February

ESMA responds to IASB's consultation on draft materiality practice statement

22 Feb, 2016

The European Securities and Markets Authority (ESMA) has published its response to the International Accounting Standard Board's (IASB's) Exposure Draft IFRS Practice Statement: Application of Materiality to Financial Statements.

The IASB released its Exposure Draft in October 2015, with the objective of explaining and illustrating the concept of materiality and at helping preparers of financial statements in applying the concept. It covers three main areas:

  • characteristics of materiality;
  • presentation and disclosure in the financial statements; and
  • omissions and misstatements.

It also contains a short section on applying materiality when considering the recognition and measurement requirements of IFRSs.

ESMA “highly welcomes” the guidance.  It agrees with the IASB that the guidance is provided in a non-mandatory form as “in certain jurisdictions mandatory guidance on materiality could conflict with national legal requirements”.  However, in order to emphasise the nature of the guidance, ESMA “considers that the guidance should take the form of Implementation Guidance to IAS 1 Presentation of Financial Statements” rather than as a Practice Statement.

Regarding the assessment of determining whether information is material or immaterial, ESMA supports the conclusion that information can be material when considered together with other information even if not judged to be material in its own right.  ESMA also welcomes the guidance on both quantitative and qualitative assessments of materiality.

ESMA considers that the examples in the draft Practice Statement “are helpful to make the guidance more practical and useful”.  It also considers that “the draft Practice Statement is only a first step to improve the understanding and application of the principle of materiality in the IFRS financial statements” and welcomes further work by the IASB in this area within the Principles of Disclosure project.

The full comment letter is available on the ESMA website.

BIS publishes government response to the consultation on deregulatory changes for LLPs and qualifying partnerships as a result of the UK implementation of the EU Accounting Directive

19 Feb, 2016

The Department for Business, Innovation and Skills (BIS) has published the government’s response to its earlier consultation on deregulatory changes for LLPs and qualifying partnerships as a result of the UK implementation of the EU Accounting Directive (‘the LLPs and qualifying partnerships consultation’).

The European Union published the EU Accounting Directive 2013/34/EU (‘the Directive’) on 26 June 2013. The Directive aimed to simplify the accounting requirements for small companies and improves the clarity and comparability of companies' financial statements within the Union.

Following a consultation by BIS in August 2014 and government response in January 2015regulations 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 proposed to introduce similar changes to the regulatory framework for LLPs.

There was broad support for the proposals with “almost all” of respondents encouraging the government to introduce the revised framework as soon as possible.  As a result of the responses to the consultation, the government will introduce the following key changes for LLPs and qualifying partnerships:

  • 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. 
  • Introduce a micro-entity regime for LLPs and qualifying partnerships. 
  • 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. 
  • Allowing 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, these 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 will also align the auditing provisions as well.

The new framework will apply for financial years beginning on or after 1 January 2016.  However, early adoption is permitted for LLPs and qualifying partnerships and groups who still have not agreed and filed their 2015 accounts prior to the regulations coming into force in 2016. 

*Update 11 March 2016 - Draft Regulations have been laid before parliament.  Click here for link to the draft regulations*

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IASB updates work plan

19 Feb, 2016

Following its February 2016 meeting, the IASB has updated its work plan. As mentioned before, directly tracing the Board's progress on the individual projects has become impossible since the change of the work plan format in July, unless the Board makes definite progress or has to make larger corrections. Of these, only a few can be identified since the previous work plan. However, the IASB has begun to indicate the month which issuance of exposure drafts or final standards may occur.

On major projects, the only change the Board notes is that the Conceptual Framework project is currently in the analysis stage (previously in public consultation). The disclosure initiative — principles of disclosure project is currently in the drafting discussion paper stage (previously in analysis).

Updates regarding the im­ple­men­ta­tion projects are:

  • Annual improvements 2015-2017 — exposure draft is no longer expected after six month, instead the Board will decide the direction of the project within the next six months.
  • Definition of a business — exposure draft issuance date is narrowed to May 2016.
  • Remeasurement of previously held interests — obtaining control or joint control in a joint operation that constitutes a business — exposure draft is narrowed to May 2016.

