Entity specific disclosures in XBRL reports

31 Mar, 2018

XBRL International has issued draft guidelines for enterprise-specific disclosures (ESDs) in XBRL reports.

ESDs are facts included in a business report as a result of requirements from authoritative sources such as International Financial Reporting Standards (IFRS) and U.S. Generally Accepted Accounting Principles (US GAAP), or voluntarily provided by the reporting entity. They are sufficiently unique as to be considered specific to the reporting entity or to a small number of reporting entities.

ESDs require special handling in XBRL as the base taxonomy may not be intended, or even able, to cover all the possible reporting requirements that reporting entities include in reports when applying the principles and requirements of a specific reporting domain. In addition, the character of ESDs makes it difficult for financial users to compare companies' financial results because ESDs are rarely defined in a recognised taxonomy while they are widely used in open reporting environments, such as IFRS reporting, which is largely based on principle.

The draft guidelines are available here. Comments are requested by 23 May 2018.

Financial Reporting Lab calls for participants for its Digital Future project

29 Mar, 2018

The Financial Reporting Lab ("the Lab") is calling for participants to participate in the next phase of its ‘Digital Future project’.

It is looking to investigate how artificial intelligence and related technologies (AI) are, and will be, used in the production and consumption of corporate reporting data.

The Lab is carrying out the project over the summer and aims to produce a report in the autumn.

Further information including the press release is available on the FRC website.

FRC publishes March 2018 editions of accounting standards to reflect triennial review amendments

29 Mar, 2018

The Financial Reporting Council ("FRC") has issued the March 2018 editions of all UK and Ireland accounting standards. These editions reflect the triennial review amendments issued in December 2017, and other amendments made since the previous editions were issued, resulting in a single up to date reference point for each standard.

The FRC has issued the following documents:

  1. Foreword to Accounting Standards;
  2. FRS 100 Application of Financial Reporting Requirements;
  3. FRS 101 Reduced Disclosure Framework;
  4. FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland;
  5. FRS 103 Insurance Contracts;
  6. Implementation Guidance to accompany FRS 103 Insurance Contracts;
  7. FRS 104 Interim Financial Reporting; and
  8. FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime.

Additionally, the FRC has also issued a revised Foreword to Accounting Standards which reflects changes to the legislation that prescribe the FRC as the accounting standard setter for the Republic of Ireland (previously the standards were promulgated in Ireland by Chartered Accountants Ireland).  

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IASB publishes revised Conceptual Framework

29 Mar, 2018

The International Accounting Standards Board (IASB) has published its revised 'Conceptual Framework for Financial Reporting'. Included are revised definitions of an asset and a liability as well as new guidance on measurement and derecognition, presentation and disclosure. The new Conceptual Framework does not constitute a substantial revision of the document as was originally intended when the project was first taken up in 2004. Instead the IASB focused on topics that were not yet covered or that showed obvious shortcomings that needed to be dealt with.



The Conceptual Framework had been left largely unchanged since its inception in 1989. In 2004, the IASB and the FASB decided to review and revise the conceptual framework, however, changed priorities and the slow progress in the project led to the project being abandoned in 2010 after only Phase A of the original joint project had been finalised and introduced into the existing framework as Chapters 1 and 3 in September 2010. Phase D saw the publication of a discussion paper and an exposure draft but was never finalised. The Boards discussed Phases B and C quite extensively without any consultation document ever being issued, and Phases E to H largely remained untouched.

During the 2011 agenda consultation many participants called for the IASB to reactivate and finalise the conceptual framework project given the multitude of open conceptual issues it is facing in many of its current projects. As a result, the IASB officially added the project to its agenda again in September 2012, this time as an IASB-only project and no longer aimed at a substantial revision of the framework but focused on those topics that are not yet covered (e.g. presentation and disclosure) or that show obvious shortcomings that need to be dealt with. As a first step, a Discussion Paper covering all aspects of the framework project was published in July 2013, followed by a comprehensive Exposure Draft in May 2015.


