We comment on proposed amendments to IFRS 3 and IFRS 11

31 Oct, 2016

We have responded to the IASB's Exposure Draft, "Definition of a Business and Accounting for Previously Held Interests (Proposed amendments to IFRS 3 and IFRS 11)," issued by the IASB in June 2016.

As stated in the comment letter, we welcome the Board’s ini­tia­tive to ad­dress­ing the issue and support the introduction of a ‘concentration test; however, we believe for it to be operational, applying the idea of ‘similar identifiable assets’ is needed. In addition, we recommend that the Board should (1) seek to minimise or eliminate the accounting differences between business combinations and asset purchases and (2) consider taking a broader approach to the amendments to IFRS 3 and IFRS 11 on obtaining control, or joint control, of a joint operation that constitutes a business.

Please click to access the full comment letter.

FRC publishes the results of its thematic review of tax disclosures

31 Oct, 2016

The Financial Reporting Council (FRC) has today published the results of its thematic review of tax reporting. Thematic review supplement the FRC’s Corporate Reporting Review (CRR) function’s monitoring of company reports and accounts for compliance with the Companies Act 2006, applicable accounting standards and other reporting requirements. The aim of these reviews is to identify examples of good practice reporting and areas where improvements can be made.

The FRC reviewed the tax disclosures of 33 FTSE companies, having informed them of this in December 2015.  The objective of the review was to “encourage more transparent reporting of the relationship between tax charges and accounting profit and factors that could affect that relationship in the future, in accordance with existing requirements”.

The key messages from the thematic review include:

  • There was evidence of improvements in the transparency of tax disclosures included in strategic reports. Those reports that demonstrated good practice provided more detail on material tax matters likely to be important to investors including discussion of important tax issues arising in the year, major tax risks facing the company and explanations of the reassessment of prior year tax estimates where these were significant and tax impacts of acquisitions.  There was also an increase in companies providing disclosures describing their general approach to tax reporting. 
  • Better reports discussed the effective tax rate including commentary on variances in the effective tax rate on the prior year, key factors influencing the effective tax rate and the expected future rate. This information provided greater visibility of the factors affecting the tax charge and its sustainability. 
  • There is scope for companies to articulate better how they account for tax uncertainties by explaining the bases for recognition and measurement. The FRC will continue to challenge companies who do not provide disclosures of the amount of uncertain tax provisions when these are subject to risk of material change in the following year.  Better disclosures covered when provision is recognised, how the provision is measured and the factors considered in determining the amount to be provided.
  • The FRC encourages companies to improve the usefulness of their disclosure of significant judgements and estimation uncertainties relating to tax. It asks that preparers consider which information about specific judgements and estimation uncertainties would be most useful to the user of the accounts.  Better disclosures would cover, for example, the nature of the assumption or uncertainty, a quantification of the carrying amount of the asset or liability subject to the uncertainty and would include sensitivity analysis or a range of possible outcomes to provide users with a better understanding of the issue. 

The press release and the full thematic review, Corporate Reporting Thematic Review – Tax Disclosures, are available on the FRC website.

Pre-meeting summaries for the November 2016 IFRS Interpretations Committee meeting

31 Oct, 2016

The IFRS Interpretations Committee will meet at the IASB's offices in London on 8 November 2016. We have now posted our popular pre-meeting summaries for the meeting that allow you to follow the Committee's decision making more closely.

On-going discussions


  • Uncertainty over Income Tax Treatments – Due Process (Agenda paper 4)
    The staff are seeking clearance to start the process to finalise the Interpretation, which will have an effective date of 1 January 2019.

Finalisation of draft agenda decisions

The IC will consider the public feedback on two matters which the IC tentatively decided not to add to its agenda:

  • IAS 12 Income Taxes: Expected manner of recovery of intangible assets with indefinite useful lives (Agenda Paper 3); and
  • IAS 32 Financial Instruments: Presentation - Written put option over NCI (Agenda Paper 9)

The staff are recommending that the IC finalise both decisions, and not add the matters to its agenda.

Tentative decisions

  • IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement – Fees and costs included in the ’10 per cent’ test for the purposes of derecognition (Agenda Paper 2)
    The Staff recommends proposing an annual improvement rather than addressing the matter through an agenda decision.
  • IAS 28 Investments in Associates and Joint Ventures - Assessment of significant influence: Fund manager acting as an agent and holding own investments in the fund (Agenda Pape 11)
    The Staff recommends that the IC not add this issue to its agenda for the reasons set out above and to issue a tentative agenda decision to that effect.

