The Commission proposal would amend the Accounting Directive to ensure that large groups publish annually a report disclosing the profit and the tax accrued and paid in each Member State on a country-by-country basis.

In its letter, FEE supports the initiative for more transparency and restoring trust in tax systems as high quality corporate reporting is in the public interest. FEE also notes that the information produced must be useful and meaningful, that the form and date of publication should be clarified, and that clearer guidance on materiality is needed. Overall, FEE sees some of the proposed amendments as "pragmatic first step" and believes that the EU should strive for a global standard.

Like with other tax initiatives in past years, greatest effectiveness would be ensured through international coordinated initiatives. Therefore, the Federation would suggest that the EU improves international coordination in this field with relevant bodies such as the OECD, the UN, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB).

Please click to download the full letter from the FEE website.

The IASB followed the reasoning of the staff that assuming IFRS 17 is issued in the first half of 2017 the 2021 effective date would allow 3.5 to 4 years from the issuance of IFRS 17 to the mandatory effective date. The Board also decided that an entity may apply IFRS 17 before 1 January 2021 but cannot do so unless it also applies IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers.

The 2021 effective date also means that entities applying the deferral approach, which permits an entity to apply IAS 39 rather than IFRS 9 for annual reporting periods beginning before 1 January 2021, can continue to do so right until the new insurance contract becomes mandatorily effective.

As stated in the comment letter, we agree with the IFRS In­ter­pre­ta­tions Committee's analysis of the IAS 12 requirements included in the tentative agenda decision; however, we note that purchases and sales of ‘single-asset’ entities give rise to a number of issues around not only deferred tax accounting, but also fair value measurement and the distinction between asset purchase and business combination accounting. We recommend that the wider accounting issues arising from such transactions be considered by the Board as it develops its agenda for the next three years.

Please click to access the full comment letter.

At the last EFRAG Board meeting on 10 November, the EFRAG Board members agreed that although the amendments do not address all of the concerns voiced they would like to send a positive endorsement signal. Therefore, the draft endorsement advice states:

Without qualifying our advice, we note that the Amendments address many of the concerns raised in our endorsement advice on IFRS 9 but do not address the cost concerns of entities undertaking insurance activities that are not predominant insurers.

Please click to access the press release on the EFRAG website. EFRAG has also updated its endorsement status report, which can be downloaded here.

The report, The Hampton-Alexander Review (“the Review”), builds upon the work of Lord Davies who, in his final report into Women on Boards in October 2015, set a target of 33% representation of women on the Boards of FTSE 350 companies by 2020.

Whilst Lord Davies focused on increasing the representation of females on the Boards of FTSE 350 companies, the review extends the focus beyond the company boardroom to senior women below the company Board.  As well as recommending that 33% of executive pipeline positions (the combined Executive Committee and Direct Reports to the Executive Committee) for FTSE 100 companies are filled by women, the review will also “continue to drive forward” the momentum of the Davies review and seek 33% female representation on the Boards of  FTSE 350 companies by 2020. 

Research has indicates that 25.1% of those currently sitting on FTSE 100 Executive Committees, and their Direct Reports are women.  There was stronger representation of women in the Direct Reports at 26% women, but less strong on the Executive Committees with only 18.7% of women.  Only 20 of the FTSE 100 currently have at least one third of their executive pipeline made up of women so there is “still more work to do” to achieve the targets set in the review.  Significantly, there are 12 FTSE 100 Executive Committees with no women on them.

The review makes a number of recommendations including:

• Women on Boards – FTSE 350 companies should aim for a minimum of 33% women’s representation on their Boards by 2020;
• FTSE Women Leaders:
  • Call to action All CEOs of FTSE 350 companies should take action to improve the under-representation of women on the Executive Committee and in the layer immediately below, the Direct Reports to the Executive Committee.
  • Target representation - There should be 33% of executive pipeline positions for FTSE 100 companies are filled by women.
  • Transparency – FTSE 350 companies should voluntarily publish details on the number of women on the Executive Committee and in the Direct Reports to the Executive Committee on an annual basis. The report recommends that this information is disclosed in the Corporate Governance Section of the Annual Report and Accounts and/or on websites.
• Government reporting requirements:
  • The Financial Reporting Council (FRC) should amend the UK Corporate Governance Code so that all FTSE 350 listed companies disclose in their Annual Report and Accounts the gender balance on the Executive Committee and Direct Reports to the Executive Committee. The FRC indicates (link to FRC website) that it “stand[s] ready to revise the UK Corporate Governance Code” following the Government consultation”.
  • The Department for Business, Energy and Industrial Strategy (BEIS) should look to clarify or support the definition of “senior managers” (for the purposes of disclosure of the gender balance in the Strategic Report) in legislation to allow clearer comparisons on gender diversity to be made by companies.

