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January

March 2017 meeting of the ICAEW FRDG

31 Jan 2017

The next meeting of the Institute of Chartered Accountants in England and Wales (ICAEW) Financial Reporting Discussion Group (FRDG) will be held on 13 March 2017 in London.

Participants at the meeting will hear about the Financial Reporting Council's (FRC's) latest discussion paper on improving the Statement of Cash Flows.

Click for more information, including registration details on the ICAEW website.

Final Tommaso Padoa-Schioppa lecture to be delivered by Jean-Claude Trichet

30 Jan 2017

Jean-Claude Trichet, president of the European Central Bank from 2003 to 2011, will deliver the final Tommaso Padoa-Schioppa lecture in connection with the IFRS Foundation Trustees' meeting in Paris on 1 February 2017.

The Tommaso Padoa-Schioppa Memorial Lecture, inaugurated in 2014 by the IFRS Foundation and the Padoa-Schioppa family, will be preceeded by a welcome address by Michel Prada, Chairman of the IFRS Foundation Trustees, and will be followed by a panel discussion on ‘Accounting post financial crisis – Lessons drawn and new challenges’ featuring Patrick de Cambourg, President of the ANC, Frédéric Oudéa, Chief Executive Officer of Société Générale, Steven Maijoor, Chair of ESMA, and Hans Hoogervorst, Chair of the IASB. The panel will be moderated by Nicolas Véron, Senior Fellow at Bruegel.

The event is by invitation only, however, in the past, videos or transcripts of the Tommaso Padoa-Schioppa Memorial Lecture were usually made available after the event.

EFRAG research into dynamic risk management

30 Jan 2017

In 2016, the European Financial Reporting Advisory Group (EFRAG) conducted targeted outreach to support the development of a new, high quality macro-hedge accounting solution by the IASB. The outreach was a fact finding exercise focused on gaining a better understanding of banks’ practices in connection with their management of interest rate risk. EFRAG has now published a report on the findings.

The outreach among 15 banks confirmed that current hedge accounting requirements do not fully accommodate the way a bank manages interest rate risk. Particular challenges are:

  • The use of open portfolios,
  • the fact that interest rate risk is managed using net positions instead of gross positions, and
  • the difficulties of designating particular items as part of a hedge accounting relationship.

While IFRS 9 has accommodated some of the above issues a comprehensive solution for dynamic risk management is still lacking. Therefore, EFRAG's fact finding exercise, which also includes theoretical background to the range of practices employed by banks and considers both the risk management and the accounting perspectives, is meant to help the IASB in developing an improved approach to reporting the effect of dynamic risk management activities in the financial statements.

Please click to access the press release and the outreach report on the EFRAG website.

Department of Health consults on 2017-2018 Group Accounting Manual

27 Jan 2017

The Department of Health have issued a consultation on the Department of Health Group Accounting Manual 2017-18. The consultation is open until 24 February 2017.

The Department of Health Group Accounting Manual (DH GAM) includes mandatory accounting guidance for all NHS bodies on completing their statutory annual report and accounts.  The DH GAM requires departmental group bodies to follow the requirements of International Financial Reporting Standards (IFRS), as adopted by the EU, and the HM Treasury Financial Reporting Manual (FReM). 

The DH GAM contains detailed accounting guidance for when departmental group bodies are required to depart from/make specific disclosures in addition to IFRSs and the FReM or when faced with particular circumstances that IFRSs or the FReM do not address. 

There are no significant changes to accounting requirements in 2017-18.  The changes proposed are focused on improving the structure of the document and the guidance contained within it.  Additionally there are some reporting changes relevant specifically to NHS providers. 

The press release and related documents are available on the DH website.

Agenda published for the January/February 2017 IFRS Foundation Trustees meeting

27 Jan 2017

The agenda for the public session of the upcoming meeting of the IFRS Foundation Trustees is now available. The Trustees will meet from 31 January to 2 February 2017 in Paris.

The agenda for the public session of the meeting is summarised below.

Tuesday, 31 January 2017

IFRS Foundation Trustees meeting (15:30–16:40)

  • Introduction and actions from the first public DPOC meeting, held on 13 October 2016
  • Technical activities: Key issues and update
  • Effects analysis: presentation on the insurance contracts Standard
  • Implementation activities for the insurance contracts Standard
  • Research Programme including due process on the share-based payment project
  • Materiality practice Statement: presentation on due process
  • IFRS 9 Financial Instruments: Comment letter period for narrow scope amendment
  • IFRS Taxonomy Consultative Group: Terms of reference
  • Correspondence: update

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

FRC’s Financial Reporting Lab issues report on disclosures of supplier relationships and commercial income

27 Jan 2017

The Financial Reporting Council’s (FRC's) Financial Reporting Lab has published a report on disclosures of Supplier Relationships and Commercial Income. The report specifically focuses on disclosures of supplier relationships and commercial income for WM Morrisons Supermarkets PLC’s (Morrisons).

