  The press release and Discussion Paper are available on the FRC website (links to FRC website). Comments are requested to be submitted by 29 January 2016.

Our Governance in brief publication on the Discussion Paper is available here.

The four studies are (all links to the European Parliament website):

• The Significance of IFRS 9 for Financial Stability and Supervisory Rules. The paper examines the interaction of the IFRS 9 expected credit loss model with supervisory rules and discusses potential implications for financial stability. It concludes that combined with improved transparency, IFRS 9 might enhance financial stability.
• IFRS Endorsement Criteria in Relation to IFRS 9. The paper evaluates whether IFRS 9 meets the criteria 'true and fair view', 'qualitative aspects', and 'European public good'. It concludes that the standard cannot reasonably be rejected on grounds of these criteria.
• Impairments of Greek Government Bonds under IAS 39 and IFRS 9: A Case Study. In a case study of a Greek government bond for the period 2009 to 2011 when Greece’s credit rating declined sharply, the study highlights the discretion that preparers have when estimating impairments. It concludes that IFRS 9 will lead to earlier impairments, however, these appear still delayed and low if compared to the fair value losses.
• Expected-Loss-Based Accounting for the Impairment of Financial Instruments: The FASB and IASB IFRS 9 Approaches. The paper outlines the work of the FASB and the IASB on the development of expected-loss methods for measuring the impairment of financial instruments arising from credit losses, and describes and compares key features of the different approaches developed by the two standard setters. It also provides information indicative of the possible effect of differences between the two approaches and summarises arguments for and against the main elements of the approaches proposed by the two standard setters.

The full transcript from the meeting is available on the FRC website.