There are also recommendations for investors and executive search firms.  Although the target for 33% representation is only for the FTSE 100 at this stage, all recommendations of the review are focused on the FTSE 350.

Whilst the focus of the review is on the executive pipeline, it also reports on the progress on the representation of women on Boards of the FTSE 350 at as October 2016.  Findings indicate that “the pace of increase on Women on Boards has slowed in the past 12 months, particularly in the FTSE 100.  Findings indicate that:

• The percentage of female-held directorships on FTSE 100 Boards has marginally increased to 26.6% from 26.1% in Lord Davies’ final report.
• The percentage of female-held directorships on FTSE 250 Boards has increased to 21.1% from 19.6% % in Lord Davies’ final report.

The report indicates that “there may be a degree of complacency with the FTSE 100 having reached the 25% target in 2015 and taking time to gear up to the new 33% target”. 

Click for:

• Press release (link to BEIS website)
• The Hampton-Alexander Review – FTSE Women Leaders (link to government website)
• Our previous UK Accounting Plus story on Women on Boards

The Stewardship Code (link to FRC website) operates on a ‘comply or explain’ basis and is aimed at institutional investors, asset owners and asset managers. It sets out good practice on engagement with investee companies, which includes monitoring companies, entering into dialogue with boards and voting at general meetings.  The aim of the Code is to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and the efficient exercise of governance responsibilities.

The signatories have been categorised into tiers based upon the quality of the reporting in their statements based on the seven principles of the Code and the supporting guidance.  The tiering exercise was undertaken in order to “improve the quality of reporting against the Code, encourage greater transparency in the market and maintain the credibility of the Code”.  Asset managers have been categorised into three tiers and asset owner and service provider signatories have been categorised into two tiers as follows:

Tier 1

Signatories provide a good quality and transparent description of their approach to stewardship and explanations of an alternative approach where necessary. 

Tier 2

Signatories meet many of the reporting expectations but report less transparently on their approach to stewardship or do not provide explanations where they depart from provisions of the Code. 

Tier 3

Significant reporting improvements need to be made to ensure the approach is more transparent. Signatories have not engaged with the process of improving their statements and their statements continue to be generic and provide no, or poor, explanations where they depart from provisions of the Code.   

There are nearly 300 signatories to the Code and more than 100 signatories are Tier 1.  The FRC has indicated that “asset managers who have not achieved at least Tier 2 status after six months will be removed from the list of signatories as their reporting does not demonstrate commitment to the objectives of the Code”.  It also welcomes contact from signatories, particularly those in Tier 3, to “discuss improvements in reporting”. 

The FRC has indicated that although it is “pleased” with the response to the tiering exercise, where “many signatories have reaffirmed their commitment to quality, transparent reporting and stewardship”, it will still look for “continuous improvement” from Code signatories.

The press release and list of tiers are available from the FRC website.

The national standard-setters agree that increased cooperation between the standard-setters around the world including the IASB is not only nice to have but an absolute must. They state that the cooperation with the IASB has improved over the last years with increased and more open dialog. However, while IASB Chairman Hans Hoogervorst seems to be satisfied with the situation as is and with the standard-setters being the ear on the ground for the IASB, the standard-setters believe that there is still room for improvement and that the dialog should not only be going one way.

Please click to access the short video (slightly over five minutes) on the IASB website.

In 2015, the government supported a review by Sir John Parker into the ethnic and cultural diversity of UK Boards.  At that time significant attention had only been focused on gender diversity led by Lord Davies in his 2011 review of Women on Boards (link to BIS website).

The report highlights: 

As a general matter, the Boardroom of Britain’s leading public companies do not reflect the ethnic diversity of either the UK or the stakeholders that they seek to engage and represent.  The ethnic minority representation in the Boardrooms across the FTSE 100 is disproportionately low, especially when looking at the number of UK citizens of colour.  

