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March

EFRAG issues annual review for 2017

21 Mar 2018

The European Financial Reporting Advisory Group (EFRAG) has published its 2017 annual review.

This publication includes reports from the EFRAG President Jean-Paul Gauzès and the TEG Chairman and CEO Andrew Watchman. It also features final endorsement advice on IFRS 16 Leases, preparatory endorsement advice work regarding IFRS 17 Insurance Contracts, research work into protecting long-term investment in Europe, and EFRAG's influence on the IASB's principles of disclosure project.

The annual review is available on the EFRAG website.

EFRAG final endorsement advice on Annual Improvements to IFRS Standards 2015-2017 Cycle

21 Mar 2018

The European Financial Advisory Group (EFRAG) has issued its final endorsement advice for the use of the Annual Improvements to IFRS Standards 2015-2017 Cycle in the European Union (EU).

The Amendments, issued in December 2017 make amendments to the following three Standards as result of the IASB's annual improvements project.

  • IFRS 3 Business Combinations and IFRS 11 Joint Arrangements - The amendments to IFRS 3 clarify that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business. The amendments to IFRS 11 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business.
  • IAS 12 Income Taxes - The amendments clarify that all income tax consequences of dividends (i.e. distribution of profits) should be recognised in profit or loss, regardless of how the tax arises.
  • IAS 23 Borrowing Costs - The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings.

EFRAG recommends the endorsement of the Amendments. EFRAG’s assessment is that the Amendments meet the technical requirements of the Regulation (EC) No 1606/2002 of the European Parliament and of the Council on the application of international accounting standards.
 
EFRAG also considers that the overall benefits of the Amendments are likely to outweigh the associated costs to implement them.

A press release and the endorsement advice letter to the European Commission are available on the EFRAG website.  EFRAG has also updated its endorsement status report.

EFRAG issues draft endorsement advice on amendments to IAS 19 regarding plan amendments, curtailments, and settlements

21 Mar 2018

The European Financial Advisory Group (EFRAG) has issued for comment its draft endorsement advice for the use of the amendments to IAS 19 regarding plan amendments, curtailments, and settlements in the European Union (EU).

The amendments confirm that if a plan amendment, curtailment or settlement occurs, it is now mandatory that the current service cost and the net interest for the period after the remeasurement are determined using the assumptions used for the remeasurement.

In addition, amendments have been included to clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling.

EFRAG recommends the endorsement of the Amendments. EFRAG’s initial assessment is that the Amendments meet the technical requirements of the Regulation (EC) No 1606/2002 of the European Parliament and of the Council on the application of international accounting standards.

EFRAG also considers that the overall benefits of the Amendments are likely to outweigh the associated costs to implement them.

Comments are requested by 21 April 2018.

For more information, see the press release, draft endorsement advice letter and the invitation to comment on the EFRAG’s website. EFRAG has also updated its endorsement status report that is available here.

FRC announces new Board appointments

20 Mar 2018

The Financial Reporting Council (FRC) has announced the appointment of Julia Unwin and Jenny Watson to its Board.

They will take up their position from 1 April 2018.

Please click for the corresponding press release on the FRC website.

Please click for the corresponding press release on the FRC website.Please

 

 

New Office Director of the IFRS Foundation liaison office in Tokyo appointed

20 Mar 2018

The Trustees of the IFRS Foundation have announced the appointment of Makoto Takahashi as next Office Director of the Foundation's Asia-Oceania liaison office.

Mr Takahashi will take over from Mitsuhiro Takemura, who will return to Deloitte, where he was seconded from.

The IFRS Foundation established the Tokyo office in February 2011 in order to expand opportunities for direct contact between the IFRS Foundation and its stakeholders in the region. The Office Director is responsible for all operations of the liaison office.

Please see the announcement on the IASB website for more information.

IFRS 9 and IFRS 17 dominate ECON exchange of views

19 Mar 2018

At the annual exchange of views this afternoon between the Committee on Economic and Monetary Affairs (ECON) of the European Parliament and representatives of the IASB and the IFRS Foundation, Parliamentarians were most interested in Information about IFRS 9 'Financial Instruments' and IFRS 17 'Insurance Contracts'.

The meeting was chaired by ECON Vice-Chair Luděk Niedermayer who in his introduction already mentioned the topics IFRS 9/sustainable finance (impact of IFRS 9 on long-term finance) and IFRS 17, which has not yet been endorsed for use in the European Union.

The focus of the IASB Chairman's initial statement was IFRS 17, which he called the IASB's "most important standard". He showed some slides that illustrated the dimensions of the change the new standard would bring about. Given the magnitude of change, Mr Hoogervorst explained, there was also resistance against it and the high costs of implementing the standard were often cited. He could not help adding that the estimation of the costs were inversely related to the enthusiasm for the standard of the person estimating. Finally, Mr Hoogervorst pointed at tomorrow's EFRAG meeting that will see presentations by AccountancyEurope, CRUF, and an asset management company. (Papers for the meeting are available here; the meeting will be broadcast.)

