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.

The Financial Conduct Authority (FCA) regulates entities that hold client assets and rules around their safeguarding are contained in the FCA’s Client Assets Sourcebook (CASS). The CASS requires those firms that hold client assets to hold them separately from their own to minimise the risks of loss to their clients in the event of insolvency.

Where an entity holds client assets the FCA’s Supervisory Manual (SUP rules) require the CASS auditor, annually, to provide a Reasonable Assurance Client Assets Report and to report, among other things, on whether the entity has adequate systems in place to safeguard their client assets. Where an investment business claims not to hold client assets, a Limited Assurance Report is required.

The Standard Providing Assurance on Client Assets to the Financial Conduct Authority aims to improve the quality of CASS audits and other CASS assurance engagements and to support auditors when undertaking these type of engagements. It is also intended to support the effective training of CASS auditors by both the accounting bodies and other training organisations in line with the FCA’s recent strengthening of its client asset regime.

The new Standard establishes requirements in respect to:

• The process for forming, and the expression of, reasonable assurance opinions; 
• The process for forming, and the expression of, limited assurance opinions;
• The provision of reasonable assurance to the FCA with respect to a firm’s proposed adoption of the alternative approach to client money segregation and a non-standard method of client money reconciliation; and
• CASS auditor confirmations in respect of non-statutory client money trusts.

The new Standard will be effective for reports to the FCA with respect to client assets covering periods commencing on or after 1 January 2016, with early adoption permitted.

The press release and Standard are available on the FRC website.

The finalised perliminary views only differ slightly from the position published in July. These changes concern the position on stewardship and on users of general purpose financial statements. EFRAG has published a document explaning the changed position, which can be downloaded from the EFRAG website.

Given it took EFRAG four months to finilase its preliminary views after publishing the first consultation document, the deadline for submitting comments on EFRAG's final preliminary position is now very short. Comments are requested by 18 November 2015. Please click for the press release on the EFRAG website.

The most sig­nif­i­cant items on the agenda include:

• Insurance contracts — Similarities and differences between the general measurement model and the variable fee approach for insurance contracts as well as three narrow issues arising from the variable fee approach will be considered.
• Goodwill and impairment — Identification and measurement of intangible assets in a business combination will be discussed.

In addition, the IASB will discuss fair value measurements, post-employment benefits, IFRS implementation issues, and the research project on share-based payment.

The full agenda for the meeting can be found here. We will post any updates to the agenda, as well as our Deloitte observer notes from the meeting, on this page as they become available.

Speakers from the IASB will present on the agenda consultation and on the conceptual framework project; speakers from ICAS will then give their views on these projects and will present the results of new research, jointly funded by ICAS and EFRAG, on professional investors’ views of the decision-usefulness of financial reporting.

Topics to be discussed include:

• Has the IASB correctly identified the right issues for the future?
• Is there anything missing from the agenda?
• Have the IASB struck the right balance between fundamental improvements to IFRS versus fine tuning the standards to keep them fit for purpose?
• Can financial reporting be considered in isolation from wider corporate reporting initiatives?
• How will the revised Conceptual Framework drive changes in future?
• How can research help to shape the future of financial reporting?

Please click for more information and registration on the ICAS website.

The IASB issued ED/2015/5 Remeasurement on a Plan Amendment, Curtailment or Settlement/Availability of a Refund from a Defined Benefit Plan (Proposed amendments to IAS 19 and IFRIC 14) on 18 June 2015.  This exposure draft proposes amending these pronouncements to clarify:

In particular, the Board will be discussion the issue of the application of IFRS 9 by insurance companies and the IASB's proposed deferral of the Standard's effective date for such entities.

The call will take place from 16.30 to 18.00 Central European Time and will be open for duly registered observers.

Further details about the event, including how to register, can be found on the EFRAG website.