The open letter published yesterday on the A4S website notes that professional accountants can help to address climate change, as accounting is central to decision-making and professional accountants can provide relevant analysis, reporting and assurance to help organisations generate and preserve value, and can therefore be influential in driving sustainable behaviours. In order to do so, however, it is essential that world leaders agree a common framework. The open letter therefore states:

Please click to access the open letter and the corresponding press release on the A4S website.

Commission Regulation (EC) No 2015/2113 of 23 November 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 24 November 2015 adopts Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) issued by the IASB in June 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).

In the interview, Mr Hoogervorst generally takes stock and then expands on four questions:

• Has the Board's private, not-for-profit status been a hindrance or a help?
• Who are IFRS for?
• How do you think the Board's due process has been working?
• What's next for the IASB?

Please click to access the interview, which runs slightly over five minutes, on the ACCA website.

Following a consultation by BIS in August 2014 and government response in January 2015, regulations were made (the Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015) which implemented the EU Accounting Directive for limited companies.  Changes were also made by the Financial Reporting Council (FRC) to UK accounting standards in July 2015 to implement those changes.  At that time, the Government indicated that it would be consulting separately for LLPs and qualifying partnerships.

The LLPs and qualifying partnerships consultation proposes to introduce similar changes to the regulatory framework for LLPs. 

The main changes proposed by BIS are to:

• Increase thresholds used to determine the size of LLPs. The thresholds for determining what is a small LLP will, as for companies, be raised to the top end of the range permitted by the Directive. An LLP will be small if it meets at least two of: total assets <£5.1m, turnover <£10.2m, <50 employees.  An LLP will be medium-sized if it meets at least two of: total assets<£18m, turnover <£36m, <250 employees.
• Limit the number of mandatory notes required of small LLPs.  Small LLPs will be required to provide thirteen disclosure notes as indicated in the consultation.
• Introduce a micro-entity regime for LLPs allowing the smallest LLPs in the UK access to a much less burdensome administrative regime.  An LLP will qualify if it meets at least two of: total assets <316,000, turnover <632,000 and average number of employees <10.
• Propose to introduce a micro-entity regime for qualifying partnerships.  This would be available to those general partnerships and limited partnerships that are Qualifying Partnerships under the Partnerships (Accounts) Regulations 2008 (SI 2008/569) as amended by the Companies and Partnerships (Accounts and Audit) Regulations 2013 (SI 2013/2005) and which meet the eligibility criteria.
• Provide LLPs with the opportunity to use alternative layouts when preparing their profit and loss account and balance sheet, provided that the information given is at least equivalent to the information otherwise required by the standard formats.
• Allow small LLPs to prepare an abridged balance sheet and profit and loss account if approved by all members of an LLP.
• Amend the approach in relation to the writing off of goodwill and development costs. In the rare situations where the useful economic life cannot be reliably estimated, the government is proposing that they should be amortised over a maximum of ten years (the top end of the range permitted by the Directive).  Reversals of goodwill impairment will be prohibited.
• Permit the use of the “equity method” in individual LLP statements.

In addition to aligning the accounting requirements between companies and LLPs, BIS also proposes to align the auditing provisions as well.  The LLPs and qualifying partnerships consultation also includes changes to:

• The audit exemption criteria for small LLPs including increasing the thresholds for the exemption.
• The audit exemption for LLPs who receive a parental guarantee.  This exemption will no longer be available for LLPs with securities are traded on a regulated market in an EEA state.
• The dormant LLPs audit exemption.  For LLPs whose securities are traded on a regulated market this exemption will no longer be available.

It is proposed that the new framework will apply for financial years beginning on or after 1 January 2016.  The consultation asks a question about whether early adoption should be permitted for financial years beginning on or after 1 January 2015.

*On 30th November BIS published an update to the original consultation document to clarify that the question of whether specific thresholds for the audit exemption should be introduced, and if so, at what level, is still under consideration*.

