EFRAG draft comment letter on DI/2015/1

17 Nov, 2015

The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment letter on IFRS Interpretations Committee exposure draft DI/2015/1 'Uncertainty over Income Tax Treatments'.

In its draft comment letter, EFRAG agrees the guidance proposed in the draft in­ter­pre­ta­tion will help reduce the inconsistencies in the accounting for uncertain income tax treatments when determining taxable profits, tax bases, unused tax losses, and tax rates. However, the EFRAG believes that the proposal may create an inconsistency between uncertainties in income tax treatments and those related to other types of tax or similar positions.

Comments are requested by 13 January 2016. For more information, see the press release and the draft comment letter on the EFRAG website.

Recent sustainability reporting developments

17 Nov, 2015

A summary of recent developments at the WBCSD/CDSB, the United Nations, and the GRI.

The World Business Council for Sustainable Development (WBCSD) and the Climate Disclosure Standards Board (CDSB) have joined forces to create The Reporting Exchange, a freely available, multi-lingual, global sustainability reporting knowledge platform. The platform will be available in open beta format at the end of 2016 to enable public users to share their feedback. The platform is planned for global release in mid-2017. Please click to access the press release on the WBCSD website.

The fourth United Nations forum on business and human rights is currently taking place in Geneva. Yesterday saw a session on "Promoting the Guiding Principles on Business and Human Rights in global governance frameworks: Recent developments and opportunities for further alignment" with speakers from a wide range of institutions. A recording of the session is available on the UN website.

During the session, the Global Reporting Initiative (GRI) launched its latest linkage document that highlights the connections between the GRI G4 Reporting Guidelines and key concepts of the United Nations Guiding Principles on Business and Human Rights. For more information, see the press release and Linking G4 and the UN Guiding Principles on the GRI website.

Investment Association publishes revised Principles of Remuneration

16 Nov, 2015

The Investment Association (IA) has published its revised Principles of Remuneration.

This remuneration guidance sets out its members’ views on the role of shareholders and directors in relation to remuneration and the manner in which remuneration should be determined and structured.  The Principles have not been significantly amended and include only one change in relation to long-term incentives.

Additionally the IA has issued a letter to Remuneration Committee chairmen highlighting key aspects of the Principles that its members have asked to be re-emphasised to companies.  These include:

  • Salary increases – Investors continue to be concerned by the level and frequency of salary increases.  The letter indicates that salary increases will continue to be an area of scrutiny for members and they will expect to see salary increases being supported with “clear and explicit” rationale; especially those above inflation or in excess of increases provided to the general workforce.
  • Bonus disclosure - Shareholders require the retrospective disclosure of bonus targets so that they can ensure that there is an appropriate link between pay and performance.
  • Pensions – There is a concern with the size of pension increases and the complex pension arrangements for Executive Directors.  It is expected that pension arrangements should be aligned with those in the rest of the company. 

The revised Principles of Remuneration and letter to Remuneration Committee chairmen are available from the IVIS website.

*Update 05/07/2016 - a revised Principles of Remuneration was published in July 2016.  This is available on the IVIS website*

DWP consults on changes for pension schemes

16 Nov, 2015

The Department for Work and Pensions (DWP) has issued a consultation on a number of changes for pension schemes to take effect from April 2016.

The consultation includes draft amending regulations which make changes to the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996 (the “AA regulations”).

The changes propose to:

  • delete most of the detailed investment disclosure information set out in the AA regulations and require the auditor to provide a statement that the accounts have been prepared in accordance with Financial Reporting Standard 102 (FRS 102) and the pensions Statement of Recommended Practice (SORP), noting any material departures from them; and
  • exempt multi-employer schemes with at least 20 participating employers from the requirement to obtain a statement from the scheme auditors on whether, in their opinion, contributions have been paid in accordance with the scheme’s schedule.

The consultation also seeks views on amendments to the governance requirements for occupational pension schemes providing money purchase benefits.  New governance requirements were introduced in April 2015 by way of the Occupational Pension Schemes (Charges and Governance) Regulations 2015 (“the governance regulations”).  These regulations inserted provisions into the Occupational Pension Schemes (Scheme Administration) Regulations 1996 and the Occupational Pension Schemes (Investment) Regulations 2005.  The governance regulations also introduced additional governance requirements for relevant multi-employer schemes.  However, since the regulations have come into force the DWP has received representations from industry representatives and legal firms on how the governance provisions for multi-employer schemes work in practice and the implications for schemes. 

The consultation seeks views on a set of draft regulations which will address these concerns, and also include some tidying-up provisions to ensure that these governance requirements work as intended.

