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Wednesday, 18 November 2015

• Fair value measurement.
• Post-employment benefits.
• Goodwill and impairment — Identification and measurement of intangible assets acquired in a business combination.
• Insurance contracts — Comparison of the general model and the variable fee approach.

Thursday, 19 November 2015

• Research project share-based payment — Global trends in pensions, potential models that might address the issue of contribution-based promises and other hybrid plans, and the potential impact of the Agenda Consultation and other IASB projects.
• IFRS implementation issues — IFRIC update.

The pre­lim­i­nary and un­of­fi­cial notes taken by Deloitte observers for the entire meeting are also available.

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.

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.

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.

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.