As recommended by the staff, the IASB voted for an effective date of 1 January 2019, with early application permitted but only if the entity is also applying IFRS 15 Revenue from contracts with customers.

In our comment letter, we support the proposals in the exposure draft; however we recommend that the Board clarify the effect of the proposals on the accounting in interim financial statements subsequent to a plan amendment, curtailment or settlement.

Please click to access the full comment letter.

The questionnaire presents nine arrangements and asks respondents to provide their assessment of whether different aspects of the definitions of assets and liabilities proposed in the May 2015 ED are met. Respondents are asked to provide their assessment solely based on the proposed definitions and the additional guidance included in the ED.

The completed questionnaire, which is available through the press release on the EFRAG website, should be submitted before 15 December 2015. The responses inform EFRAG’s assessment of the proposed definitions and the results will be communicated to the IASB in the beginning of 2016.

This issue features discussions on:

• The importance of having input from the investor community regarding the future work of the IASB.
• The IASB’s standard-setting approach.
• Current research projects pipeline.

In addition, the IASB has prepared an investor survey to gather views and priorities from the community concerning the future work plan. The survey responses are due by 15 December 2015.

For more information, see the press release and Investor Perspectives article on the IASB’s Web site.

Mr. Hooger­vorst’s speech builds on his previous comments made in June 2015 at the IFRS Foun­da­tion con­fer­ence in Paris. He explained that the contrast between his­tor­i­cal cost and fair value is not as large as some would expect and noted several prin­ci­ples that an entity can consider when selecting either his­tor­i­cal cost or current value as a mea­sure­ment basis. In addition, he commented that users are having issues with certain parts of other com­pre­hen­sive income (OCI), which has led the IASB to draw some important con­clu­sions related to its conceptual framework exposure draft. He also mentioned that mea­sure­ment and OCI will be two of the main topics he will discuss at upcoming outreach events hosted by the IASB.

Mr. Prada opened his speech with the usual ref­er­ences to the in­creas­ing global use of IFRSs before remarking on the situation in China. He praised the in­tro­duc­tion of standards that are substantially converged with IFRSs and high­lighted China’s support of the IFRS Foun­da­tion and the IASB. In addition, he suggested a possible change to the use of IFRSs in China:

Is now the time to consider further steps towards the goal of full con­ver­gence? . . . My personal view is that China has much to gain in doing so, in terms of international con­fi­dence in China’s capital market as well as Chinese lead­er­ship in establishing standards for global finance. . . . Of course, this is a decision for China alone, but we at the IFRS Foun­da­tion will support you every step of this journey.

A video of the panel dis­cus­sion held during the event will be available soon.

Amongst other measures, the consultation proposes that large businesses should publish their tax strategy annually. It seeks views on the right medium for publication of this information, in particular whether it should be included in the annual report and accounts and also on the size of company that would be required to comply with the requirements.

The FRC “welcomes the broad approach” to reporting set out in the consultation and encourages HMRC to “develop reporting principles, alongside some key content elements” to avoid boiler plate disclosures.  The FRC does not believe that the disclosures should be included within the annual report and recommend that they are given in a separate report and/or published on a website.

Additionally the FRC:

• expresses “significant concerns” about the proposal that there should be a named individual at “Executive Board” level with accountability for a business’s published tax strategy;
• urges HMRC to follow a consistent approach to that of the European Commission (who are consulting on tax transparency, including disclosure of tax management policies); and
• comments that information required under the general requirement to disclose a company’s internal governance and risk management would “lead to duplication of the information already disclosed in accordance with the UK Corporate Governance Code and Strategic Report Regulations”. 

The full comment letter is available on the FRC website.

In June 2012 the Panel of the Sharman Inquiry published its Final Report and Recommendations on Going Concern and Liquidity Risk. Key recommendations from the Panel included the need for clarification of the accounting and stewardship purposes of the going concern assessment and disclosure process and an encouragement that companies do not only highlight disclosures about going concern risks when there exists significant doubts about a company’s survival. The FRC implemented the Sharman Panel recommendations as part of its 2014 update to the UK Corporate Governance Code and also published supporting Guidance on Risk Management, Internal Control and Related Financial and Business Reporting in September 2014.  At the same time, the FRC indicated that it would issue separate, simplified guidance for non-Code companies.

The Exposure Draft contains draft guidance for those companies that do not apply the UK Corporate Governance Code.  Some companies apply the Code because they are required to do so (e.g. premium listed companies) and others do so voluntarily (e.g. some companies with a standard listing and some AIM companies). The Exposure Draft addresses all other companies excluding small and micro companies. This spans a range including large and medium-sized privately-owned businesses and most AIM companies.

The draft guidance is not mandatory for non-Code companies but is intended to act as a practical aid and a simplified version of the going concern elements of the 2014 update to the Corporate Governance Code. Notably there is no requirement for non-Code companies to produce a longer-term viability statement, required by Code companies for periods commencing on or after 1 October 2014. The draft guidance replaces the FRC’s Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009 and An Update for Directors of Companies that Adopt the Financial Reporting Standard for Smaller Entities (FRSSE): Going Concern and Financial Reporting (links to FRC website).  It incorporates recent developments in the corporate reporting framework, most notably the introduction of New UK GAAP and the strategic report. 

Small and micro companies have been scoped out of the guidance but may find parts of it to be a useful in making their going concern assessment.

The draft guidance includes:

• An overview of existing legal requirements for disclosures in the strategic report on principal risks and uncertainties and of existing requirements of accounting standards for disclosure in the financial statements on the going concern basis of accounting.
• Guidance to aid non-Code company directors in making their assessment as to whether the use of the going concern basis of accounting is appropriate when preparing the financial statements, including consideration of material uncertainties and the assessment period chosen.
• The reporting requirements for the various scenarios that may result from the going concern assessment. The draft guidance clarifies that there are no specific disclosure requirements for financial statements when the going concern basis is appropriate and when there are no material uncertainties (this differs from the 2009 Guidance which encouraged disclosure of any uncertainties).
• Factors that may be relevant when considering threats to solvency and liquidity as part of the directors’ assessment of risks and uncertainties faced by the company bearing in mind that the strategic report must include a description of principal risks and uncertainties and how these are managed and mitigated.

The press release and Exposure Draft: Guidance on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risks – Guidance for companies that do not apply the UK Corporate Governance Code are available on the FRC website.

Our Need to Know publication is available here.

Sue Harris and Ashok Gupta joined the FRC’s Codes and Standards Committee (C&S) on 1 October 2015. Sue Harris is also a member of the FRC’s Audit and Assurance Council, while Ashok Gupta currently serves on the Actuarial Council. They will continue on the Councils alongside their new positions on the C&S Committee.

Keith Barton and Allister Wilson stepped down from the C&S Committee on 30 September 2015, and respectively from the Actuarial Council and from the Audit and Assurance Council.

Dominic Veney and Martin Burke joined the FRC’s Actuarial Council on 21 September. Stephen Oxley joined the Audit and Assurance Council on 1 October 2015 and Bryan Foss will join from 14 October 2015.

The press release can be found on the FRC website.

Check out the summaries for the forthcoming discussions on leases, pollutant pricing mechanisms, issues raised at the September ITG meeting, the disclosure initiative, financial instruments with characteristics of equity, insurance contracts, insurance and IFRS 9, IFRS implementation issues, goodwill and impairment and definition of a business. We have added them to our meeting note page and will supplement them with our popular meeting notes after the meeting.