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FRC consults on amendments to FRS 101

14 Dec 2016

The Financial Reporting Council (FRC) has issued, for comment Financial Reporting Exposure Drafts (FRED) 66 proposing limited amendments to FRS 101 ‘Reduced Disclosure Framework’.

When FRS 101 was originally published, the FRC committed to review the standard on an annual basis and update it to ensure that it maintains consistency with IFRS and remains cost-effective for groups.  FRED 66 Draft Amendments to FRS 101 Reduced Disclosure Framework 2016/17 cycle is the fourth of these proposed annual updates. 

In FRED 66 the FRC proposes limited amendments to FRS 101 in relation to IFRS 16 Leases.  

Specifically FRED 66 proposes to insert an additional paragraph, 8A, to prohibit qualifying entities that are lessees from taking an exemption against paragraph 58 of IFRS 16.  This requires lessees to disclose “a maturity analysis of lease liabilities applying paragraphs 39 and B11 of IFRS 7 Financial Instruments: Disclosures separately from the maturity analysis of other financial liabilities”.  As currently drafted lessees are exempt from this requirement as paragraph 8 of FRS 101 currently provides an exemption against the requirements of IFRS 7, provided equivalent disclosures are included in the consolidated financial statements of the group.  Lessors, however, are not exempt from the requirements to provide a maturity analysis which are included in paragraphs 94 and 97 of IFRS 16. 

The Accounting Council has advised that both lessees and lessors should be required to provide the maturity analyses of IFRS 16; not least as qualifying entities are already preparing and disclosing equivalent disclosures under IAS 17 Leases and this provides useful information on the financial position of a qualifying entity. 

The proposed amendments are expected to be available from when an entity applying FRS 101 first applies IFRS 16. 

Comments on FRED 66 are requested by 31 March 2017.  FRED 66 is available on the FRC website.

Publication of revised gender pay gap reporting regulations

14 Dec 2016

In February this year, the Government published a consultation on mandatory gender pay gap reporting regulations, with a “snapshot” of the data to be taken in April 2017 and a twelve month period to analyse and publish the information. The Government has now published revised gender pay gap reporting regulations which include a number of changes from the earlier draft regulations. All employers with 250 or more relevant employees will be expected to comply with these requirements.

The key changes in the revised regulations, which are still subject to approval by Parliament, are outlined below: 


The regulations will come into force on 6 April 2017 and the “snapshot” date on which pay data must be measured has moved forwards from 30 April to 5 April. This is so that employers do not need to collect data across more than one tax year.  This means that the first disclosures are now required by 5 April 2018 at the latest. 

Relevant employee

The definition has been simplified and now refers to a person who is employed by the relevant employer. The explanatory note to the regulations confirms that this includes apprentices and self-employed contractors who are obliged to perform work personally, unless it is not reasonably practicable to do so. 

Relevant employer

The revised regulations exclude public sector employers although similar regulations are expected to apply in due course. 

Definition of pay

Hourly pay consists of both ordinary pay and bonus pay paid in the reference period.

Ordinary pay includes basic pay and payments for leave, which has been defined to include annual leave; maternity, paternity, adoption, parental or shared parental leave; sick leave; and special leave. Termination payments are now expressly excluded.

The definition of bonus pay has been clarified and includes pay “in the form of money, vouchers, securities, securities options or interests in securities that relates to profit sharing, productivity, performance, incentives or commission”.

Shares and options will be treated as paid at the time when an income tax charge arises and will be valued based on their taxable value at this time. 

Pay gap calculation

The calculation of both the mean and median pay gaps now explicitly refer only to “full-pay” employees, who are defined as employees who are not being paid at a reduced rate due to being on leave. This clarified the concerns that many employers had about maternity or other family leave skewing the figures. 

Quartile pay bands

The revised regulations clarify that the quartile pay bands should be calculated by ranking employees in order from lowest paid to highest paid and dividing them into equal sized groups. Employers will be required to disclose the proportion of males and females in each band, rather than absolute numbers. 

Bonus calculations to be published

The revised regulations will require employers to publish the difference between the median in addition to the mean bonuses paid to male and female employees (the earlier draft regulations only required the mean). 

Detailed steps to calculating the hourly rate of pay and weekly working hours are now included, providing welcome clarification particularly for employees with irregular hours. 


The explanatory notes to the regulations state that non-compliance will be an ‘unlawful act’ which will empower the Equality and Human Rights Commission to take enforcement action. 

