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FRC responds to IASB and IFRS Foundation consultations

01 Dec 2015

The Financial Reporting Council (FRC) has responded to the IASB's Request for Views on its 2015 Agenda Consultation. Although they have responded to the consultation, the FRC believes that the Trustees of the IFRS Foundation should agree a strategic direction for standard-setting before the IASB consults on an agenda. They have expressed this view to the IFRSF in response to their Review of Structure and Effectiveness.

In responding to the IASB's 2015 Agenda Consultation, the FRC makes the following key points.

  • Once the revised IFRS Conceptual Framework is issued, they strongly urge the IASB to continue to update specific areas of the Framework.
  • They support the IASB's Disclosure Initiative and consider that the main focus of the project should be on the upcoming Discussion Paper on Principles of Disclosure.
  • In terms of research projects, they believe that priority should be given to performance reporting research as part of the Primary financial sstatements project.
  • In the context of maintenance and implementation projects, they note that a large number of changes can be burdensome for preparers to implement and users to understand. They recommend that the IASB should consider this burden when assessing the merits of proposed amendments.

In response to the IFRS Foundation's Review of Structure and Effectiveness, the FRC makes the following broad observations.

  • They agree that the IFRS Foundations's current three-tier governance structure remains appropriate, although in their view it is important for the composition of the Monitoring Board to change to reflect both the balance of global financial activity and the adoption of (or commitment to adopt) IFRSs.
  • They consider that the Trustees should provide more direct oversight of both the strategic direction of the IASB's standard setting and its output. In particular, they should work to address the perception that the IASB's standards are too theoretically-based and not focussed on commercial reality by increasing their scrutiny of cost-benefit analyses.
  • They do not agree with the proposed increase in the number of "at large" Trustees, believing that the geographic distribution of Trustees should focus, though not exclusively, on those jurisdictions that apply IFRS or are committed to their adoption.
  • They support the goal of the IFRS Foundation being publicly funded and believe it is a positive step for the Foundation to be working to increase the number of accounting firms contributing to its funding.

The full response to the IASB consultation and the full response to the IFRS Foundation consultation can be found on the FRC website.

EFRAG explains its conclusion that IFRS 9 is not contrary to 'true and fair'

01 Dec 2015

Upon the request of the European Commission, the European Financial Reporting Advisory Group (EFRAG) has further explained how it has reached the conclusion contained in its endorsement advice that IFRS 9 is not contrary to the true and fair principle.

The letter does not provide additional elements of assessment on the subject but brings together in one place the elements, contained in the appendices to EFRAG’s endorsement advice on IFRS 9 Financial Instruments, that are relevant for the assessment of 'true and fair'.

Please click to access the letter with the explanations on the EFRAG website.

IFRS Foundation publishes first update to IFRS Taxonomy 2015

01 Dec 2015

The IFRS Foundation has published 'Update 1 to the IFRS Taxonomy 2015'.

The taxonomy updates contain additional taxonomy concepts that reflect new IFRSs and improvements to IFRSs, technical updates, and corrections.

For more information and access to the update, see the press release on the IASB’s website.

We comment on the Trustees’ review of structure and effectiveness

01 Dec 2015

We have responded to the IFRS Foundation Trustees' Request for Views document with proposals for further enhancing the structure and effectiveness of the organisation.

On the question of the IASB's remit, we also follow the cost argument and state that while not-for-profit organisations are within the IASB’s ‘private sector’ scope, resources at the IASB are scarce and should be concentrated on work in the for-profit sector. However, we would support the IFRS Foundation Trustees assuming oversight (not standard-setting) of activities in the public sector as many public sector entities are active in capital markets.

We disagree with the proposal to reduce the size of the IASB to 13 members as the IASB needs sufficient technical and standard-setting experience to have the ability to challenge the staff (and constituents) effectively. As it is, we already have a serious concern about the quality control over due process documents and issued IFRSs.

Finally, we think that what is missing from the consultation is a sense of context, how the IFRS Foundation Trustees see their current priorities in relation to a wider and more long-term view of financial and corporate reporting generally, and how and whether its structure and processes support that view.

Please click to access the full comment letter.

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