2016

Two AASB papers for the upcoming ASAF meeting

25 Nov, 2016

The Australian Accounting Standards Board (AASB) has published two papers that will be discussed by members during the upcoming meeting of the Accounting Standards Advisory Forum (ASAF) at the IASB's offices in London on 8 and 9 December 2016: one on digital currency and one on country-by-country reporting.

Digital currency – A case for standard setting activity recommends the IASB develop a standard that addresses the accounting for investments in intangible assets or other commodity type assets that are not financial instruments or inventory as the current alternatives to account for digital currencies (IAS 2 or IAS 38) do not provide relevant information to users of financial statements and as this issue highlights a broader issue with IFRSs in that there is no accounting standard that deals with investments in intangible assets or other commodity type assets that are not financial instruments or inventory. Please click to access the paper on the AASB website.

The second paper offers an update on the AASB approach to country-by-country reporting and argues that while much of the tax transparency initiative to date has been driven by the tax authorities, as part of remaining relevant in an ever-changing regulatory environment, it is timely for accounting standard-setters to take a leadership role in improving income tax disclosures for users of financial reports. Please click to access the paper on the AASB website.

EBA launches second impact assessment of IFRS 9 on banks

25 Nov, 2016

The European Banking Authority (EBA) has launched a second impact assessment of IFRS 9 'Financial Instruments' on a sample of approximately 50 institutions across the European Union.

The second assessment builds on the on the results of the first exercise published on 10 November 2016. As announced, the EBA expects that institutions will be able to provide more detailed and accurate insights into their implementation of IFRS 9 as the information provided by the respondents in the first exercise reflected the early stage of implementation. The new exercise builds on the objectives of the first impact assessment, namely the estimated impact of IFRS 9 on regulatory own funds, the interaction between IFRS 9 and other prudential requirements, and the implementation issues relating to IFRS 9.

Please click for the press release on the EBA website.

IASB podcast on tentative decisions in the insurance project

24 Nov, 2016

The IASB has released a podcast discussing the deliberations at the November 2016 IASB meeting on the issues that have arisen from the external testing of a draft of IFRS 17 'Insurance Contracts' and in the drafting process thus far.

During the insurance contracts session, the Board also decided to set the mandatory effective date for IFRS 17 as for annual periods beginning on or after 1 January 2021.

Please click to access the podcast (approx. 9 minutes long) on the IASB website.

Report on corporate governance policy in the European Union

24 Nov, 2016

The CFA Institute, a global association of investment professionals, has published 'Corporate Governance Policy in the European Union: Through an Investor’s Lens'. The report identifies that investors believe there is still much that could be done in Europe to simplify mechanisms to enhance corporate accountability and realise maximum value from reforms that have already been undertaken.

The findings note that investors are open to many stakeholder issues, such as promoting board diversity, environmental reporting, or good corporate citizenship more generally. The 2013 Accounting Directive including provisions on country-by-country reporting for the extractive industries and the 2014 amendments to the Accounting Directive with its focus on nonfinancial statement disclosures, including information relating to ESG issues, sustainability, and disclosure of diversity policies, are cited as examples of the need for integrated reporting and for harmonising reporting and disclosure standards, including nonfinancial reporting.

Please click to access the full report on the CFA Institute website (includes access to abstract, full PDF, summary, and references).

The Bruce Column — Moving towards a broader picture of stakeholder reporting

23 Nov, 2016

Robert Bruce, our regular, resident columnist, reports on a recent debate on the issues surrounding transparent corporate reporting.

For Melanie McLaren’s three teenage children the idea of a symposium to discuss the concept of transparent corporate reporting was mystifying. McLaren is Executive Director, Audit at the Financial Reporting Council, and she was launching an event at the Deloitte Academy to try and help pin down the many issues surrounding corporate reporting in a complicated, volatile, and ever-changing business world. But for her children such complexity doesn’t exist. If they want to know a fact or find out about an issue they simply go to Wikipedia and the answer will be there. What on earth did anyone need to talk further about? And, as McLaren asked: ‘If everything is available to everyone all the time what does that mean for corporate reporting?’

What it probably means is that she is expecting a deep debate as a result of recent questions raised by politicians over the level of trust in business; the possibility of extending business representation to ordinary employees; a range of reporting, environmental and sustainability issues; and those of gender and pay. For her the reporting was what was important. ‘What gets reported drives behaviour’, she said. And she followed that up with the idea that the corporate governance code provision laid down by the Financial Reporting Council that company directors should sign off the annual report and accounts with an assurance that the contents were ‘fair, balanced, and understandable’ pretty much encapsulated most of what was needed in terms of building trust in business.

