Summary of the October 2015 ITCG meeting

20 Nov, 2015

The IASB has published notes to the IFRS Taxonomy Consultative Group (ITCG) meeting held on 27 October 2015.

The ITCG discussed:

For more information, see the meeting notes on the IASB website.

Charity Commission findings into charities that report high governance costs

19 Nov, 2015

The Charity Commission has published the findings of a review carried out into charities that reported an “unusually high proportion” of their expenditure on governance costs. The review suggests that many charities may be incorrectly overstating their governance costs in their public annual returns or their accounts.

The Charity Commission performed a review of this area as normally, governance costs make up only a small part of a charity’s expenditure compared with the amount spent on charitable activities and the costs of raising funds.

The Charity Commission reviewed part B of the annual returns of charities to identify those that had reported both governance costs of more than 20 per-cent of their total expenditure and also reported total expenditure that was greater than 80 per-cent of their income in their most recently filed accounts – this consisted only of those larger charities with incomes over £500,000.   

A sample of 76 charities was reviewed to determine whether the charity’s trustees’ annual report and accounts provided a reasonable explanation for the high level of governance costs.

Findings indicated:

  • Only 4 per-cent of charities included a “reasonable” explanation for their high level of governance costs within their trustees’ annual report
  • 9 per-cent of charities in the sample did not have an unusually high level of governance costs but had completed their annual return incorrectly.  These findings mirror those of a previous charity commission review that found errors in annual returns with respect to the classification of charitable expenditure.
  • A “vast majority” of charities had allocated costs to governance costs that should have been allocated to other categories of expenditure.  The most common error was to equate governance costs with general management and administration costs.  A number of costs such as staff, office, depreciation and support costs should have been allocated to other categories of expenditure.

The Charity Commission comments that charities in the sample “appeared to be either not fully aware of the SORP’s requirements for reporting their expenditure in the SOFA or did not understand the difference between support costs and governance costs”.

The Charity Commission highlights that the findings “emphasise the importance of trustees having a good understanding of their charity’s activities and how these are reported in their annual reports, accounts and annual returns.  In particular, in emphasises the need for charities to understand their costs and how those costs relate to the activities that they are carrying out to achieve their objectives”.

 The press release and full findings are available on the Charity Commission website.

EFRAG to hold a Board meeting in November 2015

19 Nov, 2015

The European Financial Reporting Advisory Group (EFRAG) will hold a Board meeting on 24 November 2015 in Brussels.

An agenda with supporting papers and details on how to register for the public meeting can be found on the EFRAG website.

IASB publishes proposals for amendments under its annual improvements project (cycle 2014-2016)

19 Nov, 2015

The International Accounting Standards Board (IASB) has published an exposure draft 'Annual Improvements to IFRSs 2014–2016 Cycle'. It contains proposed amendments to three International Financial Reporting Standards (IFRSs) as result of the IASB's annual improvements project. Comments are requested by 17 February 2016.

The IASB uses the annual improvements process to make necessary, but non-urgent, amendments to IFRSs that will not be included as part of another major project.

The ED proposes the following amendments:

IFRS Subject of amendment

IFRS 1 First-time Adoption of International Financial
Reporting Standards

To delete the short-term exemptions in paragraphs E3–E7 of IFRS 1, because they have now served their intended purpose

IFRS 12 Disclosure of Interests in Other Entities

To clarify the scope of the standard by specifying that the disclosure requirements in the standard, except for those in paragraphs B10–B16, apply to an entity’s interests listed in paragraph 5 that are classified as held for sale, as held for distribution or as discontinued operations in accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations

IAS 28 Investments in Associates and Joint Ventures

To clarify that the election to measure at fair value through profit or loss an investment in an associate or a joint venture that is held by an entity that is a venture capital organisation, or other qualifying entity, is available for each investment in an associate or joint venture on an investment-by-investment basis, upon initial recognition

ED/2015/10 Annual Improvements to IFRSs 2014–2016 Cycle contains no proposed effective dates for any of the proposed amendments. The intention is to decide on these after the exposure period.

Please click for the following additional information:

IASB proposes amendments to IAS 40 on transfers of investment property

19 Nov, 2015

The International Accounting Standards Board (IASB) has published an Exposure Draft (ED) of proposed amendments to IAS 40 'Investment Property'. The amendments address transfers of investment property. Comments are requested by 18 March 2016.



The IFRS Interpretations Committee received a request for clarification of the application of paragraph 57 of IAS 40 Investment Property, which provides guidance on transfers to, or from, investment properties. More specifically, the question was whether a property under construction or development that was previously classified as inventory could be transferred to investment property when there was an evident change in use.

The Interpretations Committee referred the matter to the IASB, and at its April 2015 meeting, the IASB tentatively agreed to amend the paragraph to reinforce the principle for transfers into, or out of, investment property in IAS 40 to specify that such a transfer should only be made when there has been a change in use of the property.