Questions from the Parliamentarians on IFRS 17 included why it was perceived as so difficult to implement, why companies were against using current interest rates if for their own well-being they were surely already thinking in current interest rates, and whether the EU being the most important IFRS applying  jurisdiction could still influence the timeframe of implementation of the standard, which was perceived as being to short.

Questions on IFRS 9 included the effects of the standard on long-term finance (which EFRAG is currently investigating) and whether IFRS 9 is really an improvement over IAS 39 as IAS 39 already required writing down impaired assets. The discussion around IFRS 9 and long-term finance also strayed in to wider corporate reporting and the IASB project to update the Practice Statement on Management Commentary.

Other topics of discussion shortly touched upon were the Conceptual Framework (expected timing end of the month, "prudence" is in it), IFRS 16 (implementation is going smoothly, it is not expected to impact access to loans), and the succession of Michel Prada (candidates are being identified, interviews will be held in April, proposals will be submitted to the Monitoring Board in June).

The meeting has been recorded and is available here.

ACCA report indicates widespread benefits from the adoption of key audit matters

19 Mar 2018

The Association of Chartered Certified Accountants (ACCA) has published a report which highlights that, in addition to being useful for investors, there are further benefits from the adoption of Key Audit Matters.

In January 2015, the International Auditing and Assurance Standards Board (IAASB) released its new and revised auditor reporting standards that are designed to significantly enhance auditor's reports for investors and other users of financial statements. The most notable enhancement was a new requirement for auditors of listed entities' financial statements to communicate 'Key Audit Matters' (KAMs) that the auditor views as most significant, with an explanation of how they were addressed in the audit.

The ACCA report reviews the implementation of these new standards in eleven countries across four different continents. It reports the findings from a review of 560 new-style audit reports and also feedback gained during roundtables.

The key finding of ACCA’s report is that the benefits of KAMs go beyond better information for investors to encompass improved governance, better audit quality and enhanced corporate reporting. Specifically the report indicates:

  • KAMs encourage better conversations between the auditor and those charged with governance; this in turn contributes to better governance.
  • KAMs help the auditor to focus on the areas of the audit requiring the most careful judgement; this in turn contributes to higher audit quality.
  • KAMs give preparers incentives for revisiting financial reporting and disclosures in areas related to those KAMs. This in turn leads to better financial reporting.

A press release and the full report are available on the ACCA website.

Charity Commission review into charities with modified audit reports

19 Mar 2018

The Charity Commission has published the results of a review into the reasons why accounts for 80 charities in 2017 received a modified audit opinion.

The review follows a similar review that was conducted on charity accounts in 2016 where 97 charities received a modified audit opinion.

The main reasons that modified audit opinions were issued in the 2017 review included:

  • 48 (2016:50) charities where there was a lack of evidence to support figures within the accounts.
  • 31 (2016:45) charities who demonstrated material non-compliance with the Charity Statement of Recommended Practice (SORP)
  • One (2016: two) charity received an adverse opinion as it had prepared accounts on a going concern basis of accounting but their auditor had concluded that the charity was not a going concern.

It was noted that most of the charities that submitted accounts with a modified audit opinion in 2016 had addressed their auditor’s concerns in their following year’s accounts.

The Charity Commission review 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.

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.

Recent sustainability and integrated reporting developments

19 Mar 2018

A summary of recent developments at the CDSB/CDP and FSB.

The Climate Disclosure Standards Board (CDSB) and the Carbon Disclosure Project (CDP) have released a report on research into 1,681 companies across 14 countries and 11 sectors that shows that there is a gap between the way companies identify climate-related risks and opportunities and how they are preparing to tackle them. Ready or not: Are companies prepared for the TCFD recommendations? is available through the press release on the CDP website.

The Chair of the Financial Stability Board (FSB) has written a letter to the G20 Finance Ministers and Central Bank Governors setting out the FSB priorities for the Argentine G20 Presidency. The letter notes that the Task Force on Climate-related Financial Disclosures (TCFD) is now focused on promoting companies’ voluntary implementation of its recommendations and will report on voluntary implementation at the Buenos Aires summit. The letter is available on the FSB website.

UNEP FI and investors to form leadership group to promote climate transparency by the investor community

19 Mar 2018

The UN Environment Finance Initiative (UNEP FI) together with nine investors from six countries have formed a leadership group to promote climate transparency by the investor community.

They will work together towards a first set of climate-related investor disclosures in alignment with the recommendations of the Financial Stability Board’s (FSB’s) Task Force on Climate-related Financial Disclosures (TCFD).

UNEP FI indicates:

The outputs and conclusions of this group will encourage and ease the adoption of the TCFD’s recommendations by the wider industry. The group will also closely coordinate with, and make its insights and outputs available to, the bigger networks of climate-savvy investors such as the Principles for Responsible Investment and the Institutional Investor Group on Climate Change whose new Investor Practices Programme is structured around the TCFD recommendations. It will also support and inform the global Investor Agenda through which the global investor community will display its ambition and determination to act on climate change.

A press release is available on the UNEP FI website here.

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