The Update reports on EFRAG Board meeting on 14 January, the EFRAG Technical Expert Group (EFRAG TEG) conference call on 7 January and the EFRAG TEG meeting on 27-28 January.  The Update also lists EFRAG publications issued in January:

• EFRAG’s final comment letter in response to the IASB’s Request for Views: 2015 Agenda Consultation;
• EFRAG’s summary report of the outreach event held in Copenhagen on 25 November 2015, jointly with the Confederation of Danish Industry (DI), the Danish Accounting Standards Committee (DASC), on EFRAG and IASB agenda consultations (link to EFRAG website); and
• EFRAG’s summary report of the outreach event held in Brussels on 23 September 2015 on the IASB’s Conceptual Framework for Financial Reporting and the results of an academic study, sponsored by EFRAG and the Institute of Chartered Accountants of Scotland (ICAS) on professional investors’ financial information usage (link to EFRAG website).

Please click to download the January EFRAG Update from the EFRAG website.

The first hearing took place on 1 December 2015 and featured an introduction by the ECON Chair Roberto Gualtieri followed by short presentations by four invited experts. The presentations were followed by a joint discussion with ECON members.

The second hearing took place on 11 January 2016. IASB Chairman Hans Hoogervorst gave a short presentation of the current work of the IASB. Afterwards, he and Michel Prada, Chairman of the IFRS Foundation Trustees, answered questions of the ECON members.

The FEE paper summarising the statements and providing addition anwers can be downloaded from their website.

In the interview, Mr Carruthers talks about the IPSASB and the importance of International Public Sector Accounting Standards (IPSAS) for transparency and accountability in public sector financial management. Please click to access the recording on the IPSASB website.

The meeting will feature discussions on:

• Insurance contracts — whether to grant permission to begin the balloting process or whether it considers that it needs to re-expose the new insurance contracts Standard.
• Goodwill and impairment.
• IFRS implementation issues — IFRIC Update.
• Financial instruments with characteristics of equity — current and next steps.

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

Meeting ac­tiv­i­ties included the following:

• Executive session — The Trustees discussed a number of important strategic issues:
  • Review of structure and effectiveness of the IFRS Foundation — The Trustees reviewed (1) the progress of the review of structure and effectiveness of the IFRS Foundation and (2) the comments received on the request for views. Topics discussed included relevance of IFRS Standards, consistent application, governance and financing.  
  • Strategic Plan 2016 — The Trustees discussed specific actions and activities for 2016.
  • Working with National Standard-Setters and regional bodies — The Trustees decided on three goals: (1) to maintain effective relationships and communication with NSS and regional bodies, (2) promote consistent application of IFRS from NSS and regional bodies, and (3) work together with NSS and regional bodies on the Technical Work Programme.
  • Other issues.
  • Committee reports — The Trustees discussed reports from the Audit and Finance Committee, Human Capital Committee, and the Nominating Committee.
• IASB Chairman’s report — The Chair of the IASB provided the Trustees with an update on a number of the IASB’s technical ac­tiv­i­ties.
  • Major projects — The IASB chair discussed its recently issued leases standard, the end of deliberations in the insurance contracts project, and the different effective dates of IFRS 9 and new insurance contracts standard.
• Report of the Due Process Oversight Committee (DPOC) — The Trustees received a report about the DPOC’s January 2016 meeting. For more in­for­ma­tion, see our related news item.
• Investors in financial reporting event — The IFRS Foun­da­tion, with the CFA Institute, hosted an event 'Investors in Financial Reporting’.

The full report on the IFRS Foun­da­tion trustees’ meeting is available on the IASB’s website.

Meeting ac­tiv­i­ties included the following:

• Updates on technical ac­tiv­i­ties — The DPOC was presented with a report that outlined the due process ac­tiv­i­ties for all projects on the IASB’s current agenda. Specifically, the DPOC discussed (1) revenue recognition and the plan not to schedule additional TRG meeting, (2) agenda consultation, and (3) other projects on the disclosure initiative and dynamic risk management.
• Insurance contracts — The DPOC was updated on the progress made to this project and reviewed papers that will be presented in February’s IASB meeting.
• Leases: Quality control — The DPOC was presented with the process from giving permission to ballot the leases standard to finalizing it.
• Review of Con­sul­ta­tive group — The DPOC reviewed the activities of various con­sul­ta­tive groups (e.g., the TRG, the ITG, and the ITCG).
• Cor­re­spon­dence — No new cor­re­spon­dence has been received since the DPOC’s previous meeting.

The full report on the DPOC meeting is available on the IASB’s website.

The role of the Financial Reporting Advisory Board (FRAB) is “to ensure that government financial reporting meets the best possible standards of financial reporting by following Generally Accepted Accounting Practice (GAAP) as far as possible”.  The FRAB includes representatives from the accountancy profession in the private and public sectors, academia and government bodies.  The board meets regularly to consider proposed changes to policy and practice.

