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CAQ issues publication on non-GAAP measures

09 Dec 2016

The Center for Audit Quality (CAQ) of the American Institute of Certified Public Accountants (AICPA) has released a publication 'Non-GAAP Financial Measures: Continuing the Conversation'.

The purpose of the publication is to explore the issue of non-GAAP information, providing context on its definition and use, pertinent regulatory developments, and the current level of auditor involvement. The publication includes questions for stakeholder groups to consider as they prepare or use non-GAAP financial measures.

For more information, please see the press release and publication on the CAQ’s website.

FRRP findings in respect of strategic report and operating segments

08 Dec 2016

The Financial Reporting Council (FRC) has issued a press release of the findings of the Financial Reporting Review Panel (FRRP) stemming from its review of the annual report and accounts of Sports Direct International plc for the year ended 26 April 2015.

The principal issue arising related to whether the 2015 strategic report complied with the Companies Act 2006 requirement to be balanced and comprehensive.

The FRC noted several issues relating to the lack of discussion provided by Sports Direct in relation to international stores in its Sports Retail division, particularly those in Austria and the Baltic states in the 2015 report. It also noted a continuing lack of discussion about international stores in the 2016 strategic report. Additionally the FRC considered whether the level of aggregation provided in the company's segmental reporting disclosures was compliant with the requirements of IFRS 8 Operating Segments.

Following discussion with the FRC, the directors of Sports Direct have provided additional commentary about Sports Retail's international stores in the 2016 interim results and separately presented segmental information about these stores rather than aggregating them with UK stores. These changes will also be reflected in the company's 2017 annual report.

The full press notice can be obtained from the FRC website.

Hans Hoogervorst discusses pension liability

08 Dec 2016

At the Institute of Pension Education in Rotterdam, IASB Chairman Hans Hoogervorst spoke about pension liabilities and the effect of a low interest rate environment.

In his speech, Mr Hoogervorst noted the need for the IASB to develop additional guidance on pension scheme designs to adapt to recent developments. In addition, he commented that the IASB’s liability measurement approach is well accept and that they “reject calls to fundamentally change pension accounting to eliminate or reduce pension deficits.” Further, he provided his views on macro-economic policies. He stated:

A return to more normal interest rates will reduce the pension liability and will be beneficial for the long-term health of the pension system. But even then, short-term pain seems inevitable, because a lot of damage has been done. While the pension liability will be reduced, there will probably be short-term harm to both your bond and stock portfolios. This is another reason why I do not believe that our accounting for the pension liability exaggerates the problem.

The full tran­script of the speech is available on the IASB’s website.

IFRS Foundation publishes its second update to IFRS Taxonomy 2016

08 Dec 2016

The IFRS Foundation has published 'Update 2 to the IFRS Taxonomy 2016'.

This update includes taxonomy elements for the September 2016 final amend­ments to IFRS 4 related to the different effective dates of IFRS 9 and the upcoming insurance contracts standard.

For more in­for­ma­tion and access to the update, see the press release on the IASB’s website.

New Interpretation on foreign currency transactions and advance consideration

08 Dec 2016

The International Accounting Standards Board (IASB) has published IFRIC 22 'Foreign Currency Transactions and Advance Consideration' developed by the IFRS Interpretations Committee to clarify the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency.


The IFRS Interpretations Committee observed some diversity in practice regarding the exchange rate used when reporting transactions that are denominated in a foreign currency in accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates in circumstances in which consideration is received or paid in advance of the recognition of the related asset, expense or income. As a consequence, the Interpretations Committee decided to develop an interpretation.


Content of IFRIC 22

Issue and scope of the interpretation

The interpretation addresses foreign currency transactions or parts of transactions where

  • there is consideration that is denominated or priced in a foreign currency;
  • the entity recognises a prepayment asset or a deferred income liability in respect of that consideration, in advance of the recognition of the related asset, expense or income; and
  • the prepayment asset or deferred income liability is non-monetary.


The Interpretations Committee came to the following conclusion:

  • The date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability.
  • If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt.

Effective date

IFRIC 22 is effective for annual reporting periods beginning on or after 1 January 2018. Earlier application is permitted.


On initial application, entities apply the interpretation either:

  • retrospectively in accordance with IAS 8; or
  • prospectively to all foreign currency assets, expenses and income in the scope of the interpretation initially recognised on or after the beginning of the reporting period an entity first applies the interpretation in or the beginning of a prior reporting period presented as comparative information.


Additional information

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IASB finalises amendments to IAS 40 regarding transfers of investment property

08 Dec 2016

The International Accounting Standards Board (IASB) has published 'Transfers of Investment Property (Amendments to IAS 40)' to clarify transfers of property to, or from, investment property.



The IFRS Interpretations Committee received a request for clarification of the application of paragraph 57 of IAS 40 Investment Property, which provides guidance on transfers to, or from, investment properties. More specifically, the question was whether a property under construction or development that was previously classified as inventory could be transferred to investment property when there was an evident change in use.

