The Update reports on the EFRAG Board meeting on 10 October, the EFRAG TEG conference call on 17 October and the EFRAG TEG meeting on 25-26 October.  The Update also lists EFRAG publications issued in October:

• EFRAG's draft endorsement advice letter and invitation to comment relating to the endorsement for use in the EU of the IASB's publication Prepayment Features with Negative Compensation (Amendments to IFRS 9);
• EFRAG's final comment letter in response to the IASB's Discussion Paper DP/2017/1 Disclosure Initiative - Principles of Disclosure;
• EFRAG's draft comment letter in response to the IASB's Exposure Draft ED/2017/6 Definition of Material;
• EFRAG's feedback statement following the publication of its final comment letter on the IASB's Exposure Draft ED/2017/2 Improvements to IFRS 8 Operating Segments (Proposed amendments to IFRS 8 and IAS 34);
• EFRAG's summary report on the academic workshop it hosted on 5 September 2017 to debate ideas on some of the main issues around measurement (e.g. uncertainty and discounting) and how these could be investigated;
• EFRAG's summary report on the joint user outreach event organised together with EFFAS, the IASB, the AIAF and the OIC in Milan on 18 September 2017 covering discussions on Better Communication in Financial Reporting, Goodwill and Insurance Contracts; and
• EFRAG's summary report on the joint stakeholder conference organised together with the OIC in Rome on 9 October 2017 covering discussions on Impact Analysis and Better Communication in Financial Reporting. 

Please click to download the October EFRAG Update from the EFRAG website.

The guidance sets out minimum requirements that must be met, provides some best practice guidance and also indicates the underlying principles that should be adopted in preparing the information.

The guidance is applicable to all central government bodies that fall within the scope of the Greening Government Commitments (i.e. departments, non-ministerial departments, agencies and Non departmental public bodies) and which produce annual reports and accounts in accordance with HM Treasury’s Government Financial Reporting Manual (FReM). These bodies are required to report on sustainability (unless exempt from doing so).

The guidance is not applicable to the devolved governments of Northern Ireland, Scotland and Wales and local government entities.

The press release and guidance are available on the HM Treasury website.

The purpose of the TRG is to seek feed­back on po­ten­tial issues related to im­ple­men­ta­tion of IFRS 17 Insurance Contracts. By an­a­lyz­ing and dis­cussing po­ten­tial im­ple­men­ta­tion issues, the TRG will help the IASB de­ter­mine whether ad­di­tional action is needed, such as pro­vid­ing clar­i­fi­ca­tion or issuing other guid­ance.

The agenda for the meeting is as follows:

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

When FRS 101 was originally published, the FRC committed to review the standard on an annual basis and update it to ensure that it maintains consistency with IFRS and remains cost-effective for groups. FRED 69 FRS 101 Reduced Disclosure Framework 2017/18 cycle is the fifth of these proposed annual updates.

FRED 69 proposes no amendments to FRS 101 and indicates that detailed consideration of IFRS 17 Insurance Contracts will be deferred until a clearer picture of the progress of its endorsement is known.

Comments on FRED 69 are requested by 2 February 2018.

The press release and full consultation are available on the FRC website.

The new questions on the guidelines provide information on the definition of APMs, the scope of the APM guidelines, the application of the scope exemption, the definition of the APM ‘organic growth’, how to carry out reconciliation, and how to apply the fair review principle.

Please click for the following additional information on the ESMA website:

• press release
• expanded Q&A document
• final guidelines (as of June 2015)

Below is an analysis of all changes made to the work plan since our last analysis on 22 September 2017.

Main­te­nance project

• Accounting policy changes (changes in accounting policies that result from agenda decisions published by the IFRS Interpretations Committee) — exposure draft is now expected in first quarter of 2018.
• Classification of Liabilities — final amendments are now expected in the second half of 2018.
• Long-term interests in associates and joint ventures — the work plan reflects that the final amendments have been published.
• Improvements to IFRS 8 — Feedback statement on exposure draft is now expected in November 2017.
• Plan amendment, curtailment or settlement — final amendments are now expected in January 2018.
• Prepayment features with negative compensation — the work plan reflects that the final amendments have been published.

Research projects

• Financial in­stru­ments with char­ac­ter­is­tics of equity — a dis­cus­sion paper is now expected in the first half of 2018.
• Principles of disclosure — feedback statement on the discussion paper is now expected in the first quarter of 2018.

Other projects

• IFRS Taxonomy update for prepayment features with negative compensation — New entry added to work plan. Feedback statement on the proposed update is expected in the first quarter of 2018.

The above is a faithful com­par­i­son of the IASB work plan at 22 September 2017 and at 27 October 2017. For access to the current IASB work plan at any time, please click here.

