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.

The World Business Council for Sustainable Development (WBCSD) has released the 2017 edition of Reporting matters. This year’s report also provides insight into the TCFD recommendations, the expanding universe of disclosure requirements and updates on the status of human rights and SDG reporting. The press release on the WBCSD website offers a summary of the key findings and access to the full report.

A survey conducted by the CFA Institute in May 2017 reveals that nearly three-quarters of investment professionals worldwide (73 percent) take ESG factors into consideration in the investment process. The press release on the website of the CFA Institute offers a summary of the key findings and access to the full report.

The Carbon Disclosure Project (CDP) has released to national editions of its 2017 Climate Changge report analysing data disclosed by companies in India and Japan. Both reports can be downloaded from the CDP website. The 2017 report for India is available in the English language; the 2017 report for Japan is in Japanese.

Sir John Parker published his initial report on the ethnic diversity of UK boards in November 2016 ‘for the purpose of consultation and debate amongst business leaders, regulators and lawmakers”. The consultation period closed on 28 February 2017 and the final report (‘the Report’) has now been issued, including recommendations for companies and for executive search firms.  

‘Beyond One by ‘21’, the Report, highlights as a general matter that the boardrooms of the UK’s leading public companies do not reflect the ethnic diversity of either the UK or the stakeholders that they seek to engage and represent. The Report finds that “ethnic minority representation in the boardroom across FTSE 100 is disproportionately low, especially when looking at the number of UK citizen directors of colour”.

Key findings with regards to FTSE 100 Board diversity include:

• 1050 director positions in total;
• 85 individual directors of colour (four hold two board positions);
• total directors of colour represented about eight per cent of the total, compared to 14% of the UK population;
• 51 out of the FTSE 100 companies did not have any directors of colour;
• seven companies accounted for 40% of the directors of colour;
• five out of these seven companies have headquarters historically located outside the UK; and
• only six people of colour held the position of Chair or CEO.

The key recommendations of the Report are:

 Increase in Ethnic Diversity of UK Boards

• Each FTSE 100 board should have at least one director of colour by 2021; and each FTSE 250 board should have at least one director of colour by 2024.
• Nomination committees of all FTSE 100 and FTSE 250 companies should require their human resources teams or search firms (as applicable) to identify and present qualified people of colour to be considered for board appointment when vacancies occur.
• Given the impact of the ‘Standard Voluntary Code of Conduct’ for executive search firms in the context of gender-based recruitment, the Report recommends that the relevant principles of that code be extended on a similar basis to apply to the recruitment of minority ethnic candidates as board directors of FTSE 100 and FTSE 250 companies.

 Develop Candidates for the Pipeline & Plan for Succession

• Members of the FTSE 100 and FTSE 250 should develop mechanisms to identify, develop and promote people of colour within their organisations in order to ensure over time that there is a pipeline of board capable candidates and their managerial and executive ranks appropriately reflect the importance of diversity to their organisation.
• Led by board Chairs, existing board directors of the FTSE 100 and FTSE 250 should mentor and/or sponsor people of colour within their own companies to ensure their readiness to assume senior managerial or executive positions internally, or non-executive board positions externally.
• Companies should encourage and support candidates drawn from diverse backgrounds, including people of colour, to take on board roles internally (e.g. subsidiaries) where appropriate, as well as board and trustee roles with external organisations (e.g. educational trusts, charities and other not-for-profit roles). These opportunities will give experience and develop oversight, leadership and stewardship skills.

Enhance Transparency & Disclosure

• A description of the board’s policy on diversity should be set out in a company’s annual report, and this should include a description of the company’s efforts to increase, amongst other things, ethnic diversity within its organisation, including at board level.
• Companies that do not meet board composition recommendations by the relevant date should disclose in their annual report why they have not been able to achieve compliance.

The Report includes two appendices – A: Questions for Directors and B: The Directors’ Resource Toolkit to help UK companies enhance the ethnic diversity of their boards and to help existing boards to deliver on the Report’s recommendations.

The Parker Review Report is available on the BEIS website here.

About two months remain until the beginning of 2018 when all public companies reporting on a US GAAP and International Financial Reporting Standards (IFRS) basis adopt the revised revenue recognition requirements. The paper examines reporting patterns that have begun to crystallise in the transition to full adoption although it notes:

Notably, many companies seem to be crawling to the starting line. Very few companies have been early adopters. At the same time, insightful numerical information on anticipated impacts from those that are yet to adopt is limited.

The paper also reviews selected critical judgments that could affect reported revenue.

Please click to access the full paper on the CFA Institute website.