FRC withdraws Practice Note 26

25 Jun, 2018

The Financial Reporting Council (FRC) has withdrawn 'Practice Note 26 - Guidance on Smaller Entity Documentation'.

It is not proposed that the Practice Note be revised.

A press release is available on the FRC website.

Updated IASB work plan — Analysis

22 Jun, 2018

Following the IASB's June 2018 meeting, we have analysed the IASB work plan to see what changes have resulted from the meeting and other developments in June. The work plan reveals that the discussion paper on financial instruments with characteristics of equity will be published next week.

Below is an analysis of all changes made to the work plan since our last analysis on 25 May 2018. The most important change is one not made.

Research projects

Main­te­nance projects

The above is a faithful com­par­i­son of the IASB work plan at 25 May 2018 and at 22 June 2018. For access to the current IASB work plan at any time, please click here.

FRC Lab report on reporting performance metrics

22 Jun, 2018

A new report from the Financial Reporting Lab of the Financial Reporting Council (FRC) includes a framework and set of questions for companies and their boards to consider when deciding on how they report their performance.

The report points out that investors are calling on companies to reassess how they report their performance metrics. The metrics chosen by companies to report their performance should be clearly aligned to the company’s strategic goals, be transparent on how they are calculated and provide sufficient information that allows comparisons to be made to previous years’ performance.

The questions companies and their boards should consider when deciding on how they report their performance focus on:

  • alignment to strategy,
  • transparency,
  • context,
  • reliability, and
  • consistency.

The report, which is the outcome of the first phase of the Lab's project on performance metrics, builds on the guidance on alternative performance measures issued by the European Securities and Markets Authority (ESMA) in October 2015 but provides an investor perspective on the reporting of all types of metrics (including wider metrics that are not covered by ESMA’s guidelines).

The next phase of the project will seek to identify examples of how these principles can be put into practice.

Please click to access the press release and full report on the FRC website.

FRC publishes audit quality inspection reports for the eight largest audit firms

21 Jun, 2018

The Financial Reporting Council (FRC) has published individual audit quality inspection reports for Deloitte LLP, Ernst & Young LLP, KPMG LLP, PricewaterhouseCoopers LLP, BDO LLP, Grant Thornton LLP, Mazars LLP and Moore Stephens LLP.

The FRC indicates that “the Big Four audit practices must act swiftly to reverse the decline in this year's audit inspection results if they are to achieve the targets for audit quality set by the Financial Reporting Council". It highlights that 73% (81% in 2016/17) of FTSE 350 audits reviewed in 2017/18 were categorised as requiring “no more than limited improvements”.  The FRC has set a target that “at least 90% of FTSE 350 audits reviewed should require no more than limited improvements by 2018/19”.

The reports set out the principal findings arising from the audit quality inspection work carried out by the FRC’s Audit Quality Review (AQR) team for 2017/18. 

The reports focus on the key findings from the reviews, why such findings are important and actions the individual firms are taking to address them in order to safeguard and enhance audit quality.  Key findings address both the FRC’s inspection of individual audits and also each firm’s policies and procedures to support and promote audit quality. 

The reports also identify some examples of good practice which contributed to audit quality at each firm. 

The press release and links to individual reports are available on the FRC website.

FRC Lab publishes a report on blockchain

21 Jun, 2018

A new report from the Financial Reporting Lab of the Financial Reporting Council (FRC) concludes that “whilst cost, complexity and lack of standardisation of blockchains might be inhibiting factors, the growing use of blockchain means that those involved in corporate reporting processes need to consider its potential disruptive impact”.

The Lab considered how current developments and use-cases of blockchain technology might impact corporate reporting processes in the future. In the report, the Lab  identifies what it calls ‘challenges’ in corporate reporting and attempts to identify whether blockchain can solve some of these looking specifically at the areas of  production, distribution and consumption of corporate reporting. 

The report highlights that “blockchain has the potential to change some aspects of accounting, reporting and auditing, but this is unlikely to be imminent or all-encompassing.  Blockchain therefore merits consideration and experimentation by preparers, regulators and others involved in the corporate reporting ecosystem”.