New issues

The IC will discuss five new issues:

  • Commodities - Commodity loans (Agenda paper 10)
  • IFRS 10 Consolidated Financial Statements - Investment Entities—Consolidation of subsidiaries – (Agenda paper 5)
  • IFRS 9 Financial Instruments – modifications /exchanges of financial liabilities that do not result in derecognition (Agenda Paper 6). This paper was included in the September agenda but was not discussed for lack of time.
  • IFRS 9 Financial Instruments — Impact of symmetric ‘make whole’ and fair value prepayment options on the assessment of the SPPI condition (Agenda paper 7)
  • IFRS 9 Financial instruments/IFRS 5 Non-current Assets Held for Sale and Discontinued Operations – discontinuation of hedge accounting and business model assessment when a subsidiary is held for sale. (Agenda paper 8)

For the first three matters the staff are recommending that the matters not be taken onto the agenda. For the remaining two issues the staff have provided their initial analysis and are seeking feedback from the IC. Both matters will also be discussed with the IASB.

Post-implementation review of IFRS 13 Fair Value Measurement

The IC will be asked for initial input on areas the review should cover. (Agenda Paper 12)

The pre-meet­ing summaries for the meeting can be found here. We will update this page for our Deloitte observer notes from the meeting as they become available.

AcSB and IASB panel discussion on IFRS 15

31 Oct, 2016

On 14 October 2016 the Canadian Accounting Standards Board (AcSB) hosted a panel discussion on implementing IFRS 15 'Revenue from Contracts with Customers'. A video recording of that panel discussion as well as the slides presented are now available.

The panel was chaired by IASB member Gary Kabureck. Panelists were Karen Higgins (Vice-Chair of the AcSB and Partner at Deloitte), Karyn Brooks (Retired Senior Vice President and Controller at Bell Canada and member of the Transition Resource Group for Revenue Recognition), Cameron McInnis (Chief Accountant at the Ontario Securities Commission), and Allison McManus (Partner at KPMG and former IASB staff). After a short overview of the situation in Canada, panelists discussed in depth IFRS 15 implementation issues and project management including external communications.

The video recording (two hours and 15 minutes) is available on YouTube. The slides can be downloaded from the AcSB website.

European Union formally adopts IFRS 15

31 Oct, 2016

The European Union has published a Commission Regulation endorsing IFRS 15 'Revenue from Contracts with Customers'. IFRS 15 specifies how and when an IFRS reporter will recognise revenue as well as requiring such entities to provide users of financial statements with more informative, relevant disclosures. The standard provides a single, principles based five-step model to be applied to all contracts with customers.

Commission Regulation (EC) No 2016/1905 of 22 September 2016 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 29 October 2016 adopts IFRS 15 Revenue from Contracts with Customers issued by the IASB in May 2014. The EU effective date is the same as the IASB's revised effective date (annual periods beginning on or after 1 January 2018 with earlier appication permitted).

As a result of the EU's adoption, the EFRAG has updated its endorsement status report.

Agenda for the November 2016 Emerging Economies Group meeting

28 Oct, 2016

The agenda is available for the 12th meeting of the IASB's Emerging Economies Group (EEG), which is being held in Johannesburg on 3-4 November 2016.

The agenda for the meeting that will be chaired by IASB member Darrel Scott is sum­marised below:

Thursday 3 November 2016 (09:00-16:30)

  • Address by hosting country (South Africa)
  • Address by IASB
  • Pre­sen­ta­tions on IAS 37 issues
  • Dis­cus­sion: IAS 37 issues
  • Ad­min­is­tra­tive issues (topics for future meetings)

Friday 4 November 2016 (09:00-12:30)

  • Presentation and discussion: Post-implementation review of IFRS 13
  • IASB updates
  • Financial statements of subsidiaries
  • Dis­cus­sion and approval of the communiqué
  • Meeting summary

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

ESMA announces enforcement priorities for 2016 financial statements

28 Oct, 2016

The European Securities and Markets Authority (ESMA) has announced the priority issues that the assessment of listed companies' 2016 financial statements will focus on.