The Government will be publishing additional guidance to support the implementation of the regulations in due course. 

The revised draft regulations can be found here (link to draft regulations) and the explanatory memorandum is here (link to  Our news item on the February consultation is here.

*Update 03 March 2017 - the Regulations have now been approved by Parliament and will come into force on 6 April 2017.  No changes have been made from the draft Regulations.  The Regulations are available here (link to

IASB publishes editorial corrections

14 Dec 2016

The IASB has published a batch of editorial corrections that retract a previous correction and impact consequential amendments and stand-alone standards.

The retraction of a previous correction regards an editorial correction to IFRS 9 Financial Instruments published in July 2014.

The editorial corrections regarding consequential amendments affect

  • IFRS 15 Revenue from Contracts with Customers.

The editorial corrections stand-alone standards affect:

Editorial corrections do not change the meaning or application of pronouncements, but instead correct inadvertent errors. The editorial corrections can be viewed on the editorial corrections page of the IASB's website.

FRC amends FRS 101 and FRS 102 to remove the requirement to notify shareholders

14 Dec 2016

The Financial Reporting Council has issued Amendments to FRS 101 ‘Reduced Disclosure Framework’ and FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’.

The amendments, which were consulted on in Financial Reporting Exposure Draft (FRED) 65 remove the requirement for a qualifying entity to notify its shareholders in writing that it intends to take advantage of the disclosure exemptions in FRS 101 and FRS 102.  

The amendments are effective for accounting periods beginning on or after 1 January 2016.

Click for (all links to FRC website):

IFAC video interview with Hans Hoogervorst on the IASB's priorities to 2021

14 Dec 2016

The International Federation of Accountants (IFAC) has released a short video of IASB Chairman Hans Hoogervorst discussing the 2015 Agenda consultation the the IASB's priorities for the next five years.

Questions discussed are:

  • Why does the IASB do an agenda consultation?
  • What are the IASB's main priorities for the next five years?
  • Why has the IASB chosen "Better communication" as a theme?
  • What will be the biggest challenges for the IASB?
  • What role does the research programme play in standard-setting?
  • How does the IASB support implementation of the standards?

Please click to watch the short video (6 minutes) on the IFAC website.

FRC consults on corporate reporting research activities

13 Dec 2016

The Financial Reporting Council (FRC) has launched a consultation seeking stakeholder’s views on areas of focus for the FRC’s corporate reporting research.

The consultation particularly seeks views on:

  • The level of research activities in relation to corporate reporting that the FRC should undertake. The consultation asks at what level the FRC should undertake activities in this area; maintain research at the current level or alternatively increase or decrease the level of work in this area.
  • Potential projects that might be undertaken in the future with the aim of influencing the International Accounting Standards Board (IASB). The consultation highlights four potential projects and asks which, if any, the FRC should undertake and whether there are any other projects that stakeholders think that the FRC should undertake with a view to influencing the IASB:
    • variable and contingent consideration;
    • defined benefit pension schemes;
    • non-exchange transactions; and
    • intangible assets.
  • Whether the FRC should undertake further research:
    • to assess how corporate communications as a whole might better serve the needs of investors; and
    • to develop proposals on how corporate reporting might serve the needs of stakeholders other than investors.
  • Any other aspects of the FRC’s work on corporate reporting where stakeholders might wish to comment on. 

Comments are requested until 30 March 2017. 

The full consultation is available on the FRC website.

IASB Chairman speaks on fair value accounting and long-term investments

13 Dec 2016

During yesterday's ANC Symposium on Accounting Research, IASB Chairman Hans Hoogervorst was invited to participate in a roundtable on performance and the public European good. However, he used his openening statement to address a different topic.

Given the symposium was being held in Paris, Mr Hoogervorst commented on what he called "French accounting tradition’s problematic relationship with fair value accounting". He explained that the assumption that the IASB was made up of "market fundamentalists" was wrong as the vast majority of the IASB's accounting standards were cost-based. However, Mr Hoogervorst argued, in some case fair value accounting would be the right choice:

At the same time, I firmly believe that cost-based accounting is inadequate for reflecting the performance of long-term equity investments. Quite the opposite — the longer term an investment, the less relevant its original price becomes. I fail to see how investors would benefit from a balance sheet that shows the original price of an equity investment acquired 20 years ago.

