This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.


FRAB minutes for November 2016 meeting released

30 Nov 2016

The minutes of the Financial Reporting Advisory Board’s (FRAB’s) meeting of 24 November 2016 have been made available on the HM Treasury website.

The role of the Financial Reporting Advisory Board (FRAB) is “to ensure that government financial reporting meets the best possible standards of financial reporting by following Generally Accepted Accounting Practice (GAAP) as far as possible”.  The FRAB includes representatives from the accountancy profession in the private and public sectors, academia and government bodies.  The board meets regularly to consider proposed changes to policy and practice

Key topics discussed during the meeting included: 

  • Financial Reporting Manual (FReM) 2016-17 and 2017-18 – a paper was introduced by HM Treasury providing the Board with the revised FReM 2016-17 and illustrative statements. A draft FReM and illustrative statements for 2017-18 was also presented for consideration.
  • International Financial Reporting Standard 9 Financial Instruments consultation feedback. A paper was produced summarising the consultation feedback.  A number of respondents to the consultation saw the new impairment model as providing the greatest challenge.  The impairment approach in the consultation was received positively and HM Treasury have indicated that it proposes to mandate this across government.  Additionally it was highlighted that HM Treasury are planning to mandate the use of IFRS 9 for hedge accounting, implement retrospective application with no restatement and maintain the existing interpretations in the FReM.  Three areas were identified as requiring further work – analysis of loss allowances on liabilities held within the public sector, the impact of financial guarantee contracts and development of application guidance.
  • IFRS 15 Revenue from Contracts with Customers consultation feedback.  A paper was produced summarising the consultation feedback and proposing next steps for implementation.
  • Discount rates – a paper was presented setting out the discount rates to be applied for 2016-17. The Board was asked for its views on delaying the long-term discount rate update and conducting a full review of the discount rate policy.
  • An update on IFRS 16 Leases was given and proposed steps for implementation in the public sector context.
  • Feedback was sought on the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Local Authority (Scotland) Accounts Advisory Committee (LASAAC) exposure draft of the 2017/18 Code of Practice on Local Authority Accounting in the UK

Click here for detailed minutes and other supporting documents on HM Treasury website.

BEIS issues Green Paper on Corporate Governance

29 Nov 2016

The Department for Business, Energy & Industrial Strategy (BEIS) has issued a Green Paper seeking views on how to improve the UK corporate governance framework and setting out options for updating the framework and reforming executive remuneration. The consultation closes on 17th February 2017.

The Green Paper asks for views on:

  • executive pay;
  • strengthening the employee and customer voice; and
  • corporate governance in large private businesses. 

Executive pay 

Executive pay is the largest section of the Green Paper. Key areas include shareholder voting and other rights, shareholder engagement on pay, the role of the remuneration committee, transparency in executive pay and long-term incentive plans. 

The Green Paper proposes a number of options to the voting regime on director’s remuneration. These include making all or some elements of executive pay subject to a binding vote, introducing stronger consequences for companies losing the annual advisory vote, requiring companies to set an upper threshold for total annual pay to trigger a binding vote and increasing the frequency of the existing binding vote on remuneration policy. There is also an option of strengthening the UK Corporate Governance Code to provide more guidance on how companies should engage with shareholders on pay and what to do in the case of significant shareholder opposition to the remuneration report. 

The Green Paper also considers shareholder engagement on pay. The main options are mandating the disclosure of fund managers’ voting records at AGMs and the extent to which they have made use of proxy voting; establishing senior shareholder committees to engage with executive remuneration arrangements and considering ways to facilitate or encourage individual retail shareholders to exercise their rights to vote. 

Two main options are mentioned regarding the constitution and role of the remuneration committee. The first one is requiring the remuneration committee to consult shareholders and the wider workforce before preparing the executive pay policy and the second is requiring the chairs of remuneration committees to have served for at least 12 months on a remuneration committee before taking up the role of chair. 

On transparency in executive pay, the Green Paper includes an option for listed UK companies to include the ratio of CEO pay to median employee pay in the remuneration report each year, and the context behind that ratio. The government also includes an option to require the disclosure of bonus targets. 

The government is also seeking views on whether long-term incentive plans could be brought more in line with the long term interests of the company. 

Strengthening the employee and customer voice

The Green Paper covers four options for strengthening the stakeholder voice. The options include the introduction of stakeholder advisory panels, designating existing non-executive directors to provide an independent and clear voice for key interested groups as a formal part of the board structure, and appointing individual stakeholder representatives to company boards. There is also an option to strengthen reporting requirements related to stakeholder engagement, for example further guidance on preparation of the Strategic Report to include how directors have performed their duties under section 172 of the Companies Act 2006.

