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FRC to hold a consultation event on implementation of the EU Audit Directive and Regulation

26 Jan 2015

The Financial Reporting Council (FRC) is to hold a consultation event on 11 March 2015 in London to discuss its plans for implementation of the EU Audit Direct and Regulation in its audit and ethical standards.

In May 2014, the European Commission published a new Audit Directive and Regulation and in December 2014 the FRC published a consultation - Consultation: Auditing and ethical standards – Implementation of the EU Audit Directive and Audit Regulation.  The FRC consultation, in conjunction with a Department for Business Innovation & Skills’ (BIS) discussion paper, also published in December 2014, proposes change in the UK to implement the EU Audit Directive and Regulation as well as other changes that may be made to enhance confidence and strengthen the audit regime.

The FRC invites all stakeholders to attend the event and give input on its plans.

Further details as well as registration details are available on the FRC website.

January 2015 IASB meeting notes — Part 1

23 Jan 2015

The International Accounting Standards Board (IASB) met at its offices in London on 20-22 January 2015, some of it a joint meeting with the FASB. We have posted the Deloitte observer notes from the sessions on leases, conceptual framework, IFRS for SMEs, and insurance contracts. Additional notes will be posted in due course.

Click through for direct access to the notes:

Tuesday, 20 January 2015

Wednesday, 21 January 2015

Thursday, 22 January 2015

You can also access the preliminary and unofficial notes taken by Deloitte observers for the entire meeting.

IPSASB aligns IPSASs with recent IASB pronouncements

23 Jan 2015

The International Public Sector Accounting Standards Board (IPSASB) has finalised 'Improvements to IPSASs 2014'. The changes incorporate relevant amendments made by the International Accounting Standards Board (IASB) in the 2009-2011 and 2010-2012 cycles of annual improvements, and the changes made by 'Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38)'.

Improvements to IPSASs 2014 makes amendments made to four International Public Sector Accounting Standards (IPSASs):

  • IPSAS 1 Presentation of Financial Statements - clarification of comparative information requirements;
  • IPSAS 17 Property, Plant and Equipment - classification of servicing equipment, clarification of the revaluation methodology, acceptable methods of depreciating assets;
  • IPSAS 28 Financial Instruments: Presentation - tax effects of distributions to holders of equity instruments; and
  • IPSAS 31 Intangible Assets - clarification of the revaluation methodology, clarification of acceptable methods of amortising assets.

All amendments are effective for annual financial statements covering periods beginning on or after 1 January 1 2015. Please click to access the finalised amendments on the IPSASB website.

FRC comment letter on the IASB's Discussion Paper on rate regulation

22 Jan 2015

The Financial Reporting Council (FRC) has published a comment letter on the IASB’s Discussion Paper (DP) 2014/2 Reporting the Financial Effects of Rate Regulation. The aim of the discussion paper was to solicit feedback from constituents as to whether, and under which circumstances, financial effects arising from rate regulation should be accommodated in financial reporting.

The FRC “supports” the IASB’s work on this project, highlighting that it is a “significant issue” for entities with rate-regulated activities, many of whom consider that it is not possible, at present, to reflect the underlying economic reality of their rate-regulated activities in their IFRS financial statements.

The FRC also indicate that the IASB should not be solely focusing on a generic type of rate regulation called 'defined rate regulation' but “should comprehensively address the accounting for rate-regulated activities”.  The FRC comments:

Instead, we consider that the project should focus on identifying the enforceable rights and obligations in rate-regulatory schemes as it is these rights and obligations that could potentially result in amounts meeting the definition of an asset or a liability. A focus on defined rate regulation may result in some rate-regulatory schemes that do not have enforceable rights and obligations being included in the scope of any potential change in existing IFRS recognition requirements. In other words, the focus on defined rate regulation could potentially result in economically dissimilar schemes being accounted for in the same way.

Of the four possible approaches outlined in the DP that the IASB could consider developing, the FRC indicates that “it is too early to consider what approach should be developed further when the enforceable rights and obligations of rate regulatory schemes have not been identified”.  The FRC comments that only once the enforceable rights and obligations of rate-regulatory schemes have been identified then possible approaches can be developed.

Regarding disclosure, the FRC believes that the disclosures in IFRS 14 Regulatory Deferral Accounts “would be a good starting point”.

The full comment letter can be downloaded below. 

Click for:

We comment on a number of tentative agenda decisions of the IFRS Interpretations Committee

20 Jan 2015

We have published our comment letters on IFRS Interpretations Committee agenda decisions on IAS 12, IAS 19, IFRS 10 and IFRS 11, as published in the November 2014 IFRIC Update.

