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2016

IOSCO statement on the implementation of new accounting standards

16 Dec 2016

The International Organization of Securities Commissions (IOSCO) has published a stamentent asking companies to disclose the likely effects of the new standards on revenue, financial instruments, and leases as these are expected to significantly affect the financial statements of many issuers globally, given the breadth of their applicability.

The statement highlights the importance of the implementation process by issuers and their audit committees, and the full, accurate, and timely disclosures of the possible impacts of adopting the new standards. The statement also provides a series of matters for issuers, as well as their audit committees and auditors, to consider as issuers adopt the new standards and auditors perform related audit procedures. IOSCO considers the accuracy, integrity, and comparability of issuer disclosure to be essential for maintaining investor confidence and therefore facilitating a stable international financial system.

Please click to access the statement on the IOSCO website.

Recent sustainability and integrated reporting developments

16 Dec 2016

A summary of recent developments at the CDSB, WBCSD, GRI, GSSB, IIRC, and IPSASB.

The Climate Disclosure Standards Board (CDSB) has released a fact sheet that offers guidance to the consultation paper with recommendations for effective disclosure of climate-related financial risks released by the Task Force on Climate-related Financial Disclosures (TCFD) set up by the Financial Stability Board (FSB). It helps navigate the over 200 pages of the report by asking 20 questions ranging from "What materials has the TCFD issued?" to "What happens next?". Click to access the helpful guidance on the CDSB website.

Also from the CDSB in collaboration with the World Business Council for Sustainable Development (WBCSD) is a new is an online platform of expert-verified information covering sustainability reporting requirements and resources across 30 different countries. So far, only a beta version is available. Click to check out the new Reporting Exchange website.

The Global Reporting Initiative (GRI) has released a study Shining a light on human rights: corporate human rights performance disclosure in the mining, energy and financial sectors. The study finds that the current state of reporting on human rights impacts in the mining, energy and financial sectors could be improved, but encouragingly, there are signs of progress. Please click to access the report on the GRI website.

Also from GRI is the 2017-2019 work programme of the Global Sustainability Standards Board (GSSB). The first two standards scheduled for review are GRI 303 Water and GRI 403 Occupational Health and Safety. The full work plan is available on the GRI website.

The International Integrated Reporting Council (IIRC) has released 2016 Value of Value: Board-Level Insights. The regular global survey finds that business leaders believe that investors want future perspective and that adopting integrated reporting would help deliver success to their organisations.However, the survey also suggests that executives lack the management and reporting information to understand and interpret the future drivers of their business. Please click to access the full report on the IIRC website.

The IIRC and the International Corporate Governance Network (ICGN) has also issued a a joint statement suggesting practical ways to encourage longer-term thinking and behaviours by capital market participants. This includes:

  • A focus on the long-term with strategy, performance, governance and prospects aligned to value creation over time
  • Investors as stewards, taking a proactive interest in all aspects of value creation
  • Reporting as a key pillar of 21st century governance, leading to transparency and information disclosures which help investors to better understand companies and make better investment decisions.

The International Public Sector Accounting Standards Board (IPSASB) has released a background paper by its staff that provides information on Emissions Trading Schemes (ETSs) and other government interventions that reduce emissions of greenhouse gases, including different types of government interventions and their economic impacts. The paper also touches on accounting questions in this context. The background paper can be accessed on the IPSASB website.

FEE becomes Accountancy Europe

16 Dec 2016

In connection with its 30th anniversary, the Federation of European Accountants (Fédération des Experts-comptables Européens, FEE) has changed its name to Accountancy Europe. The event celebrating the anniversary also saw the introduction of a new President of the organisation.

Accountancy Europe has dedicated a subsection of its new web presence to the event. It features among other points:

  • A report on the anniversary event;
  • A key note speach by Herman van Rompuy, former President of the European Council; and
  • Speeches by outgoing President Petr Kriz and incoming President Edelfried Schneider.