Key topics discussed during the meeting included:

• The revised Financial Reporting Manual (FReM) 2015-16 and the draft FRem 2016-17.  The Board was presented with the revised FReM and the FReM 2016-17 was also presented to the Board for consideration.  No further changes to the FReM 2016-17 were proposed from the 2015-16 version.
• An update on International Financial Reporting Standard (IFRS) 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers implementation progress against the work plans.
• An update to the IASB’s work on the Conceptual Framework and consideration of the potential implication for the public sector.
• A proposition from the Department for Business, Innovation and Skills (BIS) of a pilot project for the rationalisation of financial reporting among Research Council bodies.  These proposals follow the implementation of the first phase of the Simplification and Streamlining Accounts project in 2015-16.
• An update on the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Local Authority (Scotland) Accounts Advisory Committee (LASAAC) Code 2016-17; a draft of which was published in July 2015.  It was noted that responses to the consultation were “mostly supportive”.

Click here for detailed minutes and other supporting documents on HM Treasury website.

SORPs issued by the Charity Commission and OSCR apply to charities preparing accounts under UK GAAP to present a ‘true and fair view’ and are intended to supplement accounting standards and other legal and regulatory requirements to reflect transactions or circumstances that are unique within the charities sector. 

In June 2014, the Financial Reporting Council (FRC) approved two new Charities SORPs for publication; one set out the accounting and reporting requirements of charities in the context of Financial Reporting Standard (FRS) 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (“Charities SORP (FRS 102)) and the other was a separate SORP based upon the Financial Reporting Standard for Smaller Entities (FRSSE) (“Charities SORP (FRSSE)).

As a result the UK implementation of the EU Accounting Directive, the FRC, in July 2015, published changes to the existing UK financial reporting framework to take effect for accounting periods beginning on or after 1 January 2016.  As SORPs are required to be updated to comply with changes to accounting Standards, these changes had a direct impact on the Charities SORPS and the Charity Commission and the OSCR have reflected these amendments (included with Amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland – Small entities and other minor amendments) in the Update Bulletin.  These amendments were consulted on in June 2015.

The Update Bulletin amends the Charities SORP (FRS 102), that was issued in July 2014, in the following key areas:

• The Scope and application module of the Charities SORP (FRS 102) is amended to state that the amendments are effective for accounting periods beginning on or after 1 January 2016 with earlier application permitted for accounting periods beginning on or after 1 January 2015 if not prohibited by regulations, charity or company law.  Should the amendments be adopted early, then the Update Bulletin is clear that all of the amendments must be adopted together in the charity’s trustees’ annual report and accounts.  The amendments also confirm that the Charities SORP (FRSSE) will be withdrawn for such accounting periods and, from 1 January 2016 all charities will be required to follow the Charities SORP (FRS 102).
• Module 10: Balance sheet and Module 24: Accounting for Groups and the Preparation of Consolidated Accounts have been amended to revise the maximum period over which goodwill and other intangible assets may be amortised in those exceptional cases where an entity in unable to make a reliable estimate of the asset’s useful economic life.
• Module 12: Impairment of assets has been amended to prohibit the reversal of impairment losses for goodwill.
• Module 14: Statement of cash flows has been amended to require only those larger charities to prepare a cash flow statement.  
• Module 17: Charity mergers has been amended to prohibit merger accounting for charities that are companies and enter into a business combination with a third party. 

The Glossary to the Update Bulletin also reflects a revised definition of ‘larger’ charity.  The Charities Act 2011 (Accounts and Audit) Order 2015 increased the charity audit income threshold from £500,000 to £1 million in England and Wales.  Larger charities are required to make more disclosures in the Trustees’ Annual Report.  The Charity Commission and the OSCR have ‘delinked’ the definition of larger charities in Appendix 1: Glossary of Terms in Update Bulletin from the new statutory audit threshold with effect for reporting periods ending on or after 31 March 2015.  This means that ‘larger charities’ are those as defined in Appendix 1: Glossary of Terms in the Update Bulletin (those charities with a gross income of £500,000 (UK) or 500,000 Euros (Republic of Ireland)) rather than as newly defined for statutory audit purposes when preparing the Trustees’ Annual Report. 

As these changes are included within an Update Bulletin to the Charities SORP (FRS 102) rather than reissuing the Charities SORP (FRS 102), charities following the Charities SORP (FRS 102) will have to refer both to the Update Bulletin and the Charities SORP (FRS 102) when preparing their accounts and reports. 

Click for:

• Update Bulletin 1 (link to Charities Commission website)
• Our previous UK Accounting Plus news item on the Charity Commission and OSCR consultation on amendments to the Charities SORP (FRS 102)
• Our previous UK Accounting Plus news item on the FRC changes to accounting standards for small and micro entities.

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.

In its response, the FRC express the view that to achieve this objective, the PS would need to be significantly more practical in approach, more accessible to the intended audience and provide guidance on additional matters with greater focus on the application of materiality to disclosures. They believe that the PS will be more successful in changing behaviour if it provides practical guidance, focussing on the thought processes and steps that preparers could follow when making materiality judgements, rather than reiterating and explaining the concept of materiality set out in existing IFRS literature. More detailed examples demonstrating how companies have applied this process in practice would also assist in this.

The FRC highlight a number of areas where, in their view, applying materiality is particularly challenging and it would be helpful for the PS to provide more guidance. They also express the view that it would be helpful if, as well as preparers, the PS also addresses stakeholders such as auditors, regulators and enforcers in its approach.

The FRC does agree with the IASB that a practice statement, rather than mandatory guidance, is the appropriate vehicle for a pronouncement on materiality, and also supports the IASB's intention to issue the PS as soon as possible and not to wait until the wider Principles of Disclosure project is completed.

The full comment letter can be obtained from the FRC website.