Corporate governance in large private businesses 

The third and final area of the Green Paper considers whether the largest private companies should be held to higher standards of corporate governance and reporting. The options include extending the voluntary approach currently applying to listed companies and using a bespoke code for unlisted companies (the paper acknowledges that some private companies already use the Corporate Governance Guidance and Principles for Unlisted Companies in the UK issued by the Institute of Directors). An example threshold of 1000+ employees is suggested but the consultation covers whether this is an appropriate cut off level. The options also explore whether further non-financial reporting requirements, such as on greenhouse gas emissions and executive remuneration, should also apply to privately held businesses.

The press release and the Green Paper are available on the BEIS website.  Our related Governance in Brief publication is available here.

EPRA publishes updated Best Practices Recommendations Guidelines

29 Nov 2016

The European Public Real Estate Association (EPRA) has published updated Best Practices Recommendations Guidelines (“the BPR Guidelines”). It has also published a question and answer document that is intended to provide additional information on the BPR Guidelines.

The Best Practice Recommendations set out additional performance measures and supplementary information to be presented in the annual reports of public real estate companies, with the aim of making the financial statements of these companies clearer, more transparent and comparable across Europe.  The BPR are important to both investors and financiers. 

The Guidelines, which assist in applying the BPR, include:

  • EPRA BPR General recommendations;
  • EPRA performance measures;
  • Core recommendations;
  • Best practice examples; and
  • An EPRA BPR checklist. 

The Best Practice Recommendations Guidelines and Best Practice Recommendations Q&A are available from the EPRA website.  Our EPRA Annual Report Survey 2015/16 is available here.

Françoise Flores appointed to the IASB

29 Nov 2016

The IFRS Foundation Trustees have announced the appointment of Françoise Flores to serve as a member of the International Accounting Standards Board (IASB). Ms Flores will join the IASB in January 2017 for an initial term ending 31 December 2021.

Ms Flores served as Chief Executive Officer of the European Financial Reporting Advisory Group (EFRAG) and Chairman of EFRAG’s Technical Expert Group (TEG) until April 2016. Most recently, she had returned to work as a partner at accountancy firm Mazars in Paris, France.

Please click for the announcement on the IASB website.

EFRAG publishes November 2016 issue of 'EFRAG Update'

29 Nov 2016

The European Financial Reporting Advisory Group (EFRAG) has published an 'EFRAG Update' summarising public technical discussions held and decisions made during November 2016.

IFRS 9 published in Official Journal of the EU

29 Nov 2016

The European Union has published a Commission Regulation endorsing IFRS 9 'Financial Instruments', confirming the decision to adopt the standard announced last Friday.

Commission Regulation (EC) No 2016/2067 of 22 November 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 November 2016 adopts IFRS 9 'Financial Instruments'. The EU effective date is the same as the IASB's effective date (annual periods beginning on or after 1 January 2018 with earlier appication permitted).

Please click to access the entry in the Official Journal.


EFRAG issues feedback statement on the IASB's exposure draft of proposed amendments on the application of the definition of a business

29 Nov 2016

The European Financial Reporting Advisory Group (EFRAG) has published its feedback statement summarising the main comments received from constituents invited to respond to its draft comment letter in relation to the International Accounting Standards Board’s (IASB’s) Exposure Draft ED/2016/1 'Definition of a Business and Accounting for Previously Held Interests'.

The amendments propose to clarify:

  • the definition of a business; and
  • the accounting for previously held interests when an entity obtains control of a business that is a joint operation and when it obtains joint control of a business that is a joint operation. 

EFRAG published its draft comment letter in July 2016 and its final comment letter in November 2016

The feedback statement summarises the main comments received by EFRAG in relation to the draft comment letter and explains how those comments were considered by EFRAG in reaching its final position on the IASB ED set out in their final comment letter to the IASB. 

The press release and full feedback statement are available on the EFRAG website.

Closing Out 2016

28 Nov 2016

Welcome to our one-stop guide for all the issues you need to consider as you prepare your December 2016 accounts and look forward to 2017.

A key theme running through 2016 has been one of uncertainty, whether over the timing and terms of the UK’s exit from the European Union following the result of June’s referendum, the possible changes in U.S. policy following the result of the presidential election or from other sources such as the continuing conflict in the Middle East. 