The report follows Morrisons through the reporting on commercial income in 2014/15 and 2015/16 and highlights that investors found the approach that it adopted was helpful.  The report highlights the disclosures made (in areas such as the accounting policies note, the CFO report, in the audit committee report and in the financial review) by Morrisons in 2014/15 when initially providing an enhanced level of disclosure (compared to others within the retail industry) when responding to increased FRC and investor interest in the nature and impact of commercial income.  It also then provides an indication as to how the focus of value to investors of the disclosures changed and how Morrisons met this challenge in the second year of disclosure. 

The report also notes that investors wish to understand the quality of supplier relationships and their place in a food retailer’s wider business model and indicates that this might be difficult to report in the confines of an annual report.  However it highlights that disclosures such as those provided by Morrisons, which drew out differential aspects of its relationships with its supply base, as part of the business model disclosures, are helpful to allow investors to understand the importance of these relationships to the company. 

Although specifically focusing on the disclosures which Morrisons made and which will be most relevant in the retail industry, the messages in the report are applicable more widely. 

The report provides valuable insight into how investors’ views on reporting and disclosure on emergent issues evolve over time and how companies could usefully adopt a similar model to Morisons when reporting on an emerging industry issue. 

Specifically the report highlights:

  • In year 1 of the emerging issue:
    • the disclosures should provide context to the emerging issue by describing the nature of the issue and detailing the significance or magnitude of the issue.
    • the disclosure should ultimately provide the investor with comfort by describing the processes and controls in place to seek to mitigate the risks associated with the emerging issue.
  • In subsequent years:
    • Companies should consider at what point the full detailed disclosure could be reduced or removed or how the disclosure can change to continually meet the changing focus of investors. Questions asked could include:
      • Is it still useful to inform investors on the original issue?
      • Is it useful to investors to now provide trend or other information?
      • Failure to make this assessment might lead investors to view the disclosure as adding clutter to the accounts especially once the initial purpose of the disclosure has passed. 

Additionally the report indicates that whilst investors value transparency of disclosure, timing, driven by a company’s financial reporting processes, is also important.  Specifically the report highlights a “strong opinion from investors” that confidence in a company’s finance processes and transparent reporting translates positively into overall confidence in the company. 

The full lab report is available on the FRC website.

ESMA publishes Q&A document on the implementation of its APM guidance

27 Jan 2017

In June 2015, the European Securities and Markets Authority (ESMA) published its final Guidelines on Alternative Performance Measures (APMs) for listed issuers that became effective in July 2016. The purpose of the document now published is to promote common supervisory approaches and practices in the implementation of these guidelines.

The questions on ESMA's final guidelines on alternative performance measures apply to alternative performance measures disclosed by issuers or persons responsible for drawing up a prospectus. They are available on the ESMA website.

CCAB publishes revised SORP for Limited Liability Partnerships

27 Jan 2017

The Consultative Committee of Accountancy Bodies (CCAB) has published a revised Limited Liability Partnerships (LLPs) Statement of Recommended Practice (SORP).

The Financial Reporting Council (FRC) has approved the CCAB as the recognised SORP-making body for issuing a recognised SORP for LLPs incorporated in Great Britain under the Limited Liability Partnerships Act 2000.  The members of the CCAB are; The Institute of Chartered Accountants in England and Wales (ICAEW), The Institute of Chartered Accountants of Scotland (ICAS), The Institute of Chartered Accountants in Ireland (ICAI), The Association of Chartered Certified Accountants (ACCA) and The Chartered Institute of Public Finance and Accountancy (CIPFA).  

SORPS issued by CCAB apply to LLPs preparing accounts under UK GAAP to present a ‘true and fair view’.  CCAB has stated that “the underlying purpose of the SORP is to deal with issues that are specific to LLPs and ensure that, as far as possible, LLPs present financial statements that are comparable with those of other entities”. 

The revisions, consulted on in 2016, update the LLP SORP as a result of amendments made by the FRC to UK accounting standards in July 2015.  These amendments resulted in:

  • The withdrawal of the FRSSE for accounting periods beginning on or after 1 January 2016;
  • Amendments FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland to add a new section (Section 1A Small Entities) outlining presentation and disclosure requirements for small entities and making other changes necessary for continued compliance with company law; and
  • The publication of FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime, a new standard available to entities choosing to apply the micro-entities regime. 