FRC announces thematic reviews for 2017/2018

15 Dec 2016

The Financial Reporting Council (FRC) has today announced the thematic reviews that it will undertake in 2017.

The thematic reviews announced today, and which are included within the FRC’s Draft Plan and Budget and Levy Proposals 2017/8, are areas where the FRC see scope for improvement and where there is particular shareholder’s interest. 

Within the areas of corporate reporting the FRC will undertake thematic reviews in the following areas: 

  • Significant accounting judgements and sources of estimation uncertainty.
  • Pension disclosures.
  • Alternative Performance Measures (APMs).  This will be the second thematic review into the use of APMs in annual reports and accounts following its first report into their use in interim statements in November 2016

The FRC has indicated that it will write to companies prior to their year-ends informing them that it intends to review disclosures in their next published reports and to specify the topic to be reviewed. 

The aim of this monitoring activity is “to drive continuous improvements in the quality of corporate reporting and to identify good examples of clear and concise disclosures”.  Examples will be shared with other companies to help them raise the quality in their corporate reporting. 

The FRC will also review and report on companies’ disclosures in relation to the following areas for any report reviewed in 2017:

  • The impact of new IFRSs; including the timeliness and usefulness of the information provided.
  • Principal risks and uncertainties relating to Brexit and the low interest rate environment and the extent to which they are company specific. 

These reviews will build upon its Annual Review of Corporate Reporting 2015/2016, published in October 2016, and its thematic review of APMs published in November 2016. 

Within the area of audit, thematic reviews will be conducted in the following areas in order to “drive continuous improvement in the quality of audit”:

  • Auditor’s responsibilities for areas of the annual report beyond the financial statements;
  • Audit firm culture and governance; and
  • Materiality, updating on the 2013 thematic review

In addition to the thematic reviews, noted above, the FRC will also focus its corporate reporting review and audit monitoring activity on the reports and audits in the priority sectors of:

  • Property
  • Travel and leisure.
  • Support services.

Click for (all links to FRC website):

December 2016 IASB meeting notes posted

15 Dec 2016

The IASB met at its offices in London on 13–14 December 2016. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

Tuesday 13 December

The last meeting for 2016 started with a brief oral update on IFRS 15 Revenue from Contracts with Customers. The update focused on the most recent TRG meeting held by the FASB.

Two implementation issues were discussed. The Board supported a proposal to amend IAS 19 Employee Benefits and IFRIC 14 IAS 19—The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. There are still some minor issues to address, which will be raised with the IFRS Interpretations Committee. The Board also decided to develop a narrow scope amendment to IFRS 9 Financial Instruments in relation to prepayment options and the assessment of the SPPI condition.

The Financial Instruments with the Characteristics of Equity Project discussion was on derivatives on ‘own equity’. The paper included an assessment of how the model being proposed would be affected by seven variables. However, the discussion focused mainly on foreign currency rights issues, for which the Board requested further analysis.

The Rate Regulated Activities project returned to the Board for its first substantive discussion since July 2015 for an education session. The Board was generally positive about the approach. The Board was not asked to make any technical decisions.

The Board was briefed on the upcoming release of the IFRS Taxonomy Update for the 2015/2016 common practice project, which focuses on agriculture, leisure, franchises, retail, and financial institutions.

Wednesday 14 December

The Wednesday sessions began with a session on the Conceptual Framework. They discussed papers on Measurement—redrafting the factors to consider in selecting a measurement basis; Business activities and long-term investment; Concepts of capital and capital maintenance; and Derecognition. The Board agreed with most of the staff recommendations.