Nevertheless she expects a deep Government-led debate in the UK over corporate governance and over building public trust in business. Though she did point to the results of much work in the field over the last twenty years or so and the reputational dividend that had produced. ‘The current UK framework is well-regarded’, she said.

So future policy has a firm foundation to build upon and will come incrementally. It will be part of a gradual evolution towards broader stakeholder reporting which will come via many different routes. And this is where the Government’s concerns could be answered. The desire and the need for a broader picture is already being met with moves towards better narrative reporting, the strategic report, integrated reporting and the integrated thinking it brings. All of this makes the value created for all stakeholders in a business much clearer and more transparent.

And the multiplicity of means provides solutions for many users. Jessica Fries, Executive Chairman at The Prince’s Accounting for Sustainability Project, stressed the importance of the annual report as a means of reporting at a specific point in time. It was then important to ensure that it was well signposted and reasonably consistent year-on-year. The length of the report was less important than the clarity of the report, she said. ‘Length doesn’t always get in the way of understandability’.

It fell to Alan Teixeira, Deloitte’s Global Director, IFRS Research, to answer the poser raised by Melanie McLaren’s children. ‘My kids tell me every day about how they’re are doing at school’, he said, ‘but that doesn’t mean I don’t need to read their school report’. The rapidly-evolving annual report will remain at the heart of corporate communication in a multiplicity of ways.

Agenda for the November 2016 GPF meeting

23 Nov, 2016

Representatives of the IASB will meet with the Global Preparers Forum (GPF) in London on Tuesday, 29 November 2016. The agenda for the meeting has been released.

The full agenda for the meeting is sum­marised below:

Tuesday, 29 November 2016 (13:00-16:30)

  • IASB and Interpretations Committee Update
  • Post-implementation Review of IFRS 13 Fair Value Measurement
  • Education Initiative commercial publications — possible improvements to the usefulness of
    • A Guide through IFRS Standards (the ‘Green Book’); and
    • A Briefing for Chief Executives, Audit Committees and Boards of Directors
  • Definition of a business

Agenda papers for this meeting are available on the IASB's website.

CIPFA seeks comments on paper exploring accounting for the cloud

22 Nov, 2016

The Chartered Institute of Public Finance and Accountancy (CIPFA) has, in response to a request from its members and their employers, begun a process of looking at issues raised by ‘accounting for the cloud’.

As a first step, it has produced a paper which explores some of the accounting issues involved and invites comments from interested parties to see if additional guidance would be helpful. 

The paper is available on the CIPFA website.

The Bruce Column — Impact, collaboration, and integrated thinking

22 Nov, 2016

This year’s Finance for the Future Awards was the most successful ever, with a wide range of entrants from all around the world, and new categories for Communicating Integrated Thinking and Investing and Financing. Our regular, resident columnist, Robert Bruce interviewed all the contenders, and then the eventual winners again, and wrote the case studies. Here he sums up the main themes of this year’s winners’ success.

If there was a theme running through the stories of all the winners of this year’s Finance for the Future Awards it was surely the focus on the impact that the efforts of the organisations concerned was creating. Bridges Ventures, which triumphed in the investment and financing category, was all about impact investing, bringing together social investors wanting to foster social impact with social enterprises wishing to grow. The success of water and waste water company United Utilities, which won the newly established Communicating Integrated Thinking award, was all about how the company was reaping the benefits from all the ways that integrated thinking had transformed both its processes and performance. The award for Innovative New Idea went to the Public Services Lab, (PSL), a consortium of organisations on Merseyside which were bringing their different but complementary skills together to create a collaborative approach to rethinking the way that public services could be delivered. Everywhere the world was being turned upside down.

‘It’s really hard’ said Bridges’ investment director, Caroline Tulloch, ‘to combine traditional financial structures and models of socially-focused businesses, and entrepreneurs’. ‘We changed the way we were working’, said United Utilities CFO Russ Houlden, ‘and we needed to communicate that to all of our stakeholders, particularly our investors, our customers and the society around us’. ‘This is a partnership between a number of different organisations’, said Chris Wright, CEO of Catch22, one of the organisations in the consortium, PSL, ‘and the idea is that we bring our collective expertise, energy, drive, and imagination to the fore to encourage others to step up and come up with solutions around the future of public service delivery’.

