This issue fea­tures:

• An interview with the President of the Asian Infrastructure Investment Bank, Mr Jin Liqun.
• An overview of key features in the new leases standard, IFRS 16.
• Current pro­jects that need input from the in­vest­ment com­mu­nity.
• A cal­en­dar of current events.

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

The comments received will be used to inform the development of proposals for changes to accounting standards, which will be subject to formal consultation at a later date, expected to be during 2017, in advance of a planned effective date of 1 January 2019.

Comments are invited on all areas including the benefits of the new standards, suggestions for improvements or areas where implementation was challenging.

Comments should be sent to ukfrsreview@frc.org.uk. 

The press release is available on the FRC website. 

The questionnaire presented nine arrangements and asks respondents to provide their assessment of whether different aspects of the definitions of assets and liabilities proposed in the May 2015 ED are met. Respondents are asked to provide their assessment solely based on the proposed definitions and the additional guidance included in the ED.

The main issues identified by the questionnaire were the following:

• The term ‘present’ was interpreted differently by the respondents when the term was considered in relation to the definition of an asset.
• The respondents had different views of what and how many past events it was necessary to consider when assessing whether the control of an economic resource arose as result of past events.
• Respondents had different assessments about whether the economic resource related to a lottery ticket was controlled by the entity acquiring the lottery ticket.
• Respondents had different assessments about whether an improved market position had the potential to produce economic benefits. 
• Respondents had different assessments about whether an assembled workforce resulted in a right of an entity.
• Respondents had different assessments about whether the costs of legal advisors related to a restructuring resulted in an obligation to transfer an economic resource.
• Although respondents generally thought that the economic resource related to a lease agreement was controlled by the entity, their arguments for this assessment were different.
• Respondents had different assessments about whether the deposit guarantee scheme resulted in an obligation to transfer an economic resource (for payments in future years).

Please click to access the summary of responses on the EFRAG website. EFRAG has provided the results of the test to the IASB staff.

Updates regarding the im­ple­men­ta­tion projects are:

• Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts: No longer has a comment to determine the direction of the project within 3 months, but now includes that a new Standard is expected within 6 months.

• Clarifications to IFRS 8 arising from the Post-implementation Review: The exposure draft is now expect within 6 months, previously it was within 3 months.

• Clarification of Classification and Measurement of Share-based Payment Transactions: The new Standard is now expect within 6 months, previously it was within 3 months.

• Clarifications to IFRS 15 Revenue from Contracts with Customers: Issues Emerging from TRG Discussions: Previously indicated that a new Standard was expected in the March/April 2016 timeframe; now its solely expected in April 2016.

• Classification of Liabilities: The new Standard is now expected after 6 months; previously it was expected within 6 months.

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

The first two documents are linkage documents.  The first document reveals how GRI's G4 Guidelines and CDP's 2016 climate change questions are aligned and the second document shows how GRI’s G4 Guidelines and CDP’s water questions (2016) are aligned.  These linkage documents are intended to avoid duplication of disclosure efforts.  This harmonisation will help companies to streamline their disclosure efforts and improve the consistency and comparability of environmental data.  The GRI and CDP Climate Change and GRI and CDP Water documents and press release can be downloaded from the GRI website.

The third document, a digital publication, indicates the future of sustainability reporting and disclosure.  The report is the culmination of the first year of GRI’s continuing Sustainability and Reporting 2025 project which is designed to promote an international discussion about the purpose of sustainability reporting and disclosures looking ahead to 2025.  The GRI conclude that changes to sustainability disclosures in the next decade will include:

