In two volumes, the Handbook contains all IPSASB pronouncements published as of 31 January 2017, including the Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities. It can be downloaded free of charge in PDF format from the IPSASB website. The IPSASB points out that the print edition is currently in production and will be available for online ordering soon.

The new webcast can be accessed on the IASB website. Earlier webcasts and webinars on IFRS 17 are available through an archive.

Throughout the speech, Sir Win Bischoff emphasised how purpose and values drives governance. 

He referred to the importance of establishing a healthy corporate culture calling it a “key ingredient in delivering long-term sustainable performance”.  Explaining further, Sir Win Bischoff put forward the view that “a poor culture is [in my view] a significant business risk in itself” and cited the FRC's report 'Corporate culture and the role of boards', published in July 2016 which highlighted the vital role of the Board in establishing and delivering good culture and behaviours within an organisation.

Alongside culture, Sir Win Bischoff indicated that a successful company also requires a diverse workforce and succession planning highlighting that “boards as a whole need thoughtfully to consider also the links between diversity, strategy and business values”. 

Concluding regarding the role of corporate governance and the public, Sir Win Bischoff highlighted:

The UK remains in a good position globally, with high levels of trust and confidence in companies among investors but worryingly lower levels among the public.  Corporate governance must be such as to establish and maintain that respect and trust also with the public”.

The full text of the speech can be obtained from the FRC website.

The Core & More concept introduced in 2015 aims to present corporate reporting in a smarter way, organising financial and non-financial information based on the interests of users. Information relevant for a wide range of stakeholders would be in the Core report, and supplementary details for a more limited audience would form the More reports. The paper presented today develops the concept further and provides ideas on what information could be presented in each of the pillars. It also explores how technology might support the Core & More concept and addresses the relationship between Core & More and integrated reporting. Please click to access the paper Core & More: an opportunity for smarter corporate reporting on the Accountancy Europe website.

The call for action notes that "the overwhelming number of existing disconnected non-financial information reporting frameworks complicates coherent, consistent, and comparable wider corporate reporting, and steadily increases the reporting burden for companies". Accountancy Europa calls on the different standard-setting bodies and initiatives to coordinate their efforts to streamline existing reporting frameworks addressing similar pieces of non-financial information. The organisation believes that the final step in this development should aim at developing a single global framework for non-financial information reporting. (At the very same event IASB Chairman Hans Hoogervorst noted in a speech that the IASB could not and would not take the decisive leadership role Accountancy Europe hints at in the call for action.) Please click to access the Call for action: Enhance the coordination of non-financial information initiatives and frameworks on the Accountancy Europe website.

Mr Hoogervorst's main message at the beginning of his peech was: "Keep calm and carry on". He explained that he was not at all concerned that the relevance of financial reporting is under threat. He noted that financial statements are primarily backward looking and, therefore, always provide an important reality check. And he also noted that the more information became available, the more need there was for comparability, standardisation and quality control.

Yet Mr Hoogervorst also conceded that times are changing and everybody needs to adapt - including the IASB. In this context he noted two aspects of the IASB's work. Firstly, he stressed the IASB's current effort at better communication in financial reporting. He noted a few projects and initiatives that form part of the effort and he also explained that the IASB may need to give preparers more guidance on how to provide context to their financial statements. And secondly, Mr Hoogervorst mentioned the IASB's non-mandatory Management Commentary Practice Statement and even went so far as to call it "an early foray of the IASB into integrated reporting". As times has moved on, however, he noted that the IASB is currently looking at taking up a project to update practice statement.

As a last aspect, Mr Hoogervorst looked at environmental, social and governance (ESG) reporting and the question of whether the IASB should become active in that field. He noted that audience for sustainability reporting is broader than that of financial reporting and that much of sustainability reporting is primarily focused on the external effects of the performance of a company. Mr Hoogervorst said that he believed that the IASB does not have the expertise to become the standard-setter in this field and that widening the audience and scope of the Board's work would most likely lead to loss of focus and identity. He stated:

If we want to create more clarity in the somewhat chaotic world of wider corporate reporting, we all need to define clearly what our responsibilities and competences are. If we all try to do everything, the most likely outcome is that nothing gets done properly.