The report therefore calls for changes in Boardroom composition and “highlights clear business reasons for increasing ethnic diversity on UK Boards”.  It sets out both internal and external benefits for increasing ethnic diversity on UK Boards.  These changes, the report indicates, are necessary “in order for corporate Britain to reflect the progress that is being made in diversity, equality and inclusion generally”.

Key findings from the FTSE 100 include:

• UK citizens of colour represent only about 1.5% of the total director population - in contrast approximately 14% of the overall UK population is a person of colour.
• 53 out of the FTSE 100 companies do not have any directors of colour.
• Only nine people of colour hold the position of Chair or CEO.

A number of recommendations, which are published for consultation, are made in the report including:

• Each FTSE 100 Board should have at least one director of colour by 2021; and each FTSE 250 Board should have at least one director of colour by 2024.
• Nomination Committees of all FTSE 100 and FTSE 250 companies should require their human resource teams or search firms to identify and present qualified people of colour to be considered for Board appointment when vacancies occur.
• The principles of the “Standard Voluntary Code of Conduct” for executive search firms should be extended to apply to recruitment of minority ethnic candidates as Board directors of FTSE 100 and FTSE 250 companies.
• There should be mechanisms within FTSE 100 and FTSE 250 companies to enable them to identify, develop and promote people of colour from within their organisations and create a pipeline of Board capable candidates over time.
• The company’s annual report should include a description of the Board’s policy on diversity including a description of the company’s efforts to increase ethnic diversity within its organisation including at Board level.
• There should be a disclosure in the annual report as to why companies have not been able to comply with Board composition recommendations.

In order to reach an ethnically diverse mix similar to the overall adult working population by 2021 (approximately 15%) the report highlights that one in five new Board appointments would need to be a person of colour. 

The report includes two appendices – A Questions for Directors and B The Directors’ Resource Toolkit to help UK companies enhance the ethnic diversity of their Boards and to help existing Boards to deliver on the report recommendations. 

The consultation period runs until 28 February 2017.  A report will then be published containing final recommendations. 

The press release and report are available on the Department for Business, Energy and Industrial Strategy (BEIS) website.

Meeting ac­tiv­i­ties included the following:

• Executive session — The Trustees discussed a number of important strategic issues:
  • Feedback on the Constitutional review — The Trustees review feedback on the Exposure Draft IFRS Foundation Review of Structure and Effectiveness: Amendments to the Constitution and made conclusions on 10 proposals.  
  • Agenda con­sul­ta­tion — The Trustees were updated on the progress on the Board’s Agenda Con­sul­ta­tion and the near-final draft of the 2015 agenda consultation feedback statement.
  • Pre­sen­ta­tion on IFRS in India — The Trustees received a pre­sen­ta­tion on the status of IFRSs in India and the development of Indian Accounting Standards.
  • Other issues — The Trustees discussed progress on the Foundation’s new website, the UK referendum on leaving the EU, intellectual property, fundraising activities in the USA, developments in Asia-Oceania, and the preparations for the Trustees’ next meeting in January 2017.
  • Committee reports — The Trustees discussed reports from the Due Process Oversight Committee, Audit and Finance Committee, the 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, agenda consultation, IFRS 9 endorsement, and other issues.
• Events in Delhi — The Institute of Chartered Accountants of India (ICAI) hosted a stakeholder event with the Trustees.

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) outreach conducted on performance reporting and debt/equity presentation for the conceptual framework project and (2) the decision on an issue regarding the interaction of IAS 28 and IFRS 9.
• 2015 Agenda Consultation: summary of the consultation process — The DPOC confirmed that the requirements of the Due Process Handbook have been meet.
• Effect Analysis — The DPOC discussed the challenges of assessing insurance products and macroeconomic consequences of applying the expected loss model under IFRS 9.
• Strategic Work Plan 2016 — The DPOC discuss benchmarking of its due process procedure against other organisations.
• Consultative groups — The DPOC agreed that the annual review of consultative groups was in accordance with the Due Process Handbook.
• Reporting protocol — The DPOC discussed the annual review and the handling of comment letters.
• IFRS education initiative due process report — The DPOC agreed that the development and level of review for the IFRS education initiative was consistent with the Due Process Handbook.
• 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.