Click for:

• Press release (link to BIS website)
• The consultation (link to BIS website)
• The EU Accounting Directive 2013/34/EU (link to European Commission website)
• Our news story on the publication of the EU Accounting Directive 2013/34/EU

This is the conclusion from the latest Audit Committee Chairs Survey 2015 overseen by the Financial Reporting Council (FRC).  All FTSE 350 ACCs and a number from those outside of the FTSE 350 were sent the survey of eight questions on audit quality.  The results indicate:

• Feedback on audit quality was “overwhelmingly positive”.  A number commented that the quality of the audit engagement partner was “crucial” to their assessment of the quality of the audit.
• The highest score was in response to the degree at which the external auditor exhibited independence and objectivity.
• Lowest scores were rated for the level of professional scepticism demonstrated by the external auditor and the quality of the external auditor’s response to regulatory oversight, suggesting further work in these areas is still required.

The press release along with a letter sent to the ACCs summarising the results of the survey are available on the FRC website.  Our news article summarising the FRC’s Audit Quality Inspection Annual Report for 2014/15 is available here.

Just as the European Securities and Markets Authority (ESMA) yesterday, FEE believes the problem should not be solved on a European level alone (by means of a carve-out). On 10 November 2015, EFRAG published a draft letter to the European Commission, stating that EFRAG is "not in a position to amend" its endorsement advice on IFRS 9 and extend it to businesses carrying out insurance activities.

ESMA makes the following main points in its response to the IFRS Foundation's Request for Views.

• Setting financial reporting standards for listed entities, rather than public sector or not-for-profit organisations, should remain the main focus and priority of the IASB.
• The IASB and IFRS Foundation should aim to create the circumstances that contribute to the consistent application of IFRS across jurisdictions and industries. The establishment of Transition Resource Groups has been useful in bridging the gap between standard-setting and implementation and the Trustees should formalise the structure and use of these.
• ESMA views the IFRS Interpretations Committee as indispensable but calls on the Trustees to further enhance its functioning and effectiveness. It also calls for a re-assessment of the composition of the Committee to ensure that it contains an appropriate balance of professional backgrounds.
• ESMA considers that the basic governance arrangements of the IFRS Foundation continue to be appropriate.  While it does not object to the Trustees proposed organisations changes, it suggests that additional efforts to safeguard the public accountability of the IFRS Foundation be reflected in the changes to the Constitution.

The full response can be found on the ESMA website.

The report The Challenges of Assuring Integrated Reports: Views from the South African Auditing Community focuses on the issue of independent assurance over an integrated report.  It looks at whether an integrated report can, and should, be subject to independent assurance in the same way that such assurance is provided on annual reports and financial statements.  Views are obtained from a number of senior assurance practitioners from South Africa where all listed companies must prepare an integrated report.  It highlights that although there is support for independent assurance over an integrated report, there are a number of technical and legal challenges that need to be overcome.

The report indicates that assurance over an integrated report has the potential to add value to the by improving the report’s credibility. 

However a number of technical challenges including the difficulty of developing suitable criteria for assuring the integrated report, the limited range of skills of a traditional audit team and the adequacy of a client’s records, systems and controls “make it impossible to assure the entire integrated report”.  As a result, the report concludes that “only certain parts of the integrated reports can, currently, be the subject of an assurance engagement”. 

The ACCA sees that assurance could be provided over those parts of the report that provide factual disclosures but “information that is abstract, interpretative predictive or qualitative is too subjective to be the subject of a limited or reasonable assurance engagement”. 

The ACCA also warns that even if suitable criteria can be developed to audit against, this could have the unintended consequence “of limiting the relevance of information included in integrated reports as companies limit disclosures to only those which can be objectively verified”.

The report makes a number of recommendations:

• In the short term, develop a set of guidelines which recommend those parts of the integrated report that should be the subject of an assurance engagement and offer a basis for describing how assurance is provided over the material components of the integrated report.
• In the long run, possibly develop an alternative assurance model which does not express an opinion on the extent to which the integrated report complies with the International Integrated Reporting Council (IIRC) Framework but instead provides something similar to a panel review by suitably qualified experts.  The ACCA highlight that there is a risk that this new level assurance “will fail to command the same respect as the audit of financial statements and will simply expand or perpetuate the audit expectation gap”.
• Before the creation of such an assurance model, companies should actually engage with stakeholders to determine the extent of demand for such assurance.

The press release and full report are available on the ACCA website.