The Interpretations Committee referred the matter to the IASB, and at its April 2015 meeting, the IASB agreed to amend the paragraph to reinforce the principle for transfers into, or out of, investment property in IAS 40 to specify that such a transfer should only be made when there has been a change in use of the property. The proposals in the exposure draft published in November 2015 have now been finalised.



The amendments in Transfers of Investment Property (Amendments to IAS 40) are:

  • Paragraph 57 has been amended to state that an entity shall transfer a property to, or from, investment property when, and only when, there is evidence of a change in use. A change of use occurs if property meets, or ceases to meet, the definition of investment property. A change in management’s intentions for the use of a property by itself does not constitute evidence of a change in use.
  • The list of evidence in paragraph 57(a) – (d) was designated as non-exhaustive list of examples instead of the previous exhaustive list.


Effective date and transition requirements

The amendments are effective for periods beginning on or after 1 January 2018. Earlier application is permitted. An entity applies the amendments to changes in use that occur on or after the beginning of the annual reporting period in which the entity first applies the amendments. Retrospective application is also permitted if that is possible without the use of hindsight.


Additional information

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IASB concludes the 2014-2016 annual improvements cycle

08 Dec 2016

The IASB has issued 'Annual Improvements to IFRS Standards 2014–2016 Cycle'. The pronouncement contains amendments to three International Financial Reporting Standards (IFRSs) as result of the IASB's annual improvements project.

Annual Improvements to IFRS Standards 2014–2016 Cycle makes amendments to the following standards:

IFRS Subject of amendment

IFRS 1 First-time Adoption of International Financial
Reporting Standards

Deleted the short-term exemptions in paragraphs E3–E7 of IFRS 1, because they have now served their intended purpose

IFRS 12 Disclosure of Interests in Other Entities

Clarified the scope of the standard by specifying that the disclosure requirements in the standard, except for those in paragraphs B10–B16, apply to an entity’s interests listed in paragraph 5 that are classified as held for sale, as held for distribution or as discontinued operations in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

IAS 28 Investments in Associates and Joint Ventures

Clarified that the election to measure at fair value through profit or loss an investment in an associate or a joint venture that is held by an entity that is a venture capital organisation, or other qualifying entity, is available for each investment in an associate or joint venture on an investment-by-investment basis, upon initial recognition

The amendments to IFRS 1 and IAS 28 are effective for annual periods beginning on or after 1 January 2018, the amendment to IFRS 12 for annual periods beginning on or after 1 January 2017.

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Hans Hoogervorst discusses the IASB's future

06 Dec 2016

During the annual American Institute of Certified Public Accountants (AICPA) Conference on Current SEC and PCAOB Developments in Washington, D.C., IASB Chairman Hans Hoogervorst spoke about global current events and what to expect from the IASB in the upcoming year and beyond.

Mr Hoogervorst began his speech by discussing Brexit and the US presidential election, the results of which have been presumed to be a “negative reaction to globalization”. He noted that he sees “no immediate consequences” for IFRS as a global standard. He acknowledged that “it is entirely possible that the trend towards growing global investment and trade may be interrupted,” but reminded the audience that “the logic for common accounting standards remains compelling” and that multi-national corporations and global investors will continue to be important to the global economy.

On the topic of US GAAP, Mr Hoogervorst stated that “the IASB is keen to keep IFRS Standards as closely converged as possible to US GAAP.”

Once the IASB completes its projects on insurance and the Conceptual Framework in 2017, Mr Hoogervorst noted that the IASB will shift its focus to improving the communication effectiveness of the financial statements. He announced that the central theme of the IASB’s new agenda will be 'better communication' and will look at improving primary financial statements (or what the IASB calls 'performance reporting'). The goals are to (1) increase comparability and (2) make it easier for regulators to enforce discipline around the presentation of non-GAAP measures. Mr Hoogervorst also announced that the IASB will continue to work on the IFRS Taxonomy to “shore up” the reliability of electronic reporting.

The full transcript of the speech is available on the IASB’s website.

Survey on XBRL reveals that only few investors extract all the data they need manually from reports

06 Dec 2016

The CFA Institute, a global association of investment professionals, has published the results of a member survey on XBRL.

While the focus of the survey is the lack of knowledge of XBRL, the poor quality of XBRL information companies provide, and the fact that neither companies nor investors regard XBRL as a communication platform, the study also provides interesting insights into where and how investors get their information.

Only 11% of respondents extract all the information they need directly and manually from financial statements and other source documents. This number has halved since 2009. On the other hand, the share of those respondents who either rely exclusively on information by third-party providers or obtain most of the data used in their evaluation of companies from third‐party data providers with only a limited amount of data extracted manually has gone up from 42% in 2009 to 58% in 2016.

The study concludes that if companies changed their approach to the use of structured data and no longer just tagged their information at the end of the financial reporting process simply to meet regulatory compliance needs, it could revolutionise financial reporting and would raise the level of awareness of XBRL which currently has 90% of investors not using XBRL because they are either unaware of XBRL (55%) or are aware but not up-to-date on its usage in financial reporting (35%). Whether better XBRL usage and awareness would also stop the trend of increasingly relying on third-party data is not a question looked at in the study.