Summary of main aspects of the Conceptual Framework

The 2018 Conceptual Framework is structured into an introductory explanation on the status and purpose of the Conceptual Framework, eight chapters, and a glossary:

Chapter Topic
Status and purpose of the Conceptual Framework
1 The objective of general purpose financial reporting
2 Qualitative characteristics of useful financial information
3 Financial statements and the reporting entity
4 The elements of financial statements
5 Recognition and derecognition
6 Measurement
7 Presentation and disclosure
8 Concepts of capital and capital maintenance
Appendix A Glossary

The key content of each chapter is summarised below:

Status and purpose of the Conceptual Framework. The first section notes that the Conceptual Framework's purpose is to assist the IASB in developing and revising IFRSs that are based on consistent concepts, to help preparers to develop consistent accounting policies for areas that are not covered by a standard or where there is choice of accounting policy, and to assist all parties to understand and interpret IFRS. It maintains that the framework does not override any specific IFRS. Should the IASB decide to issue a new or revised pronouncement that is in conflict with the framework, the IASB will highlight the fact and explain the reasons for the departure  in the basis for conclusions.

Chapter 1 - The objective of general purpose financial reporting. This is the first of the two chapters that were finalised as part of the joint project with the FASB in 2010, so there are only limited changes. The chapter notes that objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions relating to providing resources to the entity. This is identified as information about the entity’s economic resources and the claims against the reporting entity as well as information about the effects of transactions and other events that change a reporting entity’s economic resources and claims. The chapter newly stresses that information can also help users to assess management’s stewardship of the entity’s economic resources.

Chapter 2 - Qualitative characteristics of useful financial information. This is the second of the two chapters that were finalised as part of the joint project with the FASB in 2010 (published as Chapter 3 in the 2010 Conceptual Framework). Again, changes are limited. The chapter explains the fundamental qualitative characteristics (relevance and faithful representation) and the enhancing qualitative characteristics (comparability, verifiability, timeliness, and understandability) of useful financial information and notes the cost constraint. Materiality is noted as an entity-specific aspect of relevance. The chapter reintroduces an explicit reference to the notion of prudence and states that the exercise of prudence supports neutrality. Prudence is defined as the exercise of caution when making judgements under conditions of uncertainty. New is also a clarification that faithful representation means representation of the substance of an economic phenomenon instead of representation of its legal form only.

Chapter 3 - Financial Statements and the reporting entity. The chapter states the objective of financial statements (to provide information about an entity's assets, liabilities, equity, income and expenses that is useful to financial statements users in assessing the prospects for future net cash inflows to the entity and in assessing management's stewardship of the entity's resources) and sets out the going concern assumption. It only mentions two statements explicitly: the statement of financial position and the statement(s) of financial performance (the latter being the former statement of comprehensive income); the rest are "other statements and notes". The chapter notes that financial statements are prepared for a specified period of time and provide comparative information and under certain circumstances forward-looking information. New to the framework is the definition of a reporting entity and the boundary of a it. The chapter also states the IASB's conviction that, generally, consolidated financial statements are more likely to provide useful information to users of financial statements than unconsolidated financial statements.

Chapter 4 - The elements of financial statements. The main focus of this chapter is on the definitions of assets, liabilities, and equity as well as income and expenses. The definitions are quoted below:
Asset. A present economic resource controlled by the entity as a result of past events. An economic resource is a right that has the potential to produce economic benefits.
Liability. A present obligation of the entity to transfer an economic resource as a result of past events.
Equity. The residual interest in the assets of the entity after deducting all its liabilities.
Income. Increases in assets or decreases in liabilities that result in increases in equity, other than those relating to contributions from holders of equity claims.
Expenses. Decreases in assets or increases in liabilities that result in decreases in equity, other than those relating to distributions to holders of equity claims.
New is the introduction of a separate definition of an economic resource to move the references to future flows of economic benefits out of the definitions of an asset and a liability. The expression "economic resource" instead of simply "resource" stresses that the IASB no longer thinks of assets as physical objects but as sets of rights. The definitions of asets and liabilities also no longer refer to "expected" inflows or outflows. Instead, the definition of an economic resource refers to the potential of an asset/liability to produce/to require a transfer of economic benefits. Distinguishing between liabilities and equity is not part of the new framework but has been transferred to the IASB's research project on financial instruments with the characteristics of equity.

