The ASBJ publishes the paper as a contribution to the global debate about the recognition criteria in the Conceptual Framework. In the paper, the ASBJ analyses the need for a probability criterion. The ASBJ concludes that a robust description of such a criterion would be necessary while the use of the critrion is not always necessary. In particular, the ASBJ believes that:

• for the recognition of an asset or a liability that reflects a right or an obligation that results from a transaction, it is not necessary to apply a probability criterion;
• for the recognition of an asset or a liability that reflects a right or an obligation that results from other events, it will be necessary to apply a probability criterion.

Please click to access the discussion paper on the ASBJ website. The first paper in the series, entitled 'Is OCI Unnecessary?' was published in May 2014.

Check out the summaries for the forthcoming discussions on fair value measurement, post-employment benefits, goodwill and impairment, insurance contracts, the research project on share-based payment, and IFRS implementation issues. We have added them to our meeting note page and will supplement them with our popular meeting notes after the meeting.

Topics dis­cussed at the meeting in­cluded:

• Customer options for additional goods and services.
• Pre-production activities.
• Licenses — Specific application issues related to restrictions and renewals.
• Whether fixed-odds wagering contracts are inside or outside the scope of ASC 606.

 For more information, see Deloitte's Need to Know.

The pre­sen­ta­tion will include an overview of the ED and a question and answer session. It will start at 10:00 GMT time and will last ap­prox­i­mately 45 minutes. For more in­for­ma­tion, including how to reg­is­ter, see the IASB's website.

The year-end advice focuses on those areas that investors pay particular attention to; areas highlighted in the FRC’s report Improving the Quality of Reporting by Smaller Listed and Aim Quoted Companies, published in June 2015.  In that report, investors indicated that good quality reporting by smaller companies was of paramount importance to them; not least as the annual report if where they place most focus for their investment decisions in the absence of other sources of information in the sector such as analysts’ reports.

The year-end advice covers three areas:

Strategic Report

The FRC indicates that in preparing the strategic report a company should:

• Set out a clear narrative including:
  • a clear description of the business model and strategy;
  • the main trends and factors likely to affect the future development, performance or position of the business; and
  • provide linkage between various aspects of the annual report;
• Ensure that it only includes the principal risks and uncertainties that are material to the company, explain why these are material and not include generic risks;
• Ensure that financial and non-financial key performance indicators are consistent with other information presented within the annual report; and
• Ensure that there is a balanced and comprehensive analysis of the development and performance of the business.

The FRC cites that its Guidance on the Strategic Report, published in June 2014 sets out the requirements and illustrates best practice.

Accounting policies, significant judgements and errors

The FRC indicates that accounting policies should be “clear and specific, particularly in relation to revenue recognition and expenditure classification”.

It sets out a number of questions that preparers should consider when preparing the annual report and highlights that the Financial Reporting Lab report Accounting policies and integration of related financial information will provide practical ideas on what investors would expect to see in this area.

Cash Flow statements

The FRC highlights that the cash flow statement should not be left to the last minute and “adequate time” should be spent in considering the correct classification of cash flows between operating, investing and finance and making sure that these are consistent with the description of the business model in the strategic report.  Attention should also be given to the classification of unusual or non-recurring cash flows and also whether the cash flow statement reflects any late adjustments that have been put through.

The FRC draws attention to the technical findings of the Financial Reporting Review Panel in 2015-2016 indicating that this provides those areas that were commonly challenged.

The FRC will be writing to larger listed companies with year-end advice shortly.

The press release and the full letter are available on the FRC website.

Tuesday, 10 November 2015

• Items for continuing consideration:
  • IAS 16/IAS 38/IFRIC 12 — Variable payments for asset purchases and payments made by an operator to a grantor.
  • IFRS 9/IAS 39 — Derecognition of modified financial assets.
  • IFRS 9/IAS 28 — Is measurement of long-term interests in associates and joint ventures, including impairment, in accordance with IFRS 9, IAS 28, or both?
• Agenda decisions to finalise:
  • IAS 2 — Prepayments in long-term supply contracts.
• New issues:
  • IAS 12 — Income tax consequences of interest payments on, and issuing costs of, financial instruments that are classified as equity.