The reporting and, significantly, disclosure of such risks and their potential effects on a company’s performance is a key area of focus for the Financial Reporting Council (FRC) as discussed in its Annual Review of Corporate Reporting 2015/16. Other areas of focus also centre on effective, clear and unbiased communication with investors, for example:

In addition, while the changes to accounting requirements effective this year are limited, there is a high level of interest in disclosure of the likely effects of upcoming standards such as IFRS 15 on revenue and IFRS 9 on financial instruments, with a clear expectation from both the FRC and the European Securities and Markets Authority (ESMA) that clear, entity specific information will be included in 2016 financial statements. 

More broadly, initiatives in areas such as integrated reporting, disclosure of dividend policies and business model reporting continue to gain traction with the FRC reminding directors of their responsibility under the Companies Act to have regard to stakeholders such as employees, suppliers and customers in promoting the success of the company. 

Our Closing Out 2016 publication covers all these topics and more and will help you to navigate your way through the increasingly complex and interconnected issues surrounding corporate reporting.

Click for direct access to:

FRC publishes the results of its thematic review into the use of APMs

25 Nov 2016

The Financial Reporting Council (FRC) has today published the results of its thematic review into companies’ use of Alternative Performance Measures (APMs) in their narrative reporting.

The thematic review was conducted following concerns expressed by a number of stakeholders, as well as the FRC in its recently published Annual Review of Corporate Reporting, and the coming into force on 3 July of the Guidelines on Alternative Performance Measures (“the Guidelines”), issued by the European Securities and Markets Authority (ESMA). 

The interim financial statements (30 June 2016) of 20 listed companies spread across the FTSE 100, FTSE 250 and smaller companies were reviewed.  The review aimed to establish the extent to which the financial statements were consistent with the Guidelines and identify areas that companies need to take into account when preparing their December year-end strategic reports. 

The thematic review firstly looked at consistency with the Guidelines.  Key findings in this respect included:

  • With the exception of one company, all companies provided definitions of at least the most significant APMs used together with reconciliations to IFRS measures where appropriate.
  • Descriptions of APMs were not misleading and made it clear what the APM was. Descriptions were less clear for some of the items excluded in arriving at adjusted measures of profit.
  • There were varied explanations given as to how companies had determined that it was beneficial to disclose APMs. Whilst all FTSE 100 and FTSE 250 companies provided some explanation this was not so true of the smaller companies in the sample.  Some companies provided “cursory, boilerplate” explanations.  The FRC has indicated that “a good explanation states why an APM is useful, helpful or more meaningful rather than asserting that this is the case and clarifies whether an APM is used internally, why it is so used, by whom and for what purpose”.  It urges companies to ensure that their explanations “properly reflect why they believe the additional information is useful to investors and other users of their accounts”. 
  • Seven companies in the sample had made changes to ensure greater consistency with the Guidelines. Changes were largely made to give either new or enhanced explanations for their use of APMs.    

As well as assessing consistency with the Guidelines, the thematic review in particular looked at how the adjusted measures of profit were defined, how they were disclosed and how they differed from the corresponding IFRS measure.  Within the sample, 18 used adjusted measures of profit.  Key findings in this respect included:

  • There were a wide variety of terms used to refer to adjusted measure of profit including ‘adjusted’ and ‘normalised’. In 78% of cases, this alternative measure of profit was higher than the equivalent IFRS measure.
  • Some of the definitions gave rise to concerns about why certain items, in particular ‘restructuring costs’ had been excluded from the measure. The FRC indicates that better explanations as to why such items had been excluded would help to mitigate such concerns.  The FRC draws attention to its press release in December 2013 regarding consistency in the reporting of exceptional items. 

The FRC indicates that in its reviews of the December 2016 accounts it will question companies where: 

  • Good explanations for the use of APMs and for any changes made in the APMs used, including changes in definition, are not provided.
  • Good explanations of why items have been excluded from adjusted measures of profit are not provided and, in particular, where an item is excluded from adjusted profit that it has not seen others exclude.
  • A description such as non-recurring is used and that description does not appear to apply in the circumstances.
  • There is no discussion of either the IFRS results themselves or of the adjustments made to those results to arrive at adjusted profit.
  • The IFRS results are not highlighted at an early point in the narrative. 

The press release and thematic review are available on the FRC website.

European Commission announces decision to adopt IFRS 9

25 Nov 2016

On 22 November, the International Financial Reporting Standard (IFRS) 9 on Financial Instruments was adopted into EU law. There is no entry in the Offical Journal yet, however, the European Commission (EC) communicated the decision by press release.

After a positive opinion by the Accounting Regulatory Committee on 27 June 2016 and after a 3 months scrutiny period by the European Parliament and the Council that ended on 7 October 2016, the Commission has completed the endorsement process of IFRS 9 Financial Instruments.

The decision was made public in the EC's Banking and finance newsletter and a press release on the EC's Company reporting website.

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.