Chapter 5 - Recognition and derecognition. The Conceptual Framework states that only items that meet the definition of an asset, a liability or equity are recognised in the statement of financial position and only items that meet the definition of income or expenses are to be recognised in the statement(s) of financial performance. However, their recognition depends on two criteria: their recognition provides users of financial statements with (1) relevant information about the asset or the liability and about any income, expenses or changes in equity and (2) a faithful representation of the asset or the liability and of any income, expenses or changes in equity. The framework also notes a cost constraint. New to the framework is the discussion of derecognition. The requirements as presented in the framework are driven by two aims: the assets and liabilities retained after the transaction or other event that led to derecognition must be presented faithfully and the change in the entity's assets and liabilities as a result of that transaction or other event must also be presented faithfully. The framework also describes alternatives when it is not possible to achieve both aims.

Chapter 6 - Measurement. This chapter is dedicated to the description of different measurement bases (historical cost and current value (fair value, value in use/fulfilment value, and current cost)), the information that they provide and their advantages and disadvantages. Current cost is newly introduced into the Conceptual Framework as it is widely advocated in academic literature. A table offers an overview of the information provided by various measurement bases. The framework also sets out factors to consider when selecting a measurement basis (relevance, faithful representation, enhancing qualitative characteristics and the cost constraint, factors specific to initial measurement, as well as more than one measurement basis) and points out that consideration of the objective of financial reporting, the qualitative characteristics of useful financial information and the cost constraint are likely to result in the selection of different measurement bases for different assets, liabilities and items of income and expense. The framework does not provide detailed guidance on when a particular measurement basis would be suitable because the suitability of particular measurement bases will vary depending on facts and circumstances. On equity, the framework offers some limited discussion, although total equity is not measured directly. Still, the framework maintains, it may be appropriate to measure directly individual classes of equity or components of equity to provide useful information.

Chapter 7 - Presentation and disclosure. In this chapter, the framework discusses concepts that determine what information is included in the financial statements and how that information should be presented and disclosed. The statement of statement of comprehensive income is newly described as "statement of financial performance", however, the framework does not specify whether this statement should consist of a single statement or two statements, it only requires that a total or subtotal for profit or loss must be provided. It also notes that the statement of profit or loss is the primary source of information about an entity’s financial performance for the reporting period and that only in "exceptional circumstances" the Board may decide that income or expenses are to be included in other comprehensive income. Notably, the framework does not define profit or loss, thus the question of what goes into profit or loss or into other comprehensive income is still unanswered.

Chapter 8 - Concepts of capital and capital maintenance. The content in this chapter was taken over from the existing Conceptual Frameworkand and discusses concepts of capital (financial and physical), concepts of capital maintenance (again financial and physical) and the determination of profit as well as capital maintenance adjustments. The IASB decided that updating the discussion of capital and capital maintenance could have delayed the completion of the framework significantly. The Board might consider revising the description and discussion of capital maintenance in the future if it considers such a revision necessary.

The Conceptual Framework does not have a stated effective date and the Board will start using it immediately.


References to the Conceptual Framework

Together with the revised Conceptual Framework, the IASB has also issued  Amendments to References to the Conceptual Framework in IFRS Standards. The document contains amendments to IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, and SIC-32. Not all amendments, however update those pronouncements with regard to references to and quotes from the framework so that they refer to the revised Conceptual Framework. Some pronouncements are only updated to indicate which version of the framework they are referencing to (the IASC framework adopted by the IASB in 2001, the IASB framework of 2010, or the new revised framework of 2018) or to indicate that definitions in the standard have not been updated with the new definitions developed in the revised Conceptual Framework.

The amendments, where they actually are updates, are effective for annual periods beginning on or after 1 January 2020.


Additional information

The IASB also announces that on 18 April 2018, there will be two live web presentations to introduce the revised Conceptual Framework. Please click for more information and registration on the IASB website.


Financial Reporting Lab conference June 2018

28 Mar, 2018

The Financial Reporting Lab will be holding its 2018 conference in London on 21 June 2018.

The conference will look at past, present and future reporting challenges that the Lab has looked at, or will be addressing, in its projects.  It will include a presentation of how past Lab reports have influenced reporting practices, as well as looking at the challenges in company reporting over the next five years.  Participants will also hear about the Lab's latest projects on performance metrics and the digital future.

Details of how to register can be found on the Financial Reporting Council's (FRC's) website.