More information about the issues is set out below:

IssueMore information
IAS 12 Income Taxes — Selection of applicable tax rate for measurement of deferred tax relating to investment in associate
IAS 19 Employee Benefits — Should longevity swaps held under a defined benefit plan be measured at fair value as part of plan assets or on another basis as a qualifying insurance policy?
IFRS 10 Consolidated Financial Statements — Control of a structured entity by an operating lessee
IFRS 10 Consolidated Financial Statements — Control of a structured entity by a junior lender
IFRS 11 Joint Arrangements — Application issues

You can access all our comment letters to the IASB, IFRS Foundation, and IFRS Interpretations Committee here.

Comment letters on the IFRS Interpretations Committee tentative agenda decisions on IFRS 11

20 Jan 2015

The European Financial Reporting Advisory Group (EFRAG) and the European Securities and Markets Authority (ESMA) have published comment letters referring to the tentative agenda decisions of the IFRS Interpretations Committee on IFRS 11 Joint Arrangements.

EFRAG welcomes the decision of the IFRS Interpretations Committee to publish a summary of the discussions relating to IFRS 11 through a series of separate agenda decisions and believes that they will provide “useful educational material that illustrates the application of certain aspects of IFRS 11”.  

However, EFRAG does not agree with the decision to exclude the issue relating to ‘project entities’ from the published series of agenda decisions.  EFRAG considers that “communicating a summary of the discussion on this issue will also benefit constituents”.

The views of EFRAG are shared by ESMA.  ESMA comment that the publication of the agenda decisions in relation to IFRS 11 is “useful for preparers, users, auditors and regulators and will contribute to the consistent understanding and application of IFRS 11”.  ESMA also agrees that the IFRS Interpretations Committee should include its analysis on the issue relating to ‘project entities’ in the published set of an agenda decisions.

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EFRAG issues feedback statement on its draft comment letter on macro hedging

20 Jan 2015

The European Financial Reporting Advisory Group (EFRAG) has issued a feedback statement to summarise the comments received by the EFRAG on its draft comment letter on the IASB’s Discussion Paper DP/2014/1 ‘Accounting for Dynamic Risk Management: a Portfolio Revaluation Approach to Macro Hedging’.

On 17 April 2014, the IASB published for public comment a Discussion Paper (DP/2014/1) on macro hedge accounting which contained a possible approach to accounting for an entity’s dynamic risk management activities: the portfolio revaluation approach.

EFRAG issued its draft comment letter in July 2014 and a final comment letter in October 2014.

The EFRAG’s feedback statement provides an analysis of the EFRAG tentative position expressed in the draft comment letter, describes the comments received from constituents and then highlight how these comments were considered by the EFRAG Technical Group (EFRAG TEG) in reaching their final position on the IASB DP set out in their final comment letter to the International Accounting Standards Board (IASB).  

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Latest IASB ‘Investor Update’ issued

20 Jan 2015

The IASB has issued the fourth edition of its newsletter, "IASB Investor Update," to provide investors with quick access to information on current accounting and financial reporting issues. The newsletter aims to keep investors informed on new and changing guidance.

This issue features:

The IASB Investor Update newsletter is available on the IASB's website.

Changes made to the NAO draft Code of Audit Practice for the audit of local public bodies following consultation

20 Jan 2015

The National Audit Office (NAO) has published the results of its public consultation on a new draft code of audit practice for the audit of local public bodies. The summary highlights the responses received to the consultation and the main changes made to the draft Code as a result.

The consultation responses indicated that there was “strong support” for a single Code covering all audited bodies within the new arrangements for local public audit and also support for a principles-based Code rather than a rules-based based Code.  The NAO has now made changes to the initial draft Code consulted on in September 2014 and issued a final draft Code which is due to be laid before Parliament for debate and approval.  In the preface to the final draft Code the NAO comments:

We have taken a principles-based, rather than a rules-based, approach to developing the Code. This is in line with predecessor codes and has allowed us to prepare a concise, high-level code applicable to the audit of all local public bodies within the local audit model established by the Act, providing a clear framework for the auditor to meet their statutory duties. A principles-based approach also helps to ensure that the Code does not quickly become out of date as the regulatory environment evolves.

Once approved by Parliament, the Comptroller and Auditor General (C&AG) will publish the final Code which will take effect for audit work relating to the 2015-16 financial year onwards.

In addition to the final Code, the NAO has indicated that it will provide “high quality, timely guidance to auditors” to support the Code in response to those who commented that this would enhance the effectiveness of the Code.

The final draft Code and the summary of responses received to the original consultation are available on the NAO website.

IFRS Foundation appoints new Trustee

20 Jan 2015

The IFRS Foundation has announced the appointment of Kurt Schacht as Trustee of the IFRS Foundation. The appointment will begin with immediate effect and will expire on 31 December 2017.

Mr Schacht is Managing Director of the CFA Institute, leading its advocacy and regulatory affairs activities across Asia, Europe and the Americas. He currently serves as Chairman of the US Securities and Exchange Commission's Investor Advisory Committee and is on the advisory board of the Millstein Center for Global Markets at Columbia Law School.

For more information, see the press release on the IASB's website.

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