However, Mr Hoogervorst did not just leave it at that. He also followed up on the question who should take responsibility for harmonisation of ESG requirements and try to prevent overload. He argued that since so much of ESG reporting is closely intertwined with public policy goals, public authorities would be best equipped to pursue harmonisation.

Please click to access the full text of the speech on the IASB website.

An agenda and details on how to register for the meetings can be found on the EFRAG website.

The guidance answers the following questions:

• At what point is it necessary to present the cash compensation separately as a cash-settled share-based payment?
• How is it accounted for?

For more information, please see the English language press release on the ASCG website.

Background

The materiality project arose as part of the IASB's Disclosure initiative started in 2012. The first document published as part of this project was the May 2013 feedback statement Discussion Forum – Financial Reporting Disclosure, which outlined the IASB's intention to consider a number of further initiatives, including a project on materiality, seeking to develop application guidance or educational material on materiality, with input from an advisory group.

A draft practice statement on materiality was published on 28 October 2015, however, subsequently it became clear that some of the proposed guidance needed to be authoritative to have the desired effect, so the project was split up into a part that would see a practice statement published and a part that was intended to result in amendments to IAS 1 and IAS 8. Both, the final practice statement and the exposure draft of proposed amendments were published today. Please click for more information about ED/2017/6 Definition of Material (Proposed amendments to IAS 1 and IAS 8).

Objective and scope

The objective of IFRS Practice Statement Making Materiality Judgements is to assist management in presenting financial information about the entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. It applies to the preparation of financial statements in accordance with full IFRS. It is not intended for entities applying the IFRS for SMEs.

General characteristics of materiality

The Practice Statement works with the definition of materiality in the current Conceptual Framework. Similar definitions are contained in IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. However, the IASB is currently working on a new definition of materiality (see ED/2017/6 Definition of Material (Proposed amendments to IAS 1 and IAS 8 published today)) and the IASB notes that if any changes are made to the definition of material in IAS 1 and IAS 8 as a result of the proposals in the ED, the Board will make consequential amendments to the Materiality Practice Statement and the forthcoming revised Conceptual Framework.

The Practice Statement notes that the need for materiality judgements is pervasive in the preparation of financial statements and affects recognition, measurement, presentation, and disclosure. When assessing whether information is material, an entity considers its own specific circumstances and the information needs of the primary users of its financial statements.

Four-step process

The Practice Statement notes that an entity may find it helpful to follow a systematic process in making materiality judgements and offers an example of such a process.

• Step 1. The entity identifies information that has the potential to be material. In doing so it considers the IFRS requirements applicable to its transactions, other events and conditions and its primary users’ common information needs.
• Step 2. The entity then assesses whether the information identified in Step 1 is material. In making this assessment, the entity needs to consider quantitative (size) and qualitative (nature) factors.
• Step 3. In a next step, the entity organises the information within the draft financial statements in a manner that supports clear and concise communication.
• Step 4. In the most important step, the entity then steps back and assesses the information provided in the draft financial statements as a whole. It needs to consider whether the information is material both individually and in combination with other information. This final assessment may lead to adding additional information or removing information that is now considered immaterial, aggregating, disaggregating or reorganising information or even to begin the process again from Step 2.

Status and effective date

The Practice Statement is not an IFRS. Consequently, entities applying IFRSs are not required to comply with the Practice Statement. However, it should be noted that materiality is a pervasive principle in IFRSs. The Practice Statement does not have an effective date, it can be applied with immediate effect.

