2017

IASB article on putting IFRS 16 into practice

13 Jan, 2017

The IASB has published an article featuring four IASB members discussing messages they have heard from stakeholders about IFRS 16 implementation over the last year and advice to companies implementing the new standard.

  • IASB Vice-Chair Sue Lloyd discusses transition options and benefits;
  • IASB Member Gary Kabureck explains early planning and practical steps;
  • IASB Member Darrel Scott expands on judgements and discount rates; and
  • IASB Member Stephen Cooper examines investor expectations and lease disclosures between now and 2019.

Please click to access the article on the IASB website.

Recent sustainability and integrated reporting developments

13 Jan, 2017

A summary of recent developments at the GRI/IIRC, IRC, and FASB.

The Global Reporting Initiative (GRI) has announced the Corporate Leadership Group on integrated reporting 2017 (CLGir 2017) and invites companies to apply to join the group. Coordinated by GRI and in collaboration with the International Integrated Reporting Council (IIRC), the CLGir 2017 will define themes for their explorations of practical topics, including how companies can embed sustainability into the heart of their operations and business strategy by leveraging GRI Standards and the IIRC framework. Please click for more information on the GRI website.

The Integrated Reporting Committee (IRC) of South Africa notes the challenges of disclosing performance against strategic objectives in an integrated report and has published an information paper highlighting the challenges and offers key considerations. Please click to access the paper on the IRC website.

The newest FASB Outlook newsletter provides a contribution by FASB member Marc Siegel titled "Should the FASB have a role in sustainability disclosures?". The article is a reaction to questions raised as to whether the FASB should promulgate standards requiring corporate disclosures about sustainability or environmental, social, and governance (ESG) issues. Mr Siegel concludes that the answer to the question of whether FASB should engage in sustainability and/or ESG issues "is not binary". He notes that the Board engages where those issues are within the boundaries of financial reporting set forth by the FASB's Conceptual Framework but that not all sustainability or ESG information is within the boundaries. Please click to access the article on the FASB website.

New FRC appointments

12 Jan, 2017

The Financial Reporting Council (FRC) has announced the appointment of Phil Fitz-Gerald as Director of the Financial Reporting Lab. The FRC has also appointed Jennifer Sisson as Senior Investor Engagement Manager.

Phil has been at the FRC since 2009.  Jennifer will join the FRC on 27 March.  The press release is available on the FRC website.

IASB publishes proposals for amendments under its annual improvements project (cycle 2015-2017)

12 Jan, 2017

The International Accounting Standards Board (IASB) has published an exposure draft 'Annual Improvements to IFRS Standards 2015–2017 Cycle'. It contains proposed amendments to three International Financial Reporting Standards (IFRSs) as result of the IASB's annual improvements project. Comments are requested by 12 April 2017.

The IASB uses the annual improvements process to make necessary, but non-urgent, amendments to IFRSs that will not be included as part of another major project.

The ED proposes the following amendments:

Standard Subject of proposed amendment
IAS 12 Income Taxes

To clarify that the requirements in the existing paragraph 52B (to recognise the income tax consequences of dividends where the transactions or events that generated distributable profits are recognised) apply to all income tax consequences of dividends by moving the paragraph away from existing paragraph 52A that only deals with situations where there are different tax rates for distributed and undistributed profits

IAS 23 Borrowing Costs

To clarify that when an asset is ready for its intended use or sale, an entity treats any outstanding borrowing made specifically to obtain that asset as part of the funds that it has borrowed generally

IAS 28 Investments in Associates and Joint Ventures

To clarify that an entity applies IFRS 9 Financial Instruments to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied

ED/2017/1 Annual Improvements to IFRS Standards 2015–2017 Cycle does not contain proposed effective dates for the proposed amendments to IAS 12 and IAS 23 as the intention is to decide on these after the exposure period. However, it is proposed that the amendments to IAS 28 should be effective for annual periods beginning on or after 1 January 2018 to align their effective date with the effective date of IFRS 9.

As regards the proposed amendments to IAS 28, the ED contains a dissenting opinion as one Board member disagrees amending IAS 28 as proposed without also specifying the types of interests that an entity accounts for using the equity method and the types of interests that an entity accounts for applying IFRS 9.

Please click for the following additional information:

FRC publishes report into developments in corporate governance and stewardship

12 Jan, 2017

The Financial Reporting Council (FRC) has published a report providing an assessment of corporate governance and stewardship in the UK (“the report”). The report highlights the quality of compliance with, and reporting against, the UK Corporate Governance and Stewardship Codes, provides findings on the quality of engagement between companies and shareholders and provides an indication to the market as to where the FRC would like to see changes in corporate governance behaviour and reporting.

The report indicates that compliance with the UK Corporate Governance Code “remains high” but where Boards choose not to follow provisions “too many explanations are of poor quality”.  The report also indicates that the quality of reporting against the Stewardship Code has “improved substantially”.