Mr Hoogervorst admitted that market-based valuations of equity could lead to more short-term volatility in the information reported in financial statements. However, he expressed the belief that this volatility reflected the risks associated with such investments and that presenting these equities at cost would not make the volatility go away. He concluded:

Long-term investment should not be encouraged by artificial accounting stability in the numbers. Long-term investment is best served by transparency that the public can trust.

Please click to access Mr Hoogervorst's prepared statement on the IASB website. On his comments that were to the point of the roundtable we already reported in our news item on all of the symposium posted yesterday.

EFRAG Board meeting December 2016

12 Dec 2016

The European Financial Reporting Advisory Group (EFRAG) will hold a Board meeting on 13 December 2016.

An agenda with supporting papers and details on how to register for the public meeting can be found on the EFRAG website.

6th ANC Symposium on Accounting Research

12 Dec 2016

On 12 December 2016, the Autorité des Normes Comptables (ANC), the French standard-setter, hosted its 6th Symposium on Accounting Research in Paris. We have prepared a report from the symposium that explored the general theme of "Accounting and performance".

The mainstay of the symposium were presentations of six research papers each followed by roundtables on the topic presented and key speeches summing up the discussions. In addition there were introductory views presented by IASB and FASB as well as a final roundtable on performance and the public European good. In addition to a high level French audience the event drew also eminent attendance from China, Germany, Italy, Japan, Korea, the United Kingdom, and the United States as well as many other countries and supra national organisations.

IASB and FASB views

Following introductory remarks by ANC Chairman Patrick de Cambourg, former IASB member Philippe Danjou and FASB member Larry Smith introduced the IASB and FASB views respectively. Mr Danjou expanded on the IASB's "better communication" initiative, which includes the primary financial statements project, the disclosure initiative, the IFRS Taxonomy/XBRL considerations, and also work on materiality. While touching on all of these, he concentrated on the question of performance reporting and the IASB's efforts around this matter, which according to him will hopefully lead to tangible improvements but will not lead to the definition of a single measure of performance. Mr Smith noted that the FASB has been struggling with financial performance reporting as well for a long time - first jointly with the IASB, later by himself and most recently in a new research project. He explained that different background of the Board members as well as Board member rollover had not made things easier but the FASB's agenda consultation had clearly revealed that in addition to the problem of differentiating equity and liabilities the comment letters had clearly stated that financial performance reporting is a problem users and preparers want to be solved.

Research papers

  • The first research paper was dedicated to non-GAAP financial indicators and the question of whether they are representative strategic governance. The paper is available in French original and English translation on the ANC website. After the roundtable discussing internal organisation and financial communication strategies of companies, key speaker Roger Marshall (UK FRC) came to a qualified defense of non-GAAP measures. He explained that he could see their value in removing misleading volatility, in explaining where management and board of a company disagree with where IFRS requirements take them, and in reflecting the business model. However, Mr Marshall maintained that to be effective non-GAAP measures need to have a clear rationale, must be properly reconciled to IFRS numbers, and there must be valid reasons if non-GAAP measures are changed from year to year.
  • The second research paper discussed the theoretical foundations of the accounting representation of performance in a stakeholder and territorial approach. A French version and an English translation can be accessed on the ANC website. After the roundtable discussing of who the users of financial statements are, investors or (also) other stakeholders, key speaker Andreas Barckow (DRSC, Germany) explained that there is no right and no wrong answer to the question which was at the same time a beauty and a challenge. According to him, territoriality also in the metaphorical sense of non-core financial information as for example sustainability information and non-GAAP measures certainly had its place, the question was simply whether that place was in international financial reporting as the question looms whether one can really serve different constituents at the same time. Questions from the audience concluded the lively debate.
  • The third research paper on the impact of accounting and prudential standards for financial intermediaries on long-term capital investment is again available in French and English on the ANC website. The roundtable discussed the question of whether the long-term perspective can or must be integrated. Key speaker Linda Mezon (AcSB, Canada) concluded the session by providing insights from the Canadian perspective. She explained that in Canada it is believed that one can only get so many uses out of financial statements, therefore financial statements in Canada are understood not to be "be all and say all". Rather, financial statements are seen as a starting point on which others can build. Ms Mezon added that even the new expected losses approach in IFRS 9 is seen by some as pushing too much into financial statements. She concluded that building too many expectations into financial statements bears the danger of making them not useful for anybody.
  • The presentation of the fourth research paper “Marking to Market versus Taking to Market” (French version and English translation) was followed by a roundtable that discussed alternatives to mark to market and relevance and fairness. Key speaker Wei Ying (MoF, China) contributed insights into the challenges regarding fair value measurement faced by emerging economies. She explained that strict market controls in China lead to a relatively small number of listed companies. Undeveloped market infrastructure with little depth and an imbalanced structure of less mature market participants lead to irrational investing behaviour of individual and institutional investors.
  • The fifth research paper used a study a sample of European companies over ten years to discuss performance measures and components of OCI and their volatility and impact (French version and English translation). The subsequent roundtable carried the discussion further and also included the aspects of usefulness and recycling. Key speaker Yasunobu Kawanishi (ASBJ, Japan) followed with a slide presentation on the Japanese view of OCI. He explained that the ASBJ views OCI as a linkage factor between net income and comprehensive income as the objective of the balance sheet differs from the objective of the income statement. He also noted that under this approach recycling of all OCI items is needed. Questions from the audience were asked of both, the key note speaker and the panel.
  • The sixth and final research paper was dedicated to recognising environmental issues in performance measurement. This paper is also available in French and English. The following roundtable took the issue further and discussed non-financial components in the measurement of performance in general. Key speaker Angelo Casò (OIC, Italy) rounded off the discussion by explaining the change of mind that has occurred and has led from a situation where companies were not held responsible for anything but their assets to a situation where people realise that risks outside of a company may well impact a company's assets and should be reflected. However, Mr Casò maintained that financial statements are addressed at investors. When investors request sustainability information or other non-fiancial information this becomes relevant for the markets and economic decision making and should be reported. It is then that non-financial information becomes financially relevant, but only then.