The Board discussed its project on the Primary Financial Statements, focusing on the scope of the planned discussion paper. The staff proposed a narrow scope project, with targeted improvements. The main focus will be on the Statement of Comprehensive Income, with some possible changes to the Statement of Cash Flows. The staff have also been examining developing templates for a small number of industries. The Board supported taking a targeted approach, but will leave open the possibility of making consequential changes to the statement of financial position. A significant portion of the discussion focused on the importance of getting the disaggregation principle to work properly. The Board also wants to examine ways to bring more attention to OCI. There was very little support for developing templates.

The Disclosure Initiative had two topics—materiality and disclosures about restrictions on cash and cash equivalents.

The Board concluded its discussions on the materiality practice statement and the staff will start preparing the final document. The Board also decided to develop a separate exposure draft to amend the definition of materiality in IAS 1 Presentation of Financial Statements. Previously the Board had decided to wait until they had received feedback on the Principles of Disclosure discussion paper.

For disclosures about restrictions on cash and cash equivalents, the Board decided, by a narrow margin and after some debate, to support the staff recommendation not to proceed with the proposed amendments to IAS 7 Statement of Cash Flows that were exposed in 2014.

More information

Please click to access the detailed notes taken by Deloitte observers for the entire meeting.

FRC draft plan and budget highlights key areas of focus for 2017/2018

15 Dec 2016

The Financial Reporting Council (FRC) has published its Draft Plan and Budget and Levy Proposals for 2017/18 which indicates those priorities that it will focus on in 2017/18.

The FRC will continue to “drive high standards of corporate governance and reporting in the UK, and help maintain the UK’s standing as a global centre of excellence for accountancy, audit and actuarial work”.  The work plan includes a set of indicators, alongside each priority, that will assist the FRC in assessing the state of key aspects of corporate governance and reporting in the UK.

In 2017/18 the FRC’s priorities are: 

  • Promoting high quality corporate governance and effective investor stewardship. Key activities include:
    • Responding to the government’s consultation on Corporate Governance Reform, including action to update the Code and supporting guidance.
    • Following its Corporate Culture report by monitoring and reporting on culture by companies and investors.
    • Updating its Guidance on Board Effectiveness to incorporate its observations about corporate culture and the role of boards.
    • Scrutinising and reporting on the quality of reporting against the Stewardship Code and delisting signatories that fall within tier 3.
  • Enhancing the speed and effectiveness of its enforcement role
    • The FRC will seek to expand its team and review its procedures to ensure that reviews can be completed as quickly as possible with sufficient resources.
  • Promote high quality corporate reporting. Key activities include:
    • Continuing to work to influence the development of International Financial Reporting Standards (IFRSs).
    • Producing a second annual assessment of the state of corporate reporting in the UK, following its first report in October 2016.
    • Focusing corporate reporting reviews for the following priority sectors:
      • Property
      • Travel and leisure.
      • Support services.
    • Conducting thematic studies of:
      • Disclosure of judgements and estimates.
      • Pension Disclosures.
      • Alternative performance measures.
    • Monitor disclosure relating to:
      • New accounting standard disclosures
      • Principal Risks and Uncertainties – specifically the effect of the decision to leave the EU and the low interest rate environment on risk disclosures.
      • Updating its Guidance on the Strategic Report.
  • Promoting justifiable confidence in auditing. Key activities include:
    • Fulfilling its responsibilities as the Competent Authority for audit in the UK
    • Publishing a second report on developments in Audit, following its first report in July 2016. Areas of focus include changes in auditor appointment, audit of pension balances and disclosures and impact of currency fluctuations.
    • Conducting thematic reviews of:
      • Auditor’s responsibilities for areas of the annual report beyond the financial statements;
      • Audit firm culture and governance; and
      • Materiality
    • Influencing the work of the International Auditing and Assurance Standards Board (IAASB) and other standard-setting bodies
  • Promoting high quality actuarial work
  • Ensuring that it is effective and efficient, and has a corporate culture that supports its mission and regulatory role. 

The FRC also sets out its proposed budget for 2017/18 for expenditure and funding.  Overall the funding requirement is expected to increase by 4% from £34.6m to £36.0m.  This is principally through an increase of 2.5% in the levies on the professional bodies and a 5% increase in the preparers levy. 