ESMA considers the following key topics to be especially relevant for the examinations of listed companies' financial statements:

• disclosure of the expected impact of the implementation of major new standards (IFRS 9 Financial Instruments, IFRS 15 Revenue from Contracts with Customers, and IFRS 16 Leases) in the period of their initial application and
• specific issues relating to IFRS 3 Business Combinations and IAS 7 Statement of Cash Flows.

In addition, this year’s priorities emphasise the importance of measurement and disclosure of non-performing loans by credit institutions, the ongoing relevance of the fair presentation of financial performance and the disclosure on the impact of Brexit.

ESMA also highlights that the 2017 year-end will be the first time that the requirements of the amended Accounting Directive to disclose non-financial and diversity information will become applicable for certain large groups and undertakings.

ESMA and European national enforcers will monitor and supervise the application of the IFRS requirements outlined in the priorities, with national authorities incorporating them into their reviews and taking corrective actions where appropriate. ESMA will collect data on how European listed entities have applied the priorities and will publish its findings in a separate report.

Please click for the following documents on the ESMA website:

• Press release
• Public statement on enforcement priorities, providing more background on each of the focus areas
• Results of a fact-finding exercise on disclosure of the impact of the new accounting standards (IFRS 9, IFRS 15) in the 2016 annual and 2017 interim IFRS financial statements

Participants and panellists were welcomed to the well-attended event by Paolo Gnes (President of the OIC Supervisory Board) and Jean-Paul Gauzès (EFRAG Board President) which then featured a keynote speech on the future focus of financial reporting by IASB member Françoise Flores as well as two roundtables on impact analysis (facilitated by Angelo Casò (Chairman of the OIC)) and on better communication through reporting (facilitated by Andreas Barckow (Vice-President of the EFRAG Board)).

The 17 page summary of the event is available on the EFRAG website.

The new Board members are Rosa Bruguera (banking sector, Spanish), Luca Cencioni (industrial and trading companies, Italian), and Enrique Ortega (ICAC Board member, Spain). The new members will begin their three-year terms on 1 November 2017. They replace Patrice Marteau, Alphonse Kugeler, and Chris De Noose.

In addition, an observer seat has be created to represent European private investor organisations and will be filled by Jean Medernach.

For more information, see the press release on the EFRAG’s Web site.

On Tuesday 24 October 2017, the meeting started with an education session on goodwill and impairment. As an education session the staff did not ask for decisions from the Board. The Board has been considering how to make the goodwill impairment test more effective but less costly to perform. At this meeting the staff sought feedback on three issues. The first is whether there should be a single model for measuring the recoverable amount of the CGU (fair value less costs to sell or value in use) and whether to factor “dynamic headroom” into the impairment assessment. The second is whether to provide relief from the mandatory annual impairment testing of goodwill and whether to change how value in use is estimated. The third is the adequacy of the information disclosed about goodwill.  Several Board members expressed concerns about the expanding scope of the project and that this was intended to be a narrow scope project responding the post-implementation review. Accordingly, the next step is likely to be an exposure draft and not a discussion paper.

In September the Board tentatively decided to propose amending IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to lower the impracticability threshold for retrospective application of voluntary changes in accounting policies that result from agenda decisions. The Board decided to proceed with the proposal with a 120-day comment period. They expect to issue the proposal in the first quarter of 2018.

The session on rate-regulated activities focused on feedback from the World Standard-Setters Conference held in late September 2017. Although the group was generally supportive, several specific concerns were raised. The project consultative group meets on 26 October.

The Board approved the finalisation of the update to the IFRS Taxonomy for IFRS 17 Insurance Contracts. However, the lack of any formal comment letters was noted.

The day concluded with a discussion of the definition of a business. The staff have been analysing six differences between the proposed IASB definition and the FASB’s revised definition (which has already been finalised).  The Board decided to finalise the amendments which are expected to be published in the first half of 2018, for business combinations that are in an annual reporting period on or after 1 January 2020.

On Wednesday 25 October 2017, the Board supported the staff recommendation to include within the scope of the project on business combinations under common control group restructurings that are not business combinations.

The last agenda item was Conceptual Framework. The current draft underwent a fatal flaw review and the staff have been bringing issues to the Board from that review. There were two issues being discussed at this meeting. The first relates to the definition of a liability and concerns that the words “no practical ability to avoid as a going concern” captures future costs. The Board agreed with the staff analysis that they are from drafting issues rather than a flaw in the Board’s decisions. The second issue is the lack of clarity of the link between stewardship and the objective of financial reporting. The Board rejected the staff recommendation to include a flowchart in Chapter 1 of the revised Conceptual Framework to illustrate the link between the objective of general purpose financial reporting and the information needed to meet that objective.

Please click to access the detailed notes taken by Deloitte observers for the entire meeting.