ESMA considers the following key topics to be especially relevant for the examinations of listed companies' financial statements:

  • presentation of financial performance;
  • financial instruments: distinction between equity instruments and financial liabilities; and
  • disclosures of the impact of the new standards on IFRS financial statements.

In addition, taking into consideration the relevance of Brexit for some issuers in Europe, ESMA urges issuers potentially affected by the result of the UK’s referendum to leave the EU to assess and disclose the associated risks and expected impacts it may have on their business activities. ESMA expects that more information about the impact will become available as the date of Brexit approaches.

ESMA and European national enforcers will monitor and supervise the application of the IFRS requirements outlined in the priorities, with national authorities incorporating them into their reviews and taking corrective actions where appropriate. ESMA will collect data on how European listed entities have applied the priorities and will publish its findings in a separate report.

Please click for the following documents on the ESMA website:

FRC’s Financial Reporting Lab issues report on business model reporting

27 Oct, 2016

The Financial Reporting Council’s (FRC’s) Financial Reporting Lab has published a report on business model reporting. The report highlights the importance of business model information to investors and provides valuable insight for companies on the type of information that they should be including in their business model disclosure. It also incorporates best practice examples.

The report reflects the views of 19 companies, 36 investors from 27 different investment and analyst organisations and 2 retail shareholders, all who contributed to the Lab project. It found that business model information is fundamental to investors’ analysis and understanding of a company and that a lack of good business model disclosure can raise concerns over the quality of company management. The report highlights how investors need more detail on the business model than what is currently provided by the majority of companies.

The Lab report also found:

  • Nearly all investors believe the business model should be presented near the front of the strategic report given that it provides context to the rest of the annual report.
  • Current disclosures lack information that answers important questions, including what the key revenue and profit drivers of the business actually are and what the key assets and liabilities are that support the business model.
  • Most investors believe business models are best communicated through a combination of infographic and detailed narrative. Such narrative should be written in plain, clear, concise and factual language.
  • Where a company operates a number of business models, i.e. one for each division or business line, most investors want to see comprehensive disclosure for each.
  • A good business model should provide the basis for reporting on a company’s strategy and should naturally link to other key sections of the strategic report.

 Click for:

HM Treasury consults on distributable profits of long-term (life) insurers

27 Oct, 2016

HM Treasury has published a consultation seeking views on technical changes to the legal definition of life insurers’ distributable profits. This definition affects how life insurers’ calculate profits available for distribution to their shareholders.

Long-term insurance businesses are subject to different rules, compared to other companies, regarding calculation of distributable profits; specifically they apply the concept of ‘long-term fund’ in Section 843 of the Companies Act 2006 (“the Act”). 

A change in the Prudential Regulation Authority (PRA) rulebook following the introduction of Solvency II (applicable to accounts for years ending on or after 1 January 2016) means that the concept of ‘long-term fund’ referenced in Section 843 is no longer used for Solvency II firms.  As a result, changes to the Act are required to allow long-term insurers to continue to apply rules regarding distributable profits that address the specific circumstances of long-term insurers and which are consistent with with the Solvency II regulatory framework. 

Comments are requested by 15 November 2016. 

The press release and the consultation document are available on the HM Treasury website.

Update 12 December 2016

Feedback from the consultation requested an updated framework for distributions of insurance companies be in place before the end of 2016.  As a result, the statutory instrument (link to statutory instrument) effecting the changes has been made and was laid before Parliament on 8 December.

The regulations come into force on 30 December 2016 and will have effect for distributions made on or after that date by reference to relevant accounts prepared for any period ending on or after 1 January 2016.

Agenda for the November 2016 IFRS Interpretations Committee meeting

27 Oct, 2016

The IFRS Interpretations Committee will meet at the IASB's offices in London on 8 November. The agenda for the meeting is now available.

The IFRS Interpretations Committee will continue its discussions on an issue regarding IFRS 9/IAS 39, deliberate comment letters received on an issue regarding IAS 12, finalise agenda decisions on IAS 12 and IAS 32, consider new issues on IFRS 10, IFRS 9 (two issues), IFRS 5/IFRS 9/IAS 39 and commodity loans (an issue not falling into any particular standard), consider an issue on hold regarding IAS 28; and discuss the PIR of IFRS 13.

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

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