Comments are requested until 17 February 2017. 

The press release and Draft Plan and Budget and Levy Proposals 2017/8 are available on the FRC website.

IFRS Foundation publishes proposal related to IFRS Taxonomy 2016

15 Dec 2016

The IFRS Foundation has published 'Proposed Update to the IFRS Taxonomy 2016 - Common Practice' for public comment.

The taxonomy updates contain additional taxonomy concepts that reflect new IFRSs and improvements to IFRSs, technical updates, and corrections. This update includes taxonomy elements for entities in agriculture, leisure, franchises, and retail.

Comments on the proposed update to the IFRS taxonomy are due by 15 February 2017. For more information, see the press release on the IASB’s website.

TCFD launches consultation on climate-related financial disclosures

15 Dec 2016

The Task Force on Climate-related Financial Disclosures (TCFD) set up by the Financial Stability Board (FSB) to develop voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to lenders, insurers, investors and other stakeholders has published a consultation paper with recommendations for effective disclosure of climate-related financial risks.

The consultation document notes that one of the essential functions of financial markets is to price risk to support informed, efficient capital-allocation decisions and maintains that:

One of the most significant, and perhaps most misunderstood, risks that organizations face today relates to climate change. [...] Many organizations incorrectly perceive the implications of climate change to be long term and, therefore, not necessarily relevant to decisions made today.

The TCFD has developed four widely adoptable recommendations on climate-related financial disclosures that are applicable to organisations across sectors and jurisdictions:

  • Governance: Disclosure of the organisation’s governance around climate-related risks and opportunities
  • Strategy: Disclosure of the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning
  • Risk management: Disclosure of how the organisation identifies, assesses, and manages climate-related risks
  • Metrics and targets: Disclosure of the metrics and targets used to assess and manage relevant climate-related risks and opportunities

The TCFD recommends that preparers of climate-related financial disclosures provide such disclosures in their mainstream reports. The TCFD also recommends the disclosure of potential impacts of climate-related risks and opportunities under different potential scenarios, including a 2° Celsius scenario.

The press release and draft recommendations are available on TCFD website and are open for public consultation over the next 60 days.

EFRAG issues endorsement advice on amendments to IFRS 2

14 Dec 2016

The European Financial Reporting Advisory Group (EFRAG) has issued its endorsement advice for the use of the amendments to IFRS 2 'Share-based Payment' in the European Union (EU).

In June 2016 the International Accounting Standards Board (IASB) published Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2) which clarify the classification and measurement of share-based payment transactions. The amendments address several requests that the IASB and the IFRS Interpretations Committee received and that the IASB decided to deal with in one combined narrow-scope project.  The amendments address:

  • the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments;
  • share-based payment transactions with a net settlement feature for withholding tax obligations; and
  • a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled.

EFRAG supports the adoption of the amendments and recommends their endorsement.  EFRAG’s assessment is that the amendments meet the technical requirements of the Regulation (EC) No 1606/2002 of the European Parliament and of the Council on the application of international accounting standards.  

EFRAG also considers that the overall benefits of the amendments are likely to outweigh the associated costs to implement them.

EFRAG has also updated its endorsement status report to reflect the issuance of the endorsement advice.

2017 IFRS 'Blue Book' now available

14 Dec 2016

The IFRS Foundation has published '2017 IFRS Standards — Consolidated without early application' (the 'Blue Book').

This volume contains all official pronouncements that are mandatory on 1 January 2017. It does not include IFRSs with an effective date after 1 January 2017.

The following are the main changes made since 1 January 2016:

The Blue Book is available online now for subscribers to eIFRS Professional. The printed book will be available for sale in January 2017 through the IASB's web shop for £75 plus shipping (academic, developing country, and volume discounts apply).

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.