• New formats and multiple information sources.  The report indicates that reporting will be digital and tagged and more frequent with companies engaging “in almost real-time sustainability exchange through a variety of dynamic communication channels and sharing platforms.  The report envisages “networks across companies and suppliers” to share data and manage risk and improved software and search engines that will enable stakeholders to “consume the information in a much more powerful way”.
• New content.  The report indicates that “companies will be required to disclose information on their overall impacts on society and the world’s natural resources”.  The report also highlights that sustainability disclosures and the related data will include business contributions to climate change, to eliminate contamination, to protect ecosystems and to the management of natural resources.  It will also include contributions to the quality of life of all individuals and communities involved in the business’ extended value chain/operations.  Additionally the report envisages that disclosures will include impacts within the supply chain.
• A new role for stakeholders empowered by information.  The report indicates that with the different information sources, stakeholders will have “almost real-time interactions”.  As a result the report highlights that “company approaches to stakeholder relations will change”. 

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

This webcast discusses the transition steps that a lessee is required to perform and includes highlights of available transition relief and the decisions that need to be made at each stage.

The webcast is available on the IFRS 16 implementation page on the IASB’s website.

The article features:

• Examples of how the amendments to IAS 1 in December 2014 helped preparers improve their financial reporting.
• The importance of identifying the primary users.
• An assessment of disclosure materiality.
• Discussion on material and immaterial errors.

The full article is available on the IASB’s website.

The letter highlights the following key changes in corporate reporting and indicates what investors should be looking out for:

• Risk, internal control and viability.  The FRC highlights that listed companies and groups, for the first time, will be required to apply the 2014 version of the UK Corporate Governance Code. Applicable for periods commencing on or after 1 October 2014, key changes have been made in relation to going concern, risk assessment and internal control including a requirement for Boards to provide a longer-term viability statement.  The FRC indicates that the period for the longer-term viability statement “should be significantly longer than 12 months”.  It highlights that investors “should see an explanation of the period chosen, taking into account the circumstances of the company” and these should not be ‘boiler plate’.   The FRC also highlights that investors should challenge companies where key risks are not included as part of their ‘principal’ risks and uncertainties disclosure in their strategic reports.   
• Brexit.  The FRC indicates that if the UK’s renegotiation of its EU position and potential exit is considered as a principal risk by the Board then it should be disclosed as such to shareholders.
• Alternative Performance Measures.  Where companies use these, the FRC comments that these should be “clearly defined, consistent and include reconciliations to, and explanations of, how they relate to GAAP measures”.
• Audit reporting.  The FRC highlights the changes introduced in 2013 in relation to extended audit committee and auditor reporting requirements.  Investors should expect to see sufficient information about the audit “to allow for an informed discussion with the company”.  It also draws attention to its recently published guide on the impact of extended auditor reports. 
• Dividend disclosures.  The FRC indicates that investors “may wish to challenge companies that provided insufficient information in this area” and points to the recently published Financial Reporting Lab report in this area.
• Governance Reporting.  The FRC recognises that “not all parts of the Corporate Governance Code are relevant to all companies at all times”.  It indicates that where Boards elect not to comply with key provisions of the Code, “they should provide specific, meaningful explanations to investors”.  The FRC “encourages investors “to challenge companies where they do not believe that explanations given are sufficiently persuasive”.
• Accounting policies and the impact of new standards.  The FRC indicates that companies should explain critical judgements made and accounting policy choices.  The FRC highlights that investors should be able to understand the precise nature of the judgements made by the company rather than just a repeat of what the standards require.  Investors should also expect companies to indicate the likely impact of IFRS 15 Revenue from Contracts with Customers, IFRS 9 Financial Instruments and IFRS 16 Leases in their financial statements where it has been concluded by the company that the impact can be reasonably estimated.

The press release and full letter are available on the FRC website.

The suggestions are varied and range from clarifying over amending to changing sections of the draft report with respect to involvement of the European Parliament, financing, "public good", prudence, IFRS 9, convergence and many other topics. A document showing all motions for changes has been made available. Given that different MEP have commented on the same paragraphs (partly suggesting conflicting amendments), the document has grown rather long (54 pages vis-à-vis the original 10 pages). Please click to access the new document on the Parliament's website.