March

FRC publishes latest edition of quarterly newsletter on financial reporting

17 Mar, 2016

The Accounting and Reporting policy team of the Financial Reporting Council (FRC) has published its latest edition of its newsletter on financial reporting.

The newsletter “Setting the Standard” covers the following key areas:

  • Clear and Concise Reporting. The newsletter discusses the ‘Clear and Concise: Developments in Narrative Reporting’ report published in December 2015 in addition to the following narrative reporting issues:
    • The publication on the 16 February 2016 of the Department of Business, Innovation and Skills (BIS)’s consultation document on the European Union’s (EU's) non-financial reporting Directive.
    • The International Accounting Standard Board (IASB) Disclosure Initiative.
    • Draft Practice Statement on the Application of Materiality published by the IASB in October 2015.
    • The IASB’s Principles of Disclosure Discussion Paper that is expected to be published in the next six months.  More details on the Principles of Disclosure project can be found here.
  • UK GAAP Update. Three financial reporting exposure drafts (FREDs) were recently issued for comment – FRED 62, FRED 63 and FRED 64. These will affect only a limited number of entities preparing financial statements in accordance with UK GAAP.
  • Other UK GAAP updates include the triennial review of Financial Reporting Standard (FRS) 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland – this will now take place later than originally envisaged with any changes not expected to take effect before 1 January 2019.
  • IFRS Update:
  • Current projects of the Financial Reporting Lab, specifically the project on Dividend Policy Disclosure.
  • Corporate Reporting Review. The FRC will undertake a thematic review of companies’ tax reporting in 2016.

Please click here for the full newsletter on the FRC website.

IFRS conference on implementing IFRS 16

17 Mar, 2016

The IFRS Foundation has announced an IFRS conference 'Implementing IFRS 16: Leases' in London on 20 May 2016.

The conference will cover the following:

  • Welcome by IASB Chairman Hans Hoogervorst
  • IFRS 16: An Overview
  • Transition – What are Your Options and How To Make the Right Transition Decisions
  • 4 months into 3 year implementation period: What should you be doing now?
  • Implementation: Hot Topics
  • Systems Requirements
  • Ratings and Valuations
  • Panel discussion: Implementation – A Roadmap for Change

More details are available on the conference website.

March 2016 IASB meeting notes posted

17 Mar, 2016

The IASB met at its offices in London on 15–16 March 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, 15 March 2016

Wednesday, 16 March 2016

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

Constituents believe derecognition of modified financial assets needs to be addressed by the Board

16 Mar, 2016

In November 2015, the IFRS Interpretations Committee discussed a potential project to clarify the requirements in IFRS 9 and IAS 39 regarding the derecognition of modified financial assets and tentatively decided not to add the project to its agenda. Comment letters on the tentative agenda decision show that constituents believe that not dealing with the problem is not an option.

In coming to its tentative negative agenda decision, the Interpretations Committee had argued that the issue was too complex to deal with in a narrow-scope project and that informal feedback received from individual IASB members had indicated that there was "little appetite to take on such a project".

Reactions from constituents (including ESMA, the Japanese standard-setter ASBJ, the German standard-setter ASCG, and Deloitte) were quite sharp in some cases given that (i) neither IAS 39 nor IFRS 9 include requirements that are sufficient regarding the modification of financial assets, which leads to a risk of divergence in accounting practice; (ii) the modification of financial assets is already an issue that arises in practice; (iii) such transactions are likely to increase given the current economic environment; and (iv) potential issues that could arise under IFRS 9. One comment letter states:

We consider the decision being inappropriate given that there is an issue in practice. While the IFRS IC take the view that it is not appropriate to progress with the issue "at this time" and that it cannot be resolved "through an interpretation", we point to the fact that there are other means to address an issue, even in case it is a broad one.

And another adds:

Indeed, this issue has been a contentious area for some years and has been discussed by the Committee in every year from 2012 to 2015.