And this theme stretched across all of the winners. The Climate Disclosure Standards Board, CDSB, was a good example. Collaboration, for them, became the solution. ‘There was this gap in the market’, said managing director, Mardi McBrien. ‘We had climate change. We had investors who said they couldn’t use the information in the market. We had companies saying there were way too many ways to report that information and what did we want them to do. We had Governments saying: “We can’t regulate that yet”. So CDSB’s objective was to harmonise all these different interests into one place, our framework, and try and reconcile all those different objectives’. Collaboration was the only way forward. ‘It’s all about collaboration’, said McBrien. ‘It’s about bringing different disciplines and different ideas together, sharing experiences, testing things out, putting it onto the market, accepting the feedback, and trying again’. This lesson also shone through the highly commended award for HM Treasury in the public sector category. This was all about how the accounts of over 6,000 entities in the public sector were brought together to create one set of consolidated accounts for the whole of the public sector. This was a unique challenge which will create an impact which has profound consequences. ‘One of the big benefits of pulling all of the assets and liabilities into one place’, said Vicky Rock, head of government financial reporting at HM Treasury, ‘is that you can use that to assess the long-term sustainability of the public finances. So we have been working with the Office for Budget Responsibility on this and going wider than their definitions by putting in provisions, putting in guarantees, putting in contingent liabilities, to start to say how the Government’s balance sheet is going to evolve over time. What are the scale of these liabilities? How are they going to be paid for? And this is leading to changes in how policies are made in Government’.

And the range and the geographic reach of the finalists around the world emphasised how ideas of sustainability, integrated reporting and thinking, and collaborative efforts between the old silos of information within organisations are being brought together. From the social and environmental outcomes of the expansion of Auckland Airport to the way mobile banking was overcoming financial exclusion amongst the 110 million people of Pakistan, from the transformative integrated thinking at global healthcare company Novo Nordisk to the ultimate winner of the large business award, Coca-Cola Hellenic Bottling, the story was the same. ‘It really teaches you lots of lessons about collaborative working and collaborative thinking’, said Basak Kotler, director, investor relations at Coca-Cola.

ICAEW consults on assurance over bank capital ratios

22 Nov, 2016

The Institute of Chartered Accountants in England and Wales (ICAEW) has published a consultation paper setting out a proposed framework for providing assurance (both internal and external) over bank capital ratios and risk-weighted assets.

The consultation paper follows a Discussion Paper published by the ICAEW in July 2015.  Its purpose is not to create any new requirement for assurance over bank capital ratios and risk-weighted assets but to provide a framework that firms might choose to adopt when undertaking such assurance activity. 

Comments are invited until 13 February 2017.

The consultation paper is available on the ICAEW website.

Report on the October/November 2016 IFRS Advisory Council meeting

22 Nov, 2016

The IFRS Advisory Council met in London on 31 October and 1 November 2016. Significant topics on the agenda included (1) the scope of the Primary Financial Statements research project, (2) implementation support for the new insurance contracts standard, (3) key performance indicators for the IFRS Foundation, and (4) any implications of the Brexit for the IFRS Foundation.

The report — prepared by the Chair of the IFRS Advisory Council, Joanna Perry — notes the following discussions:

  • Scope of the Primary Financial Statements research project — The Members of the Council agreed that there is a tension between flexibility and comparability, and although they supported providing more guidance they warned against that guidance being too descriptive. Alternative performance measures were discussed as a topic the Board cannot ignore.
  • Implementation support for the new insurance contracts standard — The Members of the Council agreed that the use of a transition resource group is appropriate; however all of the available tools for implementation support should be used.
  • Key performance indicators for the IFRS Foundation — The Members of the Council considered and provided advice in relation to potential key performance indicators that could be used by the IFRS Foundation to monitor certain aspects of its work. The main message was that the Foundation should focus on the quality of the standard-setting process and outreach and that it will be important to keep the key performance indicators simple and focused.
  • Implications of the Brexit for the IFRS Foundation — The Members of the Council agreed that although there is a lot of uncertainty there are no immediate matters that the IFRS Foundation needs to address.

The next meeting of the IFRS Advisory Council is scheduled for 4–5 April 2017, in London. The full report on the council’s October/November meeting is available on the IASB's website.

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