EFRAG TEG and EFRAG CFSS meeting April 2018

28 Mar, 2018

The European Financial Reporting Advisory Group (EFRAG) will hold its EFRAG TEG and EFRAG CFSS meeting on 5 April 2018 in Brussels.

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

IASB issues podcast on latest Board developments

28 Mar, 2018

The IASB has released a podcast featuring Vice-Chair Sue Lloyd, Board member Darrel Scott, and education director Matt Tilling to discuss the deliberations at the March 2018 IASB meeting.

The 14-minute podcast features discussions of the following topics:

  • Disclosure initiative
  • Dynamic risk management
  • Rate-regulated activities accounting model
  • Management commentary practice statement
  • Recent CMAC, GPF, and IFRS Interpretations Committee meetings
  • PIRs of IFRS 13 and IFRS 8

The podcast can be accessed through the press release on the IASB website. More information on the topics discussed is available through our comprehensive notes taken by Deloitte observers of the March 2018 meeting.

EFRAG publishes results of literature review on IFRS 9 and long-term investment

28 Mar, 2018

​In the context of its investigation on the potential effect of IFRS 9 on long-term investments, the European Financial Reporting Advisory Group (EFRAG) commissioned a literature review on the topic. The literature review complements EFRAG's discussion paper on the impairment and recycling of equity instruments published in early March 2018.

The European Commission asked EFRAG for technical advice on the topic. EFRAG already submitted quantitative data on the current holdings of equity instruments and their accounting treatment and whether entities expect that the new accounting requirements will affect their decisions in relation to investment in equity instruments. EFRAG reported its findings from this first phase in January 2018.

In the second phase of the project, EFRAG is investigating whether and how the requirements in IFRS 9 on accounting for holdings of equity instruments could be improved. EFRAG published the discussion paper to gather constituents' views on recycling and impairment of equity instruments designated at fair value through other comprehensive income on 1 March 2018 and has now made available the results of the literature view. The literature review concludes:

The limited academic evidence on the effects of IFRS 9 and related recycling issues make it difficult to draw conclusions about the possible effects of accounting requirements on long-term investors’ investment strategies. Nevertheless, we suggest that standard setters may consider that recycling may be seen as a complex issue and that investors and other users of financial information might not clearly understand the issue.

Please click to access the results of the literature review on the EFRAG website.

FRC publishes Strategy for 2018/21

27 Mar, 2018

The Financial Reporting Council (FRC) has published its three year strategy for 2018/21 and its budget and levy proposals for the 2018/19 financial year.

The publication follows a consultation document issued in December 2017 where stakeholders broadly supported the FRC’s strategic priorities.

During 2018/21 the FRC’s strategic priorities include:

  • Promoting corporate governance and investor stewardship with a long-term focus. Key activities include:
    • Closely monitoring reporting on the new UK Corporate Governance Code including the way in which companies have reported meaningfully on how they have applied its Principles. The FRC will also seek to develop a set of corporate governance principles to enhance confidence that large companies are acting appropriately.
    • A review of the Stewardship Code; a consultation on which is expected in late 2018.
    • An assessment, later in the strategy period, of the impact of the FRC initiatives on the effectiveness of the board’s role in promoting the long-term success of companies, and the impact of the changing nature of equity ownership on the role of stewardship.
  • Promoting true and fair reporting. The FRC indicates that it aims to “drive continuous improvement in corporate reporting” and will do so through its monitoring of annual reports and accounts, the use of targeted thematic reviews and through the work of its Financial Reporting Lab.
    • Standards of corporate reporting. The FRC indicates that “although generally good there are areas of reporting where quality is not as high as it could be” and it will use its powers to address deficiencies identified. Particular focus will be on how companies are implementing IFRS 15 Revenue from Contracts with Customers, IFRS 9 Financial Instruments and IFRS 16 Leases.
    • Future developments. The FRC will also respond to developments in wider corporate reporting such as the Strategic Report and will ensure that “corporate reporting in the UK retains its relevance in the face of shifting shareholder and stakeholder expectations, capital structures and other market developments”. The FRC will also increase focus on companies’ reporting under s172 of the Companies Act 2006 and the actions the directors have taken to promote the success including impact on wider society such as climate change. Additionally the FRC will consider “the role, purpose and relevance of the annual report in its current form and how the wider information needs of investors and other stakeholders can be better met”.
  • Promoting high quality audit and assurance. The FRC’s strategic priority is to “promote justifiable confidence in UK audit”.
    • Monitoring audit quality. The FRC will publish its annual report on Developments in Audit in 2019 which will indicate whether its target that, by 2019, at least 90% of FTSE 350 audits require no more than limited improvements, has been achieved. The FRC indicates that over the three year strategy period it will consider increasing this target percentage and broaden its application paying particular attention to financial services audits. Additionally the FRC will publish the results in 2018 of a thematic review of audit firm culture in the UK and will engage with leadership to ensure that they benefit from good practices identified from that review.
    • Monitoring and supervisory approach. The FRC will implement a new approach to the monitoring and supervision of the largest audit firms in 2018/19. The FRC will set out its expectations of each firm in the areas of leadership and governance, values and behaviours, business models and financial soundness, risk management and control and evidence of audit quality.
    • The audit of the future. The FRC will look at the current statutory audit model and determine whether it can be made more effective and improve.
    • Standard setting. The FRC will continue its contribution to the development of international auditing standards and their governance framework. It will also consider how auditing standards can evolve to adapt to the opportunities offered by digital technology.
  • Promoting high quality actuarial work.
  • Effective enforcement.

