Season's Greetings

24 Dec, 2015

We wish all our readers a peaceful holiday and all the best for the New Year.

We look forward to seeing you again after the holidays and to continue to be your preferred accounting, reporting and corporate governance website in 2016.

EFRAG draft comment letter on proposed amendments to address concerns about the different effective dates of IFRS 9 and the new insurance contracts standard

24 Dec, 2015

The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment letter on the IASB exposure draft ED/2015/11 'Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance Contracts' (Proposed amendments to IFRS 4)'.

EFRAG welcomes the IASB proposals. EFRAG believes that the temporary exemption from applying IFRS 9 addresses all the concerns relating to the misalignment of IFRS 9 and the new insurance contracts standard, while the overlay approach would only address the accounting mismatches. Nevertheless, EFRAG supports both approaches as complementary solutions.

While EFRAG believes the temporary exemption to address all concerns, EFRAG is also convinced that the exemption should be available to all entities that issue material insurance contracts within the scope of IFRS 4 in order to avoid an uneven playing field in the insurance sector. As the exemption should not capture material non-insurance activities, EFRAG is of the opinion that it should be available both at and below the reporting entity level. In order to achieve this, EFRAG suggests to base the exemption on one of the following approaches:

  • A widened ‘predominant activity’ criterion which is determined on a basis that is not limited to the issuance of contracts within the scope of IFRS 4. However, it would be set at a higher threshold than proposed by the IASB; or
  • A ‘regulated entity’ criterion which considers definitions from regulatory sources.

Finally, EFRAG agrees with the expiry date set for the temporary exemption from applying IFRS 9.

Comments on EFRAG's draft comment letter are requested by 20 January 2016. For more information, see the press release and the draft comment letter on the EFRAG website.

European Union formally adopts amendments to IAS 27

24 Dec, 2015

The European Union has published a Commission Regulation endorsing the August 2014 amendments to IAS 27 that reinstate the equity method as an accounting option for investments in subsidiaries, joint ventures and associates in an entity's separate financial statements.

Commission Regulation (EC) No 2015/2441 of 18 December 2015 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council published in the Official Journal on 23 December 2015 adopts Equity Method in Separate Financial Statements (Amendments to IAS 27) issued by the IASB in August 2014. The EU effective date is the same as the IASB's effective date (annual periods beginning on or after 1 January 2016 with earlier appication permitted).

As a result of the EU's adoption, the EFRAG has updated its endorsement status report.

FRC updates taxonomies to reflect changes in UK GAAP and company law

23 Dec, 2015

The Financial Reporting Council (FRC) has published additional tags to the XBRL electronic tagging conventions (taxonomies) to reflect recent changes in UK GAAP and company law.

The taxonomies, which were last published in September 2014, enable accounts to be filed electronically and help users of annual reports extract and analyse data from them.

The 2014 suite of taxonomies has been updated with additional tags to enable:

  • Micro preparers to tag using only those parts of the Financial Reporting Standard (FRS) 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland taxonomy which are relevant
  • Small preparers using FRS102 to do likewise
  • FRS 101 Reduced Disclosure Framework preparers using the International Financial Reporting Standard (IFRS) formats to tag using the extant IFRS taxonomy
  • The introduction of an Abridged Accounts indicator

A number of new tags have also been added for the reporting of subsidiaries and an additional tag has been added to indicate companies which have more than 200 subsidiaries.

HMRC and companies House will be updating their guidance to incorporate the amended taxonomies.

*Update 8 January 2016 - the amended HMRC guidance is now available on the HMRC* website.

The press release (including a link to the amended taxonomies) is available on the FRC website.

Summary of the CMAC November 2015 meeting

22 Dec, 2015

The IASB has released a summary of the Capital Markets Advisory Committee (CMAC) meeting which was held in London on 6 November 2015.

The topics discussed at the meeting included:

  • 2015 agenda consultation
  • Goodwill and impairment
  • Trustees’ review of structure and effectiveness
  • Conceptual framework: measurement
  • IFRS 9 Financial Instruments: Education session on new impairment requirements
  • Disclosure initiative project: materiality practice statement

The next CMAC meeting will take place on 25 February 2016.

The full meeting summary is available on the IASB's website.

FRC draft plan and budget highlights key areas of focus for 2016/2017

22 Dec, 2015

The Financial Reporting Council (FRC) has published its Draft Plan & Budget and Levy Proposals for 2016/17, which represents the first year of its new 2016/19 three year strategic programme.

During 2016/17 the FRC intends to focus on four key priorities:

  • Audit: establishing and making the most effective use of the FRC’s new role as the UK competent authority for audit regulation
  • Corporate governance: focusing on best practice, including through the FRC’s work on corporate culture and promoting effective engagement between boards and investors.
  • Corporate reporting: focusing on embedding recent changes, influencing the development of IFRSs and helping smaller listed and AIM companies with the quality of reporting.
  • Actuarial standards: completing an update of the framework for actuarial standards by implementing a standard to cover a broader range of actuarial work and refocusing the FRC’s specific Technical Actuarial Standards.