Suggested changes

The amendments proposed in ED/2015/9 Transfers of Investment Property (Proposed amendment to IAS 40) are:

  • Paragraph 57 will be amended to state that an entity shall transfer a property to, or from, investment property when, and only when, there is evidence of a change in use. The change of use shall consist of the property meeting, or ceasing to meet, the definition of investment property.
  • The list of examples of evidence in paragraph 57(a) – (d) will be presented as a non-exhaustive list instead of an exhaustive list.


Effective date and transition requirements

The ED does not contain a proposed effective date. However, the ED proposes that the amendments would be applied retrospectively and that early application should be permitted.


Additional information

Please click for:

ESMA believes Conceptual Framework to be incomplete without guidance on liability and equity

18 Nov, 2015

The European Securities and Markets Authority (ESMA) has commented on the IASB's exposure drafts ED/2015/3 'Conceptual Framework for Financial Reporting' and ED/2015/4 'Updating References to the Conceptual Framework'.

In its comment letter, ESMA supports the IASB's initiative and agrees with most proposals in the EDs. However, ESMA "regrets that the ED does not provide guidance on some essential issues in financial reporting which leaves the Conceptual Framework incomplete". The two point ESMA particularly stresses are:

  • According to ESMA, the ED does not include sufficient guidance on distinguishing between liability and equity. ESMA agrees with the view that the definition of a liability should be used to distinguish between liability and equity, but is concerned that the IASB has not sufficiently considered the issue yet. ESMA is also worried that dealing with this matter in a separate project might lead to subsequent changes to the definition of a liability.
  • ESMA is concerned that the ED does not attempt to define performance. ESMA concludes that as a result the Conceptual Framework will include neither a clear basis for distinguishing between items that should be recognised in profit or loss and items that should be recognised in other comprehensive income (DCI), nor a principle establishing whether and when recycling is appropriate.

Please click to access the full comment letter on the ESMA website.

EFRAG issues feedback statement on the IASB's exposure draft on the effective date of amendments to IFRS 10 and IAS 28

18 Nov, 2015

The European Financial Reporting Advisory Group (EFRAG) has published its feedback statement summarising the main comments received from constituents invited to respond to its draft comment letter in relation to the International Accounting Standards Board’s (IASB’s) Exposure Draft ED/2015/7 'Effective Date of Amendments to IFRS 10 and IAS 28'.

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.
EFRAG published its draft comment letter in September 2015 and its final comment letter in October 2015.

The feedback statement summarises the main comments received by EFRAG in relation to the draft comment letter and explains how those comments were considered by EFRAG in reaching its final position on the IASB ED set out in their final comment letter to the IASB.

The press release and full feedback statement are available on the EFRAG website.

SEC Commissioner believes it's time to take step forward

18 Nov, 2015

In a speech at the 34th Annual Current Financial Reporting Issues Conference in New York, SEC Commissioner Michael S. Piwowar commented on the potential alternative of allowing domestic issuers in the U.S. to provide IFRS-based information as a supplement to U.S. GAAP financial statements without requiring reconciliation.

The alternative had been introduced by Jim Schnurr, Chief Accountant of the US Securities and Exchange Commission (SEC), at a financial reporting conference in early December 2014. At the annual American Institute of Certified Public Accountants (AICPA) Conference on Current SEC and PCAOB Developments a week later, Mr Schnurr and Julie Erhardt, Deputy Chief Accountant of the SEC, further discussed this possible option. Since then, little has been heard of the proposal or any other proposal or the progress regarding the rule-making process.

In his speech, Commissioner Piwowar has now pointed out an another benefit the proposal might have in addition not taking away anything from investors who currently use and like U.S. GAAP and lowering the cost of providing IFRS financial reporting for companies want to provide IFRS information:

It is difficult to gauge investor demand for financial reporting under IFRS by U.S. domestic issuers. How does one predict investor demand for IFRS reporting when it is largely not available in the domestic context? For instance, twenty years ago, it was difficult to predict the demand for “smart phones” when the product was not available to the general public. […] Our chief accountant has raised an interesting and incremental approach that should provide further insight as to whether there is investor demand for IFRS reporting. His idea – to allow, but not mandate, IFRS financial reporting as a supplement without reconciliation to GAAP – is worthy of serious consideration. […] It would provide useful data on investor demand for us to analyze. Of course, the specific details would still need to be worked out, but I think – eleven months after the idea was first broached – that the Commission should take this additional step forward.

Please click to access the full text of the speech on the SEC website.

ACCA event on the future of financial reporting

17 Nov, 2015

On 24–26 November 2015, the Association of Chartered Certified Accountants (ACCA) will host a virtual event on “Accounting for the Future.” The event will focus on what finance professional can expect to change between now and 2020.

The event is broken into three main themes: (1) employability and the economy, (2) corporate perspectives, and (3) practice and the public sector. Participation to the virtual event is free, but registration is required.

For more information, see the press release on the ACCA’s website.

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