Please click to access the full report on the CFA Institute website.

The Bruce Column — Going for the heart of the global debate

05 Dec 2016

Richard Howitt has just taken over as Chief Executive of the International Integrated Reporting Council, following in the footsteps of Paul Druckman. Our regular, resident columnist Robert Bruce has just interviewed him on film. Here he reports on what Howitt had to say in that interview. It is clear that the global adoption of integrated reporting and its use as a catalyst for reform more generally of global corporate governance systems are going to feel the full force of his powers of persuasion and implementation.

There will be no slowing of momentum at the International Integrated Reporting Council. Richard Howitt, its new chief executive, has hit the ground running. In a film interview I did with him it was clear that global adoption of integrated reporting and its use as a catalyst for much reform of global corporate governance systems is going to feel the full force of his powers of persuasion and implementation. As an MEP Howitt was involved with integrated reporting almost from the outset and now he has taken over from Paul Druckman as chief executive. After Druckman’s five years of travelling the world and building momentum behind integrated reporting ideas, Howitt says he feels ‘a huge responsibility on me to drive it forward’, with hopes of moving ‘towards global adoption’. He intends there to be a seamless but equally energetic transition. ‘I bring huge energy and ideas to the task’, he said, ‘but I am absolutely signed up to the concept and there will be big continuity’. 

The Druckman years were of building experience, understanding, acceptance and momentum. Now Howitt can build on that. ‘I want to send a very clear signal to all our international partners that IIRC continues and will be enhanced as a global coalition and a global movement’. The spreading of the word and the spreading of its application in practice is, as Howitt put it, ‘deeply exciting’. He is encouraged, as he put it, ‘that no one single company anywhere in the world having decided to go down the road of integrated reporting has gone back on that. They see the advantages’. And he is working off the back of successes. In Japan over 300 companies are producing integrated reports. In Malaysia over 20 major companies are committed to producing integrated reports. And South Africa has just introduced a new corporate governance code that explicitly embeds integrated reporting within it. ‘This is something with deep international momentum behind it’, said Howitt. ‘There are going to be very exciting times in the months and years ahead’. But it is not about simply implementing a system. ‘This is not a numbers game’, he said. ‘It’s not about quantity. It’s about quality’. And it is about a much wider influence. ‘We want integrated reporting to be a key part of corporate governance’, he said. He talked of the debates going on around the world about reform of the capital markets, the shift to long-termism by investors. ‘All those are our debates’, he said, and across the coming five years ‘integrated reporting will be seen as a means, a tool, by which these aims can be realized and we will be at the heart of shaping that debate’. And within companies it will be just as powerful a tool. ‘Integrated reporting is not an add-on’, he said, ‘not disclosure for disclosure’s sake, but genuinely about companies building long-term value, being better managed, understanding and managing risk, and therefore reducing costs but creating value. This is a very, very strong message’. 

And it all has a wider significance around the world. Howitt sees it as being at the heart of the debate around the idea of inclusive capitalism, articulated by the UK’s Prime Minister but also, as Howitt pointed out, a global movement. He hopes the UK Government will take to heart his views that within company law politicians, in his words, ‘stick to a backward looking definition of shareholder primacy’, whereas in the Corporate Governance Code ‘they are working exactly along the lines that the IIRC does to say that there should be a concentration for boards and for executives on long-term value creation’. Talking about the conversations the IIRC has had with Government Howitt pointed out that ‘we have said to them that aligning corporate governance codes and stewardship codes to the principles of integrated reporting and long-term value creation is an important contribution’. 

He also wants, through the Corporate Reporting Dialogue, to bring the major standard-setting frameworks involved in both financial reporting and sustainability reporting around the world together. ‘I am very proud that we have convened and led that work’, he said. And he also raised the importance of the accounting profession as a key element in the change that integrated reporting is bringing about. ‘The accounting profession have been key drivers in this’, he said. ‘They share the same aim of wanting better corporate reporting. They don’t want to be part of the old compliance world. They want to ensure that their work is improving the management for good business strategy. It is all part of that long-term value creation story’. And he urged the profession to bring its skills to bear on traditional areas like assurance, hitherto rarely discussed in the integrated reporting arena. ‘It shows how important it is for the accounting community internationally that we drive ahead on this goal of assuring integrated reporting’. 

He is also very keen to ensure that business is not seen in the public arena as something untrustworthy. He is keen to speak up for business. He sees more moral strength in business than elsewhere. His view after the recent Rio Summit for sustainable development is that ‘there was no doubt there that the business leaders were ahead of the governmental representatives on what they wanted to see’. And his experience around the international business world generally leads him to say: ‘I am not meeting people who are morally neutral and ambiguous people’, he says. ‘I’m meeting people with vision, people with passion, people who are committed, who can see they have the opportunity in their business, in their work, to be able to realise aims that many people outside of business would share’. He intends using his energy to put this across and build it into the international debates taking place. ‘It is part of how we are going to deliver integrated reporting ‘, he says.

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.