Key projects will include:

  • Corporate governance: to continue to promote corporate governance and corporate cultures that support the long-term success of companies. During 2016/17 the FRC will publish a report of the findings of its market-led initiative launched in 2015 in order to gather practical insight into corporate culture and the role of boards. This report will include observations, identify best practice and develop practical and market-led ‘how to’ resources. There will also be feedback published in 2016/17 on the discussion paper on ‘UK Board Succession Planning’ with the eventual aim of replacing the FRC’s Guidance on Board Effectiveness. The FRC is currently consulting on limited changes to the UK Corporate Governance Code linked to the implementation of the EU Audit Regulation and Directive (ARD).
  • Investor stewardship: to focus on effective investor engagement, including the monitoring of reporting by Stewardship Code signatories and encouraging advisers and intermediaries to help to facilitate engagement. The relevant parts of the EU Shareholders Rights Directive will also be implemented by the FRC. In addition the FRC will publish their annual assessment of the quality of engagement.
  • Corporate reporting: to follow up on the FRC’s project to improve the quality of reporting by smaller listed and UK AIM quoted companies. The FRC will continue to influence the IASB’s agenda and work on its Conceptual Framework and standards on financial instruments, leasing and insurance whilst promoting prudence and stewardship as cornerstones of the IASB’s work. In continuing to develop its ‘Clear & Concise’ initiative the FRC will assist BIS in the UK implementation of the Non-Financial Reporting Directive. The Financial Reporting Lab is also expected to deliver its report on Business Model reporting and develop its project on the Digital Future.
  • Audit and assurance: to implement the ARD with a clear delineation of responsibility between the FRC and the professional bodies. In 2016/17 the FRC will undertake thematic reviews of firms’ quality review processes, the use of data analytics on audits and firms’ root cause analysis of the findings from internal and external monitoring.
  • Actuarial work: to complete work on the new framework of Technical Actuarial Standards and to consult on whether independent oversight of the actuarial profession remains necessary and appropriate.

Priority sectors for both the Corporate Reporting Review and Audit Quality Review will be:

  • the extractive industry;
  • companies servicing extractive companies;
  • companies servicing the public sector; and
  • media businesses.

In their Audit Quality Review the FRC will pay particular attention to the quality of first year audits, revenue recognition policies, tax provisioning and the audit of IT controls. The FRC expects to review around 250 corporate reviews and 140 individual audits.

In respect of its budget, the FRC proposes an overall expenditure of £33.5m in 2016/17 compared to the £33.7m estimated spend in 2015/16. The decrease is largely due to lower than forecast expenditure on accountancy disciplinary case costs.

The consultation will be open until 12 February 2016.  The FRC will be holding an open meeting to discuss its priorities for 2016/17 on 10 February 2016.  Details can be found here.

Click for the consultation issued by the FRC (link to FRC website).

FEE believes IASB needs to take a more active role in driving the broader corporate reporting agenda

22 Dec, 2015

The Federation of European Accountants (Fédération des Experts-comptables Européens, FEE) has responded to the 'Request for Views' document the IASB published in August to launch its second agenda consultation.

Next to comments on project prioritisation, FEE suggests that the IASB takes a more active role in the broader corporate reporting agenda, including both financial and non-financial reporting, in order not to be pushed to the sidelines. FEE states:

The current focus on financial information only seems not to be sustainable over the long term as (primary) users are using other sources of information in their economic decision-making process, which might lead to a declining relevance and importance of financial statements.

FEE also links back to its October 2015 paper putting forward a new approach to corporate reporting that would see a "core" report and "more" reports.

Please click to access the comment letter on the FEE website.

ESMA publishes table showing compliance with guidelines on alternative performance measures

22 Dec, 2015

The European Securities and Markets Authority (ESMA) has published a table showing (intended) compliance with its final Guidelines on Alternative Performance Measures (APMs) for listed issuers.

The guidelines apply to issuers with securities traded on regulated markets, and persons responsible for drawing up a prospectus. They are effective from 3 July 2016. The table on the ESMA website show that 17 members states, European Territories, and EEA states already do comply with the guidelines and 15 intend to do so.

2016 IFRS 'Blue Book' now available

21 Dec, 2015

The IFRS Foundation has published '2016 IFRS Consolidated without early application' — the 'Blue Book'.

This volume contains all official pro­nounce­ments that are mandatory on 1 January 2016. It does not include IFRSs with an effective date after 1 January 2016.

The following are the main changes made since 1 January 2015:

The Blue Book sells for £72 plus shipping (academic, de­vel­op­ing country, and volume discounts apply). The pub­li­ca­tion can be purchased through the IASB web shop.

Please note that the IASB has already published editorial corrections to the Blue Book 2016 that show how to adjust the text of the book to remove those deferred September 2014 amendments to IAS 28 and IFRS 10, which are not now required for annual reporting periods beginning on 1 January 2016.

EFRAG, EFFAS, AIAF, and IASB issue summary of outreach event on profit or loss and OCI

21 Dec, 2015

The European Financial Reporting Advisory Group (EFRAG), the European Federation of Financial Analysts Societies (EFFAS), the Associazione Italiana degli Analisti e Consulenti Finanziari (AIAF), and the International Accounting Standards Board (IASB) have issued a summary report related to their joint outreach event held on 22 October 2015 related to Exposure Draft ED/2015/3 ‘Conceptual Framework for Financial Reporting’.

Specifically, members of the panel and participants of the outreach event discussed how profit or loss (P&L) could become more useful and what the role of other comprehensive income (OCI) may be. The press release on the EFRAG website offers a summary of the main observations and access to the full report.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.