A number of changes have also been made as a result of amendments made to the Limited Liability Partnerships (Accounts and Audit) Regulations 2016 (SI 2016/575) (“The LLP Regulations”) and the consequential amendments to FRS 105 that were issued in May 2016 to align the standard with recent changes to UK company law and make the micro-entities regime available to LLPs and qualifying partnerships.

The CCAB notes that “while these changes (the above amendments made by the FRC and amendments made to the LLP Regulations) do not fundamentally alter the financial reporting regime for LLPs, they allow LLPs – particularly small LLPs – to benefit from a less burdensome financial reporting regime and ensure that the legislative requirements for LLPs are aligned with those applicable to limited companies”.

The revised SORP is applicable for LLPs that report under FRS 102.  It does not apply to LLPs complying with International Financial Reporting Standards (IFRSs), FRS 101 Reduced Disclosure Framework or FRS 105.  LLPs qualifying for and choosing to apply the micro-entities regime should apply the requirements of FRS 105.  Those small LLPs applying Section 1A of FRS 102 will need to comply with the recognition and measurement requirements of FRS 102 and the requirements of the revised SORP. 

The revised SORP is effective for accounting periods beginning on or after 1 January 2016.  However earlier adoption will be permitted for accounting periods beginning on or after 1 January 2015 provided that the LLP Regulations are applied from the same date.

Click for (all links to CCAB website):

IASB podcast on latest Board developments

26 Jan 2017

The IASB has released a podcast featuring its Chair, Hans Hoogervorst and Vice-Chair, Sue Lloyd discussing the deliberations at the January 2017 IASB meeting.

In the 10-minute podcast, Mr Hoogervorst and Ms Lloyd discuss the upcoming insurance contracts Standard, the planned post-implementation review of IFRS 13 Fair Value Measurement, the planned narrow-scope amendment to IFRS 9, Financial Instruments, and Board's plans for 2017, including a discussion paper on the principles of disclosure and the final Statement on materiality practice (both planned for the first half of 2017).

The podcast is available on the IASB's website. For more information about the January 2017 IASB meeting, see our comprehensive notes taken by Deloitte observers.

ECON exchange of views with Hans Hoogervorst and Michel Prada

26 Jan 2017

At the annual exchange of views between the Committee on Economic and Monetary Affairs (ECON) of the European Parliament and representatives of the IASB and the IFRS Foundation, IASB Chairman Hoogervorst and Michel Prada, Chairman of the IFRS Foundation Trustees, stood ready to answer questions of the Parliamentarians.

The session began with re-elected ECON Chairman Roberto Gualteri welcoming Mr Hoogervorst and Mr Prada and stressing that relations between the European Parliament and the IASB had markedly improved over the last few years, which he took to be a good sign.

Mr Hoogervorst then made a few short introductory remarks mainly on the forthcoming new standard on insurance contracts (currently expected in May 2017), on which he also promised a full-fledged effect analysis, and on the better communication theme the IASB has set for its work programme 2017-2021. Regarding the latter, he expanded on performance reporting, non-GAAP measures, primary financial statements, digital reporting, and, to a certain extent, integrated reporting.

Afterwards, there was a broad range of questions from the Parliamentarians ranging from very broad to very detailed. There were for example questions regarding whether the election of Mr Trump in the United States would have an effect on the international financial reporting landscape (Mr Hoogervorst responded that "make US GAAP great again" had been a motto of US accounting well before the election) and regarding diversity (30% female Board members, on the staff more female than male members).

Technical questions that drew the most attention were the amendments to IFRS 4 regarding the application of IFRS 9 together with IFRS 4. While Parliamentarians acknowledged the positive endorsement advice EFRAG hat published in January, they noted concerns regarding the cost component (which EFRAG had not been able to assess) and also asked why the deferral approach would not be available to conglomearates. Mr Hoogervorst repeated the IASB's belief that having two different standards applied in the same company did not seem desirable and that the overlay approach would provide conglomerates with a solution to their problems.

Another topic that was approached from different angles was the frequency of amendments to IFRSs. This was discussed from the perspective of balance between stable platform and necessary maintenance and also from the perspective of post-implementation reviews. The question was whether more detailed effect analyses could help reduce the amount of necessary amendments that are identified as result of post-implementation reviews. There was also some confusion as to whether making minor improvements to a standard as a result of a post-implementation reviews meant "re-opening" of a standard.

Generally, the session suffered slightly from translation mistakes and inaccuracies as well as from other minor misunderstandings, which however were overcome by joint efforts from both sides and the offer to answer the remaining questions by email.

For more information, see the video recording of the ECON meeting. (Please note that the recording, including Mr Hoogervorst's introductory remarks, can be watched in any of the EU's official languages).

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