The report recommends actions for various groups which would allow the idea of blockchain to be taken forward including:

  • Regulators, standard-setters and professional bodies who are encouraged to monitor blockchain developments and consider how they may impact corporate reporting. The creation of a forum where all those involved in corporate reporting can share and learn is recommended.
  • Preparers and users of corporate reporting who are encouraged to focus on gaining a greater level of understanding and consider experimentation and cautious innovation when costs and benefits are balanced.

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

IFRS Foundation issues illustrative examples in XBRL for the IFRS Taxonomy 2018

20 Jun, 2018

The IFRS Foundation has published the IFRS Taxonomy Illustrative Examples 2018.

The purpose of these examples is to il­lus­trate the use of the IFRS Taxonomy 2018 elements by tagging the illustrative examples that accompany IFRS Standards.

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

'An introduction to accounting for cryptocurrencies'

20 Jun, 2018

Chartered Professional Accountants of Canada (CPA Canada) has published an introduction to accounting for cryptocurrencies under IFRS.

The paper notes that concerns have been raised that the current application of IFRSs, particularly the application of IAS 38 Intangible Assets and the measurement of cryptocurrencies at cost, is not reflective of economic substance and does not provide relevant information to users of financial statements. It therefore analyses the problem in five sections:

  • a brief overview explaining what cryptocurrencies are;
  • a discussion of possible approaches to accounting for cryptocurrencies under existing IFRS;
  • an update on accounting standard-setting activity related to cryptocurrencies;
  • a brief summary of the tax implications of transactions involving cryptocurrencies; and
  • supplemental guidance on determining fair value for cryptocurrencies.

The authors of the guide encourage accounting standards-setters to undertake research in this area to better understand and evaluate the potential impacts of cryptocurrencies and to ensure the accounting for cryptocurrencies is relevant and useful.

Please click to access the publication on the CPA Canada website.

IFRS Foundation Trustees propose tenure increases for Chair and Vice-Chair

19 Jun, 2018

The Trustees of the IFRS Foundation have issued narrow-scope amendments to the IFRS Foundation Constitution that will increase the maximum tenure of the Trustees’ Chair and Vice-Chair.

Specifically, the proposed amendments would:

  • Increase the maximum tenure of the Trustee Chair and Vice-Chair to nine years.
  • Allow the option to appoint a Chair from either internally within the Trustees or externally.
  • Clarify the requirements for Trustee reappointments.

Comments on the proposal are due by 17 September 2018. For more information, see the press release on the IASB’s website.

IIRC launches the ‘Integrated Thinking & Strategy’ special interest group

18 Jun, 2018

The International Integrated Reporting Council (IIRC) has launched the ‘Integrated Thinking & Strategy’ special interest group which “offers world-renowned and innovative organizations the opportunity to share thinking about developing strategy across multiple capitals, learn from world leaders and co-create a common world view of integrated thinking that is globally relevant to help build resilient, future-fit businesses”.

The group, a subset of the International <IR>network, is collecting case studies and examples of current thinking and practice in the area of integrated thinking. It aims to “co-creatively craft what we understand best practice to look like, and we will identify adoption pathways that help organizations employ integrated thinking in their own work”.

Information for those interested in joining the group is available on the IIRC website.

FRC publishes a summary of the findings from its panel discussion on IFRS 17

18 Jun, 2018

The Financial Reporting Council (FRC) has published a summary of the findings from its panel discussion on IFRS 17 'Insurance Contracts' held in 24 April 2018.

The event provided participants with an opportunity to hear from experts about their key issues and challenges with the standard and enabled them to provide their own views on the standard.

The summary covers:

  • Panel perspectives and observations on IFRS 17.
  • The cost of implementation.
  • Whether implementation should be delayed until the EU has endorsed the standard.
  • Whether Solvency II should be closer aligned with IFRS 17.
  • Whether financial statements prepared under IFRS 17 are comparable and understandable.
  • Whether there are plans to amend UK GAAP for IFRS 17.

The full summary is available on the FRC 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.