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

The changes were consulted on in March 2015 by way of a joint consultation between the FCA and HM Treasury.  The changes apply to entities with securities admitted to trading on an EEA regulated market that have the UK as their "home state" for securities regulation.

The Policy Statement covers a number of topics. The key points of accounting, auditing and governance interest are:

• relaxing the publication deadline for half-yearly reports from two months to three months after the end of the period to which it relates;
• extending the period for which an issuer must retain its annual and half-yearly reports on a website from five years to ten years;
• a requirement to notify the FCA of changes in voting rights held. The UK already goes further than the directive by requiring disclosure of positions in financial instruments that have a similar economic effect to owning shares; minor adjustments have been made to align with the TDAD; and
• an extension of the regime to allow sanctions to be applied to "the members of administrative, management or supervisory bodies of the legal entity concerned". The existing provisions of the Financial Services and Markets Act 2000 only apply to directors - this change is necessary to allow for different forms of legal entity.

The FCA has also indicated that it will issue a future consultation on the format of the ‘reports on payments to governments’ required under the TDAD for companies in the extractive or logging industries.  The FCA implemented this requirement of the TDAD early within PS15/1 in January 2015.

The new DTRs will come into force on 26 November 2015 and any changes to the current DTR regime will become effective that day.

The press release and Policy Statement is available on the FCA website.

In its endorsement advice, EFRAG committed to sending an update on the IASB's progress in addressing concerns relevant to the insurance industry. A draft letter to be send to the European Commission has now been made available on the EFRAG website. EFRAG notes that the IASB has decided to propose a deferral approach and an overlay approach, both aimed at addressing the mismatch, in December this year, but states:

The IASB is progressing options to address the issues facing the insurance industry. However, as of the date of this letter, we are not in a position to amend our recommendation that “all businesses other than those carrying out insurance activities are required to account for their financial instruments in compliance with IFRS 9 in 2018 and businesses carrying out insurance activities are permitted to do so in compliance with IFRS 9 from the same date”.

EFRAG explains that any final decisions in the project will be made at the earliest in six to nine months from now and that uncertainty exists as to whether the IASB will provide an appropriate remedy when it makes these final decisions:

EFRAG assesses, on a very preliminary basis, that the IFRS 4 amendments, if finalised on the basis of current IASB tentative decisions, would not allow EFRAG to lift the reservations included in its endorsement advice of IFRS 9.

Please click to access the draft letter on the EFRAG website. Comments are requested by 20 November 2015 as the intention is to finalise the letter during the meeting of the EFRAG Board on 24 November 2015.

The final report discusses “audit firm transparency reporting,” which is a practice “employed by audit firms to be transparent in their own reporting to investors and other stakeholders about the firm itself, notably, with respect to firm governance and elements of their system of quality control for their financial statement audits.”

According to the final report, an au­dit firm trans­parency re­port should contain in­for­ma­tion that is:

• “[C]lear, use­ful and pre­sented in suf­fi­cient de­tail to be mean­ing­ful to the dif­fer­ent groups of likely users of the re­port.”
• “[F]act-based and not po­ten­tially mis­lead­ing.”
• “[U]n­bi­ased and not ori­ented to­ward mar­ket­ing or sell­ing ser­vices.”
• “[C]on­cise, spe­cific to the firm and avoids the use of boil­er­plate lan­guage.”
• “[T]imely, ac­cu­rate and com­plete.”
• “[B]al­anced in com­mu­ni­cat­ing the au­dit firm’s out­put mea­sures of au­dit qual­ity in ad­di­tion to any in­put mea­sures.”
• “[S]uf­fi­cient in terms of ex­plain­ing the lim­i­ta­tions of the in­di­ca­tors of au­dit qual­ity, in­clud­ing that the in­di­ca­tors may not be com­pa­ra­ble across au­dit firms.”

For more information, see the press release and final report on IOSCO’s Web site.