Additional information

Please click for:

• IASB press release (link to IASB website)
• Access to the Practice Statement on the IASB website
• IASB project summary and feedback statement (link to IASB website)
• Video hosted by IASB Board member Françoise Flores explaining the Practice Statement.
• Our summary of IFRS Practice Statement Making Materiality Judgements
• Need to know newsletter summarising the Practice Statement
• Our UK Accounting Plus project page on Disclosure initiative — Materiality
• Our UK Accounting Plus project page on Disclosure initiative — Overview

Background

The materiality project arose as part of the IASB's Disclosure initiative started in 2012. The first document published as part of this project was the May 2013 feedback statement Discussion Forum – Financial Reporting Disclosure, which outlined the IASB's intention to consider a number of further initiatives, including a project on materiality, seeking to develop application guidance or educational material on materiality, with input from an advisory group.

A draft practice statement on materiality was published on 28 October 2015, however, subsequently it became clear that some of the proposed guidance needed to be authoritative to have the desired effect, so the project was split up into a part that would see a practice statement published and a part that was intended to result in amendments to IAS 1 and IAS 8. Both, the final practice statement and the exposure draft of proposed amendments were published today. Please click for more information about Practice Statement 2 Making Materiality Judgements.

Suggested changes and reasoning behind the changes

The changes proposed in ED/2017/6 Definition of Material (Proposed amendments to IAS 1 and IAS 8) all relate to a revised definition of 'material' which is quoted below from the ED:

Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of a specific reporting entity’s general purpose financial statements make on the basis of those financial statements.

Three new aspects of the proposed definition should especially be noted:

• Obscuring. The existing definition only focused on omitting or misstating information, however, the Board concluded that obscuring material information with information that can be omitted can have a similar effect. Although the term obscuring is new in the definition, it was already part of IAS 1 (IAS 1.30A).
• Could reasonably be expected to influence. The existing definition referred to 'could influence' which the Board felt might be understood as requiring too much information as almost anything ‘could’ influence the decisions of some users even if the possibility is remote.
• Primary users. The existing definition referred only to 'users' which again the Board feared might be understood too broadly as requiring to consider all possible users of financial statements when deciding what information to disclose.

In addition, the ED proposes some clarifications to the explanation accompanying the definition of material. These proposals include:

• Relocating some information that explains rather than defines material from the definition into the explanatory paragraphs accompanying the definition;
• adding a description of the characteristics of the primary users of financial statements;
• noting that the consideration of the characteristics of users must be judged in the entity’s circumstances;
• explaining that even well-informed and diligent users may need to seek the aid of an adviser from time to time; and
• highlighting that the materiality of information is assessed either individually or in combination with other information.

Effective date

The exposure draft does not contain a proposed effective date which the IASB intends to decide on after the exposure. However, the Board has already concluded that an entity should apply the amendments prospectively and that earlier application will be permitted.

Additional information

Please click for:

• IASB press release (link to IASB website)
• Access to the exposure draft on the IASB website
• Need to know newsletter explaining the proposed amendments
• Our UK Accounting Plus project page on Disclosure initiative — Materiality
• Our UK Accounting Plus project page on Disclosure initiative — Overview

The main reasons that modified audit opinions were issued included:

• 50 charities where there was a lack of evidence to support figures within the accounts. In a “majority” of these instances the lack of evidence was as a result of deficiencies in the charity’s accounting records. 
• 45 charities who demonstrated material non-compliance with the Charity Statement of Recommended Practice (SORP)
• Two charities who received an adverse opinion as they had prepared accounts on a going concern basis of accounting but their auditor had concluded that the charity was not a going concern.

The Charity Commission review, which elaborates on the specificities within the two larger categories highlighted above, provides some wider lessons for other charities to minimise the risk of a modified audit opinion aimed at trustees.  It comments:

To minimise the risk of a modified audit opinion, trustees need to check that their charity has sound financial systems and accounting records in place, take SORP compliance seriously and work with their auditors to provide the information that they will need for their audit.  Where appropriate, the trustees’ annual report should explain the circumstances behind a modified audit opinion and provide assurance that the trustees are taking action in response to the concerns reported by their auditor.

The review also highlights a number of resources to assist trustees in this respect.

The press release and report are available on the Charity Commission website.