The revised IASB work plan is available on the IASB's website.

IFRS Foundation issues “Debrief” on IFRS 9

19 Feb, 2016

The IFRS Foundation has issued a new Debrief series video, “From incurred to expected — two years to go.” The video features IASB Board member Sue Lloyd as she discusses aspects of IFRS 9, which is set to be effective on 1 January 2018.

Topics discussed in the video include:

  • Background information during IFRS 9 developed.
  • Effects IFRS 9 will have on the accounting for loan losses.
  • Information on work done since IFRS 9 was completed in 2014.
  • Implementation considerations for companies.
  • IFRS 9’s interaction with prudential regulations.
  • Connection between the work on EDTF and IFRS 9.
  • Next steps

For more information, see the Debrief video on the IASB’s website.

Agenda for February 2016 CMAC meeting

18 Feb, 2016

Representatives from the International Accounting Standards Board (IASB) will meet with the Capital Markets Advisory Council (CMAC) in London on Thursday 25 February 2016. The agenda for meeting as well as the meeting papers have been released.

A summary of the agenda for the meeting is set out below:

Thursday, 25 February 2015 (08:55-16:15)

  • Welcome
  • IFRS Advisory Council: role and recent activities
  • Update on amendments to IAS 7
  • Interaction of IFRS 4 with effective date of IFRS 9
  • Discussion of structured electronic reporting with break-out sessions
  • IFRS 9 education session on new impairment requirements
  • Information gathering session on users’ view on operating profit
  • Update on IFRS 16
  • Follow-up from November 2015 CMAC meeting

Agenda papers for the meeting are available on the IASB's website.

Former President of ASCG Liesel Knorr elected next IFASS Chair

18 Feb, 2016

The International Forum of Accounting Standard Setters (IFASS) has elected Ms Liesel Knorr, former president of the Accounting Standards Committee of Germany (ASCG), as Chair-designate.

Ms Liesel Knorr follows Ms Tricia O’Malley, past chairman of the Accounting Standards Board of Canada (AcSB) and IASB member from 2001 to 2007. The IFASS (formerly known as National Standard-setters, NSS) is a grouping of national accounting standard-setters from around the world, plus other organisations that have a close involvement in financial reporting issues.

Further information can be obtained in the related press release on the ASCG website.

February 2016 IASB meeting notes posted

17 Feb, 2016

The IASB met at its offices in London on 16–17 February 2016. We have posted the Deloitte observer notes from all of the sessions held on both days.

Please click through for direct access to the notes:

Tuesday, 16 February 2016

Wednesday, 17 February 2016

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

ESMA comment letter on annual improvements 2014-2016

17 Feb, 2016

The European Securities and Markets Authority (ESMA) has issued its comment letter on the IASB exposure draft ED/2015/10 'Annual Improvements to IFRSs 2014–2016 Cycle'.

ESMA supports the proposed amendments that would affect three IFRSs: IFRS 1, IFRS 12, IAS 28.

The full comment letter is available on the ESMA website.

IIRC CEO to step down in 2016

17 Feb, 2016

The Board of the International Integrated Reporting Council (IIRC) has announced that its Chief Executive Officer (CEO) Paul Druckman is to step down during 2016.

Paul Druckman has served as CEO for almost five years and oversaw the development of the International Integrated Reporting Framework, which was released in December 2013.  He has also raised awareness of and overseen the adoption of Integrated Reporting in over 25 countries. 

No date has yet been set for his departure.  A further announcement will be made when the Board appoints a successor.

The press release is available on the IIRC website.

ESMA comment letter on transfers of investment property

17 Feb, 2016

The European Securities and Markets Authority (ESMA) has issued its comment letter on the IASB exposure draft ED/2015/9 'Transfers of Investment Property (Proposed amendment to IAS 40)'.

ESMA supports the proposed amendment addressing whether a property under construction or development that was previously classified as inventory could be transferred to investment property when there is an evident change in use.  ESMA also supports retrospective application of the amendment.

The full comment letter is available on the ESMA website.

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