The issue is set to be discussed at the upcoming meeting of the IFRS Interpretation Committee on 22 March 2016 from 4.40pm. Despite the comments received (all but one advocate further action) the staff recommends finalising the agenda decision with only a few suggested editorial changes as the comment letters received did not reveal any new information.

Please click for the following additional information:

Agenda for the April 2016 ASAF meeting

16 Mar, 2016

The International Accounting Standards Board (IASB) has released an agenda for the meeting of the Accounting Standards Advisory Forum (ASAF), which is to be held at the IASB's offices in London on 7-8 April 2016.

The agenda for the meeting is summarised below:

Thursday, 7 April 2016 (9:30-17:00)

  • Feedback to the 2015 Agenda Consultation
  • Conceptual Framework
    • seek members’ advice on the IASB's strategy for developing the Conceptual Framework
    • seek the views of ASAF members on a proposal by EFRAG on how Chapter 6 Measurement could easily be expanded to meet the concerns raised in the EFRAG comment letter on the exposure draft
  • Rate-regulated activities — discuss an example that might provide insight how a possible accounting model for activities that are subject to defined rate regulation may reconcile to the principles of IFRS 15 and with the definitions of assets and liabilities being proposed in the Conceptual Framework project
  • Accounting for inflation — presentation by GLASS


Friday, 8 April 2016 (9:00-14:45)

  • Business combinations under common control (BCUCC) — update on the project and plan for future deliberations
  • Amendment to IFRS 4: Applying IFRS 9 with IFRS 4 — summary of the feedback received on the exposure draft and feedback and advice from ASAF members following the IASB’s discussions in March 2016
  • Share-based payments — seek the ASAF members’ views on the possible next steps in this project
  • Project updates and agenda planning
    • Disclosure initiative
    • Financial instruments with characteristics of equity
    • Accounting for dynamic risk management
    • Research projects
    • Agenda planning

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

Webinar on proposed IPSASB guidance on public sector combinations

16 Mar, 2016

The International Public Sector Accounting Standards Board (IPSASB) has released a webinar introducing its Exposure Draft ED 60 'Public Sector Combinations'.

ED 60 classifies public sector combinations as either amalgamations or acquisitions taking into account control and other factors. Gaining of control over an operation creates a rebuttable presumption that the combination is an acquisition. If the acquisition presumption is rebutted, then the transaction is treated as an amalgamation. Comments are requested by 30 June 2016.

Please click to access the webinar and the presentation slides on the IPSASB website.

EFRAG issues feedback statement on its public consultation document on the IASB Exposure Draft of a new Conceptual Framework

15 Mar, 2016

The European Financial Reporting Advisory Group (EFRAG) has published its feedback statement summarising the main comments received from constituents invited to respond to its public consultation in relation to the International Accounting Standard Board’s (IASB’s) exposure draft ED/2015/3 'Conceptual Framework for Financial Reporting'.

The International Accounting Standards Board (IASB) published the comprehensive Exposure Draft ED/2015/3 Conceptual Framework for Financial Reporting containing proposals for topical areas where it considers a revision and amendment of the existing Conceptual Framework necessary on 28 May 2015. Included in the ED are proposals to revise the definitions of an asset and a liability, to introduce guidance on measurement and derecognition, and to set a framework for presentation and disclosure.

EFRAG published a document for public consultation on the proposals on 8 July 2015 and its final comment letter on 23 December 2015 (link to EFRAG website).

This feedback statement summarises the main comments received by EFRAG on its Document for Public Consultation in response to the IASB’s ED and explains how those comments were considered by EFRAG in its discussions on its final comment letter.

The press release and full feedback statement are available on the EFRAG website.

Two new integrated reporting publications

15 Mar, 2016

In the context of the recent focus on sustainable capitalism and the global interest shown by firms, investors, and regulators in the work of the International Integrated Reporting Council (IIRC), we point out two recent publications.