Key highlights of the report, which is based upon a number of reports and surveys published by the FRC and others, include: 

Corporate Governance

  • 90 per cent of FTSE 350 companies comply with all, or all but one or two, of the UK Corporate Governance Code’s 54 provisions. Full compliance has increased from 57 per-cent to 67 per-cent.
  • Code provision B.1.2 which states that at least half the board (excluding the chairman) should be independent, remains the area of most non-compliance amongst FTSE 350 companies. Non-compliance in this area is, however, decreasing.
  • There was reduced investor support for remuneration resolutions with concern noted about a lack of transparency about the link between executive pay and performance.
  • The majority of FTSE 350 companies now have in place arrangements to enable them to recover or withhold variable pay. 91 per-cent have malus and/or clawback provisions on the annual bonus and 78 per-cent on long-term plans.  It is expected that other companies will introduce similar arrangements when their remuneration policies next go for shareholder approval.
  • The FRC’s initial assessment of viability statements “suggests that there is little variation in disclosures between business sectors” and a number of companies (in a sample taken by the FRC) only provided basic information. The FRC “encourages companies to provide more constructive reporting in line with the spirit of the Code, including a clear rationale for their choice of timeframe, what qualifications and assumptions were made, and how the underlying analysis was performed”.  The report provides some suggestions for viability reporting.
  • Companies are providing basic descriptions of their succession planning policies and companies may not be spending enough time considering board and senior management succession. The FRC indicates the need for nomination committees to play a more active role in aligning board composition with company strategy to ensure that the board has the required skills to ensure long-term success. 

Stewardship

  • The report draws attention to the FRC’s public assessment of signatories’ reporting against the Stewardship Code, published in November 2016, which demonstrated “much improved reporting against the Code and greater transparency in the UK market”.
  • The FRC expects “continuous reporting improvements from signatories” and encourages them to “consider whether their statements are clear and make revisions where necessary”.
  • The FRC will be considering how to encourage further improvements in reporting and possible revisions to the UK Stewardship Code in 2018. 

The full report expands upon these areas and also provides a summary of the FRC’s report into corporate culture that was published in July 2016.  Additionally the full report indicates where the FRC would like to see changes made to corporate governance behaviour and reporting. 

Click for (all links to FRC website):

Tom Scott appointed to the IASB

11 Jan, 2017

The IFRS Foundation Trustees have announced the appointment of Tom Scott to serve as a member of the International Accounting Standards Board (IASB). Mr Scott will join the IASB in April 2017 for an initial term 5-year term.

Mr Scott has been an academic in the field of accounting at various universities in Canada since the late 1970s. Most recently, he acted as a Director and Professor of Accounting at the School of Accounting and Finance, University of Waterloo, Canada. He also served as a member of the Canadian Accounting Standards Board from 2003 to 2011.

Please click for the announcement on the IASB's website.

IFAC updates Policy Position Paper on enhancing organisational reporting

11 Jan, 2017

The International Federation of Accountants (IFAC) has issued an updated version of its Policy Position Paper 8 on enhanced organisational reporting. The update emphasises IFAC's position that integrated reporting is the way to achieve a more coherent corporate reporting system, fulfilling the need for a single report that provides a fuller picture of organisations’ ability to create value over time.

While IFAC had originally maintained that there are a range of different organisational reporting frameworks and that it was important to examine the relationship between these frameworks, this position has now been modified and IFAC puts the International Integrated Reporting Council (IIRC) and the implementation of its Framework first claiming that integrated reporting is the key to enhanced organisational reporting. The paper states:

[T]he integrated report can be used as an “umbrella” report for an organization’s broad suite of reports and communications, enabling greater interconnectedness between different reports and recognizing that there is a range of different frameworks and regulations available, and under development.

The updated version of the paper also includes a new section that describes integrated reporting in more detail.

Please click for the following information on the IFAC website:

FRC Priorities 2017/18 Open Meeting

10 Jan, 2017

The FRC is holding an Open Meeting on Wednesday 1 February 2017 to give stakeholders the opportunity to comment on its priorities for 2017/18.

The FRC published its Draft Plan and Budget and Levy Proposals indicating its priorities for 2017/18 in December 2016 with a comment period until 17 February 2017.  

Registration details for the meeting are available on the FRC website.

FRC believes the IFRS Foundation should remain in the UK

10 Jan, 2017

As reported, the IFRS Foundation is seeking a new office location and had not excluded the possibility of moving overseas.

The Financial Reporting Council (FRC) has now responded to the Foundation’s call for tenders on relocation services and states that the UK is the most powerful centre of accounting expertise outside the US that offers the IFRS Foundation unique access to IFRS knowledge and experience. Therefore, the FRC concludes:

A move overseas for the IFRS Foundation would be counter-productive. It is logical for the Foundation to remain in the UK.

Please click to access the press release on the FRC website.

IASB posts update on insurance webinars

10 Jan, 2017

In April and May 2016, the IASB posted a series of eight webinars on the forthcoming insurance contracts standard. Now a twenty minute update has been made available that reflects more recent decisions in the project.

The new webinar covers:

  • The need for change and the history of the project
  • Level of aggregation
  • Applying the Standard for the first time

Please click to access the update as well as all previous webinars on the IASB website.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.