Final roundtable

A final roundtable, that also saw participation of IASB Chairman Hans Hoogervorst and EFRAG President Jean-Paul Gauzès, discussed performance and the public European good. The panelists provided a wide range of comments. ANC Chairman Patrick de Cambourg opened the floor for the discussion with the comment that accounting itself is not neutral and should therefore refer, as overarching guidance, to the public interest. EFRAG President Jean-Paul Gauzès maintained that the European voice, being the voice of a whole continent should be heard, but it should be heard in the context of the overall context of standard-setting and of its individual aspects such as for example impact assessments.

Erik Nooteboom from the European Commission noted that the EU does not and will not development its own standards, however, it would carefully weigh adopting each standard against its own "framework" that included the endorsement criteria and among them the European public good. However, he noted that it was difficult if not impossible to define "European public good", rather it would be made up of the whole range of careful considerations. IASB Chairman Hans Hoogervorst commented that he could not see that defining the European - and global - public good would be so difficult. The only ambition of the IASB would be would be to develop accounting standards that reflected as closely as possible economic reality so that investors around the world could make informed decisions. If this was not an immense public good, he wondered, what would be?

Mr Hoogervorst also added that the IASB had no power to force jurisdictions into adopting IFRSs - all jurisdictions including the EU had the free choice to withdraw from IFRS application which to his mind was an expression of full sovereignty - something which Erik Nooteboom wholeheartedly supported and which reflected an earlier comment Jean-Paul Gauzès had made that raising the European voice meant raising the voice of sovereignty.

Reacting to a question from the audience on whether sustainability reporting would be an expression of public good and whether the IASB had plans to embark on that, Mr Hoogervorst responded that taking that on at the current time was beyond the IASB's resources and expertise. However, he pointed out that the IASB was a member of the IIRC, observed developments close and could - in the long run - see updating the management commentary practice statement for guidance on how to integrate sustainability reporting and financial reporting into an integrated report as a possible solution.

Recordings from the IASB research forum

09 Dec 2016

The third IASB Research Forum was held in conjunction with the 2016 Contemporary Accounting Research (CAR) conference that took place in Waterloo, Ontario, Canada on 15 and 16 October 2016. The Canadian Accounting Standards Board (AcSB) sponsored a webcast of the event and has now made available recordings on YouTube.

The papers that made up the IASB research forum were:

  • Moving the Conceptual Framework Forward: Accounting for Uncertainty
  • Assets and Liabilities: When do they Exist?
  • Relative Effects of IFRS Adoption and IFRS Convergence on Financial Statement Comparability

Please click here for the AcSB website that offers access to the recordings of the three sessions. The site also offers links to the author presentations and discussant presentations.

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