The FRC also sets out its budget for 2018/19 for expenditure and funding. Overall the funding requirement is expected to increase by 1% in 2018/19. This is principally as a result of an additional funding requirement from the accountancy profession to cover additional work as competent authority for audit and its new role in monitoring local public audit.

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

IASB and IFRS Foundation react to EU fitness check on public reporting by companies

27 Mar, 2018

On 21 March 2018, the European Commission (EC) published a consultation document 'Fitness Check on the EU Framework for Public Reporting by Companies' that seems to come with the desired result of introducing 'carve-ins' when endorsing IFRSs for use in the European Union.

As reported earlier, the document seems oddly tilted against the use of IFRSs as issued by the IASB. The Chairmen of the IASB and the IFRS Foundation have now released a press release conceding that each jurisdiction is free to do as it chooses but wondering why a jurisdiction would choose a way forward that goes against the objectives of the G20, was only recently warned against in the very same jurisdiction, and leads to a state that has been identified as less than ideal in other jurisdictions.

The press release notes that the EU, a G20 member, has always been a strong supporter of the G20 objective of achieving a single set of high-quality global accounting standards and wonders why the EU would now consider undermining this objective.

The press release also repeats that both, the EU's own Maystadt review in 2013 and evaluation of the IAS Regulation in 2015, concluded that introducing carve-ins to create EU-adapted IFRSs risked encouraging the creation of regional, rather than global standards, which would lead to increased costs of capital and reporting for European issuers and would open the door to lobbying for private interests during the endorsement process.

Finally, the press release offers evidence from other jurisdictions to refute some claims in the consultation:

  • It provides numbers proving that the EU is not an outlier in adopting IFRSs without modification.
  • Major jurisdictions that have not adopted IFRSs at all (United States) still allow the use of unmodified IFRSs for foreign issuers, while introducing carve-ins would mean a loss of that privilege.
  • In major jurisdictions that offer a choice between unmodified IFRSs and locally amended standards (Japan), no company has adopted the locally amended standards in order not to lose the enhanced comparability with international competitors and to be able to better communicate with international investors.
  • Major jurisdictions with local accounting standards that are substantially converged with IFRSs (China, India) are committed to full convergence over time as the current state is not perceived as ideal mainly due to the limited international recognition of local standards.

The press release concludes:

Again, we completely accept that it is up to the EU to adopt accounting standards as it sees fit. But we believe that the introduction of EU carve-ins to IFRS Standards is in many ways a solution looking for a problem. There is no compelling evidence to show why it is needed, while the costs to EU companies―adding accounting friction to European capital markets―would undoubtedly exceed the benefits, the opposite of what the European Capital Markets Union project has set out to achieve.

Please click to access the full press release on the IASB website.

Of the big European standard-setters, only the German ASCG has so far reacted to the launch of the consultation. It fears a "politically desired result" and notes that it is of great importance that the "business community raises its voice in this important survey and sends a clearly audible signal to Brussels". Please see the full press release on the ASCG website.

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