The IIRC's <IR> Banking Network have released the publication Applying the Integrated Reporting concepts of outcomes and social and relationship capital in the banking industry

The second paper is academic research into the question whether integrated report quality is associated with stock liquidity, firm value, expected future cash flow, and cost of capital. The study, The Economic Consequences Associated with Integrated Report Quality: Early Evidence from a Mandatory Setting, uses data from South Africa because it is the only country where integrated reporting is mandated. It finds that integrated reporting is positively associated with both stock liquidity and firm value. Among the authors of the paper are Stanford University professor and former IASB member Mary Barth and Elmar Venter from the University of Pretoria and scholar in the Deloitte IAAER Scholarship Programme. The paper is available free of charge through SSRN.

We comment on the IASB’s proposed amendments to IAS 40

14 Mar, 2016

We have responded to the IASB's Exposure Draft, "Transfers of Investment Property (Proposed amendments to IAS 40)," that was IASB published in November 2015.

As stated in the comment letter, we welcome the Board’s initiative to addressing the issue; however, we believe that additional clarity needs to be provided on the application to properties under construction and the role of management intent in an assessment of whether a change in use has occurred.

Please click to access the full comment letter.

ICAEW publishes report providing recommendations to improve the quality of corporate reporting

14 Mar, 2016

The Institute of Chartered Accountants in England and Wales (ICAEW) has published an 'Audit Insights' publication that “examines seven important areas of annual reporting and makes recommendations that will improve the quality of corporate information provided”. The publication builds upon its publication Corporate Reporting: Seven questions and a debate for 2016 published in December 2015 which offered seven questions for users, preparers and auditors to ask in order to provide better information during the reporting season.

The ICAEW observe that “company reports are too long” and indicates that “there does not seem to be enough momentum to do anything about it”.  It highlights the importance of the annual report to company stakeholders in understanding a company’s financial performance, its business model, strategy for future growth and key risks.  Given the importance of the annual reports the ICAEW indicates that “it is essential that they are relevant and present a coherent and balanced picture of the business and its prospects”.  However, with the increase in rules and regulations for disclosure, the ICAEW indicates that the size of annual reports have “ballooned” and observes that annual reports are now in danger of not being “fit for purpose”. 

To help achieve this aim the report provides recommendations in seven key areas of annual reporting with the objective of improving the quality of information provided to stakeholders.  The questions are:

  1. Is everything in the report material?
  2. Are performance measures credible?
  3. Is tax reporting understandable?
  4. Does the audit committee report on key issues?
  5. Is the audit report providing insights?
  6. Does the remuneration report explain high pay?
  7. Is the company putting enough resources into reporting?

The ICAEW recommendations are intended to “encourage improved reporting so that companies give an insightful and understandable picture of their corporate performance to a wider stakeholder audience” and provide only meaningful and relevant information that tells a coherent story.  The focus of the report is on the “length and complexity” of information provided in the “front-half” of annual reports.

The ICAEW indicates that in order to ensure that information in the front half remains useful for investors and other stakeholders:

  • Regulators and standard-setters have an important role to play.  The ICAEW “endorses” the work of the FRC with its Clear & Concise initiative and the Financial Reporting Lab’s work in encouraging innovation.  However, the ICAEW comments that the FRC should look at other initiatives – such as supporting the reporting of information outside of the annual report; for example on a company’s website.  The ICAEW highlights that “this will empower risk-averse preparers to be more challenging and confident in only including information that is meaningful to a company’s specific circumstances”. 
  • Auditors should help companies navigate the complexities of current reporting with best-practice advice and by producing an informative audit report.
  • Investors need to play a more active role to influence what is disclosed.
  • Preparers should only provide meaningful and relevant information that will produce a coherent business story.

The ICAEW “hopes that this report will help to reignite the debate over how corporate reporting needs to change to improve communication and accountability”.

The press release and full report is available on the ICAEW website.  Our previous UK Accounting Plus news item on the December report is available here.

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