Additionally views are sought on:

  • How information about investments in pension schemes is, and can be, made available to beneficiaries.
  • How to reduce regulatory burdens on occupational pension schemes.

Comments are requested until 9 December 2015.

The press release and full consultation are available on the DWP website.

Sir Winfried Bischoff speaks at the ICAEW’s Audit Quality Forum

16 Nov, 2015

Sir Winfried Bischoff, Chairman of the Financial Reporting Council (FRC), spoke about the importance of company culture at the Audit Quality Forum event: Whose culture is it anyway? on 12 November 2015.

Sir Winfried highlighted:

Society wants company behaviour to improve, and culture to change.  It expects a company’s culture to instil confidence among its investors and other stakeholders and to deliver the company’s objectives in a way that enhances long term value. 

He indicated that culture was “very high” on the FRC agenda and that “addressing cultural issues and embarking on cultural change in a company is not an easy task”.  Sir Winfried Bischoff indicated that good corporate governance was essential to a strong company culture and that poor governance and cultural weaknesses were prevalent among recent corporate failings.  He highlighted the FRC project on corporate culture and behaviour which aims to gather practical insight into corporate culture and the role of boards; to understand how boards can shape, embed and assess culture; and to identify and promote best practice.

Sir Winfried Bischoff commented that a positive culture “can improve a company’s prospects and staff morale” and highlighted the important role that audit can play in enhancing and supporting the development of company culture. 

The full text of the speech can be obtained from the FRC's website.

IASB Chairman speaks on ten years of IFRS in Italy and the European Union

13 Nov, 2015

IASB Chairman Hans Hoogervorst discussed the impact of 10 years of IFRS in Italy and throughout the European Union during a speech in Milan.

In his speech, Mr Hoogervorst commented on what he views as the main lessons learned from IFRS in Europe in the past decade. These three lesson are:

  1. The use of IFRS has improved financial reporting and increased transparency throughout the European Union.
  2. The co-operative relationship the IASB has develop with Europe has increased level of outreach and stakeholder participation by national standard-setters and others.
  3. The decade-long work with Europe shows other jurisdictions that adopting a single set of high quality standards can be achieved globally.

Full transcript of his speech is available on the IASB’s website.

IFAC study links accounting to prosperity and better living standards

13 Nov, 2015

The International Federation of Accountants (IFAC) has published a study, conducted by the Centre for Economics and Business Research on IFAC's behalf, that finds that regions of the world with a higher share of accountants in total employment have a higher per capita GDP.

The study reveals that the accounting profession is strongly linked to national economic growth and improved living standards and is estimated to contribute $575 billion annually to the global economy. IFAC concludes:

Professional accountants contribute to better information, reporting, measurement and decision making. When nations have a robust system to track the flow of money in government, within businesses, and between organizations, transparency and accountability are improved, organizations are strengthened, and economies are enhanced.

Please click to access the study Nexus 2: The Accountancy Profession – A Global Value Add on the IFAC website.

EFRAG supports conclusions in DI/2015/2

13 Nov, 2015

The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment letter on IFRS Interpretations Committee exposure draft DI/2015/2 'Foreign Currency Transactions and Advance Consideration'.

In its draft comment letter, EFRAG welcomes the guidance proposed in the draft interpretation, as it will help reduce the identified diversity in practice. EFRAG also agrees with the proposed consensus and believes it is consistent with the underlying principles in IAS 21 The Effects of Changes in Foreign Exchange Rates.

Please click to access the draft comment letter on the EFRAG website. Comments are requested by 13 January 2016.

EFRAG TEG conference call November 2015

12 Nov, 2015

The European Financial Reporting Advisory Group (EFRAG) will hold a TEG conference call on 19 November 2015.

An agenda and details on how to register for the call can be found on the EFRAG website.

EFRAG publishes final comment letter on clarifications to IFRS 15

12 Nov, 2015

The European Financial Reporting Advisory Group (EFRAG) has issued its final comment letter on the IASB exposure draft ED/2015/6 'Clarifications to IFRS 15'.

EFRAG states that, whilst supporting the convergence of IFRS 15 with the FASB's standard Revenue from Contracts with Customers, EFRAG agrees with the IASB’s decision not to clarify certain issues where the FASB has decided to provide further guidance in the Standard. EFRAG believes that, at this stage, before the implementation of IFRS 15, the IASB should only clarify those issues that are strictly necessary for a proper understanding of IFRS 15.

The press release and final comment letter are available on the EFRAG website.

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